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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended March 31, 1998.
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____ to _____.
Commission file number 1-11226.
TOMMY HILFIGER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BRITISH VIRGIN ISLANDS NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
6/F, PRECIOUS INDUSTRIAL CENTRE
18 CHEUNG YUE STREET
CHEUNG SHA WAN
KOWLOON, HONG KONG NOT APPLICABLE
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 852-2745-7798
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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ORDINARY SHARES, $.01 PAR VALUE PER SHARE NEW YORK STOCK EXCHANGE
TOMMY HILFIGER U.S.A., INC. 6.50% NOTES DUE 2003 NEW YORK STOCK EXCHANGE
TOMMY HILFIGER U.S.A., INC. 6.85% NOTES DUE 2008 NEW YORK STOCK EXCHANGE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant based upon the closing price on June 5, 1998: Ordinary Shares, $.01
----------------------
Par Value - $2,411,683,760
- --------------------------
The number of shares outstanding of the registrant's stock as of June 5, 1998:
Ordinary Shares, $.01 Par Value - 46,603,864 shares.
- ---------------------------------------------------
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TABLE OF CONTENTS
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ITEM PAGE
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PART I
Item 1. Business....................................... 3
Item 2. Properties..................................... 12
Item 3. Legal Proceedings.............................. 12
Item 4. Submission of Matters to a Vote of
Security Holders.............................. 13
PART II
Item 5. Market for Registrant's Common Equity
and Related Matters........................... 13
Item 6. Selected Financial Data........................ 15
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 16
Item 8. Financial Statements and Supplementary
Data.......................................... 22
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure.................................... 23
PART III
Item 10. Directors and Executive Officers of
the Company................................... 23
Item 11. Executive Compensation......................... 26
Item 12. Security Ownership of Certain Beneficial
Owners and Management......................... 33
Item 13. Certain Relationships and Related
Transactions.................................. 34
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K........................... 38
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PART I
ITEM 1. BUSINESS
GENERAL
Tommy Hilfiger Corporation ("THC" or the "Company"; unless the context
indicates otherwise, all references to the "Company" include THC and its
subsidiaries), through its subsidiaries, designs, sources and markets men's and
women's sportswear, jeanswear and childrenswear, under the Tommy Hilfiger
trademarks. See "Acquisition of Womenswear, Jeanswear and Canadian Licensees."
Through a range of strategic licensing agreements, the Company is expanding its
product lines to offer a broader array of apparel, accessories, footwear,
fragrance and home furnishings. The Company's products can be found in leading
department and specialty stores throughout the United States, Canada, Mexico,
Central and South America, Europe, Japan, Hong Kong and other countries in the
Far East. Tommy Hilfiger is the Company's principal designer and provides
leadership and direction for all aspects of the design process. The Company's
sportswear is designed to combine classic American styling with unique details
and fit to give time-honored basics a fresh and updated look for customers who
desire high quality, designer clothes at competitive prices. The Company was
organized under the laws of the British Virgin Islands in June 1992.
The Company's principal growth strategy has been to expand its in-store
shop program, whereby participating retailers set aside floor space highlighted
by distinctive fixtures dedicated for the exclusive sale of the Company's
products by the retailer. The Company expects to continue to pursue this
strategy by increasing the number and size of its in-store shops in the United
States and internationally.
In addition to continuing to expand the in-store shop program, the Company
plans to grow by broadening its range of product offerings, both in-house and
through licensing arrangements, and by expanding its channels of distribution.
Through the expansion of its product lines, the Company believes it will serve a
wider variety of customer needs. Since 1992, the Company has introduced several
in-house products, including boyswear, childrenswear for infants and toddlers,
swimwear, athleticwear, caps and bags. Additionally, the Company has introduced
new products through licensing agreements, including men's and women's
fragrances, jeanswear, women's casualwear, footwear and other accessories. See
"Merchandising Strategies - Licensing and Distributorships."
As of March 31, 1998, the Company operated 56 outlet stores and nine
specialty retail stores, including a store in London, England and currently
plans to open approximately ten additional outlet stores by March 31, 1999. The
Company also opened a flagship store in Beverly Hills, California in November
1997 and plans to open a flagship store in London, England by Spring 1999. See
"Merchandising Strategies - Retailing."
As of March 31, 1998, the Company was engaged in principally one industry
segment, the design, importation and distribution of men's sportswear and
childrenswear.
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ACQUISITION OF WOMENSWEAR, JEANSWEAR AND CANADIAN LICENSEES
On May 8, 1998, following the approval by the shareholders of the Company
on May 5, 1998, the Company, through its wholly owned subsidiaries, acquired
Pepe Jeans USA, Inc., the Company's United States womenswear and jeanswear
licensee ("Pepe USA"), TJ Far East Limited, Pepe USA's buying agency affiliate
("Pepe Far East"), and Tomcan Investments Inc. ("Tomcan"), the parent
corporation of Tommy Hilfiger Canada Inc. ("TH Canada"), the Company's Canadian
licensee (collectively, the "Acquired Companies"), for an aggregate purchase
price of $755,760,000 in cash plus 9,045,930 Ordinary Shares of the Company (the
"Acquisition"). The cash portion of the purchase price was funded through a
combination of cash on hand, the issuance of debt securities in a public
offering and bank borrowings. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
in Item 7.
Pursuant to a license granted by the Company, Pepe USA has exclusive United
States rights to develop, source and market men's, women's and girls' jeanswear
and jeans-related apparel, including women's and girls' casualwear, bearing the
Tommy Jeans and Tommy Hilfiger trademarks. Pepe USA markets its products
principally through in-store shops and fixtured areas in leading department
stores and through leading specialty stores. Pepe USA will be launching the
Tommy Jeans women's line, which will include jeanswear and jeans-related apparel
for young women, in Fall 1998. Pepe Far East and its subsidiaries perform
buying agency services for womenswear and jeanswear under the Tommy Jeans and
Tommy Hilfiger trademarks for both Pepe USA and the Company's third-party
distributors outside the United States.
Pursuant to a license granted by the Company, TH Canada has exclusive
Canadian rights to source, manufacture and distribute apparel bearing the Tommy
Hilfiger and Tommy Jeans trademarks, including men's sportswear and
athleticwear, boys' sportswear, women's and girls' casualwear and men's, women's
and girls' jeanswear. TH Canada markets Tommy Hilfiger and Tommy Jeans products
principally through leading specialty stores and through in-store shops and
fixtured areas in leading department stores.
Information on the components of the Company's pro forma net revenue,
giving effect to the Acquisition, is presented in Note 15 to the Consolidated
Financial Statements in Item 8. For more information relating to the
Acquisition, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources" in Item 7, Note 15
to the Consolidated Financial Statements in Item 8 and "Certain Relationships
and Related Transactions - The Acquisition" in Item 13.
Unless specified otherwise, all information set forth in this report
relates to the Company and its subsidiaries as of March 31, 1998, prior to the
Acquisition.
MERCHANDISING STRATEGIES
WHOLESALE
The Company organizes its men's, women's and children's apparel
collections, including products produced under licensing arrangements, into
three primary product lines: Core, Core Plus and Fashion. In fiscal 1998, the
Company introduced an athleticwear line and an infant and toddler line.
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Core
The Core line is comprised of the Company's seasonless products or
"basics", all in classic solid colors. Core items are made available for sale
by the Company throughout the year and, therefore, generally are kept in stock
by the Company. Since Core items are seasonless, they do not have fixed selling
periods and, therefore, retailers' inventories of Core products tend to be
maintained throughout the year and reordered as necessary. The Company receives
orders from most of its larger customers for Core products on an electronic data
interchange ("EDI") system, which expedites reorders. See "Management
Information Systems."
Core Plus
The Core Plus line is comprised of a broad selection of seasonal "basics"
which are derived from Core but offer a greater variety of fabrics, colors and
patterns, such as stripes and plaids. The Core Plus line also incorporates
certain Fashion products that had previously been successful at retail. The
Company sells four different seasonal groups of Core Plus products each year.
As compared to Fashion items, Core Plus items provide the retailer with longer
selling periods at regular prices. Because Core Plus is a broader product
category than Fashion, with a longer regular-price selling period, the Company's
shipping deadlines are more flexible and the Company may be able to place
reorders when demand is high.
Fashion
The Fashion line represents the most updated component of the Company's
product line. Fashion items consist of a group of product classifications
coordinated around a seasonal theme selected by Tommy Hilfiger. The Company
offers Fashion products under at least three themes per season, thereby creating
a continual flow of new merchandise in the marketplace.
LICENSING AND DISTRIBUTORSHIPS
In connection with the Company's business strategy of expanding its market
penetration through product line and geographic expansion, the Company considers
entering into licensing and distribution agreements with respect to certain
products if the Company believes such arrangements provide more effective
manufacturing, distribution and marketing of such products than could be
achieved in-house. The Company continually pursues new opportunities in product
categories, which are believed to be complementary to its existing product lines
as well as opportunities for geographic expansion through licenses and
distributorships to enhance its international presence.
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As shown in the table below, since Fall 1992, the Company has introduced
several product lines through license arrangements with companies which are
among the industry leaders in their respective categories and has entered into
several strategic geographic licenses and distributorships:
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PRODUCT CATEGORY LICENSEE AVAILABLE AT RETAIL
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Socks Mountain High Hosiery, Inc. Holiday 1992
Neckwear Superba, Inc. Father's Day 1993
Belts and small leather goods Trafalgar, Inc. Fall 1993
Men's suits, sport coats, dress slacks, top coats, formal wear Hartmarx Corporation Fall 1994
Men's dress shirts Oxford Industries, Inc. Fall 1994
Men's underwear Jockey International, Inc. Fall 1994
Men's fragrance Aramis, Inc. (Estee Lauder) Father's Day 1995
Men's jeanswear(a) Pepe Jeans USA, Inc. Fall 1995
Men's robes and sleepwear Russell-Newman, Inc. Holiday 1995
Golfwear Oxford Industries, Inc. Holiday 1995
Eyewear Liberty Optical Fall 1996
Women's fragrance Aramis, Inc. (Estee Lauder) Fall 1996
Women's casualwear(a) Pepe Jeans USA, Inc. Fall 1996
Men's footwear The Stride Rite Corporation Spring 1997
Men's sunglasses Lantis Eyewear Corporation Fall 1997
Athletics fragrance Aramis, Inc. (Estee Lauder) Spring 1998
Formal accessories Marks & Barry Spring 1998
Linens, bedding and bath products Revman Industries, Inc. Summer 1998
Young women's jeanswear(a) Pepe Jeans USA, Inc. Fall 1998
Leather outerwear GIII Leather Fashions, Inc. Fall 1998
Women's footwear The Stride Rite Corporation Holiday 1998
Women's robes and sleepwear Russell-Newman, Inc. Holiday 1998
Women's sunglasses Lantis Eyewear Corporation Holiday 1998
Women's hosiery Mountain High Hosiery, Inc. Holiday 1998
</TABLE>
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GEOGRAPHIC TERRITORY LICENSEE/DISTRIBUTOR AVAILABLE AT RETAIL
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Central and South America American Sportswear S.A. 1989
Canada(a) Tommy Hilfiger Canada Inc. 1990
Japan Novel-ITC Licensing Limited 1991(b)
Mexico Tommy Hilfiger Mexico SA de CV 1995
Europe Tommy Hilfiger Europe B.V. (a
subsidiary of Pepe Jeans London
Corporation) 1997
Asia-Pacific KSDP International 1998
</TABLE>
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(a) Businesses acquired by the Company in the Acquisition in fiscal year 1999.
(b) From 1991 to 1996, the operations in Japan were conducted through a Company
joint venture with Itochu.
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In addition to a royalty payment or license fee, all of the Company's
licensees and distributors are required to contribute to the advertisement and
promotion of Tommy Hilfiger products on the basis of a percentage of their net
sales of Tommy Hilfiger products or a percentage of their net purchases of Tommy
Hilfiger products (depending on the terms of the license or distributorship
agreement), subject to minimum amounts.
RETAILING
The Company believes its outlet store business has positioned it to take
advantage of an expanding segment of the retail apparel industry that appeals to
customers' increasing value orientation and provides the Company with an
additional channel of distribution. The Company stocks its outlet stores with a
mixture of first-quality products manufactured specifically for its outlet
stores' customers as well as out-of-season products. As of March 31, 1998, the
Company operated 56 outlet stores and currently plans to open approximately
ten additional outlet stores by March 31, 1999. The Company's outlet stores
are located primarily in major outlet centers in the United States. As of March
31, 1998, the Company operated nine specialty retail stores, including a store
in London, England, and a flagship store in Beverly Hills, California. In
Spring 1999, the Company also expects to open a flagship store in London,
England. The Company does not plan to expand further its existing base of
specialty retail stores. See "Properties."
Flagship stores serve as showcases for all of the Company's products as it
seeks to propel the brand into the elite circle of designers with international
recognition. This investment underlines the Company's strong belief in the role
of flagships as image builders. These stores are planned to be followed by
flagships in key markets such as New York City.
DESIGN
Tommy Hilfiger is the Company's principal designer and provides leadership
and direction for all aspects of the design process. Tommy Hilfiger selects
designers on the basis of their understanding of the retail industry and their
ability to understand what consumers desire and which designs are most likely to
be commercially viable. Design teams are responsible for separate product
classifications. In addition, the Company has senior designers, whose
responsibility is to coordinate the design teams. Design teams utilize computer
aided design stations, which provide timely translation of designs into sample
depictions varying in color, cut and style. The speed of production and breadth
of the resulting output assist the Company in selecting desirable designs for
the sourcing and research and development staffs to assess.
RESEARCH AND DEVELOPMENT
The Company employs senior production executives who oversee a staff whose
primary functions are to identify ways to develop new designs and products more
efficiently, and to identify new and more cost-effective sourcing methods. This
group receives new product direction from Tommy Hilfiger and then researches and
develops the potential product. This process is designed to avoid costly
attempts to develop products that require designs or production methods that are
not efficient. In addition, the staff researches and identifies new sources for
both fabrics and manufacturing worldwide in order to control or reduce
manufacturing costs while maintaining the Company's quality standards.
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SALES AND MARKETING
Tommy Hilfiger products are sold in over 2,000 department and specialty
retail store locations. The Company's department store customers include major
United States retailers such as Dillard Department Stores, Federated Department
Stores (including Macy's, Bloomingdale's, and Burdines), The May Department
Stores Company (including Lord & Taylor and Foley's), Belk Stores and Dayton
Hudson. The Company believes that its relationships with major retailers,
including the active sales involvement of the Company's senior management, are
important elements of its marketing strategy. The Company's strategy is to
continue to grow by broadening its United States in-store shop program,
expanding its product lines and marketing to new customers both in the United
States and internationally.
A significant aspect of the Company's ability to increase the commitment of
its existing customers and to attract new customers is its in-store shop and
fixturing program, whereby participating retailers set aside floor space
highlighted by distinctive fixtures dedicated for exclusive sale of the
Company's products by the retailer. This program enables the retailer to create
an environment consistent with the Company's image and to display and stock a
greater volume of the Company's products per square foot of retail space. Such
shops and fixtured areas encourage longer-term commitment by the retailer to the
Company's products, including the retailer's provision of upgraded staffing.
These shops and fixtured areas also increase consumer product recognition and
loyalty because of the retail customer's familiarity with the location of the
Company's products in the store. The continued expansion of the Company's in-
store shop and fixturing programs is dependent on market conditions, including
continued demand for the Company's products.
The Company's sales and marketing departments include individuals located
in the Company's New York headquarters, Atlanta and Dallas showrooms and Los
Angeles, Chicago, Philadelphia, San Francisco and Cincinnati regional sales
territories. The sales force sells only the Tommy Hilfiger collection.
The Company employs an extensive staff of merchandise coordinators located
throughout the United States. These merchandisers educate the retailers'
salespeople about the Company's current products, provide the Company with
first-hand consumer feedback concerning consumer reaction to the Company's
products and coordinate the in-store displays with the department stores. In
addition to the coordinator program, the Company also conducts a training
program for the department stores' Tommy Hilfiger selling specialists. The
program is designed to educate specialists on the Company's image and
merchandising standards and to promote the development and servicing of
clientele. The program educates specialists in customer assistance and advice,
including merchandise selection and the coordination of complete outfits of
Tommy Hilfiger products. Over 1,000 specialists have completed the program.
The Company sells substantially all its out-of-season products, which are
principally from the Fashion and Core Plus product lines, to certain discount
retailers and through its Company owned outlet stores. The net revenues from
such sales represented less than 15% of the Company's net revenue for each of
the last three fiscal years.
ADVERTISING, PUBLIC RELATIONS AND PROMOTION
The Company believes that advertising to promote and enhance the Tommy
Hilfiger brand and the image of Tommy Hilfiger products is important to its
long-term growth strategy. All of the Company's licensees and distributors are
required to contribute to the advertisement and promotion of Tommy Hilfiger
products a percentage of their net sales of Tommy Hilfiger products or a
percentage of their net purchases of Tommy Hilfiger products (depending on the
terms of the license or distributorship
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agreement), subject to minimum amounts. Advertising by the Company, its
licensees and most of its distributors is coordinated by the Company and
principally appears in magazines, newspapers, and outdoor advertising media. In
addition, selected personal appearances by Tommy Hilfiger, corporate
sponsorships and charitable programs are utilized to further enhance awareness
of the Company's image and promote the Company's products. The Company employs
an advertising and public relations staff to implement these efforts.
SOURCING
The Company's sourcing strategy is to contract for the manufacture of its
products. Outsourcing allows the Company to maximize production flexibility
while avoiding significant capital expenditures, work-in-process inventory
buildups and the costs of managing a large production work force. The Company
inspects products manufactured by contractors to determine whether they meet the
Company's standards. See "Quality Control."
The Company imports most of its finished goods because it believes it can
import higher quality products at lower costs. Management maintains extensive
and long-term relationships with leading manufacturers in the Far East,
including, among others, manufacturers located in Indonesia, Thailand, India,
the Philippines, Taiwan and Mauritius. None of the countries from which the
Company sources accounts for more than 15% of the total cost of products
purchased. The Company monitors duty, tariff and quota-related developments and
continually seeks to minimize its potential exposure to duty, tariff and quota-
related risks through, among other measures, geographical diversification of its
manufacturing sources, the maintenance of its buying offices in Hong Kong,
Macau and India, allocation of production to merchandise categories where
more quota is available and shifts of production among countries and
manufacturers.
The Company's production and sourcing staff oversees all aspects of apparel
manufacturing and production, the negotiation for raw materials and research and
development of new products and sources. The Company operates buying offices
based in Hong Kong, Macau and India, as well as the United States, which perform
product development, sourcing, production scheduling and quality control. In
addition, the Company contracts with various buying subagents that perform
similar services for the Company's licensees and geographic distributors, for
specified commissions.
The Company has its products manufactured according to plans prepared each
year which reflect prior years' experience, current fashion trends, economic
conditions and management estimates of a line's performance. The Company
separately negotiates with suppliers for the sale of required raw materials,
which are then purchased by its contractors in accordance with the Company's
specifications. The Company limits its exposure to holding excess inventory by
committing to purchase a portion of total projected demand and the Company, in
its experience, has been able to satisfy its excess demand through reorders.
The Company believes that its policy of limiting its commitments for purchases
early in the season reduces its exposure to excess inventory and obsolescence.
As noted above, the Company does not own or operate any manufacturing
facilities and is therefore dependent upon third parties for the manufacture of
all its products. The inability of a manufacturer to ship orders of the
Company's products in a timely manner, including as a result of local financial
market disruption which could impair the ability of such suppliers to finance
their operations, or to meet quality standards, could cause the Company to miss
the delivery date requirements of its customers for those items, which could
result in cancellation of orders, refusal to accept deliveries or a reduction in
purchase prices, any of which could have a material adverse effect on the
Company's financial condition and results of operations. The Company has no
long-term formal arrangements with any of its suppliers and historically has
experienced only limited difficulty in satisfying its raw material and finished
goods requirements. Although the Company believes it could replace such
suppliers without a material adverse effect on the
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Company, there can be no assurance that such suppliers could be replaced in a
timely manner, and the loss of such suppliers could have a significant effect on
the Company's short-term operating results.
QUALITY CONTROL
The Company's quality control program is designed to ensure that purchased
goods meet the Company's standards. The Company inspects prototypes of each
product prior to cutting by the contractors and performs two in-line inspections
and a final inspection prior to shipment. All finished goods are shipped to the
Company's New Jersey facilities for re-inspection and distribution. While the
Company's return policy permits customers to return defective products for
credit, less than 1% of the Company's shipments in fiscal 1998 were returned as
defective under this policy.
MANAGEMENT INFORMATION SYSTEMS
The Company believes that high levels of automation and technology are
essential to maintain its competitive position and the Company continues to
invest in computer hardware, systems applications and networks to enhance and to
speed the apparel design process, to support the sale and distribution of
products to its customers and to improve the integration and efficiency of its
United States and Far East operations. The Company utilizes computer-aided
design stations for use by Tommy Hilfiger and his design teams, which provide
timely translations of designs into sample depictions varying in color, cut and
style. The Company has also uses introduced an EDI system to receive on-line
orders from its customers and to accumulate sales information on its products.
The EDI technology enables the Company to provide valuable sales information and
inventory maintenance information services to its customers who have adopted
such technology. Nine of the Company's 10 largest customers communicate with
the Company through EDI technology.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Year 2000" in Item 7.
DISTRIBUTION
Wholesale distribution is centralized in a 360,000 square foot New Jersey
facility to which all products are shipped. The facility is operated and
principally staffed by an independent contractor who charges the Company on the
basis of the number of items processed, subject to a minimum annual fee. The
Company has the right, at any time during the contract period, to terminate the
distribution agreement by making a specified payment. In addition, the Company
utilizes a 200,000 square foot facility in New Jersey for retail distribution.
The Company maintains its distribution management group and certain
administrative functions at its New Jersey facilities.
CREDIT AND COLLECTION
The Company collects substantially all of its receivables through a credit
company pursuant to an agreement whereby the credit company pays the Company
after the credit company receives payment from the Company's customer. If the
customer becomes bankrupt or insolvent or the receivable becomes 120 days past
due, the credit company pays the Company 50% of the outstanding receivable. The
credit company establishes maximum credit limits for each customer account.
Bad debts as a percentage of net sales were less than 0.1% in each of the
Company's last three fiscal years.
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TRADEMARKS
The Company utilizes six principal trademarks, which it owns: the names
TOMMY HILFIGER(R), TOMMY JEANS(R) and HILFIGER ATHLETICS(TM), the Company's
distinctive flag logo, the crest and the green eyelet the Company uses on
certain of its products. Tommy Hilfiger Licensing, Inc. ("THLI"), a subsidiary
of Tommy Hilfiger U.S.A., Inc. ("TH USA") which is a subsidiary of the Company,
has registered or applied for registration for these trademarks for use in the
United States and has registered or applied for registration of these trademarks
in numerous countries in North America, Europe, Asia, South America and
elsewhere. The Company regards its trademarks and other proprietary rights as
valuable assets in the marketing of its products. THLI is a party to an
agreement with Mr. Hilfiger that restricts the sale, lease, license or other
conveyance of THLI's trademarks, the amendment of the license agreement between
THLI and TH USA or the creation of any lien on THLI trademarks without Mr.
Hilfiger's consent until Mr. Hilfiger's death or his termination of employment
with TH USA without the consent of TH USA.
BACKLOG
The Company generally receives orders approximately three to five months
prior to the time the products are delivered to stores. Thus, the Company's
backlog of orders, which the Company believes, based on industry practice and
past experience, will result in sales, at March 31, 1998 represents a
significant portion of the Company's expected sales through September 30, 19986.
At March 31, 1998, the Company's backlog of orders was approximately $303
million, compared to approximately $283 million at March 31, 1997. The Company's
backlog depends upon a number of factors, including the timing of "market weeks"
during which a significant percentage of the Company's orders are received and
the timing of shipments. Accordingly, a comparison of backlog from period to
period is not necessarily meaningful and may not be indicative of eventual
actual shipments.
COMPETITION; CHANGES IN FASHION TRENDS
The apparel industry is highly competitive. The Company competes with
numerous domestic and foreign designers, brands and manufacturers of apparel,
accessories and other products, some of which may be significantly larger and
more diversified, and have greater resources, than the Company. In addition,
the Company believes that its success depends in substantial part on its ability
to anticipate, gauge and respond to changing consumer demand and fashion trends
in a timely manner. The Company attempts to minimize the risk of changing
fashion trends and product acceptance by closely monitoring retail sales trends.
However, if fashion trends shift away from the Company's products, or if the
Company otherwise misjudges the market for its product lines, it may be faced
with a significant amount of unsold finished goods inventory or other conditions
which could have a material adverse effect on the Company.
DEPENDENCE ON CUSTOMERS UNDER COMMON CONTROL
The Company's department store customers include major United States
retailers, certain of which are under common ownership. When considered together
as a group under common ownership, sales to the department store customers which
were owned by Federated Department Stores, Dillard Department Stores, and The
May Department Stores Company accounted for approximately 22%, 22%, and 15%,
respectively, of the Company's fiscal 1998 net wholesale product sales. A
decision by the controlling owner of a group of department stores to decrease
the amount purchased from the Company or to cease carrying the Company's
products could adversely affect the Company.
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EMPLOYEES
At March 31, 1998, the Company had approximately 1,160 full-time employees
and 660 part-time employees. Virtually all of the Company's part-time employees
were employed in the Company's specialty retail and outlet stores. None of the
Company's employees is a member of a union. The Company considers its relations
with its employees to be excellent.
ITEM 2. PROPERTIES
The principal executive offices of the Company are located at 6/F, Precious
Industrial Centre, 18 Cheung Yue Street, Cheung Sha Wan, Kowloon, Hong Kong. TH
USA's principal executive offices are located at 25 West 39th Street, New York,
New York 10018.
The general location, use and approximate size of the principal properties
which the Company occupied and all of which were leased as of March 31, 1998,
except for the Hong Kong office space and a New York property which houses the
Company's executive offices and its primary sales, marketing and licensing
offices and its main sales and licensees' showrooms, are set forth below:
<TABLE>
<CAPTION>
Approximate Area in
Location Use Square Feet
- -------- --- -----------
<S> <C> <C>
Hong Kong.......................................... Executive offices and principal buying office 20,000
New York, New York................................. TH USA headquarters and sales offices 170,000
New York, New York................................. Design, production and administrative offices 66,000
Edison, New Jersey(1).............................. Administrative offices 19,000
South Brunswick, New Jersey........................ Warehouse distribution and administrative offices 360,000
</TABLE>
(1)The Company's warehouse space in Edison, New Jersey, which is maintained,
operated and principally staffed by an independent contractor, is not included
in the square footage description.
The Company operates 56 outlet stores, each averaging approximately 3,300
square feet, generally located in major outlet centers in the U.S., nine retail
stores in metropolitan areas, including one in London, England, each averaging
approximately 3,800 square feet and a 20,000 square foot flagship store in
Beverly Hills, California. In addition, the Company has two regional showrooms
outside of New York City. All of such stores and showrooms are leased.
ITEM 3. LEGAL PROCEEDINGS
On February 2, 1998, February 12, 1998 and February 17, 1998, three alleged
holders of Ordinary Shares filed purported derivative actions in New York state
court on behalf of the Company against the members of the Board of Directors.
The actions were later consolidated and an amended complaint was served on May
29, 1998. The amended complaint alleges that the Board's approval of the
Acquisition constitutes a breach of fiduciary duty and corporate waste, and
seeks equitable relief and damages in favor of the Company, and an award of fees
to the plaintiffs' attorneys. On June 15, 1998, the Company and its directors
moved to dismiss the consolidated action on several grounds. The motion to
dismiss remains pending.
12
<PAGE>
The Company and its subsidiaries are from time to time involved in routine
legal matters incidental to their businesses. In the opinion of the Company's
management, the resolution of these matters will not have a material effect on
its financial position or its results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 5, 1998, the Company held a Special Meeting of Shareholders at The
Royal Pavilion Hotel, Porters, St. James, Barbados, relating to the Acquisition.
At the meeting, the shareholders voted on a proposal to approve the stock
purchase agreement, dated as of January 31, 1998, by and among the Company, TH
USA, Tommy Hilfiger (Eastern Hemisphere) Limited and Pepe Jeans London
Corporation and the transactions contemplated thereby, including the issuance of
9,045,930 Ordinary Shares, par value $.01 per share, of the Company pursuant to
the stock purchase agreement.
A total of 29,213,037 votes were cast in favor of the proposal, 46,508
votes were cast against and 54,145 votes abstained. There were 0 broker non-
votes with respect to this proposal.
There were a total of 37,557,934 shares entitled to vote, in person or by
proxy, at the meeting. A total of 8,244,244 shares did not vote.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS
The Company's Ordinary Shares, par value U.S. $0.01, are listed and traded
on the New York Stock Exchange under the symbol "TOM." As of June 5, 1998,
there were approximately 858 record holders of the outstanding Ordinary Shares.
The following table sets forth, for each of the periods indicated, the high
and low sales prices per Ordinary Share as reported on the New York Stock
Exchange Composite Tape.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Fiscal Year ended March 31, 1998
First Quarter.......................................... 53 3/4 36 7/8
Second Quarter......................................... 51 1/8 39 3/16
Third Quarter.......................................... 50 3/8 33
Fourth Quarter......................................... 61 1/2 35 3/16
Fiscal Year ended March 31, 1997
First Quarter.......................................... 55 7/8 41 1/2
Second Quarter......................................... 59 3/8 41 3/4
Third Quarter.......................................... 61 1/8 44 1/8
Fourth Quarter......................................... 59 1/8 42 1/2
</TABLE>
In the past two fiscal years, the Company has not paid any dividends. The
Company anticipates that all of its earnings in the foreseeable future will be
retained for the development and expansion of its business and, therefore, has
no current plans to pay cash dividends. Future dividend policy will depend on
the Company's earnings,
13
<PAGE>
capital requirements, financial condition, restrictions imposed by agreements
governing indebtedness of the Company and its subsidiaries, availability of
dividends from subsidiaries, receipt of funds in connection with repayment of
loans to subsidiaries or advances from operating subsidiaries and other factors
considered relevant by the Board of Directors of the Company. For certain
restrictions on the ability of subsidiaries of the Company to pay dividends to
the Company, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources" in Item 7.
14
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data have been derived from the Company's
Consolidated Financial Statements. The information should be read in
conjunction with the Consolidated Financial Statements and related Notes thereto
that appear elsewhere in this Annual Report and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Item 7.
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
- ----------------------------
Net revenue................................ $847,110 $661,688 $478,131 $320,985 $227,201
Cost of goods sold......................... 447,524 344,884 258,419 174,584 127,053
-------- -------- -------- -------- --------
Gross profit............................... 399,586 316,804 219,712 146,401 100,148
Selling, general and administrative
expenses............................. 236,571 190,976 132,270 85,954 58,702
-------- -------- -------- -------- --------
Income from operations..................... 163,015 125,828 87,442 60,447 41,446
Interest expense........................... 1,258 761 754 207 317
Interest income............................ 7,013 6,181 5,712 3,217 637
-------- -------- -------- -------- --------
Income before income taxes and
minority interest.................... 168,770 131,248 92,400 63,457 41,766
Provision for income taxes................. 55,590 44,866 30,900 22,742 16,422
-------- -------- -------- -------- --------
Net income................................. $113,180 $ 86,382 $ 61,500 $ 40,715 $ 25,344
======== ======== ======== ======== ========
Basic earnings per share................... $3.03 $2.33 $1.72 $1.16 $.80
======== ======== ======== ======== ========
Weighted average shares outstanding........ 37,374 37,059 35,767 34,963 31,779
======== ======== ======== ======== ========
Diluted earnings per share................. $2.99 $2.28 $1.65 $1.12 $.77
======== ======== ======== ======= ========
Weighted average shares and share
equivalents outstanding.............. 37,886 37,885 37,241 36,346 32,836
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
As of March 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ---------- ---------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
- ------------------
Cash, cash equivalents and short-term
investments................................ $157,051 $109,908 $127,743 $ 86,031 $ 50,867
Working capital............................. 345,886 270,667 238,439 165,261 110,589
Total assets................................ 618,010 463,085 358,622 239,493 190,378
Short-term borrowings....................... -- -- 5,975 275 2,645
Long-term debt.............................. -- 1,510 1,789 2,064 2,341
Shareholders' equity........................ 519,062 397,464 301,338 209,024 161,715
</TABLE>
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All references to years relate to the fiscal year ended March 31 of such
year.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to net revenue of certain items in the Company's Consolidated
Statements of Operations:
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
------------------------------------------------------
1998 1997 1996
----------------- ----------------- ----------------
<S> <C> <C> <C>
Net revenue........................................ 100.0% 100.0% 100.0%
Cost of goods sold................................. 52.8 52.1 54.0
----- ----- -----
Gross profit....................................... 47.2 47.9 46.0
Selling, general and administrative expenses....... 28.0 28.9 27.7
----- ----- -----
Income from operations............................. 19.2 19.0 18.3
Interest expense................................... 0.1 0.1 0.2
Interest income.................................... 0.8 0.9 1.2
----- ----- -----
Income before income taxes......................... 19.9 19.8 19.3
Provision for income taxes......................... 6.5 6.7 6.4
----- ----- -----
Net income......................................... 13.4% 13.1% 12.9%
===== ===== =====
</TABLE>
Year Ended March 31, 1998 Compared to Year Ended March 31, 1997
The Company's net income increased 31.0% to $113,180,000, or $2.99 per
share on a diluted basis, in 1998 from $86,382,000, or $2.28 per share on a
diluted basis, in 1997. As a percentage of net revenue, net income increased to
13.4% in 1998 from 13.1% in 1997.
Net revenue increased $185,422,000, or 28.0%, to $847,110,000 in 1998 from
$661,688,000 in 1997. This improvement is principally due to volume increases
in each of the Company's operating divisions, as outlined below.
Wholesale net revenue increased to $587,922,000 in 1998 from $479,307,000
in 1997, an improvement of $108,615,000 or 22.7%. This improvement consists of
a menswear wholesale sales increase of 12.3% and a childrenswear wholesale sales
increase of 79.5%. In 1998, menswear wholesale sales were $455,127,000 while
childrenswear wholesale sales were $132,795,000. In 1997, menswear wholesale
sales were $405,319,000 while childrenswear wholesale sales were $73,988,000.
These increases were due to increases in volume, which resulted primarily from
increased sales to existing customers, offset by a decrease in the average sales
price per unit. The increased sales to existing customers were partially the
result of the Company's in-store shop and fixtured area expansion program,
whereby certain of the Company's customers have increased the amount of square
footage where the Company's products are featured.
Net revenue in the Company's retail division increased 31.3% to
$196,066,000 in 1998 from $149,312,000 in 1997. The increase in the number of
stores, as well as an increase in sales at existing stores, contributed to the
improved revenue. Of the total increase of $46,754,000,
16
<PAGE>
$17,371,000 was attributable to retail stores opened since March 31, 1997. The
total number of retail stores open as of March 31, 1998 and 1997 were 66 and 55,
respectively.
Net revenue from royalties and buying agency commissions increased 90.9% to
$63,122,000 in 1998 from $33,069,000 in 1997. Of the increase of $30,053,000,
approximately 31.8% was due to the introduction of new licensed products since
March 31, 1997. The remainder of the increase reflects the incremental revenue
associated with a general increase in sales of existing licensed products and
buying agency services. Included in net revenue from royalties and buying
agency commissions is $22,901,000 and $12,341,000, in 1998 and 1997,
respectively, from the Company's womenswear, jeanswear and Canadian licensees,
which were acquired by the Company effective May 8, 1998.
Gross profit as a percentage of net revenue decreased to 47.2% in 1998 from
47.9% in 1997. This decrease is attributable to lower margins in menswear
wholesale operations and a greater contribution to wholesale operations of
childrenswear, which typically produces lower margins than menswear. This was
partially offset by increased royalty and buying agency commissions, which
produce higher margins than wholesale and retail operations.
Selling, general and administrative expenses, as a percentage of net
revenue, decreased to 28.0% in 1998 from 28.9% in 1997. This decrease is due to
the leveraging of these expenses against the higher revenue base. Selling,
general and administrative expenses increased to $236,571,000 in 1998 from
$190,976,000 in 1997. This increase is primarily due to increased volume
related expenses of the Company's wholesale and retail operations to support the
higher revenue. In addition, depreciation and amortization has increased due to
the greater number of in-store shops and fixtured areas.
The provision for taxes decreased to 32.9% of income before taxes in 1998
from 34.2% in 1997. The decrease was primarily attributable to the relative
level of earnings in the various taxing jurisdictions to which the Company's
earnings are subject.
Year Ended March 31, 1997 Compared to Year Ended March 31, 1996
The Company's net income increased to $86,382,000, or $2.28 per share on a
diluted basis, in 1997 from $61,500,000, or $1.65 per share on a diluted basis,
in 1996. This represents an improvement of $24,882,000 or 40.5%. As a
percentage of net revenue, net income increased to 13.1% in 1997 from 12.9% in
1996.
Net revenue increased 38.4% to $661,688,000 in 1997 from $478,131,000 in
1996. This increase is a result of improvements in each of the Company's
wholesale, retail, and licensing and buying agency divisions, as outlined below.
Wholesale net revenue increased to $479,307,000 in 1997 from $381,239,000
in 1996, an improvement of 25.7%. This improvement includes a 23.9% increase in
menswear wholesale sales, to $405,319,000 in 1997 from $327,189,000 in 1996, and
a 36.9% increase in childrenswear wholesale sales, to $73,988,000 in 1997 from
$54,050,000 in 1996. These increases were primarily due to volume increases as
a result of increased sales to existing customers, opening new in-store shops
and fixtured areas, and the expansion of certain existing shops. The number of
men's in-store shops increased to 1,046 at March 31, 1997 from 866 at March 31,
1996 while the number of childrenswear fixtured areas increased to 1,069 at
March 31, 1997 from 872 at March 31, 1996. In addition to the volume increase,
the change in product
17
<PAGE>
mix of the Company's wholesale sales resulted in a higher average unit selling
price. Of the total wholesale sales increase, approximately 67% was due to
volume and approximately 33% was due to the increased average unit selling
price.
Net revenue in the Company's retail division increased 81.6% to
$149,312,000 in 1997 from $82,212,000 in 1996. This improvement was due to an
increase in the number of stores open as well as increased sales at existing
stores. Of the total increase of $67,100,000, $31,503,000 was attributable to
new retail stores opened during 1997. The total number of retail stores open as
of March 31, 1997 and 1996 was 55 and 44, respectively.
Net revenue from royalties and buying agency commissions increased 125.3%
to $33,069,000 in 1997 from $14,680,000 in 1996. This increase reflects the
incremental revenue associated with newly licensed products and a general
increase in sales from existing licensees and buying agency services. Of this
increase, approximately 35% was due to products introduced under new licenses in
1997 while the balance was due to licenses existing as of March 31, 1996.
Included in net revenue from royalties and buying agency commissions is
$12,341,000 and $3,582,000, in 1997 and 1996, respectively, from the Company's
womenswear, jeanswear and Canadian licensees, which were acquired by the Company
effective May 8, 1998.
Gross profit improved to 47.9% of net revenue in 1997 from 46.0% of net
revenue in 1996. This increase was attributable to the increases in retail
operations and royalties and buying agency commissions, each of which had higher
percentage revenue increases, and which produce higher margins, than wholesale
operations. In addition, wholesale margins increased due primarily to the
change in mix of products sold.
Selling, general and administrative expenses increased as a percentage of
net revenue to 28.9% in 1997 from 27.7% in 1996. The increased percentage was
due to an increase in marketing and advertising expense to promote and enhance
the brand name and the image of the Company's products. Selling, general and
administrative expenses increased to $190,976,000 in 1997 from $132,270,000 in
1996. This increase was principally due to increased volume-related expenses to
support the higher revenue and the increased marketing and advertising expenses
mentioned above.
The provision for taxes increased to 34.2% of income before taxes in 1997
from 33.4% in 1996. This increase was primarily attributable to the relative
level of earnings in the various taxing jurisdictions to which the Company's
earnings are subject.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary ongoing funding requirements are to finance working
capital and the continued growth of the business. Principally, this includes
the purchase of inventory in anticipation of increased sales of the wholesale
and retail divisions as well as capital expenditures related to the expansion of
the menswear in-store shop and childrenswear fixtured area programs and
additional retail stores. The Company's sources of liquidity are cash on hand,
cash from operations and the Company's available credit. Additionally, the
Company required financing in May 1998 to acquire its womenswear, jeanswear and
Canadian licensees as discussed further below.
18
<PAGE>
The Company's cash and cash equivalents balance increased from $109,908,000
at March 31, 1997 to $157,051,000 at March 31, 1998. This represented an
overall increase of $47,143,000 due primarily to cash provided by operating
activities, partially offset by cash used in investing activities. A detailed
analysis of the changes in cash and cash equivalents is presented in the
Consolidated Statements of Cash Flows.
Net cash from operating activities in 1998 was $108,049,000, an increase of
$45,414,000 over the 1997 amount of $62,635,000. This amount is primarily made
up of cash generated by net earnings offset, in part, by an increase in working
capital. The increase in working capital was mainly due to increases in
accounts receivable and inventory. Accounts receivable increased 30.9% from
$79,984,000 at March 31, 1997 to $104,732,000 at March 31, 1998 due to the
increased sales level. Inventory increased 21.9% to $150,947,000 at March 31,
1998 from $123,847,000 at March 31, 1997. Higher inventory levels at March 31,
1998 were primarily attributable to the timing of receipts of inventory for the
summer and fall seasons.
Capital expenditures were $67,814,000 in 1998, compared with $83,960,000 in
1997. The 1997 amount includes the purchase of the property which houses the
Company's executive offices, along with its primary sales, marketing and
licensing offices and its main licensees' showrooms, for approximately
$25,875,000. Significant capital expenditures in 1998 included additions
related to the Company's first flagship store in Beverly Hills and the Company's
in-store shop and fixtured area expansion program.
At March 31, 1998, accrued expenses and other current liabilities included
$18,863,000 of open letters of credit for inventory purchased. Additionally, at
March 31, 1998, TH USA was contingently liable for unexpired bank letters of
credit of $53,273,000 related to commitments of TH USA to suppliers for the
purchase of inventories and leases.
On May 8, 1998, the Company acquired its womenswear, jeanswear and Canadian
licensees for an aggregate purchase price of $755,760,000 in cash and 9,045,930
Ordinary Shares of the Company. The cash portion of the purchase price was
funded from a combination of debt financing and cash on hand. The debt financing
portion of the purchase price consisted of $250,000,000 of 6.50% notes maturing
on June 1, 2003 (the "2003 Notes"), $200,000,000 of 6.85% notes maturing on June
1, 2008 (the "2008 Notes") and $200,000,000 of term loan borrowings pursuant to
the new $450,000,000 term and revolving credit facilities (the "New Credit
Facilities"). The 2003 Notes and the 2008 Notes (collectively, the "Notes") were
issued by TH USA and guaranteed by THC. Following the announcement of the
proposed Acquisition on February 1, 1998, the Company sold US Treasury futures
contracts to protect against the potential increase in interest rates between
the announcement and the closing date of the Acquisition. These transactions
resulted in deferred gains of approximately $4,490,000 at March 31, 1998. Such
gains, together with subsequent adjustments through the date of transaction
financing, will be amortized over the respective terms of the Notes to reduce
the effective interest rate. The indenture under which the Notes were issued
contains covenants that, among other things, restrict the ability of
subsidiaries of THC to incur additional indebtedness, restrict the ability of
THC and its subsidiaries to incur indebtedness secured by liens or enter into
sale and leaseback transactions and restrict the ability of THC and TH USA to
engage in mergers or consolidations.
The New Credit Facilities, which are guaranteed by THC, consist of an
unsecured $250,000,000 TH USA five-year revolving credit facility, of which up
to $150,000,000 may be used for direct borrowings, and an unsecured $200,000,000
five-year term credit
19
<PAGE>
facility which was borrowed by TH USA in connection with the Acquisition. The
revolving credit facility will be available for letters of credit, working
capital and other general corporate purposes. The New Credit Facilities replaced
the Company's existing secured revolving credit agreement, which had been in
place since April 1, 1996.
Borrowings under the term loan facility are repayable in quarterly
installments as follows: $40,000,000 in the 12-month period ending March 31,
2000, $50,000,000 in each of the next two succeeding 12-month periods and
$60,000,000 in the next succeeding 12-month period.
The New Credit Facilities contain a number of covenants that, among other
things, restrict the ability of subsidiaries of THC to dispose of assets, incur
additional indebtedness, create liens on assets, pay dividends or make other
payments in respect of capital stock, make investments, loans and advances,
engage in transactions with affiliates, enter into sale and leaseback
transactions, engage in mergers or consolidations or change the businesses
conducted by them. The New Credit Facilities also restrict the ability of THC to
create liens on assets or enter into sale and leaseback transactions. Under the
New Credit Facilities, subsidiaries of THC may not pay dividends or make other
payments in respect of capital stock to THC that in the aggregate exceed 33% of
the Company's cumulative consolidated net income, commencing with the fiscal
year ended March 31, 1998, less certain deductions. In addition, under the New
Credit Facilities, THC and TH USA are required to comply with and maintain
specified financial ratios and tests (based on the Company's consolidated
financial results), including, without limitation, an interest expense coverage
ratio, a maximum leverage ratio and a minimum consolidated net worth test.
Other than the financing requirements in connection with the Acquisition
described above, cash requirements in fiscal 1999 will primarily include working
capital and capital expenditures relating to the in-store shop and fixtured area
programs and the opening of additional retail stores, including flagship stores.
The amount of total committed capital expenditures at March 31, 1998, including
expenditures relating to these projects, was approximately $750,000. The
Company expects fiscal 1999 capital expenditures (including those of the
acquired companies) to approximate $100,000,000. The Company intends to fund
such cash requirements for fiscal 1999 and future years from available cash
balances, internally generated funds and borrowings available under the New
Credit Facilities. The Company believes that these resources will be sufficient
to fund its cash requirements for such periods.
INFLATION
The Company does not believe that the relatively moderate rates of
inflation experienced over the last few years in the United States, where it
primarily competes, have had a significant effect on its net revenue or
profitability. Higher rates of inflation have been experienced in a number of
foreign countries in which the Company's products are manufactured but have not
had a material effect on the Company's net revenue or profitability. The
Company has historically been able to partially offset its cost increases by
increasing prices or changing suppliers.
EXCHANGE RATES
The Company receives United States dollars for substantially all of its
product sales and its licensing revenues. Inventory purchases from contract
manufacturers throughout the world are denominated in United States dollars;
however, purchase prices for the Company's products may be impacted by
fluctuations in the exchange rate between the United States dollar and the
20
<PAGE>
local currencies of the contract manufacturers, which may have the effect of
increasing the Company's cost of goods in the future. During the last three
fiscal years, exchange rate fluctuations have not had a material impact on the
Company's inventory costs; however, due to the number of currencies involved and
the fact that not all foreign currencies react in the same manner against the
United States dollar, the Company cannot quantify in any meaningful way the
potential effect of such fluctuations on future income. The Company does not
engage in hedging activities with respect to such exchange rate risk.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income, which establishes standards for reporting comprehensive income and its
components, and Statement No. 131, Disclosures about Segments of an Enterprise
and Related Information, which establishes revised reporting and disclosure
requirements for operating segments. The Company will adopt Statement Nos. 130
and 131 in the first quarter of fiscal 1999 and year-end fiscal 1999,
respectively. These statements increase disclosure only and will have no effect
on the Company's financial position or results of operations.
YEAR 2000
The Company has assessed the ability of its computerized information
systems to process transactions relating to years 2000 and beyond. While certain
modifications are required, the Company expects to achieve necessary
modifications on a timely basis at a cost which will not be material to
operations. There can be no assurance, however, that the systems of other
companies on which the Company's processes rely will be timely converted, or
that a failure to successfully convert by another company, or a conversion that
is incompatible with the Company's systems, would not have an adverse impact on
the Company's operations.
SAFE HARBOR STATEMENT
Safe Harbor Statement under the Private Securities Litigation Reform Act of
---------------------------------------------------------------------------
1995. This report contains forward-looking statements within the meaning of
- ----
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements are indicated by
words or phrases such as "anticipate," "estimate," "project," "management
expects," "the Company believes" and similar words or phrases. Such statements
are based on current expectations and are subject to certain risks,
uncertainties and assumptions, including, but not limited to, economic,
competitive, governmental and technological factors affecting the Company's
operations, markets, products, services and prices. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated
or projected.
21
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Report of Independent Accountants
Consolidated Statements of Operations for the years ended March 31, 1998, 1997
and 1996
Consolidated Balance Sheets as of March 31, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended March 31, 1998, 1997
and 1996
Consolidated Statements of Changes in Shareholders' Equity for the years ended
March 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
22
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants...................................... F-2
Consolidated Statements of Operations for the years ended March 31,
1998, 1997 and 1996.................................................... F-3
Consolidated Balance Sheets as of March 31, 1998 and 1997.............. F-4
Consolidated Statements of Cash Flows for the years ended March 31,
1998, 1997 and 1996.....,.............................................. F-5
Consolidated Statements of Changes in Shareholders' Equity for the
years ended March 31, 1998, 1997 and 1996.............................. F-6
Notes to Consolidated Financial Statements............................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of
Tommy Hilfiger Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) of this Annual Report on Form 10-K present
fairly, in all material respects, the financial position of Tommy Hilfiger
Corporation and its subsidiaries at March 31, 19986 and 19975, and the results
of their operations and their cash flows for each of the three years in the
period ended March 31, 19986, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
New York, New York
May 20, 1998
F-2
<PAGE>
TOMMY HILFIGER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
MARCH 31,
----------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net revenue........................................................ $847,110 $661,688 $478,131
Cost of goods sold................................................. 447,524 344,884 258,419
-------- -------- --------
Gross profit....................................................... 399,586 316,804 219,712
Selling, general and administrative expenses....................... 236,571 190,976 132,270
-------- -------- --------
Income from operations............................................. 163,015 125,828 87,442
Interest expense................................................... 1,258 761 754
Interest income.................................................... 7,013 6,181 5,712
-------- -------- --------
Income before income taxes......................................... 168,770 131,248 92,400
Provision for income taxes......................................... 55,590 44,866 30,900
-------- -------- --------
Net income......................................................... $113,180 $ 86,382 $ 61,500
======== ======== ========
Earnings per share:
Basic earnings per share........................................... $3.03 $2.33 $1.72
======== ======== ========
Weighted average shares outstanding................................ 37,374 37,059 35,767
======== ======== ========
Diluted earnings per share......................................... $2.99 $2.28 $1.65
======== ======== ========
Weighted average shares and share equivalents outstanding.......... 37,886 37,885 37,241
======== ======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE>
TOMMY HILFIGER CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AS OF MARCH 31,
----------------------------------------
1998 1997
---- ----
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents........................... $157,051 $109,908
Accounts receivable................................. 104,732 79,984
Inventories......................................... 150,947 123,847
Other current assets................................ 25,554 18,614
-------- --------
Total current assets................................ 438,284 332,353
Property and equipment, at cost, less accumulated
depreciation and amortization....................... 160,089 121,540
Other assets.............................................. 19,637 9,192
-------- --------
Total Assets........................................ $618,010 $463,085
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.................................... $ 16,201 $ 5,996
Accrued expenses and other current liabilities...... 76,197 55,690
-------- --------
Total current liabilities....................... 92,398 61,686
Other liabilities......................................... 6,550 2,425
Long-term debt............................................ -- 1,510
Shareholders' equity
Preference Shares, $0.01 par value-shares
authorized 5,000,000; none issued.................. -- --
Ordinary Shares, $0.01 par value-shares authorized
50,000,000; issued and outstanding 37,557,934
and 37,249,529, respectively...................... 376 372
Capital in excess of par value...................... 173,416 165,032
Retained earnings................................... 345,195 232,015
Cumulative translation adjustment................... 75 45
-------- --------
Total shareholders' equity.......................... 519,062 397,464
-------- --------
Commitments and contingencies
Total Liabilities and Shareholders' Equity.......... $618,010 $463,085
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE>
TOMMY HILFIGER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
MARCH 31,
--------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income........................................................... $113,180 $ 86,382 $ 61,500
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization..................................... 29,840 20,842 13,439
Deferred income taxes............................................. (463) (4,428) (6,287)
Stock compensation expense........................................ -- -- 60
Equity in loss of equity investee................................. -- -- 143
Changes in operating assets and liabilities
Increase in assets
Accounts receivable........................................... (24,748) (11,582) (17,917)
Inventories................................................... (27,100) (42,419) (29,419)
Other assets.................................................. (17,497) (751) (5,805)
Increase (decrease) in liabilities
Accounts payable.............................................. 10,205 (3,458) 7,356
Accrued expenses and other liabilities........................ 24,632 18,049 11,157
-------- -------- ---------
Net cash provided by operating activities......................... 108,049 62,635 34,227
-------- -------- ---------
Cash flows from investing activities
Purchases of property and equipment.................................. (67,814) (83,960) (28,694)
Purchases of investments............................................. (20,000) -- (101,138)
Maturities of investments............................................ 20,000 -- 151,352
-------- -------- ---------
Net cash (used in) provided by investing activities............... (67,814) (83,960) 21,520
-------- -------- ---------
Cash flows from financing activities
Proceeds from the exercise of employee stock options................. 5,685 3,929 13,027
Tax benefit from exercise of stock options........................... 2,703 5,812 17,715
Short-term bank borrowings, net...................................... -- (5,975) 5,700
Payments on long-term debt........................................... (1,510) (279) (275)
Other................................................................ 30 3 12
-------- -------- ---------
Net cash provided by financing activities......................... 6,908 3,490 36,179
-------- -------- ---------
Net increase (decrease) in cash................................... 47,143 (17,835) 91,926
Cash and cash equivalents, beginning of period............................ 109,908 127,743 35,817
-------- -------- ---------
Cash and cash equivalents, end of period.................................. $157,051 $109,908 $ 127,743
======== ======== =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE>
TOMMY HILFIGER CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Capital in Unearned Cumulative Total
Ordinary excess of Retained stock translation shareholders'
Shares par value earnings compensation adjustment equity
-------- ---------- -------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1995 $352 $124,859 $ 84,133 ($350) $ 30 $209,024
Net income............................... 61,500 61,500
Exercise of employee stock options....... 17 13,010 13,027
Tax benefit from exercise of stock
options................................. 17,715 17,715
Amortization of unearned stock
compensation............................ (290) 350 60
Translation adjustment................... 12 12
---- -------- -------- ---- ---- --------
BALANCE, MARCH 31, 1996 369 155,294 145,633 -- 42 301,338
Net income................................. 86,382 86,382
Exercise of employee stock options......... 3 3,926 3,929
Tax benefit from exercise of stock options. 5,812 5,812
Translation adjustment..................... 3 3
---- -------- -------- ---- ---- --------
BALANCE, MARCH 31, 1997 372 165,032 232,015 -- 45 397,464
Net income................................. 113,180 113,180
Exercise of employee stock options......... 4 5,681 5,685
Tax benefit from exercise of stock options. 2,703 2,703
Translation adjustment..................... 30 30
---- -------- -------- ---- ---- --------
BALANCE, MARCH 31, 1998 $376 $173,416 $345,195 -- $ 75 $519,062
==== ======== ======== ==== ==== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE>
TOMMY HILFIGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The consolidated financial statements include the accounts of Tommy
Hilfiger Corporation ("THC") and all majority-owned subsidiaries, including
Tommy Hilfiger U.S.A., Inc. ("TH USA"), Tommy Hilfiger Licensing, Inc. ("THLI"),
Tommy Hilfiger Retail, Inc. ("THR"), Tommy Hilfiger Flagship Stores, Inc., Tommy
Hilfiger (Eastern Hemisphere) Limited ("THEH"), Tommy Hilfiger (HK) Limited
("THHK") and, through June 30, 1996, Tommy Hilfiger Nippon Co., Ltd. ("THN"), as
well as THN's 49% interest in Tommy Hilfiger Japan Co., Ltd. ("TH Japan")
(collectively "the Company").
(b) Organization and Business
THC was incorporated as a British Virgin Islands company in June 1992 and
acts as a holding company for each of the following operating subsidiaries.
TH USA designs and imports men's sportswear and childrenswear for wholesale
distribution under the trademark license agreement with THLI described below.
THLI licenses the use of the Tommy Hilfiger trademarks to TH USA, THR and
other affiliates and non-affiliates. These agreements grant the licensee
exclusive rights for use of the trademarks for specified products in specified
geographical areas.
THR commenced operations in April 1993 and as of March 31, 19986 operated
6644 retail stores.
THEH and THHK act as commissioned buying agents for TH USA, THR and certain
other of THLI's licensees.
THN was a 90% owned subsidiary and acted as a holding company for the
Company's interest in TH Japan, a joint venture with Itochu, Ltd. TH Japan had
licensed the rights to manufacture and distribute the majority of the Company's
products in Japan from THLI and, in turn, sublicensed these rights to various
Japanese companies. The joint venture terminated on June 30, 1996 and THN was
dissolved in November 1996.
(c) Basis of Consolidation
All significant intercompany balances and transactions have been
eliminated. The Company accounted for its interest in TH Japan on the equity
basis.
(d) Cash and Cash Equivalents and Investments
The Company considers all financial instruments purchased with original
maturities of three months or less to be cash equivalents.
Short-term investments include investments with an original maturity of
greater than three months and a remaining maturity of less than one year. These
investments are carried at market value and are classified as trading
securities.
F-7
<PAGE>
(e) Inventories
Inventories are valued at the lower of cost (weighted average method) or
market.
(f) Property and Equipment
Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets, ranging from three to twenty-five years.
Leasehold improvements are amortized using the straight-line method over the
lesser of the terms of the leases or the estimated useful lives of the assets.
The Company's share of the cost of constructing in-store shop displays is
capitalized and amortized using the straight-line method over their estimated
useful lives. These costs are included in "Furniture and fixtures". Major
additions and betterments are capitalized and repairs and maintenance are
charged to operations in the period incurred.
(g) Income Taxes
The Company has recorded its provision for income taxes under the liability
method. Under this method, deferred tax assets and liabilities are recognized
based on differences between the financial statement and tax bases of assets and
liabilities using presently enacted tax rates.
(h) Earnings Per Share, Share Equivalents and Authorized Shares
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, Earnings Per Share, which requires presentation in the
Consolidated Statements of Operations of both basic and diluted earnings per
share. The Company adopted this statement in the third quarter of fiscal 1998.
Earnings per share and share equivalents for all periods presented have been
restated to reflect the adoption of this statement.
The weighted average number of shares outstanding for basic earnings per
share were 37,374,000, 37,059,000 and 35,767,000 during the years ended March
31, 1998, 1997 and 1996, respectively. For diluted earnings per share, these
amounts increased by 512,000, 826,000 and 1,474,000 during the years ended March
31, 1998, 1997 and 1996, respectively, due to potentially dilutive common stock
equivalents issuable under the Company's stock option plans.
On May 5, 1998, the number of authorized Ordinary Shares was increased to
75,000,000.
(i) Revenues
Net revenues from wholesale product sales are recognized upon shipment of
products to customers. Allowances for estimated returns and discounts are
provided when sales are recorded. Retail store revenues are recognized at the
time of sale. Licensing royalties and buying agency fees are recognized as
earned.
F-8
<PAGE>
Net wholesale sales to major customers, based upon their ownership at March
31, 1998, as a percentage of total net wholesale sales, for the three-year
period ended March 31, 19968 were as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
---------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Customer A 22% 23% 22%
Customer B 22% 21% 21%
Customer C 15% 16% 14%
</TABLE>
(j) Foreign Currency Translation
The consolidated financial statements of the Company are prepared in United
States dollars as this is the currency of the primary economic environment in
which the Company operates, and substantially all of its revenues are received
and expenses are disbursed in United States dollars. The financial statements
of non-United States entities are translated into United States dollars in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 52.
Under this translation method, adjustments resulting from translating the
financial statements of the non-United States entities are recorded in
shareholders' equity.
(k) Segment Information
The Company is engaged in principally one industry segment, the design,
importation and distribution of men's sportswear and childrenswear.
Substantially all of the Company's net revenue and income from operations
are derived from, and identifiable assets (other than the time deposits
mentioned in Note 2 which are located in Singapore) are located in, the United
States and, therefore, constitute foreign operations in that the Company is
incorporated in the British Virgin Islands.
(l) Fair Value of Financial Instruments
The fair values of the Company's monetary assets and liabilities
approximate carrying values due to the relatively short-term nature of these
items.
(m) Advertising Costs
Advertising costs are charged to operations when incurred and totaled
$21,841,000, $19,651,000, and $7,929,000 and $4,348,000 during the years ended
March 31, 1998, 1997 and 1996, respectively.
(n) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(o) Reclassification of Prior Year Balances
Certain prior year balances have been reclassified to conform to current
year presentation.
F-9
<PAGE>
NOTE 2 - CASH EQUIVALENTS AND INVESTMENTS
Cash equivalents consist of time deposits and have original maturities of
less than three months. As of March 31, 1998, cash equivalents in the
Consolidated Balance Sheet include $85,628,000 of time deposits which are
earning interest at 5.38%.
NOTE 3 - ACCOUNTS RECEIVABLE
TH USA collects substantially all of its receivables through a credit
company pursuant to an agreement whereby the credit company pays TH USA after
the credit company receives payment from the Company's customer. If the
customer becomes bankrupt or insolvent or the receivable becomes 120 days past
due, the credit company pays TH USA 50% of the outstanding receivable. The
credit company establishes maximum credit limits for each customer account. As
of March 31, 1998, substantially all accounts receivable were pledged as
collateral under a bank financing agreement.
NOTE 4 - INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
March 31,
---------
1998 1997
---- ----
<S> <C> <C>
Finished goods............. $148,488,000 $122,237,000
Raw materials.............. 2,459,000 1,610,000
------------ ------------
$150,947,000 $123,847,000
============ ============
</TABLE>
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
March 31,
---------
1998 1997
---- ----
<S> <C> <C>
Furniture and fixtures............. $121,669,000 $ 88,507,000
Leasehold improvements............. 51,840,000 27,924,000
Buildings and land................. 41,211,000 37,885,000
Machinery and equipment............ 23,673,000 16,263,000
------------ -----------
238,393,000 170,579,000
Less: accumulated depreciation and
amortization.................... 78,304,000 49,039,000
------------ ------------
$160,089,000 $121,540,000
============ ============
</TABLE>
NOTE 6 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities are comprised of the
following:
<TABLE>
<CAPTION>
March 31,
---------
1998 1997
---- ----
<S> <C> <C>
Accrued compensation............ $22,187,000 $15,734,000
Letters of credit payable....... 18,863,000 5,705,000
Accrued marketing............... 3,340,000 6,369,000
Other........................... 31,807,000 27,882,000
----------- -----------
$76,197,000 $55,690,000
=========== ===========
</TABLE>
F-10
<PAGE>
NOTE 7 - LONG-TERM DEBT
In connection with the purchase of real estate, THEH obtained a ten-year,
$2,746,000 mortgage. The debt, payable in equal quarterly installments through
August 2003, was repaid in its entirety during fiscal 1998.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
(a) Leases
The Company leases office, warehouse and showroom space, retail stores and
office equipment under operating leases, which expire not later than 2023. The
Company normalizes fixed escalations in rental expense under its operating
leases. Minimum annual rentals under non-cancelable operating leases, excluding
operating cost escalations and contingent rental amounts based upon retail
sales, are payable as follows:
<TABLE>
<CAPTION>
Fiscal Year Ending March 31,
----------------------------
<S> <C>
1999....................... $10,051,000
2000....................... 11,121,000
2001....................... 10,161,000
2002....................... 9,063,000
2003....................... 8,814,000
Thereafter................. 46,681,000
</TABLE>
Rent expense was $12,551,000, $8,911,000 and $5,768,000 for the years ended
March 31, 1998, 1997 and 1996, respectively.
(b) Letters of credit
TH USA is contingently liable for unexpired bank letters of credit at March
31, 1998 of $50,273,000 related to commitments for the purchase of inventories
and $3,000,000 related to leases.
(c) Legal matters
On February 2, 1998, February 12, 1998 and February 17, 1998, three alleged
holders of Ordinary Shares filed purported derivative actions in New York state
court on behalf of the Company against the members of the Board of Directors.
The actions were later consolidated and an amended complaint was served on May
29, 1998. The amended complaint alleges that the Board's approval of the
Acquisition (see Note 15) constitutes a breach of fiduciary duty and corporate
waste, and seeks equitable relief and damages in favor of the Company, and an
award of fees to the plaintiffs' attorneys. On June 15, 1998, the Company and
its directors moved to dismiss the consolidated action on several grounds. The
motion to dismiss remains pending.
The Company and its subsidiaries are from time to time involved in routine
legal matters incidental to their businesses. In the opinion of the Company's
management, based on advice of counsel, the resolution of these matters will not
have a material effect on the financial position or the results of operations of
the Company.
F-11
<PAGE>
NOTE 9 - INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
---------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current:
U.S. Federal........................ $48,463,000 $39,276,000 $29,100,000
State and Local..................... 5,810,000 6,688,000 6,238,000
Non-U.S............................. 1,727,000 3,330,000 1,849,000
----------- ----------- -----------
56,000,000 49,294,000 37,187,000
----------- ----------- -----------
Deferred:
U.S. Federal........................ (510,000) (3,724,000) (4,940,000)
State and Local..................... 100,000 (737,000) (1,347,000)
Non-U.S............................. -- 33,000 --
----------- ----------- -----------
(410,000) (4,428,000) (6,287,000)
----------- ----------- -----------
Provision for income taxes............. $55,590,000 $44,866,000 $30,900,000
=========== =========== ===========
</TABLE>
Significant components of the Company's deferred tax assets are summarized
as follows:
<TABLE>
<CAPTION>
March 31,
---------
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets - current:
Inventory costs..................... $ 5,082,000 $ 5,054,000
Allowances for doubtful accounts
and sales discounts............. 1,661,000 2,415,000
Accrued compensation................ 2,490,000 1,580,000
Other items, net.................... 2,014,000 3,070,000
----------- -----------
11,247,000 12,119,000
Deferred tax assets - non-current:
Depreciation and amortization....... 3,670,000 2,335,000
----------- -----------
Total deferred tax assets.............. $14,917,000 $14,454,000
=========== ===========
</TABLE>
The U.S. and non-U.S. components of income before income taxes are as
follows:
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
---------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
U.S. $136,793,000 $104,671,000 $71,606,000
Non-U.S............................... 31,977,000 26,577,000 20,794,000
------------ ------------ -----------
$168,770,000 $131,248,000 $92,400,000
============ ============ ===========
</TABLE>
F-12
<PAGE>
The provision for income taxes differs from the amounts computed by
applying the applicable U.S. federal statutory rate to income before taxes as
follows:
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
---------------------------
1998 1997 1996
--- ---- ----
<S> <C> <C> <C>
Provision for income taxes at the
U.S. federal statutory rate....... $ 59,070,000 $45,937,000 $32,340,000
State and local income taxes, net of
federal benefits.................. 3,841,000 3,868,000 3,179,000
Non-U.S. income taxed at different
rates............................. (10,031,000) (6,350,000) (5,612,000)
Other................................ 2,710,000 1,411,000 993,000
------------ ----------- -----------
Provision for income taxes........... $ 55,590,000 $44,866,000 $30,900,000
============ =========== ===========
</TABLE>
THC is not taxed on income in the British Virgin Islands ("BVI"), where it
is incorporated. THC's subsidiaries are subject to taxation in the jurisdictions
in which they operate.
Provision has not been made for taxes on undistributed non-BVI earnings of
$192,312,000 at March 31, 1998, as those earnings will continue to be
reinvested. As a result of various tax planning strategies available to the
Company, it is not practical to estimate the amount of tax, if any, that might
be payable on the eventual remittance of such earnings.
NOTE 10 - RELATED PARTIES
See related disclosures in Note 15 - Acquisition of Womenswear, Jeanswear
and Canadian Licensees.
Effective February 1, 1997, the Company entered into a licensing agreement
with Pepe Jeans London Corporation ("PJLC") which provides for the distribution
of the Company's products throughout the European market. PJLC subsequently
assigned this license to a subsidiary. Under this agreement, the licensee pays
THLI a royalty based on a percentage of the value of licensed products sold by
the licensee. Except with the approval of THLI, all products sold by or through
the licensee must be purchased through THEH or TH USA pursuant to buying agency
agreements. Under these agreements, THEH and TH USA are paid a buying agency
commission based on a percentage of the cost of products sourced through them.
The distribution of products under this arrangement began in fiscal 1998.
Results of operations include $1,641,000, for the year ended March 31, 1998, of
royalties and commissions under this arrangement.
Effective June 30, 1996, the Company's joint venture arrangement with TH
Japan covering the Company's Japanese operations expired. Effective July 1,
1996, the Company entered into an exclusive license agreement for Japan with
Novel-ITC Licensing Limited ("NIL"), a related party. Under the license
agreement, NIL pays THLI a royalty based on a percentage of the value of
licensed products sold by NIL's sublicensee. Except with the approval of THLI,
all products sold by or through NIL or its sublicensee must be purchased through
THEH or TH USA pursuant to buying agency agreements. Under these agreements,
THEH and TH USA are paid a buying agency commission based on a percentage of the
cost of products sourced through them. Pursuant to this new arrangement,
royalties and commissions totaled $4,211,000 in fiscal 1998 and $2,745,000 in
fiscal 1997. Pursuant to the prior arrangement, royalties and commissions
totaled $488,000 in fiscal 1997 and $1,939,000 in fiscal 1996.
F-13
<PAGE>
Effective October 1, 1995, the Company entered into U.S. and international
license agreements with a related party, AIHL Investment Group Limited (formerly
SEL International Investments Corp.) ("AIHL"), the parent of PJLC, for the
manufacture, sale and distribution of men's, women's and girls' jeanswear and
jeans related apparel (which includes women's and girls' casualwear) bearing the
Tommy Hilfiger and Tommy Jeans registered trademarks. The U.S. and international
license agreements were subsequently assigned by AIHL to PJLC and by PJLC to two
of its subsidiaries. Other assets in the Consolidated Balance Sheets include a
note receivable from AIHL in connection with this transaction. The note, which
has a face value of $5,000,000, and has a maturity of September 30, 2000, is
recorded at its present value of $4,097,000 at March 31, 1998 and $3,735,000 at
March 31, 1997. Under this license arrangement, the Company receives royalties
from subsidiaries of PJLC based upon a percentage of net sales of licensed
products. The fiscal 1998, 1997 and 1996 results of operations include
$19,016,000, $9,963,000 and $1,915,000 of such royalties. Net sales included in
the Consolidated Statements of Operations for these licensed products prior to
this agreement were $12,370,000 in fiscal 1996. In addition, in connection with
this license, a subsidiary of PJLC leases certain space at the Company's U.S.
headquarters, for which rent of $262,000 and $214,000 was received by the
Company in fiscal 1998 and 1997, respectively. TH USA purchases finished goods
in the ordinary course of business from PJLC and its subsidiaries. Such
purchases amounted to $8,400,000 and $14,100,000 during the fiscal years ended
March 31, 1998 and 1997, respectively.
In June 1994, the Company granted a director of the Company an option to
purchase a 10% equity interest in THR in connection with entering into an
employment agreement with THR. In July 1994, this option was exercised at
$193,000, an exercise price equal to 10% of the fair market value of THR as
determined by an independent appraisal. As a result of this transaction, the
value of the Company's proportionate interest in THR increased by $190,000.
During March 1996, in connection with the termination of the director's
employment, the Company repurchased this equity interest for its fair value of
$1,800,000.
TH USA purchases finished goods in the ordinary course of business from
affiliated companies. Such purchases amounted to $14,600,000, $9,852,000 and
$10,970,000 during the fiscal years ended March 31, 1998, 1997 and 1996,
respectively. In addition, contractors of the Company purchased raw materials in
the ordinary course of business from affiliates of the Company. Such purchases
amounted to $5,930,000, $5,811,000 and $7,910,000 during the fiscal years ended
March 31, 1998, 1997 and 1996, respectively.
The Company has entered into a license agreement and a related buying
agency agreement with a Canadian licensee, in which one of the Company's
directors has an indirect beneficial ownership interest. Under the license
agreement, the Company receives a royalty from the licensee based upon a
percentage of net sales of licensed products. Under the buying agency agreement,
the Company receives commissions based on a percentage of the cost of goods
sourced on behalf of the licensee. Results of operations include $3,885,000,
$2,378,000 and $1,667,000 for the years ended March 31, 1998, 1997 and 1996,
respectively, for royalties and commissions earned from this licensee.
TH USA sells merchandise in the ordinary course of business to a retail
store that is owned by a relative of a director of the Company. Sales to this
customer amounted to approximately $476,000, $435,000 and $397,000 during the
years ended March 31, 1998, 1997 and 1996, respectively.
F-14
<PAGE>
THEH has two consulting agreements with affiliates. THEH paid fees of
$875,000 in each of fiscal 1998 and 1997 and $375,000 in fiscal 1996 under such
agreements.
TH USA had a consulting agreement with an affiliate. The fees and related
expenses under this consulting agreement totaled $619,000 during the year ended
March 31, 1996.
Under the terms of an agreement with an affiliate, THHK reimburses the
affiliate for certain general and administrative expenses incurred by the
affiliate on behalf of THHK. Payments made to the affiliate for the years ended
March 31, 1998, 1997 and 1996 were $77,000, $58,000 and $114,000, respectively.
NOTE 11 - PROFIT SHARING PLAN
TH USA maintains employee savings plans for eligible U.S. employees. TH
USA's contributions to the plans are discretionary with matching contributions
of up to 50% of employee contributions of up to 5% of employee compensation. For
the years ended March 31, 1998, 1997 and 1996, the Company made plan
contributions of $568,000, $345,000 and $271,000, respectively.
NOTE 12 - STOCK OPTION PLANS
In September 1992, the Company and its subsidiaries adopted stock option
plans (the "Plans") authorizing the issuance of an aggregate of up to 1,450,000
Ordinary Shares to directors, officers and employees of the Company, as well as
1,520,000 Ordinary Shares reserved for issuance in connection with an option
granted to a former officer of the Company pursuant to his employment agreement.
The remaining unexercised options granted under the terms of the officer's
employment agreement were exercised during fiscal 1996. Subsequently, through
May 1998, a total of 4,750,000 Ordinary Shares of THC were authorized and
reserved for issuance to directors, officers and employees of the Company, under
the Plans. In August 1994, the Board of Directors and shareholders of the
Company approved the Tommy Hilfiger Corporation Non-Employee Directors Stock
Option Plan (the "Directors Option Plan"). Under the Directors Option Plan,
directors who are not officers or employees of the Company are eligible to
receive stock option grants. The total number of Ordinary Shares for which
options may be granted under the Directors Option Plan may not exceed 200,000
Ordinary Shares in the aggregate, subject to certain adjustments.
F-15
<PAGE>
Transactions involving the Plans and the Directors Option Plan are
summarized as follows:
<TABLE>
<CAPTION>
Weighted Average
Exercise
Option Shares Price Per Share
------------- ---------------
<S> <C> <C>
Outstanding as of March 31, 1995 2,548,024 $ 9.37
Granted...................................... 793,400 $29.50
Exercised.................................... (1,654,724) $ 7.86
Canceled..................................... (85,100) $18.09
----------
Outstanding as of March 31, 1996 1,601,600 $20.10
Granted...................................... 708,300 $48.20
Exercised.................................... (369,605) $10.64
Canceled..................................... (51,725) $39.56
----------
Outstanding as of March 31, 1997 1,888,570 $31.26
Granted...................................... 1,358,950 $42.20
Exercised.................................... (308,405) $18.44
Canceled..................................... (312,580) $40.46
----------
Outstanding as of March 31, 1998 2,626,535 $37.34
==========
</TABLE>
The following table summarizes information concerning currently outstanding and
exercisable options:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------- ----------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$7.50-$20.00 293,445 5.51 $13.60 161,820 $10.42
$20.81-$30.25 550,220 7.35 $28.49 326,000 $29.50
$38.63-$45.00 976,200 9.29 $40.05 -- --
$45.13-$59.13 806,670 8.52 $48.75 39,750 $45.39
--------- ---- ------ ------- ------
$7.50-$59.13 2,626,535 8.23 $37.34 527,570 $24.85
========= ==== ====== ======= ======
</TABLE>
Options vest over periods ranging from 1-6 years. The exercise price of
all options granted under the Plans and the Directors Option Plan is the market
price on the dates of grant.
F-16
<PAGE>
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations in accounting for its stock option
awards. Accordingly, no compensation expense has been recognized for stock
options granted in 1998, 1997 and 1996. Had compensation cost been recorded
based upon the fair value at the grant dates as an alternative provided by SFAS
No. 123, "Accounting for Stock Based Compensation", the Company's net income and
earnings per share (basic and diluted) would have been reduced by approximately
$4,824,000 and $.13, respectively, in 1998, $2,998,000 and $.08, respectively,
in 1997 and $2,131,000 and $.06, respectively, in 1996. These amounts are for
disclosure purposes only and may not be representative of future calculations
since the estimated fair value of stock options is amortized to expense over the
vesting period, and additional options may be granted in future years. The fair
values of options granted was estimated at $21.38 in 1998, $22.33 in 1997 and
$13.72 in 1996 on the dates of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions for 1998, 1997 and 1996,
respectively: volatility of 43%, 40% and 42%; risk free interest rate of 6.5%,
6.1% and 6.3%; expected life of 5.9 years, 5.7 years and 5.6 years; and no
future dividends.
NOTE 13 - STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
---------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosure of cash
flow information:
Cash paid during the year:
Interest $ 1,142,000 $ 930,000 $ 1,382,000
=========== =========== ===========
Income taxes $54,749,000 $34,559,000 $24,428,000
=========== =========== ===========
</TABLE>
NOTE 14 - QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1998
- ----
<S> <C> <C> <C> <C>
Net revenue.................................. $173,735,000 $224,546,000 $246,104,000 $202,725,000
Gross profit................................. 81,703,000 109,708,000 115,303,000 92,872,000
Net income................................... 17,507,000 31,894,000 36,381,000 27,398,000
Basic earnings per share..................... .47 .85 .97 .73
Diluted earnings per share................... .46 .84 .96 .73
1997
- ----
Net revenue.................................. $124,129,000 $178,907,000 $188,199,000 $170,453,000
Gross profit................................. 58,119,000 86,931,000 90,231,000 81,523,000
Net income................................... 12,578,000 24,090,000 27,397,000 22,317,000
</TABLE>
F-17
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Basic earnings per share .34 .65 .74 .60
Diluted earnings per share .34 .63 .72 .59
</TABLE>
The quarterly financial data for the years ended March 31, 1998 and 1997
are unaudited; however, in the opinion of the Company, the interim data includes
all adjustments, consisting only of normal recurring adjustments, necessary to
present such data fairly.
NOTE 15 - ACQUISITION OF WOMENSWEAR, JEANSWEAR AND CANADIAN LICENSEES
On May 8, 1998, following the approval by the shareholders of the Company
on May 5, 1998, the Company, through its wholly owned subsidiaries, acquired
from related parties Pepe Jeans USA, Inc., the Company's United States
womenswear and jeanswear licensee ("Pepe USA"), TJ Far East Limited, Pepe USA's
buying agency affiliate, and Tomcan Investments Inc., the parent corporation of
Tommy Hilfiger Canada Inc. ("TH Canada"), the Company's Canadian licensee
(collectively, the "Acquired Companies"), for an aggregate purchase price of
$755,760,000 in cash plus 9,045,930 Ordinary Shares of the Company (the
"Acquisition"). The cash portion of the purchase price was funded from a
combination of debt financing and cash on hand.
The debt financing portion of the purchase price consisted of $250,000,000
of 6.50% notes maturing on June 1, 2003 (the "2003 Notes"), $200,000,000 of
6.85% notes maturing on June 1, 2008 (the "2008 Notes") and $200,000,000 of term
loan borrowings pursuant to the new $450,000,000 term and revolving credit
facilities (the "New Credit Facilities"). The 2003 Notes and the 2008 Notes
(collectively, the "Notes") were issued by TH USA and guaranteed by THC. The
indenture under which the Notes were issued contains covenants that, among other
things, restrict the ability of subsidiaries of THC to incur additional
indebtedness, restrict the ability of THC and its subsidiaries to incur
indebtedness secured by liens or enter into sale and leaseback transactions and
restrict the ability of THC and TH USA to engage in mergers or consolidations.
The New Credit Facilities, which are guaranteed by THC, consist of an
unsecured $250,000,000 TH USA five-year revolving credit facility, of which up
to $150,000,000 may be used for direct borrowings, and an unsecured $200,000,000
five-year term credit facility which was borrowed by TH USA in connection with
the Acquisition. The revolving credit facility will be available for letters of
credit, working capital and other general corporate purposes. The New Credit
Facilities replaced the Company's existing secured revolving credit agreement
which had been in place since April 1, 1996.
Borrowings under the term loan facility are repayable in quarterly
installments as follows: $40,000,000 in the 12-month period ending March 31,
2000, $50,000,000 in each of the next two succeeding 12-month periods and
$60,000,000 in the next succeeding 12-month period.
The New Credit Facilities contain a number of covenants that, among other
things, restrict the ability of subsidiaries of THC to dispose of assets, incur
additional indebtedness, create liens on assets, pay dividends or make other
payments in respect of capital stock, make investments, loans and advances,
engage in transactions with affiliates, enter into sale and leaseback
transactions, engage in mergers or consolidations or change the businesses
conducted by them. The New Credit Facilities also restrict the ability of THC
to create liens on assets or enter into sale and leaseback transactions. Under
the New Credit Facilities, subsidiaries of THC may not pay dividends or make
other payments in respect of capital stock to THC that in the
F-18
<PAGE>
aggregate exceed 33% of the Company's cumulative consolidated net income,
commencing with the fiscal year ended March 31, 1998, less certain deductions.
In addition, under the New Credit Facilities, THC and TH USA are required to
comply with and maintain specified financial ratios and tests (based on the
Company's consolidated financial results), including, without limitation, an
interest expense coverage ratio, a maximum leverage ratio and a minimum
consolidated net worth test.
At the date of the Acquisition, the licenses between the Acquired Companies
and the Company consisted of: a license with Pepe USA covering jeans and jeans
related apparel and women's and girls' casualwear in the United States (the
"Pepe United States License"); a license with T.H. International N.V., a
subsidiary of PJLC, covering jeans and jeans related apparel and women's and
girls' casualwear worldwide (other than in the United States and certain
specified countries) (the "Pepe International License"); a geographic license
with Tommy Hilfiger Europe B.V., a subsidiary of PJLC, covering men's and boys'
sportswear lines in Europe and certain other countries (the "Pepe European
License"); and a master geographic license for Canada with TH Canada (the
"Canadian License").
In connection with the Acquisition, the Company acquired the businesses
operated under the Pepe United States License and the Canadian License, the Pepe
International License was canceled and the license arrangements for Europe
previously covered by the Pepe International License were consolidated under the
Pepe European License. Accordingly, the Pepe European License was amended to,
among other things, include in its scope men's, women's and children's jeanswear
and jeans related apparel (including women's and girls' casualwear) and to
increase the minimum sales levels, guaranteed minimum royalties and minimum
advertising payments required thereunder. The Pepe European License was also
amended to provide the Company certain additional rights in connection with any
proposed future transfer of the business conducted under the Pepe European
License. In addition, in connection with the Acquisition, the $5,000,000 note
receivable from AIHL (see Note 10 - Related Parties) was canceled in
consideration for a capital contribution being made to Pepe USA in the same
amount as the receivable.
The Acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of the Acquired Companies
will be included in the consolidated results of the Company from the date of the
Acquisition. The unaudited pro forma combined condensed balance sheet of the
Company and the Acquired Companies as of March 31, 1998, after giving effect to
certain pro forma adjustments, is as follows:
<TABLE>
<CAPTION>
Unaudited
---------
ASSETS
<S> <C>
Current assets $ 440,052,000
Property and equipment, net 206,528,000
Intangible and other assets 1,329,807,000
--------------
Total assets $1,976,387,000
==============
LIABILITIES AND SHAREHOLDERS' EQUITY
</TABLE>
F-19
<PAGE>
<TABLE>
<S> <C>
Current liabilities $ 169,401,000
Long term debt 650,000,000
Deferred tax and other liabilities 260,408,000
Shareholders' equity 896,578,000
--------------
Total liabilities and shareholders' equity $1,976,387,000
==============
</TABLE>
The unaudited pro forma combined condensed results of operations of the
Company and the Acquired Companies for the years ended March 31, 1998 and 1997,
after giving effect to certain pro forma adjustments, are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
-------------------------------------
1998 1997
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Net revenue $1,270,811,000 $908,382,000
Gross profit 590,412,000 408,321,000
Income from operations 212,679,000 110,865,000
Income before taxes 166,405,000 63,882,000
Provision for income taxes 50,236,000 7,694,000
Net income 116,169,000 56,188,000
Diluted earnings per share $2.48 $1.20
</TABLE>
The foregoing unaudited pro forma balance sheet and statement of operations
data assume that the Acquisition took place as of March 31, 1998 for balance
sheet purposes and as of April 1, 1996 for purposes of the statement of
operations. The results also reflect (a) the elimination of certain revenues,
cost of sales and royalty expense, (b) amortization of intangible assets,
principally over 40 years, (c) incremental management compensation and net
interest expense and (d) applicable income tax effects. The unaudited pro forma
combined financial statements do not include any adjustments for special charges
expected to be recorded or synergies expected to be realized in connection with
the Acquisition.
On a combined pro forma basis, components of the Company's net revenue for
the years ended March 31, 1998 and 1997 would have been as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
--------------------------------
1998 1997
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Wholesale:
Menswear $ 706,374,000 $579,795,000
Womenswear 181,926,000 78,275,000
Childrenswear 136,910,000 73,988,000
Retail 196,066,000 149,312,000
Licensing 49,535,000 27,012,000
-------------- ------------
Total net revenue $1,270,811,000 $908,382,000
============== ============
</TABLE>
F-20
<PAGE>
Wholesale revenue includes revenues from the sale of menswear, womenswear
and childrenswear. Menswear is comprised of men's sportswear and jeanswear.
Womenswear is comprised of women's casualwear and jeanswear. Childrenswear
includes boys' sizes 4-20, and infants and toddlers. Retail revenue reflects
sales from the Company's outlet, specialty and flagship stores. Licensing
revenue consists of royalties and buying agency commissions, of which
approximately $3,700,000 and $5,200,000 in 1998 and 1997, respectively, relate
to the Pepe brand and will not recur prospectively.
NOTE 16 - FINANCIAL INSTRUMENTS
Following the announcement of the proposed Acquisition on February 1, 1998,
the Company sold US Treasury futures contracts to protect against the potential
increase in interest rates which would be in effect upon the funding of the
Acquisition. At March 31, 1998, such contracts, having a notional value of
$675,000,000, had generated deferred gains of approximately $4,490,000.
Cumulative gains or losses resulting from changes in the market values of the
futures contracts through the time of transaction financing will be amortized as
adjustments to interest expense over the appropriate debt amortization periods.
NOTE 17 - SUMMARIZED FINANCIAL INFORMATION
The following presents summarized financial information of TH USA, a wholly
owned subsidiary of THC, and its consolidated subsidiaries, as of March 31, 1998
and 1997 and for each of the three years in the period ended March 31, 1998. TH
USA is the issuer and THC is the guarantor of the Notes. The Company has not
presented separate financial statements and other disclosures concerning TH USA
because management has determined that such information is not material to
holders of the Notes.
<TABLE>
<CAPTION>
March 31,
----------
1998 1997
---- ----
<S> <C> <C>
Current assets $354,128,000 $247,070,000
Noncurrent assets 179,556,000 128,506,000
Current liability due to THC 28,669,000 26,740,000
Other current liabilities 89,197,000 57,617,000
Noncurrent liability due to THC 216,651,000 168,651,000
Other noncurrent liabilities 6,550,000 2,366,000
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
---------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net revenue $838,622,000 $656,526,000 $473,322,000
Gross profit 384,190,000 304,420,000 207,314,000
Net income 72,415,000 52,956,000 11,574,000
</TABLE>
F-21
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION
- ---- --- ----------------
<S> <C> <C>
Silas K.F. Chou 51 Chairman of the Board
Thomas J. Hilfiger 47 Honorary Chairman of the Board and Principal
Designer
Joel J. Horowitz 47 Chief Executive Officer, President and
Director
Benjamin M.T. Ng 35 Chief Financial Officer, Executive Vice
President-Strategic Development, Assistant
Secretary and Director
Lawrence S. Stroll 38 Chief Executive Officer of Tommy Hilfiger
(HK) Limited ("THHK") and Director
Ronald K.Y. Chao 59 Director
Lester M.Y. Ma 51 Director
Joseph M. Adamko 65 Director
Clinton V. Silver 68 Director
Simon Murray 58 Director
Joel H. Newman 57 Chief Administrative Officer and Executive
Vice President-Finance
Arthur Bargonetti 64 Senior Vice President-Operations
Joseph Scirocco 41 Senior Vice President and Treasurer
Lawrence T.S. Lok 41 Secretary
</TABLE>
Silas K.F. Chou has been Chairman of the Board of Directors of the Company since
1992. Mr. Chou also has served for more than the past five years as an
Executive Director of Novel Enterprises Limited ("Novel Enterprises"). Mr. Chou
was appointed as Managing Director of Novel Enterprises in 1996. In addition,
Mr. Chou has been the Chairman of the board of directors of Novel Denim Holdings
Limited ("Novel Denim"), a Mauritius-based manufacturer of denim garments and
fabric quoted on the Nasdaq National Market and an affiliate of Novel
Enterprises, since 1996. Since 1992, Mr. Chou has been the Chairman of the
board of directors of Pepe Jeans London Corporation and its predecessor
(collectively, "PJLC") and Chief Executive Officer of AIHL Investment Group
Limited and its predecessor (collectively, "AIHL").
Thomas J. Hilfiger has been a Director since 1992 and Honorary Chairman of the
Board of Directors of the Company since 1994. Prior thereto, Mr. Hilfiger was
Vice Chairman of the Board of the Company and its predecessors since 1989, and
President of Tommy Hilfiger, Inc.
23
<PAGE>
("THI") from 1982 to 1989. Mr. Hilfiger has been designing clothes under the
TOMMY HILFIGER(R) trademark since 1984.
Joel J. Horowitz is Chief Executive Officer and President of the Company. Mr.
Horowitz has served as Chief Executive Officer since 1994 and as President since
1995. From 1989 to 1994, Mr. Horowitz served as President and Chief Operating
Officer of the Company and its predecessors. Mr. Horowitz has been a Director
of the Company since 1992.
Benjamin M.T. Ng has been a Director of the Company since 1992 and its Chief
Financial Officer and Executive Vice President-Strategic Development since May
1998. From 1992 to 1998, Mr. Ng served as Executive Vice President-Corporate
Finance of the Company. From 1988 to 1991, Mr. Ng was employed in the mergers
and acquisitions department at Goldman, Sachs & Co. Mr. Ng devotes a
significant portion of his time to matters related to AIHL and its affiliates
other than the Company.
Lawrence S. Stroll has been a Director of the Company since 1992 and has served
as Chief Executive Officer of THHK since 1993. In addition, he was active in
the senior management of THI from 1989 to 1990 and has served as an advisor to
the Company and its predecessors since 1989 through a consulting arrangement.
Mr. Stroll has also been Group Chief Executive Officer of PJLC since 1993 and
Chairman of the Board of AIHL since 1992. Mr. Stroll's legal name is Lawrence
S. Strulovitch.
Ronald K.Y. Chao has been a Director of the Company since 1992. In 1996, Mr.
Chao was appointed as Vice Chairman of Novel Enterprises. For more than five
years prior thereto, Mr. Chao served as the Managing Director of Novel
Enterprises. In addition, Mr. Chao has also served as a director of Novel Denim
since February 1997.
Lester M.Y. Ma has been a Director of the Company since 1992 and served as its
Treasurer from 1996 to 1997. Mr. Ma has been an Executive Director and Group
Chief Accountant of Novel Enterprises for more than the past five years. In
addition, Mr. Ma has been a director of Novel Denim since 1992 and its Treasurer
since February 1997. Mr. Ma's legal name is Mang Yin Ma.
Joseph M. Adamko has been a Director of the Company since 1993. Since 1992, Mr.
Adamko has been a director of Sterling Bancorp and Vice Chairman and a director
of Sterling National Bank. Prior thereto, Mr. Adamko was employed by
Manufacturers Hanover Trust Company of New York in a variety of positions for
over 30 years, including most recently as a Managing Director.
Clinton V. Silver has been a Director of the Company since 1994. Mr. Silver
currently serves as a consultant to, and from 1991 until his retirement in 1994,
served as Deputy Chairman of, Marks & Spencer plc ("Marks & Spencer"), an
international retailer based in London. Mr. Silver served as a director of
Marks & Spencer from 1974 to 1994 and as Joint Managing Director from 1990 to
1994. Mr. Silver is also a non-executive director of Hillsdown Holdings plc and
the Pentland Group plc.
Simon Murray has been a Director of the Company since April 1997. From 1993 to
1997, Mr. Murray was the Executive Chairman Asia Pacific of Deutsche Bank AG and
is currently the Chairman of General Enterprise Management Services, a private
equity fund management company sponsored by Simon Murray And Associates and
Deutsche Bank. Mr. Murray is also a director of a number of public companies in
the Far East, including Hutchison Whampoa Limited
24
<PAGE>
and Orient Overseas (International) Limited, and other companies in Europe,
including Compagnie General Des Eaux.
Joel H. Newman has been the Company's Chief Administrative Officer and Executive
Vice President-Finance since May 1998. From 1997 to 1998, Mr. Newman served as
Executive Vice President-Operations of the Company. Since 1993, Mr. Newman has
also held various senior operations and financial positions with TH USA. Prior
to joining the Company, Mr. Newman held various senior operations and financial
positions with major companies in the apparel wholesale and retail industries.
Arthur Bargonetti has been Senior Vice President-Operations of the Company since
May 1998. In addition, Mr. Bargonetti has been the Chief Operating Officer and
Executive Vice President of Pepe Jeans USA, Inc. since 1994. Prior thereto, Mr.
Bargonetti was the Chief Operating Officer and Executive Vice President of
Bidermann Industries U.S.A., Inc.
Joseph Scirocco has been Senior Vice President and Treasurer of the Company
since December 1997. Prior to joining the Company, Mr. Scirocco was employed in
the Retail and Consumer Products Group of Price Waterhouse LLP, where he served
as an Audit Partner since 1990.
Lawrence T.S. Lok has been Secretary of the Company and Novel Enterprises since
December 1994. In addition, Mr. Lok has been Secretary of Novel Denim since
February 1997. Mr. Lok has also been Deputy Group Chief Accountant of Novel
Enterprises for more than the past five years.
Ronald K.Y. Chao and Silas K.F. Chou are brothers.
TERMS OF DIRECTORS
The Company's Board of Directors is divided into three classes with
staggered three-year terms. At each Annual Meeting of Shareholders, the
successors of the class of directors whose terms expire at such meeting are
elected for three-year terms. The terms of Messrs. Horowitz, Chao and Murray
expire in 1998; the terms of Messrs. Chou, Hilfiger and Adamko expire in 1999;
and the terms of Messrs. Ng, Stroll, Ma and Silver expire in 2000.
SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities ("Reporting Persons")
to file reports of ownership and changes in ownership ("Section 16 Reports")
with the Securities and Exchange Commission (the "SEC") and the New York Stock
Exchange. Reporting Persons are required by the SEC to furnish the Company with
copies of all Section 16 Reports they file.
Based solely on its review of the copies of such Section 16 Reports
received by it, or written representations received from Reporting Persons, all
Section 16(a) filing requirements applicable to the Company's Reporting Persons
during and with respect to the fiscal year ended March 31, 1998 have been
complied with on a timely basis.
25
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid and accrued by the
Company and its subsidiaries for the fiscal years ended March 31, 1998, 1997 and
1996 to the Company's chief executive officer and the four other most highly
compensated executive officers (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------- -----------------
AWARDS
-----------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) STOCK OPTIONS (#) COMPENSATION ($)
- ----------------------------- ---- ---------- --------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Joel J. Horowitz........................ 1998 540,000 9,343,000 -- 600(1)
Chief Executive Officer and 1997 473,000 7,174,000 -- 353
President 1996 430,000 5,016,000 -- 270
Thomas J. Hilfiger...................... 1998 10,464,000 3,500,000(2) -- 600(1)
Honorary Chairman and 1997 8,498,223 4,500,000(2) -- 353
Principal Designer 1996 6,510,179 800,000 -- 270
Silas K.F. Chou......................... 1998 750,000(3) 325,000 -- --
Chairman of the Board 1997 750,000(3) 325,000 -- --
1996 750,000(3) 325,000 -- --
Lawrence S. Stroll...................... 1998 625,000(4) 325,000 -- --
Director; Chief Executive Officer 1997 625,000(4) 325,000 -- --
of THHK 1996 625,000(4) 325,000 -- --
Benjamin M.T. Ng........................ 1998 250,000 700,000 5,000 5,229(5)
Director; Chief Financial Officer 1997 250,000 211,375 5,000 4,044
and Executive Vice President- 1996 150,000 288,625 150,000 4,093
Strategic Development
</TABLE>
________
(1) Amount represents premiums paid by the Company for group term life
insurance on behalf of the Named Executive Officer.
(2) All of the 1998 amount, and $3,500,000 of the 1997 amount, will be payable
on a deferred basis. See "Certain Employment Agreements."
(3) 1998 and 1997 amounts include 50% of the fees paid pursuant to a consulting
agreement between Tommy Hilfiger (Eastern Hemisphere) Limited ("THEH") and
Fasco International, Inc. ("Fasco International"), a subsidiary of
Sportswear Holdings Limited ("Sportswear Holdings"). 1996 amount includes
50% of the fees paid pursuant to a consulting agreement between TH USA and
Falcon International, Inc. ("Falcon International"), a subsidiary of
Sportswear Holdings. See "Certain Relationships and Related Transactions."
(4) Includes (i) for 1998 and 1997, 50% of the fees paid pursuant to a
consulting agreement between THEH and Fasco International, and for 1996,
50% of the fees paid pursuant to a consulting agreement between TH USA and
Falcon International; and (ii) all of the fees paid pursuant to a
consulting agreement between THEH and an affiliate of Mr. Stroll. See
"Certain Relationships and Related Transactions."
(5) Amount represents employer matching contribution under the Tommy Hilfiger
U.S.A. 401(k) Profit Sharing Plan of $4,629 and premiums paid by the
Company for group term life insurance on behalf of Mr. Ng of $600.
26
<PAGE>
STOCK OPTION GRANTS
The following table sets forth information regarding grants of stock
options during fiscal year 1998 made to the only Named Officer who has received
Company option grants.
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS GRANT DATE VALUE(1)
-------------------------------------------------------------------------------- -------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL STOCK
UNDERLYING OPTIONS
STOCK GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE
NAME GRANTED (#) FISCAL YEAR (2) ($/SH) DATE PRESENT VALUE($)
---- ----------- --------------- ----- ---- ----------------
<S> <C> <C> <C> <C> <C>
Benjamin M.T. Ng 5,000 0.36% 38.625 04/28/07 $91,292
</TABLE>
- --------------
(1) The fair value of these options on the date of grant was estimated using
the Black-Scholes option-pricing model with the following assumptions:
volatility of 43%; risk-free interest rate of 6.8%; expected life of 5
years; and no future dividends. The dollar amount in this column is not
intended to forecast potential future appreciation, if any, of the
Company's Ordinary Shares.
(2) This percentage is calculated with respect to stock options granted under
the Plans (as defined below) during the last fiscal year. The stock options
granted to Mr. Ng during the last fiscal year were non-qualified options
granted pursuant to the Plans. Such options become exercisable in 20%
increments each April 30, commencing April 30, 1998. See "Stock Option
Plans".
STOCK OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding stock option exercises
during fiscal year 1998 by the only Named Executive Officer who has received
Company option grants, and the values of such officer's unexercised options as
of March 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED STOCK VALUE OF UNEXERCISED IN-THE-
SHARES OPTIONS AT MONEY STOCK OPTIONS AT
ACQUIRED ON VALUE FISCAL YEAR-END (#) FISCAL YEAR-END ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
----- ----------- ----------- -------------------------- -------------------------
<S> <C> <C> <C> <C>
Benjamin M.T. Ng -- -- 151,070/9,000 4,490,492/166,938
</TABLE>
CERTAIN EMPLOYMENT AGREEMENTS
Subsidiaries of the Company had employment agreements with Messrs. Hilfiger
and Horowitz during fiscal year 1998.
The employment agreement with Tommy Hilfiger, the Company's Honorary
Chairman of the Board and Principal Designer, provides for his employment as the
designer of all products carrying the Tommy Hilfiger trademark until his death,
disability or incompetence. Mr. Hilfiger receives an annual base salary of
$900,000, subject to adjustments. If net sales of TH USA and
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<PAGE>
its subsidiaries are less than $48,333,333 in any year, Mr. Hilfiger's base
salary for such year is reduced by 1.5% of such shortfall, to not less than
$500,000. If net sales are greater than $48,333,333 in any fiscal year, Mr.
Hilfiger receives an additional payment equal to 1.5% of such excess. If Mr.
Hilfiger terminates his employment without the consent of TH USA other than by
reason of his death, disability or incompetence, TH USA will have no further
obligations under the agreement. The employment agreement provides that TH USA
and its subsidiaries cannot enter into any line of business without the consent
of Mr. Hilfiger if he shall reasonably determine that such line of business
would be detrimental to the Tommy Hilfiger trademark.
The employment agreement with Mr. Horowitz provides for his employment as
Chief Executive Officer of the Company and TH USA until March 14, 1999. The
agreement provided for an annual base salary in fiscal year 1998 of $540,000.
The base salary is subject to increase each year thereafter by the average
percentage increase for all employees of TH USA. In addition, Mr. Horowitz is
entitled to receive an amount equal to 5 percent of the Company's earnings
before depreciation, interest on financing of fixed assets, non-operating
expenses and taxes ("operating earnings"), subject to a minimum of $200,000 per
year and a maximum of $710,000 per year, which maximum has been reduced each
year (from an original level of $900,000) by the increase in his base salary;
provided, that if the Company's operating earnings are below $2 million in any
year, TH USA is entitled to offset 10% of any shortfall (up to $75,000) against
such payments in future years to the extent they would otherwise exceed
$200,000.
Beginning in fiscal 1995, the Company became subject to Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), under which public
companies are not permitted to deduct annual compensation paid to certain
executive officers in excess of $1,000,000 per executive, unless such excess is
paid pursuant to an arrangement based upon performance and approved by
shareholders and provided that the other requirements set forth in Section
162(m) and related regulations are met. Payments required to be made pursuant
to the aforementioned employment agreements with Messrs. Hilfiger and Horowitz,
which were entered into prior to the effective date of Section 162(m), are not
subject to such restrictions.
On May 22, 1995, the Compensation Committee approved and the Board of
Directors adopted, and on July 28, 1995, the shareholders approved, the Tommy
Hilfiger U.S.A., Inc. Supplemental Executive Incentive Compensation Plan (the
"SEIC Plan"), effective as of April 1, 1995 for each of the four fiscal years
ending March 31, 1999. The purpose of the SEIC Plan is to provide a significant
and flexible economic opportunity to Mr. Horowitz, Chief Executive Officer and
President of the Company and Chief Executive Officer of TH USA, in an effort to
reward his contribution to the Company and its subsidiaries. The SEIC Plan is
administered by the Compensation Committee and provides for a cash award to Mr.
Horowitz equal to 5 percent of the operating earnings (as defined above) of the
Company. Awards under the plan are calculated and paid quarterly based on 3.75
percent of operating earnings for the first three fiscal quarters, with the
remaining amount of the bonus (based on the 5 percent rate) payable at the end
of the fiscal year. The amount of the award is reduced by the amount of any
other bonuses based on the operating earnings of the Company or any of its
subsidiaries granted to Mr. Horowitz. The 5 percent operating earnings bonus
payable under Mr. Horowitz's employment agreement is credited against bonuses
payable under the SEIC Plan. The SEIC Plan does not contain any cap on the
maximum amount of the bonus payable thereunder. The SEIC Plan bonus payable to
Mr. Horowitz in respect of fiscal year 1998, net of the $710,000 bonus payable
under his employment agreement, was $8,633,000. While the Company believes that
compensation
28
<PAGE>
payable pursuant to the SEIC Plan will be deductible for federal income tax
purposes pursuant to Section 162(m), there can be no assurance in this regard.
The employment agreements with Messrs. Hilfiger and Horowitz also provide
that such executives are eligible to receive additional annual bonuses at the
discretion of TH USA's Compensation Committee if the TH USA Compensation
Committee determines that certain performance levels established by the
Company's Compensation Committee have been satisfied. If, however, compensation
is awarded based on an arrangement that does not satisfy the requirements of
Section 162(m), the Company would not be allowed to deduct for tax purposes any
payments in excess of the $1,000,000 limitation. The Compensation Committee
approved discretionary bonuses of $3,500,000, $4,500,000 and $800,000 for Mr.
Hilfiger in fiscal years 1998, 1997 and 1996, respectively. The full amount of
the fiscal year 1998 bonus, and $3,500,000 of the fiscal year 1997 bonus, was
granted on a deferred basis as described below (the "Deferred Bonuses").
The Deferred Bonuses (and any interest accrued thereon) will be paid in
annual installments on the last day of each fiscal year of the Company in the
largest possible amounts that can be paid, after taking into account any base
salary and other compensation in that fiscal year which would be counted for
purposes of Section 162(m), and still be fully deductible under such
regulations. The unpaid portion of the Deferred Bonus will accrue interest at a
rate equal to TH USA's bank borrowing rate. While the Company believes that such
Deferred Bonus payments will be deductible for federal income tax purposes
pursuant to Section 162(m), there can be no assurance in this regard.
STOCK OPTION PLANS
Tommy Hilfiger U.S.A., Inc. and Tommy Hilfiger (Eastern Hemisphere) Limited 1992
Stock Incentive Plans
In September 1992, the Company and its subsidiaries adopted stock option
plans (collectively, the "Plans") authorizing the issuance of an aggregate of up
to 1,450,000 Ordinary Shares to directors, officers and employees of the Company
and its subsidiaries, as well as 1,520,000 Ordinary Shares that were reserved
for issuance in connection with an option granted to a former director and
executive officer of the Company pursuant to his employment agreement. Messrs.
Hilfiger, Horowitz, Chou, Chao and Stroll are not eligible for grants under the
Plans. In December 1993, July 1995, November 1996 and October 1997, the
Company's shareholders approved amendments to the Plans to increase by a total
of 3,250,000 the number of Ordinary Shares reserved for issuance under the
Plans. In addition, in January 1998 the Compensation Committee approved, and in
May 1998 the Board of Directors adopted, an amendment to the Plans to increase
by 1,500,000 the number of Ordinary Shares reserved for issuance thereunder.
The Plan for employees of TH USA has been administered by the Compensation
Committee of the Board of Directors of TH USA and the Plan for employees of the
Company's non-United States subsidiaries have been administered by the Company's
Compensation Committee (collectively, the "Compensation Committees"). The
Compensation Committees determine the employees to whom awards are granted, the
number of awards granted and the specific terms and conditions of each grant,
subject to the provisions of the Plans.
29
<PAGE>
Under the Plans, awards may include stock options, stock appreciation
rights and restricted stock. An option or right granted under the Plans must
have an exercise price of not less than market value at the date of grant.
Options may be exercisable at such times, in such amounts, in accordance with
such terms and conditions, and subject to such restrictions as are set forth in
the option agreement evidencing the grant of such options.
Adjustments in the number and kind of shares subject to options granted
under the Plans are made by the Compensation Committees in the event of a
merger, consolidation, recapitalization, reclassification, stock split, warrants
or rights issuance, stock dividend or combination of shares. In addition, the
grants may provide for acceleration or immediate vesting in the event of a
change of control of the Company or its subsidiaries.
Non-Employee Directors Stock Option Plan
In August 1994, the Board of Directors and shareholders of the Company
approved the Tommy Hilfiger Corporation Non-Employee Directors Stock Option Plan
(the "Directors Option Plan"). Under the Directors Option Plan, directors who
are not officers or employees of the Company or any subsidiary of the Company
("Non-Employee Directors") are eligible to receive stock options.
The Directors Option Plan is administered by the Company's Compensation
Committee consisting of not less than two members of the Board, each of whom is
a "disinterested person" as that term is used in Rule 16b-3 promulgated under
the Exchange Act ("Rule 16b-3"). Subject to certain specific limitations and
restrictions set forth in the Directors Option Plan, the Company's Compensation
Committee has full and final authority to interpret the Directors Option Plan,
to prescribe, amend and rescind rules and regulations, if any, relating to the
Directors Option Plan and to make all determinations necessary or advisable for
the administration of the Directors Option Plan. However, grants of stock
options to participants under the Plan and the amount, nature and timing of the
grants are not subject to the determination of the Committee.
The total number of Ordinary Shares for which options may be granted under
the Directors Option Plan may not exceed 200,000 shares while the Directors
Option Plan is in effect, subject to certain adjustments described in the
Directors Option Plan. Each Non-Employee Director receives an initial stock
option to purchase 10,000 Ordinary Shares at a price equal to the fair market
value at the time of the grant of the Ordinary Shares subject to such stock
option.
Prior to termination of the Directors Option Plan, on the first to occur of
either the April 1 or October 1 following the first anniversary of each Non-
Employee Director's date of initial grant (the "First Annual Grant Date"), and
on each anniversary of such Non-Employee Director's First Annual Grant Date,
such Non-Employee Director will receive an additional stock option to purchase
1,000 Ordinary Shares at a price equal to the fair market value of the Ordinary
Shares at the time of the grant, provided such individual continues to be a Non-
Employee Director.
The term of each stock option will be 10 years unless earlier terminated by
termination of the director status of a Non-Employee Director. The stock
options will be exercisable in equal installments over five years from the date
of grant. The stock options granted under the Directors Option Plan may not be
assigned or transferred except by will, applicable laws of descent and
distribution or pursuant to a qualified domestic relations order.
30
<PAGE>
The Board may amend, alter or discontinue the Directors Option Plan, but no
amendment, alteration or discontinuation will be made which would (i) impair the
rights of an optionee under a stock option without the optionee's consent,
except such an amendment as would cause the Directors Option Plan to qualify for
the exemption provided by Rule 16b-3 or (ii) disqualify the Directors Option
Plan from the exemption provided by Rule 16b-3. In addition, (i) no amendment
will be made without the approval of the Company's shareholders to the extent
such approval is required by law or agreement, and (ii) the Directors Option
Plan will not be amended more often than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
All stock options granted by the Company are non-qualified stock options
for purposes of the Code. The grant of non-qualified stock options does not
result in any taxable income to the participant. Upon the exercise of a non-
qualified stock option, the excess of the market value of the shares acquired
over their cost to the participant is taxable to the participant as ordinary
income. TH USA will generally be entitled to a corresponding deduction at the
time such amounts are included in income by a TH USA Plan participant. The
participant's tax basis for the shares is their fair market value at the time of
exercise. Income realized on the exercise of a non-qualified stock option is
subject to federal and (where applicable) state and local withholding taxes.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From August 1994 through the end of the Company's 1997 fiscal year, the
Compensation Committee consisted of Mr. Adamko, who is the Chairman, and Mr.
Silver. In April 1997, Mr. Murray was appointed as an additional member of the
Compensation Committee.
During the Company's last fiscal year, Sportswear Holdings, a British
Virgin Islands corporation, was 49.99% owned by Westleigh Limited, a British
Virgin Islands corporation privately owned by members of the Chao family
(including Messrs. Silas K.F. Chou, Chairman of the Board of the Company, and
Ronald K.Y. Chao, a Director of the Company) and an affiliate of Novel
Enterprises ("Westleigh"), and 49.99% owned by Gadwal Limited, a Hong Kong
corporation in which Mr. Stroll, a Director of the Company and Chief Executive
Officer of THHK, has a indirect beneficial ownership interest ("Gadwal"). At
the end of fiscal year 1998, Gadwal transferred all of its assets, including its
ownership interest in Sportswear Holdings, to Flair Investment Holdings Limited,
a British Virgin Islands corporation and a wholly owned subsidiary of Gadwal
("Flair"). AIHL is owned 70% by Sportswear Holdings, 22.5% by Mr. Hilfiger,
Honorary Chairman of the Board and Principal Designer of the Company, and 7.5%
by Mr. Horowitz, Chief Executive Officer, President and a Director of the
Company. PJLC is owned 100% by Blackwatch Investments Limited, a British Virgin
Islands corporation ("Blackwatch"). Blackwatch is owned 97% by AIHL and 3% by
Anasta Holdings Limited, a British Virgin Islands corporation and an affiliate
of Mr. Chou ("Anasta"). Mr. Ng, Chief Financial Officer, Executive Vice
President-Strategic Development and a Director of the Company, and Mr. Ma, a
Director of the Company, may have certain economic interests based on the
performance of AIHL and its affiliates. Novel Enterprises and its affiliates
also hold other interests in the apparel industry, including an approximately
48% ownership interest in Novel Denim.
31
<PAGE>
Mr. Chou is Chairman of the Board of Directors of PJLC and Mr. Stroll is
Group Chief Executive Officer and a director of PJLC. Mr. Ng is also a director
of PJLC. Messrs. Chao and Ma are directors of certain subsidiaries of PJLC.
Messrs. Chou, Stroll and Ng are executive officers and directors of
Blackwatch.
Messrs. Chou, Stroll, Hilfiger and Horowitz are executive officers and
directors of AIHL. Mr. Ma is an executive officer and director of AIHL. Mr. Ng
is an executive officer, and until May 1997 was a director, of AIHL.
Messrs. Chou and Stroll are executive officers and directors of Sportswear
Holdings and Mr. Chao is a director of Sportswear Holdings.
Messrs. Chou and Chao are directors of Westleigh Limited.
Messrs. Chou, Chao and Ma are executive officers and directors of Novel
Enterprises.
Mr. Chou is an executive officer, director and chairman of the compensation
committee of Novel Denim. Mr. Chao is a director of Novel Denim and Mr. Ma is
an executive officer and director of Novel Denim.
See "Certain Relationships and Related Transactions" in Item 13.
DIRECTOR COMPENSATION
Directors who are employees of the Company or its subsidiaries receive no
additional compensation for their service on the Board and its Committees. All
other Directors of the Company receive a retainer of $25,000 per annum. Each
member of a Committee of the Board of Directors receives a retainer of $5,000
per annum, and each Chairman of a Committee of the Board of Directors receives
an additional retainer of $3,000 per annum. These Directors also receive $2,000
for attendance at each meeting of the Board or a Committee.
In October 1997, a Special Committee of Independent Directors, consisting
of Messrs. Murray, Adamko and Silver, was formed to consider and negotiate the
possible acquisition of the Company's womenswear, jeanswear and Canadian
licensees. Each member of this Special Committee received a supplemental fee of
$15,000 in fiscal year 1998.
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth data as of June 5, 1998 concerning the
beneficial ownership of Ordinary Shares by (i) the persons known to the Company
to beneficially own more than five percent of the outstanding Ordinary Shares of
the Company, (ii) all directors and nominees and each Named Executive Officer
and (iii) all directors and executive officers as a group as reported by each
person.
<TABLE>
<CAPTION>
AMOUNT PERCENT
BENEFICIALLY OWNED OF CLASS(1)
------------------ ----------
<S> <C> <C>
Pepe Jeans London Corporation(2)
Craigmuir Chambers
P.O. Box 71
Road Town, Tortola
British Virgin Islands........................... 9,045,930 19.1%
The Equitable Companies Incorporated(3)
1290 Avenue of the Americas
New York, NY 10104............................... 4,474,120 9.5%
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
Silas K.F. Chou(2)............................... --- ---
Thomas J. Hilfiger(2)............................ 10,000 *
Joel J. Horowitz(2).............................. 10,600 *
Benjamin M.T. Ng................................. 153,070(4) *
Lawrence S. Stroll(2)............................ --- ---
Ronald K.Y. Chao(2).............................. 2,400(5) *
Lester M.Y. Ma................................... 4,600(5) *
Joseph M. Adamko................................. 6,000(6) *
Clinton V. Silver................................ 6,600(5) *
Simon Murray..................................... 2,000(5) *
All directors and executive officers as a group
(including Ordinary Shares owned by PJLC)
(14 persons)(2).................................. 9,284,200 19.6%
</TABLE>
- --------
* Less than 1%.
(1) Shares outstanding includes the right to acquire beneficial ownership of
724,370 Ordinary Shares pursuant to currently exercisable stock options
under Company stock option plans. For purposes of this table, "currently
exercisable" stock options include options becoming vested and exercisable
within 60 days from June 5, 1998.
(2) Information based on Schedule 13D dated May 8, 1998 filed with the
Securities and Exchange Commission (the "SEC") by PJLC. According to the
Schedule 13D, PJLC, a parent holding company, has shared dispositive and
shared voting power over all of the shares. As set forth in the Schedule
13D and under "Directors and Executive Officers of the Company -
Compensation Committee Interlocks and Insider Participation" in Item 10:
PJLC is owned 100% by Blackwatch; Blackwatch is owned 97% by AIHL and 3% by
Anasta, an affiliate of Mr. Chou; AIHL is owned 70% by Sportswear Holdings,
22.5% by Mr. Hilfiger and 7.5% by Mr. Horowitz; and Sportswear Holdings is
owned 49.99% by Westleigh, which is privately owned by members of the Chao
family (including Messrs. Chou and Chao), and 49.99% owned by Flair, in
which Mr. Stroll has an indirect beneficial ownership interest. According
to the Schedule 13D, each of Blackwatch, AIHL, Anasta, Sportswear Holdings,
Westleigh, Flair, Mr. Hilfiger and Mr. Horowitz may be deemed to
beneficially own, and may be deemed to have shared dispositive power and
shared voting power over, all of the Ordinary Shares owned by PJLC through
their respective direct or indirect ownership of the capital stock of PJLC.
(3) Information based on Amendment to Schedule 13G dated March 9, 1998 filed
with the SEC by The Equitable Companies Incorporated ("Equitable").
According to the Schedule 13G, (a) Equitable, a parent holding company, has
33
<PAGE>
sole dispositive power over 4,417,920 of the shares, shared dispositive
power over 1,600 of the shares, sole voting power over 1,134,032 of the
shares and shared voting power over 3,281,200 of the shares and (b) certain
of Equitable's subsidiaries have sole dispositive power over 4,472,500 of
the shares, shared dispositive power over 1,600 of the shares, sole voting
power over 1,188,632 of the shares and shared voting power over 3,281,200
of the shares.
(4) Issuable upon the exercise of currently exercisable stock options under the
Plans.
(5) Issuable upon the exercise of currently exercisable stock options under the
Directors Option Plan.
(6) Includes 4,600 Ordinary Shares issuable upon the exercise of currently
exercisable stock options under the Directors Option Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain relationships and transactions between the Company and certain
directors and officers of the Company and certain of their affiliates are
described below.
THE ACQUISITION
On January 26, 1998, Pepe USA entered into a share purchase agreement with
Lawvest Holdings Inc. ("Lawvest"), a company in which Mr. Stroll and his
descendants have a 100% beneficial ownership interest, to acquire Tomcan, the
parent corporation of TH Canada, the Company's Canadian licensee. Lawvest's
sole shareholder executed a guarantee of Lawvest's indemnification obligations
under this agreement. On January 31, 1998, the Company entered into a stock
purchase agreement (the "Stock Purchase Agreement") with PJLC to acquire Pepe
USA, the Company's United States womenswear and jeanswear licensee, and Pepe Far
East, Pepe USA's buying agency affiliate. Also on January 31, 1998, AIHL
executed a guarantee of the performance by PJLC of its obligations under the
Stock Purchase Agreement. On May 8, 1998, following the approval by the
shareholders of the Company on May 5, 1998, the Company, through its wholly
owned subsidiaries, acquired Pepe USA and Pepe Far East from PJLC for an
aggregate purchase price of $755,760,000 in cash plus 9,045,930 Ordinary Shares
of the Company (the "Purchase Price Shares"). Immediately following this
transaction, Pepe USA acquired from Lawvest all of the outstanding shares of
Tomcan with funds provided by PJLC using proceeds from the cash consideration
paid to it in the Acquisition.
At the time of the execution of the Stock Purchase Agreement, the Company
entered into a lock-up agreement (the "Lock-Up Agreement") with PJLC,
Blackwatch, AIHL, Anasta, Sportswear Holdings, Westleigh, Gadwal, Mr. Hilfiger
and Mr. Horowitz (collectively, the "PJLC Affiliates"), prohibiting the transfer
of the Purchase Price Shares for two years from the date of the Acquisition,
with additional restrictions during the following three years on transfers of
the shares as a block, subject in each case to certain exceptions. Under the
Lock-Up Agreement, the two-year prohibition on transfers may only be amended
with the approval of disinterested holders of a majority of the Ordinary Shares
of the Company.
At the time of the closing of the Acquisition, the Company entered into a
registration rights agreement with the PJLC Affiliates (with Flair substituted
for Gadwal) under which the PJLC Affiliates, along with their successors and
permitted transferees under the Lock-Up Agreement, will have the right to
require the Company to register sales of the Purchase Price Shares following the
second anniversary of the Acquisition. At this time, Messrs. Chou and Stroll
also entered into a non-competition agreement with the Company restricting their
ability to compete in the United States or Canada with the Pepe USA businesses
for four years following the Acquisition.
34
<PAGE>
At the date of the Acquisition, the licenses between the Acquired Companies
and the Company consisted of: a license with Pepe USA covering jeans and jeans
related apparel and women's and girls' casualwear in the United States (the
"Pepe United States License"); a license with T.H. International N.V., a
subsidiary of PJLC, covering jeans and jeans related apparel and women's and
girls' casualwear worldwide (other than in the United States and certain
specified countries) (the "Pepe International License"), a geographic license
with Tommy Hilfiger Europe B.V., a subsidiary of PJLC, covering men's and boys'
sportswear lines in Europe and certain other countries (the "Pepe European
License"); and a master geographic license for Canada with TH Canada (the
"Canadian License").
In connection with the Acquisition, the Company acquired the businesses
operated under the Pepe United States License and the Canadian License, the Pepe
International License was canceled and the license arrangements for Europe
previously covered by the Pepe International License were consolidated under the
Pepe European License. Accordingly, the Pepe European License was amended to,
among other things, include in its scope men's, women's and children's jeanswear
and jeans related apparel (including women's and girls' casualwear) and to
increase the minimum sales levels, guaranteed minimum royalties and minimum
advertising payments required thereunder. The Pepe European License was also
amended to provide the Company certain additional rights in connection with any
proposed future transfer of the business conducted under the Pepe European
License. In addition, in connection with the Acquisition, the $5,000,000 note
receivable from AIHL (as described below) was canceled in consideration for a
capital contribution being made to Pepe USA in the same amount as the
receivable.
OTHER RELATIONSHIPS AND TRANSACTIONS
Effective February 1, 1997, the Company entered into the Pepe European
License with PJLC. PJLC subsequently assigned the license to a subsidiary,
Tommy Hilfiger Europe B.V. Under this agreement, the licensee pays THLI a
royalty based on a percentage of the value of licensed products sold by the
licensee. Except with the approval of THLI, all products sold by or through the
licensee must be purchased through THEH or TH USA pursuant to buying agency
agreements. Under these agreements, THEH and TH USA are paid a buying agency
commission based on a percentage of the cost of products sourced through them.
The distribution of products under this arrangement began in fiscal 1998.
Results of operations include $1,641,000, for the year ended March 31, 1998, of
royalties and commissions under this arrangement.
Effective June 30, 1996, the Company's joint venture arrangement with Tommy
Hilfiger Japan Co., Ltd. ("TH Japan") covering the Company's Japanese operations
expired. Effective July 1, 1996, the Company entered into an exclusive license
agreement for Japan with Novel-ITC Licensing Limited ("NIL"), a company jointly
controlled by Itochu Corporation, which was the 51% owner of TH Japan, and Novel
Enterprises. Mr. Stroll indirectly owns a 3.5% equity interest in NIL. Under
the license agreement, NIL pays THLI a royalty based on a percentage of the
value of licensed products sold by THMJ Incorporated ("THMJ"), NIL's
sublicensee. Novel Enterprises and Messrs. Stroll, Hilfiger and Horowitz
indirectly own equity interests of 15.2%, 15.2%, 9.7% and 3.2%, respectively, in
THMJ. Except with the approval of THLI, all products sold by or through NIL or
THMJ must be purchased through THEH or TH USA pursuant to buying agency
agreements. Under these agreements, THEH and TH USA are paid a buying agency
commission based on a percentage of the cost of products sourced through them.
Pursuant to this new arrangement, royalties and commissions totaled $4,211,000
during fiscal year 1998.
35
<PAGE>
Effective October 1, 1995, the Company entered into the Pepe United States
License and the Pepe International License with a related party, AIHL (formerly
SEL International Investments Corp.), the parent of PJLC. The U.S. and
international licenses were subsequently assigned by AIHL to PJLC, and by PJLC
to two of its subsidiaries, Pepe USA and T.H. International N.V., respectively.
The Company received a note receivable from AIHL in connection with this
transaction. The note, which has a face value of $5,000,000, and has a maturity
of September 30, 2000, is recorded at its present value of $4,097,000. Under
this license agreement, the Company receives royalties from subsidiaries of PJLC
based upon a percentage of net sales of licensed products. The fiscal 1998
results of operations include $19,016,000 of such royalties. In addition, in
connection with this license, a subsidiary of PJLC leases certain space at the
Company's U.S. headquarters, for which rent of $262,000 was received by the
Company in fiscal 1998.
TH USA purchases finished goods in the ordinary course of business from
PJLC and its subsidiaries. Such purchases amounted to $8,400,000 in the fiscal
year ended March 31, 1998.
TH USA purchases finished goods in the ordinary course of business from
affiliates of Novel Enterprises. Such purchases amounted to $14,600,000 during
the fiscal year ended March 31, 1998. In addition, contractors of the Company
purchase raw materials in the ordinary course of business from affiliates of
Novel Enterprises pursuant to the Company's designation of such sources as
acceptable suppliers. Such purchases amounted to $5,930,000 during the fiscal
year ended March 31, 1998.
The Company has entered into the Canadian License and a related buying
agency agreement with TH Canada, in which Mr. Stroll, a Director of the Company
and Chief Executive Officer of THHK, has an indirect beneficial ownership
interest. Under the Canadian License, the Company receives a royalty from the
licensee based upon a percentage of net sales of licensed products. Under the
buying agency agreement, the Company receives commissions based on a percentage
of the cost of goods sourced on behalf of the licensee. Results of operations
include $3,885,000 for the year ended March 31, 1998 for royalties and
commissions earned from this licensee.
The Company sells merchandise in the ordinary course of business to a
retail store that is owned by Mr. Hilfiger's sister. Sales to this customer
amounted to approximately $476,000 during the year ended March 31, 1998.
THEH has a consulting agreement with an affiliate, Fasco International,
pursuant to which THEH pays Fasco International $500,000 per year, plus
reimbursement of expenses. The agreement has renewable one year terms. The
fees and related expenses under this consulting agreement totaled $500,000
during the year ended March 31, 1998.
THEH has a consulting agreement with an affiliate of Mr. Stroll. THEH paid
fees of $375,000 in fiscal 1998 to such affiliate.
Under the terms of an agreement with Novel Enterprises, THHK reimburses
Novel Enterprises for certain general and administrative expenses incurred by it
on behalf of THHK. Payments made to Novel Enterprises for the year ended March
31, 1998 were $77,000.
36
<PAGE>
The law firm of Gursky & Associates, P.C., of which Steven Gursky,
Secretary of TH USA and Assistant Secretary of the Company, is a member,
provides legal services to the Company and its subsidiaries. Payments to Gursky
& Associates, P.C., excluding reimbursement of expenses, were approximately
$1,919,000 in fiscal year 1998. Mr. Gursky is a cousin of Mr. Horowitz, an
executive officer and Director of the Company.
The Audit Committee of the Board of Directors monitors and approves
transactions between the Company and its affiliates to seek to provide that such
transactions are on terms which are no less favorable as a whole to the Company
than could be obtained from unaffiliated parties. The Audit Committee is
composed of Non-Employee Directors who are not affiliated with Westleigh, Novel
Enterprises, Novel Denim, Gadwal, Flair, Sportswear Holdings, AIHL, Anasta,
Blackwatch, PJLC, NIL or THMJ.
37
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Index to Financial Statements and Financial Statement Schedules
(a) 1. Financial Statements
The following consolidated financial statements of the Company are
included in Item 8:
Consolidated Statements of Operations for the years ended March 31,
1998, 1997 and 1996
Consolidated Balance Sheets as of March 31, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended March 31,
1998, 1997 and 1996
Consolidated Statements of Changes in Shareholders' Equity for the
years ended March 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedules
Form 10-K
Page
----
Schedule I - Condensed Financial
Information of Registrant 43
All other schedules have been omitted because of the absence of the
conditions under which they are required or because the required information is
included in the Consolidated Financial Statements or Notes thereto.
(a) 3. Exhibits
Exhibit
Number Description
- ------ -----------
2. -- Stock Purchase Agreement, dated as of January 31, 1998, by and
among the Company, Tommy Hilfiger U.S.A., Inc., Tommy Hilfiger
(Eastern Hemisphere) Limited and Pepe Jeans London Corporation
(the Company hereby undertakes to furnish supplementally to the
Securities and Exchange Commission upon request copies of all
omitted schedules to this exhibit)
3. -- Memorandum of Association and Articles of Association of the
Company, as amended (conformed to reflect all amendments through
May 5, 1998)
38
<PAGE>
4.1 -- Specimen certificate of the Company's Ordinary Shares, par value
$.01 per share (previously filed as Exhibit 4 with Registration
No. 33-48587 and incorporated herein by reference)
4.2 -- Indenture, dated as of May 1, 1998, among Tommy Hilfiger U.S.A.,
Inc., as Issuer, the Company, as Guarantor, and The Chase
Manhattan Bank, as Trustee
4.3 -- Form of Tommy Hilfiger U.S.A., Inc. 6.50% Note due 2003
(previously filed as Exhibit 4.1 to the Company's Current Report
on Form 8-K dated May 5, 1998 and incorporated herein by
reference)
4.4 -- Form of Tommy Hilfiger U.S.A., Inc. 6.85% Note due 2003
(previously filed as Exhibit 4.1 to the Company's Current Report
on Form 8-K dated May 5, 1998 and incorporated herein by
reference)
10.1 -- Amended and Restated Credit Agreement, dated as of July 11, 1996
(the "Old Credit Agreement"), among Tommy Hilfiger U.S.A., Inc.
and Tommy Hilfiger Retail, Inc., as Borrowers, the Company, Tommy
Hilfiger (Eastern Hemisphere) Limited, Tommy Hilfiger (HK)
Limited, Tommy Hilfiger Licensing, Inc. and Tommy Hilfiger
Flagship Stores, Inc., as Guarantors, The Chase Manhattan Bank,
as Administrative Agent, and the Lenders named therein
(previously filed as Exhibit 10(b) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1996
and incorporated herein by reference)
10.2 -- First Amendment, dated as of October 18, 1996, to the Old Credit
Agreement (previously filed as Exhibit 10.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31,
1997 and incorporated herein by reference)
10.3 -- Second Amendment, dated as of December 31, 1996, to the Old
Credit Agreement (previously filed as Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997 and incorporated herein by reference)
10.4 -- Credit Agreement, dated as of May 8, 1998, among the Company, as
Guarantor, Tommy Hilfiger U.S.A., Inc., as Borrower, the several
Lenders from time to time parties thereto, Fleet Bank, N.A., as
Documentation Agent, Nationsbank, N.A., as Syndication Agent, and
The Chase Manhattan Bank, as Administrative Agent
*10.5 -- Stock Option Plans of the Company and its subsidiaries, as
amended and restated
*10.6 -- Tommy Hilfiger Corporation Non-Employee Directors Stock Option
Plan (previously filed as Exhibit 10.3 with Registration No. 33-
88906 and incorporated herein by reference)
*10.7 -- Tommy Hilfiger U.S.A., Inc. Supplemental Executive Incentive
Compensation Plan (previously filed as Exhibit 10(a) to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1995 and incorporated herein by reference)
*10.8 -- Tommy Hilfiger U.S.A., Inc. Voluntary Deferred Compensation Plan
*10.9 -- Tommy Hilfiger U.S.A., Inc. Supplemental Executive Retirement
Plan
*10.10 -- Amended and Restated Employment Agreement, dated as of June 30,
1992, between Tommy Hilfiger U.S.A., Inc. and Tommy Hilfiger
(previously filed as Exhibit 10.3 with Registration No. 33-48587
and incorporated herein by reference)
39
<PAGE>
*10.11 -- Amended and Restated Employment Agreement, dated as of June 30,
1992, between Tommy Hilfiger U.S.A., Inc. and Joel Horowitz
(previously filed as Exhibit 10.4 with Registration No. 33-48587
and incorporated herein by reference)
*10.12 -- Amendment, dated as of March 8, 1994, to Amended and Restated
Employment Agreement, dated as of June 30, 1992, by and between
Tommy Hilfiger U.S.A., Inc. and Joel Horowitz (previously filed
as Exhibit 7 to the Company's Annual Report on Form 20-F for the
fiscal year ended March 31, 1994 and incorporated herein by
reference)
*10.13 -- Consulting Agreement, dated April 1, 1991, between Polostro
Limited and Tommy Hilfiger (Eastern Hemisphere) Limited
(previously filed as Exhibit 10.13 with Registration No. 33-48587
and incorporated herein by reference )
*10.14 -- Amendment, dated as of April 1, 1993, to Consulting Agreement,
dated April 1, 1991, between Polostro Limited and Tommy Hilfiger
(Eastern Hemisphere) Limited (previously filed as Exhibit 18 to
the Company's Annual Report on Form 20-F for the fiscal year
ended March 31, 1994 and incorporated herein by reference)
*10.15 -- Consulting Agreement, dated April 1, 1996, between Fasco
International, Inc. and Tommy Hilfiger (Eastern Hemisphere)
Limited (previously filed as Exhibit 10.25 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31,
1996 and incorporated herein by reference)
10.16 -- Amended and Restated Factoring Agreement, dated as of April 1,
1998, between Tommy Hilfiger U.S.A., Inc. and Century Business
Credit Corporation
10.17 -- Amended and Restated Factoring Agreement, dated as of April 1,
1998, between Pepe Jeans USA, Inc. and Century Business Credit
Corporation
10.18 -- Lease, dated April 24, 1995, between Forsgate Industrial Complex
L.P. and Tommy Hilfiger U.S.A., Inc. (previously filed as Exhibit
10.25 to the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1995 and incorporated herein by reference)
10.19 -- Lease, dated June 10, 1997, between Hartz Mountain Industries,
Inc. and Pepe Jeans USA, Inc.
10.20 -- Trademark Agreement, dated June 30, 1992, between Thomas J.
Hilfiger and Tommy Hilfiger, Inc. (previously filed as Exhibit
10.15 with Registration No. 33-48587 and incorporated herein by
reference)
10.21 -- License Agreement, dated June 24, 1996, between Tommy Hilfiger
Licensing, Inc. and Novel-ITC Licensing Limited (portions of this
exhibit, which have been filed separately with the Securities and
Exchange Commission, have been omitted pursuant to an order of
the Commission granting confidential treatment) (previously filed
as Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1996 and incorporated
herein by reference)
40
<PAGE>
10.22 -- License Agreement, dated as of February 1, 1997 (the "Europe
License"), between Tommy Hilfiger Licensing, Inc. and Pepe Jeans
London Corporation (as assigned to Tommy Hilfiger Europe B.V.)
(portions of this exhibit, which have been filed separately with
the Securities and Exchange Commission, have been omitted and
are the subject of a request made to the Commission for
confidential treatment) (previously filed as Exhibit 10.31 to
the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1997 and incorporated herein by reference)
10.23 -- First Amendment, dated December 1, 1997, to the Europe License
(previously filed as Exhibit 10(d) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended December 31,
1997 and incorporated herein by reference)
10.24 -- Second Amendment, dated May 8, 1998, to the Europe License
(portions of this exhibit, which have been filed separately with
the Securities and Exchange Commission, have been omitted and
are the subject of a request made to the Commission for
confidential treatment)
10.25 -- Lock-Up Agreement, dated as of January 31, 1998, by and among
the Company, Pepe Jeans London Corporation, Blackwatch
Investments Limited, AIHL Investment Group Limited, Anasta
Holdings Limited, Sportswear Holdings Limited, Westleigh
Limited, Gadwal Limited, Thomas J. Hilfiger and Joel J. Horowitz
(previously filed as Exhibit 10.1 to the Company's Current
Report on Form 8-K dated April1, 1998 and incorporated herein by
reference)
10.26 -- Registration Rights Agreement, dated as of May 8, 1998, by and
among the Company, Pepe Jeans London Corporation, Blackwatch
Investments Limited, AIHL Investment Group Limited, Anasta
Holdings Limited, Sportswear Holdings Limited, Westleigh
Limited, Flair Investment Holdings Limited, Thomas J. Hilfiger
and Joel J. Horowitz
10.27 -- Non-Competition Agreement, dated as of May 8, 1998, among the
Company, Silas K.F. Chou and Lawrence S. Stroll
11. -- Statement re: Computation of Per Share Earnings
21. -- Subsidiaries of the Company
23. -- Consent of Price Waterhouse LLP
24. -- Powers of Attorney
27. -- Financial Data Schedule
___________
* Management contract or compensatory plan or arrangement.
(b) 1. Reports on Form 8-K
Current Report on Form 8-K dated January 31, 1998 reporting matters
under Item 5 thereof.
41
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TOMMY HILFIGER CORPORATION
/s/ Benjamin M.T. Ng
--------------------
Benjamin M.T. Ng
Chief Financial Officer and Executive Vice
President-Strategic Development
June 24, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
* Chairman of the Board June 24, 1998
- -----------------
(Silas K.F. Chou)
Director and Honorary Chairman June 24, 1998
*
- --------------------
(Thomas J. Hilfiger)
* Director, Chief Executive Officer and President June 24, 1998
- ------------------
(Joel J. Horowitz) (principal executive officer)
/s/ Benjamin M.T. Ng Director, Chief Financial Officer, Executive Vice June 24, 1998
- --------------------
(Benjamin M.T. Ng) President-Strategic Development and Assistant
Secretary (principal financial officer)
* Director June 24, 1998
- --------------------
(Lawrence S. Stroll)
* Director June 24, 1998
- ------------------
(Ronald K.Y. Chao)
* Director June 24, 1998
- ----------------
(Lester M.Y. Ma)
* Director June 24, 1998
- ---------------
(Joseph Adamko)
* Director June 24, 1998
- -------------------
(Clinton V. Silver)
* Director June 24, 1998
- --------------
(Simon Murray)
* Senior Vice President and Treasurer (principal June 24, 1998
- -----------------
(Joseph Scirocco) accounting officer)
</TABLE>
*/s/ Benjamin M.T. Ng
---------------------
Benjamin M.T. Ng
(Attorney-in-Fact)
42
<PAGE>
SCHEDULE I
TOMMY HILFIGER CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Equity in income of subsidiaries....................... $168,770 $131,248 $92,400
Income before income taxes............................. 168,770 131,248 92,400
Provision for income taxes............................. 55,590 44,866 30,900
-------- -------- -------
Net income............................................. $113,180 $ 86,382 $61,500
======== ======== =======
</TABLE>
NOTE 1
Registrant is a British Virgin Islands holding company formed in June 1992
in connection with the Company's reorganization. See Notes 1(a) and 1(b) to the
Consolidated Financial Statements.
NOTE 2
Certain provisions of the agreements governing indebtedness of the Company
and its subsidiaries restrict the distribution of income and assets by the
Company's subsidiaries. See Note 15 to the Consolidated Financial Statements.
43
<PAGE>
SCHEDULE I
(CONTINUED)
TOMMY HILFIGER CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31,
---------
1998 1997
---- ----
<S> <C> <C>
Investment in subsidiaries.............................................................. $519,062 $397,464
-------- --------
Total Assets......................................................................... $519,062 $397,464
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Preference shares, $0.01 par value-shares authorized 5,000,000; none issued.............
Common shares, $0.01 par value-shares authorized 50,000,000; issued and outstanding.....
37,557,934 and 37,249,529, respectively................................................. $ 376 $ 372
Capital in excess of par value.......................................................... 173,416 165,032
Retained earnings....................................................................... 345,195 232,015
Cumulative translation adjustment....................................................... 75 45
-------- --------
Total shareholders' equity........................................................... 519,062 397,464
-------- --------
Total Liabilities and Shareholders' Equity....................................... $519,062 $397,464
======== ========
</TABLE>
44
<PAGE>
SCHEDULE I
(CONTINUED)
TOMMY HILFIGER CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Years Ended March 31,
------------------------------------------
1998 1997 1996
------------- ------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................... $ 113,180 $ 86,382 $ 61,500
Adjustments to reconcile net income to net cash from
operating activities:
Net equity in income of subsidiaries............... (113,180) (86,382) (61,500)
------------- ------------- ------------
Net cash provided by operating activities.......... -- -- --
------------- ------------- ------------
Cash flows from investing activities -- -- --
------------- ------------- ------------
Cash flows from financing activities -- -- --
------------- ------------- ------------
Net change in cash............................................. -- -- --
Cash at beginning of year...................................... -- -- --
------------- ------------- ------------
Cash at end of year............................................ $ -- $ -- $ --
============== ============== ==============
</TABLE>
45
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------- -----------
<S> <C>
2. -- Stock Purchase Agreement, dated as of January 31, 1998, by and among
the Company, Tommy Hilfiger U.S.A., Inc., Tommy Hilfiger (Eastern
Hemisphere) Limited and Pepe Jeans London Corporation (the Company
hereby undertakes to furnish supplementally to the Securities and
Exchange Commission upon request copies of all omitted schedules to
this exhibit)
3. -- Memorandum of Association and Articles of Association of the Company,
as amended (conformed to reflect all amendments through May 5, 1998)
4.1 -- Specimen certificate of the Company's Ordinary Shares, par value $.01
per share (previously filed as Exhibit 4 with Registration No.
33-48587 and incorporated herein by reference)
4.2 -- Indenture, dated as of May 1, 1998, among Tommy Hilfiger U.S.A., Inc.,
as Issuer, the Company, as Guarantor, and The Chase Manhattan Bank, as
Trustee
4.3 -- Form of Tommy Hilfiger U.S.A., Inc. 6.50% Note due 2003 (previously
filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated
May 5, 1998 and incorporated herein by reference)
4.4 -- Form of Tommy Hilfiger U.S.A., Inc. 6.85% Note due 2003 (previously
filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated
May 5, 1998 and incorporated herein by reference)
10.1 -- Amended and Restated Credit Agreement, dated as of July 11, 1996 (the
"Old Credit Agreement"), among Tommy Hilfiger U.S.A., Inc. and Tommy
Hilfiger Retail, Inc., as Borrowers, the Company, Tommy Hilfiger
(Eastern Hemisphere) Limited, Tommy Hilfiger (HK) Limited, Tommy
Hilfiger Licensing, Inc. and Tommy Hilfiger Flagship Stores, Inc., as
Guarantors, The Chase Manhattan Bank, as Administrative Agent, and the
Lenders named therein (previously filed as Exhibit 10(b) to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1996 and incorporated herein by reference)
10.2 -- First Amendment, dated as of October 18, 1996, to the Old Credit
Agreement (previously filed as Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1997 and
incorporated herein by reference)
10.3 -- Second Amendment, dated as of December 31, 1996, to the Old Credit
Agreement (previously filed as Exhibit 10.3 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1997 and
incorporated herein by reference)
10.4 -- Credit Agreement, dated as of May 8, 1998, among the Company, as
Guarantor, Tommy Hilfiger U.S.A., Inc., as Borrower, the several
Lenders from time to time parties thereto, Fleet Bank, N.A., as
Documentation Agent, Nationsbank, N.A., as Syndication Agent, and The
Chase Manhattan Bank, as Administrative Agent
*10.5 -- Stock Option Plans of the Company and its subsidiaries, as amended and
restated
</TABLE>
46
<PAGE>
<TABLE>
<S> <C>
*10.6 -- Tommy Hilfiger Corporation Non-Employee Directors Stock Option Plan
(previously filed as Exhibit 10.3 with Registration No. 33-88906 and
incorporated herein by reference)
*10.7 -- Tommy Hilfiger U.S.A., Inc. Supplemental Executive Incentive
Compensation Plan (previously filed as Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1995 and incorporated herein by reference)
*10.8 -- Tommy Hilfiger U.S.A., Inc. Voluntary Deferred Compensation Plan
*10.9 -- Tommy Hilfiger U.S.A., Inc. Supplemental Executive Retirement Plan
*10.10 -- Amended and Restated Employment Agreement, dated as of June 30, 1992,
between Tommy Hilfiger U.S.A., Inc. and Tommy Hilfiger (previously
filed as Exhibit 10.3 with Registration No. 33-48587 and incorporated
herein by reference)
*10.11 -- Amended and Restated Employment Agreement, dated as of June 30, 1992,
between Tommy Hilfiger U.S.A., Inc. and Joel Horowitz (previously
filed as Exhibit 10.4 with Registration No. 33-48587 and incorporated
herein by reference)
*10.12 -- Amendment, dated as of March 8, 1994, to Amended and Restated
Employment Agreement, dated as of June 30, 1992, by and between Tommy
Hilfiger U.S.A., Inc. and Joel Horowitz (previously filed as Exhibit 7
to the Company's Annual Report on Form 20-F for the fiscal year ended
March 31, 1994 and incorporated herein by reference)
*10.13 -- Consulting Agreement, dated April 1, 1991, between Polostro Limited
and Tommy Hilfiger (Eastern Hemisphere) Limited (previously filed as
Exhibit 10.13 with Registration No. 33-48587 and incorporated herein
by reference)
*10.14 -- Amendment, dated as of April 1, 1993, to Consulting Agreement, dated
April 1, 1991, between Polostro Limited and Tommy Hilfiger (Eastern
Hemisphere) Limited (previously filed as Exhibit 18 to the Company's
Annual Report on Form 20-F for the fiscal year ended March 31, 1994
and incorporated herein by reference)
*10.15 -- Consulting Agreement, dated April 1, 1996, between Fasco
International, Inc. and Tommy Hilfiger (Eastern Hemisphere) Limited
(previously filed as Exhibit 10.25 to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1996 and incorporated
herein by reference)
10.16 -- Amended and Restated Factoring Agreement, dated as of April 1, 1998,
between Tommy Hilfiger U.S.A., Inc. and Century Business Credit
Corporation
10.17 -- Amended and Restated Factoring Agreement, dated as of April 1, 1998,
between Pepe Jeans USA, Inc. and Century Business Credit Corporation
10.18 -- Lease, dated April 24, 1995, between Forsgate Industrial Complex L.P.
and Tommy Hilfiger U.S.A., Inc. (previously filed as Exhibit 10.25 to
the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1995 and incorporated herein by reference)
10.19 -- Lease, dated June 10, 1997, between Hartz Mountain Industries, Inc.
and Pepe Jeans USA, Inc.
10.20 -- Trademark Agreement, dated June 30, 1992, between Thomas J. Hilfiger
and Tommy Hilfiger, Inc. (previously filed as Exhibit 10.15 with
Registration No. 33-48587 and incorporated herein by reference)
</TABLE>
47
<PAGE>
<TABLE>
<S> <C>
10.21 -- License Agreement, dated June 24, 1996, between Tommy Hilfiger
Licensing, Inc. and Novel-ITC Licensing Limited (portions of this
exhibit, which have been filed separately with the Securities and
Exchange Commission, have been omitted pursuant to an order of the
Commission granting confidential treatment) (previously filed as
Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1996 and incorporated herein by
reference)
10.22 -- License Agreement, dated as of February 1, 1997 (the "Europe
License"), between Tommy Hilfiger Licensing, Inc. and Pepe Jeans
London Corporation (as assigned to Tommy Hilfiger Europe B.V.)
(portions of this exhibit, which have been filed separately with the
Securities and Exchange Commission, have been omitted and are the
subject of a request made to the Commission for confidential
treatment) (previously filed as Exhibit 10.31 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1997 and
incorporated herein by reference)
10.23 -- First Amendment, dated December 1, 1997, to the Europe License
(previously filed as Exhibit 10(d) to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended December 31, 1997 and
incorporated herein by reference)
10.24 -- Second Amendment, dated May 8, 1998, to the Europe License (portions
of this exhibit, which have been filed separately with the Securities
and Exchange Commission, have been omitted and are the subject of a
request made to the Commission for confidential treatment)
10.25 -- Lock-Up Agreement, dated as of January 31, 1998, by and among the
Company, Pepe Jeans London Corporation, Blackwatch Investments
Limited, AIHL Investment Group Limited, Anasta Holdings Limited,
Sportswear Holdings Limited, Westleigh Limited, Gadwal Limited, Thomas
J. Hilfiger and Joel J. Horowitz (previously filed as Exhibit 10.1 to
the Company's Current Report on Form 8-K dated April 1, 1998 and
incorporated herein by reference)
10.26 -- Registration Rights Agreement, dated as of May 8, 1998, by and among
the Company, Pepe Jeans London Corporation, Blackwatch Investments
Limited, AIHL Investment Group Limited, Anasta Holdings Limited,
Sportswear Holdings Limited, Westleigh Limited, Flair Investment
Holdings Limited, Thomas J. Hilfiger and Joel J. Horowitz
10.27 -- Non-Competition Agreement, dated as of May 8, 1998, among the Company,
Silas K.F. Chou and Lawrence S. Stroll
11. -- Statement re: Computation of Per Share Earnings
21. -- Subsidiaries of the Company
23. -- Consent of Price Waterhouse LLP
24. -- Powers of Attorney
27. -- Financial Data Schedule
</TABLE>
________
* Management contract or compensatory plan or arrangement.
48
<PAGE>
EXHIBIT 2
CONFORMED COPY
STOCK PURCHASE AGREEMENT
BY AND AMONG
TOMMY HILFIGER CORPORATION,
TOMMY HILFIGER U.S.A., INC.,
TOMMY HILFIGER (EASTERN HEMISPHERE) LIMITED
AND
PEPE JEANS LONDON CORPORATION
DATED AS OF JANUARY 31, 1998
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
<C> <S> <C>
Certain Definitions..................................................... 5
ARTICLE II
Purchase and Sale of Stock; Closing..................................... 10
Section 2.1. Purchase and Sale.................................... 10
Section 2.2. Time and Place of Closing............................ 11
ARTICLE III
Representations and Warranties of Seller................................ 11
Section 3.1. Incorporation; Authorization; etc. .................. 11
Section 3.2. Capitalization; Structure............................ 12
Section 3.3. Financial Statements................................. 13
Section 3.4. Properties; Leases................................... 14
Section 3.5. Absence of Certain Changes........................... 14
Section 3.6. Litigation; Orders................................... 14
Licenses, Approvals, Other Authorizations, Consents,
Section 3.7. Reports, etc......................................... 14
Section 3.8. Labor Matters........................................ 14
Section 3.9. Compliance with Laws................................. 15
Section 3.10 Insurance............................................ 15
Section 3.11. Material Contracts................................... 15
Section 3.12. Brokers, Finders, etc. .............................. 15
Section 3.13. Affiliate Transactions............................... 16
Section 3.14. Environmental Compliance............................. 16
Section 3.15. Undisclosed Liabilities.............................. 17
Section 3.16. Proxy Statement...................................... 17
Section 3.17. Acquisition of Shares for Investment................. 17
ARTICLE IV
Representations and Warranties of Parent................................ 18
Section 4.1. Incorporation; Authorization; etc. .................. 18
Section 4.2. Capitalization....................................... 19
Section 4.3. Other Authorizations, Consents, Reports, etc......... 19
Section 4.4. Brokers, Finders, etc. .............................. 19
Section 4.5. Acquisition of Shares for Investment................. 19
Section 4.6. SEC Filings; Financial Statements.................... 20
Section 4.7. Proxy Statement...................................... 20
ARTICLE V
Covenants of Seller and Parent.......................................... 20
Investigation of Business; Access to Properties and
Section 5.1. Records.............................................. 20
Section 5.2. Efforts; Obtaining Consents.......................... 21
Section 5.3. Further Assurances................................... 21
Section 5.4. Conduct of Business by Seller........................ 21
Section 5.5. Conduct of Business by Parent........................ 23
Section 5.6. Preservation of Business............................. 23
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
Section 5.7. Non-Solicitation........................................ 23
Section 5.8. Notice of Developments.................................. 23
Section 5.9. License Agreements...................................... 23
Section 5.10. Financial Statements.................................... 23
Section 5.11. Intercompany Accounts; Indebtedness..................... 24
Section 5.12. Proxy Statement......................................... 24
Section 5.13. Stockholders Meeting.................................... 24
Section 5.14. NYSE Listing............................................ 24
Section 5.15. Financing............................................... 24
Section 5.16. Blackwatch Note......................................... 25
Section 5.17. Resignation of Directors................................ 25
ARTICLE VI
Employee Benefits........................................................ 25
Section 6.1. Employee Benefit Plans.................................. 25
Section 6.2. Company Employee Benefit Plans.......................... 26
Section 6.3. Non-U.S. Company Employee Benefit Plans................. 27
Section 6.4. Administration.......................................... 27
Section 6.5. Reportable Event........................................ 27
ARTICLE VII
Tax Matters.............................................................. 27
Section 7.1. Tax Returns of the Companies and the Subsidiaries....... 27
Section 7.2. Allocation of Certain Taxes............................. 28
Section 7.3. Filing Responsibility................................... 28
Section 7.4. Refunds and Carrybacks.................................. 29
Section 7.5. Cooperation and Exchange of Information................. 29
Section 7.6. Tax Indemnification by Seller........................... 30
Section 7.7. Tax Certification....................................... 30
Section 7.8. Definitions............................................. 30
ARTICLE VIII
Conditions to Parent's, TH USA's and THEH's Obligations to Close......... 31
Section 8.1. Representations, Warranties and Covenants of Seller..... 31
Section 8.2. Regulatory Approvals.................................... 31
Section 8.3. No Orders or Injunctions................................ 31
Section 8.4. Opinions of Seller's Counsel............................ 31
Section 8.5. Certain Agreements...................................... 32
Section 8.6. Stockholder Approval.................................... 32
Section 8.7. Canada Purchase......................................... 32
Section 8.8. NYSE Listing............................................ 32
Section 8.9. Parent Financing........................................ 32
Section 8.10. Consents................................................ 32
ARTICLE IX
Conditions to Seller's Obligation to Close............................... 32
Section 9.1. Representations, Warranties and Covenants of Parent..... 32
Section 9.2. Regulatory Approvals.................................... 32
Section 9.3. No Orders or Injunctions................................ 32
</TABLE>
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<TABLE>
<CAPTION>
<C> <S> <C>
Section 9.4. Opinions of Parent's Counsel........................... 32
Section 9.5. Certain Agreements..................................... 32
Section 9.6. Stockholder Approval................................... 32
Section 9.7. NYSE Listing........................................... 32
Section 9.8. Consents............................................... 32
ARTICLE X
Survival; Indemnification................................................. 33
Section 10.1. Survival............................................... 33
Section 10.2. Indemnification by Seller.............................. 33
Section 10.3. Indemnification Procedures............................. 33
Section 10.4. Limits on Indemnification.............................. 34
Section 10.5. Losses Net of Insurance................................ 34
ARTICLE XI
Termination............................................................... 35
Section 11.1. Termination............................................ 35
Section 11.2. Procedure and Effect of Termination.................... 35
ARTICLE XII
Miscellaneous............................................................. 35
Section 12.1. Counterparts........................................... 35
Section 12.2. Governing Law.......................................... 35
Section 12.3. Jurisdiction; Waiver of Trial by Jury.................. 35
Section 12.4. Entire Agreement....................................... 36
Section 12.5. Expenses............................................... 36
Section 12.6. Notices................................................ 36
Section 12.7. Successors and Assigns................................. 37
Section 12.8. Headings; Definitions.................................. 37
Section 12.9. Amendments and Waivers................................. 37
Section 12.10. Severability........................................... 37
Section 12.11. Interpretation......................................... 37
Signatures............................................................. 38
</TABLE>
Schedule 3.1(a) Jurisdictions in Which Companies and Subsidiaries are
Qualified to Do Business
Schedule 3.1(d) Violations and Accelerations
Schedule 3.2(a) Stock Information
Schedule 3.3(a) Pepe Exceptions to Applicable Accounting Principles
Schedule 3.3(b) Tomcan and TH Canada Exceptions to Applicable Accounting
Principles
Schedule 3.4 Real Property and Leases
Schedule 3.5 Absence of Certain Changes
Schedule 3.6 Litigation
Schedule 3.7(b) Consents and Approvals
Schedule 3.8 Labor Agreements, Disputes
Schedule 3.9 Compliance With Law
Schedule 3.10 Insurance Policies
Schedule 3.11 Material Transactions
Schedule 3.13 Affiliate Transactions
Schedule 3.14 Environmental Compliance
Schedule 3.15 Undisclosed Liabilities
Schedule 4.1(b) Violations and Accelerations
Schedule 4.2(b) Rights to Acquire Stock
Schedule 4.3 Authorizations and Consents
Schedule 4.6 SEC Filings
Schedule 5.2 Consents
Schedule 5.4 Conduct of Business by Seller
Schedule 6.1(a) Company of Employee Benefit Agreement
Schedule 6.1(d) Payments Caused by this Agreement
Schedule 6.2(d) Multiemployer Plans
Schedule 7.1(a) Income Tax Returns
Schedule 7.1(b) Contested Taxes; Reserves
Schedule 7.1(c) Tax Extensions and Powers of Attorneys
Schedule 7.1(d) Audits
Schedule 10.2(a) Retained Actions
Exhibit 1.1(a) Terms of Second Amendment to the License Agreement dated
February 1, 1997 by and between Tommy Hilfiger Licensing,
Inc. and Seller, as amended
Exhibit 1.1(b) Terms of Non-Competition Agreement
Exhibit 1.1(c) Form of Registration Rights Agreement
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement"), dated as of January 31,
1998, is by and among Tommy Hilfiger Corporation, a British Virgin Islands
corporation ("Parent"), Tommy Hilfiger U.S.A., Inc., a Delaware corporation
and a wholly owned subsidiary of Parent ("TH USA"), Tommy Hilfiger (Eastern
Hemisphere) Limited, a British Virgin Islands corporation and a wholly owned
subsidiary of Parent ("THEH"), and Pepe Jeans London Corporation, a British
Virgin Islands corporation ("Seller").
Whereas, Seller owns (a) 100% of the issued and outstanding shares of common
stock of Pepe Jeans USA, Inc., a California corporation ("Pepe USA"), and (b)
100% of the issued and outstanding ordinary shares of TJ Far East Limited, a
British Virgin Islands corporation ("Pepe Far East" and, together with Pepe
USA, the "Companies");
Whereas, TH USA and THEH desire to purchase from Seller, and Seller desires
to sell to TH USA and THEH, 100% of the issued and outstanding shares of
common stock of Pepe USA and 100% of the issued and outstanding ordinary
shares of Pepe Far East, respectively, upon the terms and subject to the
conditions set forth herein (the "Stock Purchases");
Whereas, AIHL Investment Group Limited ("AIHL"), a British Virgin Islands
corporation, has entered into a Guarantee, dated of even date herewith,
pursuant to which AIHL has guaranteed all of the obligations of Seller under
the Stock Purchase Agreement (the "AIHL Guarantee"); and
Whereas, Pepe USA has agreed to purchase (the "Canada Purchase") from
Lawvest Holdings Inc., a British Virgin Islands corporation ("Lawvest"), all
of the issued and outstanding ordinary shares of Tomcan Investments, Inc., a
British Virgin Islands corporation ("Tomcan"), which will be consummated
immediately after the consummation of the Stock Purchases.
Now, Therefore, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
As used in this Agreement the following terms shall have the following
respective meanings:
"Action" shall mean any complaint, claim, prosecution, indictment, action,
suit, arbitration, investigation, inquiry or proceeding by or before any
Governmental Authority.
"Affiliate" shall mean any Person that directly, or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with the party specified.
"Agreement" shall have the meaning set forth in the preamble hereof.
"AIHL" shall have the meaning set forth in the recitals hereof.
"AIHL Guarantee" shall have the meaning set forth in the recitals hereof.
"Amended European License Agreement" shall mean the License Agreement dated
as of February 1, 1997 by and between Tommy Hilfiger Licensing, Inc. and
Seller, as assigned by Seller to TH Europe and as amended by the First
Amendment thereto, as further amended by the Second Amendment thereto
containing substantially the terms set forth on Exhibit 1.1(a) hereto, to be
entered into between Tommy Hilfiger Licensing, Inc., Seller and TH Europe.
"Ancillary Agreements" shall mean, collectively, the Amended European
License Agreement, the Canada Purchase Agreement, the Lock-Up Agreement and
the Registration Rights Agreement.
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"Applicable Return" shall have the meaning set forth in Section 10.1(a)
hereof.
"Assets" shall have the meaning set forth in Section 3.4 hereof.
"Bentley Trust Guarantee" shall mean the Guarantee, dated as of January 26,
1998 made by ATC Trustees (Cayman) Limited in trust for the Bentley Trust, in
favor of Pepe USA.
"Blackwatch" shall mean Blackwatch Investments Limited, a British Virgin
Islands corporation.
"Blackwatch Note" shall have the meaning set forth in Section 5.16 hereof.
"Canada Financial Statements" shall have the meaning set forth in Section
3.3(b) hereof.
"Canadian Liabilities" shall have the meaning set forth in Section 10.2(a).
"Canada Purchase" shall have the meaning set forth in the recitals hereof.
"Canada Purchase Agreement" shall mean the Share Purchase Agreement, dated
as of January 26, 1998, between Pepe USA and Lawvest.
"Canadian Subsidiaries" shall mean Tomcan and TH Canada.
"Closing" shall mean the consummation of the transactions contemplated by
Section 2.1 of this Agreement.
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any
successor thereto.
"Companies" shall have the meaning set forth in the recitals hereof.
"Company Employee Benefit Plans" shall have the meaning set forth in Section
6.1(a) hereof.
"Company Group" shall have the meaning set forth in Section 7.3(a) hereof.
"Company Material Adverse Effect" shall have the meaning set forth in
Section 3.5 hereof.
"Company Pension Plan" shall have the meaning set forth in Section 6.1(c)
hereof.
"Continuing Affiliate" shall mean Seller, AIHL, Blackwatch, Lawvest or any
of their respective corporate Affiliates (other than the Companies, Tomcan,
Parent and their respective subsidiaries).
"Controlled Group Liability" shall have the meaning set forth in Section
6.2(f) hereof.
"Covered Losses" shall mean any and all debts, losses, liabilities, claims,
fines, royalties, deficiencies, damages, obligations, payments (including,
without limitation, those arising out of any demand, assessment, settlement,
judgment or compromise relating to any Action), costs and expenses (including,
without limitation, interest and penalties due and payable with respect
thereto and reasonable attorneys' and accountants' fees and any other out-of-
pocket expenses incurred in investigating, preparing, defending, avoiding or
settling any Action or in enforcing another party's obligations hereunder),
including, without limitation, any of the foregoing arising under, out of or
in connection with any Action, order or consent decree of any Governmental
Authority or award of any arbitrator of any kind, or any law, rule,
regulation, contract, commitment or undertaking.
"Determination" shall have the meaning set forth in Section 7.8(a) hereof.
"Encumbrance" shall mean any mortgage, pledge, lien, easement, restrictive
covenant, right of way, lease, purchase agreement, option, security interest
or other encumbrance and agreement.
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"Environmental Law" shall have the meaning set forth in Section 3.14(a)(ii)
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall have the meaning set forth in Section 6.2(e) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Expiration Date" shall have the meaning set forth in Section 10.1(a)
hereof.
"Financial Statements" shall have the meaning set forth in Section 3.3(b)
hereof.
"GAAP" shall mean United States generally accepted accounting principles.
"Governmental Authority" shall have the meaning set forth in Section 3.1(d)
hereof.
"Hazardous Substance" shall have the meaning set forth in Section 3.14(a)(i)
hereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Income Taxes" shall have the meaning set forth in Section 7.8(c).
"Income Tax Returns" shall have the meaning set forth in Section 7.8(b).
"Indemnification Threshold" shall have the meaning set forth in Section 10.4
hereof.
"Indemnified Parties" shall have the meaning set forth in Section 10.2(a)
hereof.
"Intellectual Property" means all United States and foreign (a) patents,
patent applications, patent disclosures and improvements thereto, (b)
trademarks, service marks, logos, trade names and corporate names and
registrations and applications for registration thereof, including, but not
limited to, all marks registered in the United States Patent and Trademark
Office, (c) copyrights and registrations and applications for registration
thereof, (d) computer software, data and documentation, (e) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs,
plans, proposals, technical data, copyrightable works, financial, marketing
and business data, pricing and cost information, business and marketing plans
and customer and supplier lists and information) and (f) copies and tangible
embodiments thereof (in whatever form or medium) in which any Company or
Subsidiary has any rights.
"International License Agreement" shall mean the International License
Agreement dated August 28, 1995 between Tommy Hilfiger Licensing, Inc. and SEL
International Investments Corp., as ultimately assigned to T.H. International
N.V., as amended.
"IRS" shall have the meaning set forth in Section 7.8(d).
"Lawvest" shall have the meaning set forth in the recitals hereof.
"Licenses" shall have the meaning set forth in Section 3.7(a).
"Lock-Up Agreement" shall mean the Lock-Up Agreement, dated of even date
herewith, among Parent, Seller and certain direct and indirect stockholders of
Seller.
"Memorandum Amendment" shall have the meaning set forth in Section 4.1(a)
hereof.
"Multiemployer Plan" shall have the meaning set forth in Section 6.2(e)
hereof.
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"Multiple Employer Plan" shall have the meaning set forth in Section 6.2(e)
hereof.
"Net After-Tax Basis" shall mean, with respect to the calculation of any
indemnification payment owed to any party pursuant to this Agreement,
calculation thereof in a manner taking into account any Taxes owing by the
indemnified party or its Affiliates as a result of receipt or accrual of the
indemnity payment and any Tax benefit received or accrued by the indemnified
party or its Affiliates as a result of the indemnified liability.
"Non-Competition Agreement" shall mean the Non-Competition Agreement
containing substantially the terms set forth on Exhibit 1.1(b) hereto, to be
entered into between the Company, Silas K.F. Chou and Lawrence S. Stroll.
"Non-U.S. Company Employee Benefit Plans" shall have the meaning set forth
in Section 6.1(a) hereof.
"Notice of Claim" shall have the meaning set forth in Section 10.3(a)
hereof.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Other Taxes" shall have the meaning set forth in Section 7.8(e).
"Parent" shall have the meaning set forth in the preamble hereof.
"Parent SEC Reports" shall have the meaning set forth in Section 4.6(a)
hereof.
"Parent Shares" shall mean the Ordinary Shares, $.01 par value per share, of
Parent.
"Parent Stockholders Meeting" shall have the meaning set forth in Section
3.16 hereof.
"Pepe Balance Sheet" shall have the meaning set forth in Section 3.3(a)
hereof.
"Pepe Far East" shall have the meaning set forth in the recitals hereof.
"Pepe Far East Purchase Price" shall have the meaning set forth in Section
2.1(a) hereof.
"Pepe Far East Shares" shall mean the Ordinary Shares, $1.00 par value per
share, of Pepe Far East.
"Pepe Financial Statements" shall have the meaning set forth in Section
3.3(a) hereof.
"Pepe USA" shall have the meaning set forth in the recitals hereof.
"Pepe USA Cash Purchase Price" shall have the meaning set forth in Section
2.1(a) hereof.
"Pepe USA Shares" shall mean the shares of Common Stock, without par value,
of Pepe USA.
"Pepe Year-End Balance Sheet" shall mean the condensed combined balance
sheet of Pepe USA and Pepe Far East and its subsidiaries as of December 31,
1997, previously provided by Seller to TH USA and THEH.
"Permitted Exceptions" shall mean (a) mechanics', materialmen's, carriers',
workmen's, warehousemen's, repairmen's, landlords' or similar liens imposed by
law arising and incurred in the ordinary course of business and securing
obligations that are not delinquent, (b) liens for taxes and other
governmental charges, assessments or fees which (i) are not yet due and
payable or which may be paid without penalty or (ii) are being contested in
good faith through appropriate procedures and in respect of which a Company or
Subsidiary has created adequate reserves or (c) Encumbrances which
individually or in the aggregate do not detract from the value of any of the
property or assets subject thereto or interfere with the present use thereof.
"Person" shall mean any individual, firm, corporation, partnership or other
entity (including Governmental Authorities), and shall include any successor
(by merger or otherwise) of such entity.
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"Price Waterhouse" shall mean Price Waterhouse LLP or one of its
international affiliates.
"Proxy Statement" shall have the meaning set forth in Section 5.12 hereof.
"Purchase Price Cash Amount" shall have the meaning set forth in Section
2.1(a) hereof.
"Purchase Price Shares" shall have the meaning set forth in Section 2.1(a)
hereof.
"RCRA Hazardous Waste" shall have the meaning set forth in Section
3.14(a)(iii) hereof.
"Real Property" shall have the meaning set forth in Section 3.4 hereof.
"Registration Rights Agreement" shall mean the Registration Rights Agreement
in the form attached hereto as Exhibit 1.1(c), to be entered into between the
Company, Seller and certain direct and indirect stockholders of Seller.
"Retained Liabilities" shall have the meaning set forth in Section 10.2(a)
hereof.
"Retained Note" shall have the meaning set forth in Section 2.1(c) hereof.
"Returns" shall have the meaning set forth in Section 7.8(f).
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall have the meaning set forth in the preamble hereof.
"Seller Affiliate" shall mean any of Seller, the Companies, the
Subsidiaries, the Canadian Subsidiaries, AIHL, Blackwatch, Anasta Holdings
Limited, Sportswear Holdings Limited, Westleigh Limited and Gadwal Limited.
"Seller's knowledge" or "knowledge of Seller" shall mean the knowledge of
those individuals who as of the date hereof or at anytime thereafter are
officers or directors of Seller, after due inquiry by such officers and
directors of the officers and directors of the Companies and the Subsidiaries.
"Seller Note" shall have the meaning set forth in Section 5.16 hereof.
"Shares" shall have the meaning set forth in Section 2.1(a) hereof.
"Stock Purchases" shall have the meaning set forth in the recitals hereof.
"Subsidiaries" shall mean TJ Clothing (H.K.) Limited, a Hong Kong
corporation, Pepe International Limited, a Hong Kong corporation, THHK
Womenswear Limited, a Hong Kong corporation, and any subsidiary of a Company
formed after the date of this Agreement.
"Taxes" shall have the meaning set forth in Section 7.8(h) hereof.
"Tax Laws" shall have the meaning set forth in Section 7.8(g).
"Taxing Authority" shall have the meaning set forth in Section 7.8(i)
hereof.
"TH Canada" shall mean Tommy Hilfiger Canada, Inc., a company incorporated
under the Canada Business Corporations Act.
"THEH" shall have the meaning set forth in the preamble hereof.
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"TH Europe" shall mean Tommy Hilfiger Europe B.V., a corporation organized
under the laws of The Netherlands.
"TH Incentive Plans" shall mean, collectively, the Tommy Hilfiger (Eastern
Hemisphere) Limited 1992 Stock Incentive Plan, as amended, the Tommy Hilfiger
U.S.A., Inc. 1992 Stock Incentive Plan, as amended, and the Tommy Hilfiger
Corporation Non-Employee Directors Stock Option Plan.
"T.H. International N.V." shall mean T.H. International N.V., a corporation
organized under the laws of The Netherlands Antilles.
"TH Licenses" shall mean, collectively, the International License Agreement;
the Amended and Restated License Agreement, dated as of May 24, 1995, between
TH Canada and Tommy Hilfiger Licensing, Inc., as amended; the Amended and
Restated License Agreement, dated as of May 24, 1995, between TH Canada (d/b/a
Tommy Hilfiger Shops Inc.) and Tommy Hilfiger Licensing, Inc., as amended; and
the United States License Agreement, dated as of August 28, 1995, between SEL
International Investments Corp. and Tommy Hilfiger Licensing, Inc., as
ultimately assigned to Pepe USA, as amended.
"TH USA" shall have the meaning set forth in the preamble hereof.
"Tomcan" shall have the meaning set forth in the recitals hereof.
"Tomcan Balance Sheet" shall have the meaning set forth in Section 3.3(b)
hereof.
"Tomcan Shares" shall mean the shares, par value $1.00 per share, of Tomcan.
"Withdrawal Liability" shall have the meaning set forth in Section 6.2(d)
hereof.
ARTICLE II
Purchase and Sale of Stock; Closing
Section 2.1. Purchase and Sale. (a) On the basis of the representations,
warranties, covenants and agreements and subject to the satisfaction or waiver
(to the extent permitted) of the conditions set forth in Articles VIII and IX,
at the Closing Seller will sell and TH USA and THEH, respectively, will
purchase fifty thousand (50,000) Pepe USA Shares and one thousand (1,000) Pepe
Far East Shares (collectively, the "Shares"), which constitute, and will
constitute as of the Closing, 100% of the issued and outstanding shares of
capital stock or other equity interests of Pepe USA and Pepe Far East,
respectively. In payment for such Pepe Far East Shares, simultaneously with
the delivery by Seller of certificates for such Pepe Far East Shares, with all
appropriate stock powers and requisite tax stamps attached, properly signed,
in form suitable for the transfer of such Pepe Far East Shares to THEH, and
subject to the satisfaction or waiver (to the extent permitted) of the
applicable conditions set forth herein, THEH will wire transfer $25,000,000.00
(the "Pepe Far East Purchase Price") in immediately available funds to the
account or accounts specified by Seller. In payment for such Pepe USA Shares,
simultaneously with the delivery by Seller of certificates for such Pepe USA
Shares, with all appropriate stock powers and requisite tax stamps attached,
properly signed, in form suitable for the transfer of such Pepe USA Shares to
TH USA, and subject to the satisfaction or waiver (to the extent permitted) of
the applicable conditions set forth herein, (i) TH USA will wire transfer
$730,760,000.00 (the "Pepe USA Cash Purchase Price" and, together with the
Pepe Far East Purchase Price, the "Purchase Price Cash Amount") in immediately
available funds to the account or accounts specified by Seller and (ii) Parent
will deliver to TH USA and TH USA will deliver to Seller certificates
representing 9,045,930 Parent Shares (the "Purchase Price Shares").
(b) Certificates for the Purchase Price Shares shall be in definitive form
and registered in the name of Seller and shall be delivered to Seller bearing
a legend or legends referencing restrictions under the Securities Act on
transfer of the Purchase Price Shares and such other legends as the Board of
Directors of Parent determines to be necessary or appropriate, including any
required by the Lock-Up Agreement.
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(c) In addition, at the Closing Parent will purchase from Seller the
$10,000,000.00 Subordinated Promissory Note dated April 1, 1997 from Pepe USA
to Seller (the "Retained Note") for an amount equal to the principal thereof
as of the Closing Date.
Section 2.2. Time and Place of Closing. Subject to satisfaction or waiver of
the conditions to Closing set forth herein, the Closing shall take place at
the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York,
New York, as promptly as practicable after satisfaction or waiver, if
permissible, of the conditions set forth in Articles VIII and IX or at such
other time and date as Parent and Seller may agree (the "Closing Date").
ARTICLE III
Representations and Warranties of Seller
Seller hereby represents and warrants to Parent as follows:
Section 3.1. Incorporation; Authorization; etc. (a) Each of the Companies
and Subsidiaries has been duly organized, is validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each of the
Companies and Subsidiaries has full corporate power and authority to own its
properties and assets and to conduct its business as it is now being conducted
and is in good standing and is duly qualified to transact business in each
jurisdiction in which the nature of property owned or leased by it or the
conduct of its business requires it to be so qualified except where the
failure to be in good standing or so qualified would not have a material
adverse effect on the Companies and the Subsidiaries, taken as a whole. Each
jurisdiction in which any of the Companies or Subsidiaries is qualified to do
business is set forth on Schedule 3.1(a).
(b) Seller has been duly organized, is validly existing and in good standing
under the laws of the British Virgin Islands.
(c) Seller has full corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. Each Seller Affiliate has full corporate
power and authority to execute each of the Ancillary Agreements to which it is
a party, to perform its obligations thereunder and to consummate the
transactions contemplated thereby. The execution and delivery of this
Agreement, the performance of Seller's obligations hereunder and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate proceedings on the part of
Seller, and no other corporate proceeding or action on the part of Seller or
its Board of Directors and stockholders are necessary therefor. The execution
and delivery of each Ancillary Agreement to which any Seller Affiliate is a
party, the performance of their respective obligations thereunder and the
consummation of the transactions contemplated thereby by each Seller Affiliate
party to such agreements have been duly and validly authorized by all
necessary corporate proceedings on the part of such Seller Affiliate, and no
other corporate proceeding or action on the part of any Seller Affiliate and
their respective Boards of Directors and stockholders are necessary therefor.
(d) The execution, delivery and performance of this Agreement and each of
the Ancillary Agreements by the Seller Affiliates will not (i) violate or
conflict with any provision of the memorandum of association or articles of
association (or similar instruments) of any Seller Affiliate, (ii) except as
set forth on Schedule 3.1(d), conflict with, violate or constitute a default
under any provision of, or be an event that is (or with the giving of notice
or passage of time or both will result in) a violation of or default under, or
result in the acceleration of or entitle any party to accelerate (whether
after the giving of notice or lapse of time or both) any obligation or right
under, or result in the imposition of any lien upon or the creation of a
security interest in any of the Shares or any of the assets or properties of
any of the Companies or of any of the Subsidiaries pursuant to, or require a
consent or create a penalty or increase any Company's or Subsidiary's payment
or performance obligations under, any material mortgage, lien, lease,
instrument, order, arbitration award, judgment or decree, or any material
contract, agreement, license or permit, to which Seller, any Company or any
Subsidiary is a party or by which any of them or any of their property is
bound, or (iii) assuming that all consents, approvals, authorizations and
other actions described in Section 3.7(b) have been obtained and all filings
and obligations set forth in
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Section 3.7(b) have been made, violate or conflict with in any material
respect, or result in the imposition of any material lien (other than liens
arising from any actions taken or arrangements made by Parent or any of its
subsidiaries) upon any of the Shares, or any of the assets or properties of
any Company or any Subsidiary pursuant to, any provision of law, regulation,
rule, writ, injunction, decree, statute, order, judgment or ruling of any
federal, state, local, foreign, supernational or supranational court or
tribunal (including any court or tribunal dealing with labor matters),
governmental, regulatory or administrative agency, department, bureau,
authority or commission or arbitral panel ("Governmental Authority") or any
other material restriction of any kind or character to which Seller, any
Company or any Subsidiary is or may be subject or by which any of them or any
of their property is or may be bound. This Agreement, the Canada Purchase
Agreement and the Lock-Up Agreement have been, and, at the Closing, the
Registration Rights Agreement and the Amended European License Agreement will
be, duly executed and delivered by each Seller Affiliate that is a party to
such agreements, and, assuming the due execution hereof and thereof by Parent
and any subsidiary of Parent that is a party to such agreements, this
Agreement, the Canada Purchase Agreement and the Lock-Up Agreement constitute,
and at the Closing the Registration Rights Agreement and the Amended European
License Agreement will constitute, the legal, valid and binding obligations of
such Seller Affiliates enforceable against such parties in accordance with
their respective terms except, in each case, as such enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally, and except as the
availability of equitable remedies may be limited by the application of
general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity).
(e) Upon consummation of the Stock Purchases at the Closing, as contemplated
by this Agreement, Seller will deliver to TH USA and THEH good and valid title
to all of the outstanding Pepe USA Shares and Pepe Far East Shares,
respectively, free and clear of any liens, claims, charges, security
interests, options or other legal or equitable encumbrances or other rights of
third parties (except those imposed by the federal securities laws or any
action taken or arrangement made by Parent or any of its subsidiaries).
(f) Seller has made available to TH USA and THEH complete and correct copies
of the memorandum of association and articles of association (or similar
instruments), as amended to date, of Seller and each of the Companies and
Subsidiaries, and has made available to TH USA and THEH the corporate minute
books containing the records of meetings of the stockholders and boards of
directors, the stock certificate books and the stock record books of the
Companies and the Subsidiaries. The stock record books of the Companies and
the Subsidiaries which Seller has made available to TH USA and THEH are
complete and correct in all respects and accurately reflect the ownership of
all of the outstanding shares of the Companies' and the Subsidiaries'
respective capital stock and all other securities issued by any of the
Companies or Subsidiaries. All material corporate actions taken by the
Companies and the Subsidiaries since their respective organization and
incorporation have been duly authorized and subsequently ratified as
necessary. None of the Companies or the Subsidiaries is in default under or in
violation of any provision of its memorandum of association or articles of
association (or similar instruments).
Section 3.2. Capitalization; Structure. (a) The authorized capital stock of
Pepe USA consists of 100,000 Pepe USA Shares, of which 50,000 shares are
issued and outstanding. The authorized capital stock of Pepe Far East consists
of 10,000 Pepe Far East Shares, of which 1,000 shares are issued and
outstanding. All of the outstanding shares of capital stock of the Companies
are validly issued, fully paid and nonassessable and are owned beneficially
and of record by Seller. All of the outstanding shares of capital stock or
other equity interests of the Subsidiaries, as listed on Schedule 3.2(a), are
validly issued, fully paid and nonassessable. Except as listed on Schedule
3.2(a), all of the outstanding shares of capital stock or other equity
interests (i) of the Subsidiaries (other than Pepe International Limited) are
owned by Pepe Far East, (ii) of Pepe International Limited are owned by TJ
Clothing (H.K.) Limited, (iii) of TH Canada are owned by Tomcan and (iv) of
Tomcan are owned by Lawvest, all in the amounts set forth on Schedule 3.2(a).
Neither the Shares nor the shares of outstanding common stock or other equity
interests of any Subsidiary have been issued in violation of, or are subject
to, any preemptive rights. The shares of capital stock or other equity
interests of the Subsidiaries and the Shares are
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owned in each case free and clear of any liens, claims, charges, security
interests, options or other legal or equitable encumbrances or restrictions.
Immediately following the consummation of the Canada Purchase pursuant to the
terms of the Canada Purchase Agreement, the Tomcan Shares will be owned
directly or indirectly by Pepe USA and the shares of capital stock or other
equity interests of TH Canada will be owned by Tomcan, in each case free and
clear of any liens, claims, charges, security interests, options or other
legal or equitable encumbrances or restrictions. There are no outstanding
options, warrants, subscriptions or other rights of any kind to acquire, or
obligations to issue, shares of capital stock of any class of, or other equity
interests in, any Company or, except as set forth on Schedule 3.2(a), any
Subsidiary, or any securities convertible into or exchangeable or exercisable
for any shares of capital stock of any class of, or other equity interests in,
any Company or any Subsidiary.
(b) None of the Companies or Subsidiaries directly or indirectly owns or has
the right to acquire any capital stock of or other equity interests,
investment, partnership, joint venture or similar interest in any corporation,
partnership or other entity or other Person except for (i) the ownership of
the outstanding shares or other equity interests of the Subsidiaries, as set
forth on Schedule 3.2(a) and (ii) the right of Pepe USA to purchase the Tomcan
Shares pursuant to the Canada Purchase Agreement. Except for (i) obligations
or liabilities incurred in connection with its incorporation or organization,
(ii) ownership of the equity interests of TH Canada and (iii) as set forth on
the Tomcan Balance Sheet, Tomcan has not and will not have incurred, directly
or indirectly, through any subsidiary or Affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind
whatsoever or entered into any agreements or arrangements with any Person.
Section 3.3. Financial Statements. (a) Seller has previously furnished to TH
USA true and complete copies of (i) the combined financial statements of Pepe
USA and Pepe Far East and its subsidiaries, including combined balance sheets
as of March 31, 1997 and March 31, 1996, combined statements of operations and
retained earnings (accumulated deficit) and combined statements of cash flows
for the fiscal-year periods ended March 31, 1997, March 31, 1996 and March 31,
1995 (such financial statements being audited and accompanied by the
unqualified opinion of Price Waterhouse) and (ii) unaudited condensed combined
financial statements for Pepe USA and Pepe Far East and its subsidiaries as of
and for the nine-month period ended December 31, 1997 (the "Pepe Financial
Statements"). The audited combined balance sheet as of March 31, 1997 is
referred to in this Agreement as the "Pepe Balance Sheet." The Pepe Financial
Statements (including, in each case, any notes thereto) present fairly in all
material respects the combined financial position and results of operations
and cash flows of Pepe USA and Pepe Far East and its subsidiaries for the
respective periods or as of the respective dates set forth therein, in each
case in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as otherwise indicated therein or on Schedule 3.3(a)
and except, in the case of the unaudited Pepe Financial Statements, for
changes resulting from normal and recurring year-end adjustments). The Pepe
Financial Statements have been prepared from and in accordance with the books
and records of Pepe USA and Pepe Far East and its subsidiaries.
(b) Seller has previously furnished to TH USA true and complete copies of
the financial statements of (i) TH Canada, including balance sheets as of
March 31, 1997, March 31, 1996 and March 31, 1995, the statements of income
and retained earnings and statements of changes in financial position for the
fiscal-year periods ended March 31, 1997, March 31, 1996 and March 31, 1995
and (ii) Tomcan, including a consolidated balance sheet as of December 31,
1997, and statements of income and retained earnings and statements of changes
in financial position for the nine-month period ended December 31, 1997 (such
financial statements as of and for the fiscal-year period ended March 31, 1997
and as of and for the nine-month period ended December 31, 1997 being audited
and accompanied by the unqualified opinion of Price Waterhouse and such
financial statements as of and for the fiscal-year periods ended March 31,
1996 and March 31, 1995 being audited and accompanied by the unqualified
opinions of Ptack Schnarch Basevitz) (the "Canada Financial Statements" and
together with the Pepe Financial Statements, the "Financial Statements"). The
Canada Financial Statements have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods involved (except as otherwise
indicated therein or on Schedule 3.3(b)). The audited condensed balance sheet
of Tomcan as of December 31, 1997 is referred to in this Agreement as the
"Tomcan Balance Sheet."
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Section 3.4. Properties; Leases. Except for Permitted Exceptions or as set
forth on Schedule 3.4 hereto, at the Closing a Company or a Subsidiary will
have good and marketable title to, or valid leasehold interests in, as the
case may be, and hold free and clear of all Encumbrances, all of the
properties and assets reflected in the Pepe Balance Sheet or acquired in the
ordinary course of business since the date of the Pepe Balance Sheet (the
"Assets") other than assets sold or fixtures transferred in the ordinary
course of business consistent with past practice. Schedule 3.4 sets forth a
list of all real property used in conducting the businesses of the Companies
and the Subsidiaries (collectively, the "Real Property"). Seller has delivered
to TH USA and THEH or otherwise made available, correct and complete copies of
all leases, subleases and other material agreements or other material
instruments relating to the Real Property to which any of the Companies or
Subsidiaries is a party, all of which are identified on Schedule 3.4 hereto.
There are no pending or, to Seller's knowledge, threatened condemnation
proceedings relating to any of the Real Property. None of the real property
improvements (including leasehold improvements), equipment and other assets
owned or used by the Companies or the Subsidiaries is subject to any
commitment or other arrangement for their sale or use by any Affiliate of any
of the Companies or the Subsidiaries or by third parties.
Section 3.5. Absence of Certain Changes. Except as set forth on Schedule 3.5
hereto and except as contemplated by this Agreement, since March 31, 1997,
there has been no (a) change or development in, or effect on, the business or
businesses of the Companies and the Subsidiaries that is, or could reasonably
be expected to be, materially adverse to the business, assets, liabilities,
condition (financial or otherwise), results of operations or prospects of the
Companies and the Subsidiaries, taken as a whole (a "Company Material Adverse
Effect") or (b) action taken by any Company or any Subsidiary which, if taken
from the date hereof through the Closing, would violate Section 5.4(b) through
(m).
Section 3.6. Litigation; Orders. Except as set forth on Schedule 3.6 hereto,
there are no Actions pending or, to the knowledge of Seller, threatened or
claims asserted against any Company or Subsidiary other than routine Actions
in the ordinary course of business as to which the claims against the
Companies and the Subsidiaries are less than $100,000 individually and
$250,000 in the aggregate. Except as set forth on Schedule 3.6 hereto, there
are no material judgments or material outstanding orders, injunctions,
decrees, stipulations, settlement agreements, citations, investigations, fines
or awards against or binding upon any Company or Subsidiary or any of their
respective properties or businesses.
Section 3.7. Licenses, Approvals, Other Authorizations, Consents, Reports,
etc. (a) The Companies and the Subsidiaries possess or have been granted all
material registrations, filings, applications, certifications, notices,
consents, licenses, permits, approvals, certificates, franchises, orders,
qualifications, authorizations and waivers ("Licenses") of any Governmental
Authority necessary to entitle them to conduct their businesses in the manner
in which they are presently being conducted.
(b) Except (i) as set forth on Schedule 3.7(b) hereto, (ii) for the pre-
merger notification requirements of the HSR Act and any necessary approvals or
filings under the Competition Act (Canada) or the Investment Canada Act and
(iii) those the failure to make, file, give or obtain which would not have a
Company Material Adverse Effect or prevent the consummation of the Stock
Purchases and the other transactions contemplated hereby, there are no
Licenses required to be made, filed, given or obtained by Seller, or any of
the Companies or Subsidiaries with, to or from any Governmental Authority in
connection with the consummation of the Stock Purchases, the Canada Purchase
and the other transactions contemplated under this Agreement or any of the
Ancillary Agreements.
Section 3.8. Labor Matters. Schedule 3.8 hereto sets forth all collective
bargaining or other agreements with labor unions, trade unions, employee
representatives, work committees, guilds or associations representing
employees of any of the Companies or Subsidiaries. As of the date hereof, none
of the Companies or Subsidiaries is involved in or, to Seller's knowledge,
threatened with any labor dispute, arbitration, lawsuit, grievance or
administrative proceeding (other than immaterial grievances), relating to
labor matters involving any current or former employee of any Company or
Subsidiary. Except as set forth on Schedule 3.8, as of the date hereof, no
union or association organizing or election activities involving any nonunion
employees of any Company or Subsidiary are in progress or, to the knowledge of
Seller, have been threatened since April 1, 1995.
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Section 3.9. Compliance with Laws. Except as may be disclosed in Schedule
3.9, the conduct of the businesses of the Companies and Subsidiaries is in and
has been in compliance in all material respects with all material statutes,
laws, regulations, ordinances, rules, judgments, orders or decrees applicable
thereto. Except as set forth on Schedule 3.9, neither Seller nor any Company
or Subsidiary has received written notice of any alleged violation of any
statute, law, regulation, ordinance, rule, judgment, order or decree from any
Governmental Authority applicable to any of the Companies or Subsidiaries or
to their properties which has not been satisfactorily addressed and which give
rise to material fines or other civil penalties or to any criminal
liabilities. In furtherance and not in limitation of the foregoing, neither
Seller nor any Company or Subsidiary has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item of property,
however characterized, to any government official or other governmental party,
in the United States or any other country, which is in any manner related to
the businesses or operations of the Companies or the Subsidiaries and which
was illegal under any statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees of any Governmental Authority (including, without
limitation, the U.S. Foreign Corrupt Practices Act).
Section 3.10. Insurance. Each of the Companies and Subsidiaries is covered
by valid and currently effective insurance policies issued in its favor that
are customary in scope and amount of coverage for privately-owned companies of
similar size and financial condition in the industry and locale in which it
operates. Schedule 3.10 lists all insurance policies which are in effect
covering any of the Companies, the Subsidiaries or their employees, or the
Real Property and such Schedule lists each of the parties to such policies.
Except as set forth on Schedule 3.10, all such policies are in full force and
effect, all premiums due thereon have been paid and the Companies and the
Subsidiaries have complied with the provisions of such policies in all
material respects.
Section 3.11. Material Contracts. Except as set forth on Schedule 3.11
hereto, neither any Company nor any Subsidiary is a party to or bound by any
written or oral (a) employment, consulting or non-competition agreement or
contract requiring payments of compensation to any one Person in excess of
$75,000 per year or aggregate payments of compensation to any one Person in
excess of $150,000; (b) joint venture or partnership contract or agreement;
(c) contract or agreement restricting the right of any of the Companies or the
Subsidiaries to compete in any way with any other Person; (d) other than trade
payables in the ordinary course of business, agreement or contract creating,
evidencing or securing, as of the date hereof, obligations of any of the
Companies or the Subsidiaries for (i) borrowed money, (ii) purchase money
indebtedness, (iii) any guarantee or assumption of an obligation for borrowed
money or purchase money indebtedness or other obligations of reimbursement of
any maker of a letter of credit or any guaranty of minimum equity or capital
or any make-whole or similar agreement, (iv) any loan or extension of credit
by any Company or Subsidiary or (v) bankers acceptance; (e) agreement or
contract relating to any outstanding commitment for capital expenditures in
excess of the amount set forth on the capital budget provided to Parent prior
to the date hereof; (f) licenses, whether as licensor or licensee, of any
Intellectual Property; (g) any material lease as lessee or lessor of real or
personal property; (h) capitalized lease or sale-leaseback or material
conditional sale agreement; (i) distributorship or franchise agreement; (j)
material raw material or other supply agreements or any exclusive dealing,
requirements or take-or-pay contracts; (k) other than as identified in Section
3.12, any brokerage or finders fee agreements; or (l) other contract or
agreement, entered into other than in the ordinary course of business,
involving an estimated total future payment or payments in excess of $100,000.
Each contract or agreement set forth on Schedule 3.11 hereto is in full force
and effect, and, to Seller's knowledge, is legal, valid and binding and
enforceable against each other Person party thereto. Neither any of the
Companies or Subsidiaries, nor, to Seller's knowledge, any other party to any
such contract or agreement, is in material breach thereof or default
thereunder and there does not exist under any provision thereof, any event
that, with the giving of notice or the lapse of time or both, would constitute
such a breach or default by any Company or Subsidiary or, to Seller's
knowledge, by any other party to any such contract or agreement, except for
such breaches, defaults and events as to which requisite waivers or consents
have been or prior to the Closing will have been obtained. Seller has made
available to TH USA and THEH true and correct copies of each of such written
agreements and contracts or provided written summaries of any such oral
agreements and contracts.
Section 3.12. Brokers, Finders, etc. No Seller Affiliate has employed, or is
subject to any valid claim of, any broker, finder, or other similar
intermediary in connection with the transactions contemplated by this
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Agreement or the Ancillary Agreements who might be entitled to a fee or
commission in connection with such transactions, other than pursuant to an
engagement letter with each of Allen & Company Incorporated and Smith Barney
Canada, true and correct copies of which Seller has previously provided to TH
USA and THEH, the fees and expenses of which will be payable by Pepe USA and
TH Canada, respectively.
Section 3.13. Affiliate Transactions. Except as disclosed in the notes to
the Financial Statements or as set forth on Schedule 3.13 hereto, (a) no
Continuing Affiliate or any officer, director or employee of any Continuing
Affiliate provides or causes to be provided to any of the Companies or the
Subsidiaries any assets, loans, advances, services or facilities and (b) none
of the Companies or Subsidiaries provides or causes to be provided to any such
officer, director or employee or Continuing Affiliate any assets, loans,
advances, services or facilities. Except as set forth on Schedule 3.13 hereto,
none of the Companies or the Subsidiaries, jointly with any Continuing
Affiliate, purchases or sells goods or services.
Section 3.14. Environmental Compliance. (a) For purposes of this Section
3.14, (i) "Hazardous Substance" means any pollutant, contaminant, hazardous or
toxic substance or waste, solid waste, petroleum, petroleum product, by-
product or breakdown product, or any other chemical, substance or material
listed or identified in or regulated by or under any Environmental Law; (ii)
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S) 9601 et seq., the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. (S) 6901 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq., the
Clean Air Act, 42 U.S.C. (S) 7401 et seq., the Toxic Substances Control Act,
15 U.S.C. (S) 2601 et seq., the Safe Drinking Water Act, 42 U.S.C. (S) 300f et
seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C. (S)
11001 et seq., the Occupational Safety and Health Act, 29 U.S.C. (S) 651 et
seq., the Oil Pollution Act, 33 U.S.C. (S) 2701 et seq., in each case as
amended from time to time, and any other statute, rule, regulation, law, by-
law, ordinance or directive of any Governmental Authority dealing with the
pollution or protection of natural resources or the indoor or ambient
environment or with the protection of human health or safety; and (iii) "RCRA
Hazardous Waste" means a solid waste that is listed or classified as a
hazardous waste, as that term is defined in or pursuant to the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. (S) 6901 et seq.
(b) Except as set forth on Schedule 3.14, there are no claims pending or, to
the knowledge of Seller, threatened, and none of Seller, the Companies or
Subsidiaries has received any written notice, alleging, warning or notifying
any Company or Subsidiary that any Company or Subsidiary is, has been or may
be in violation of, or non-compliance with, in any material respect, any
Environmental Law.
(c) Except as set forth on Schedule 3.14, to the knowledge of Seller, no
Hazardous Substances have ever been buried, spilled, leaked, discharged,
emitted, generated, stored, used or released, and no Hazardous Substances are
now present in amounts, concentrations or conditions requiring investigation,
study, removal, remediation or any other response action or corrective action
under, or forms the basis of a claim pursuant to, any Environmental Law, in,
on, from or under the Real Property or any other property with respect to
which any Company or Subsidiary may be identified as a potentially responsible
party or otherwise bear liability, except for immaterial quantities stored or
used by any Company or Subsidiary in the ordinary course of its business and
in accordance, in all material respects, with all applicable Environmental
Laws.
(d) Except as set forth on Schedule 3.14, the Real Property is not being
used and, to the knowledge of Seller, never has been used in connection with
the business of manufacturing, storing or transporting Hazardous Substances,
and, to the knowledge of Seller, no RCRA Hazardous Wastes have been treated,
stored or disposed of there.
(e) Except as set forth on Schedule 3.14, to Seller's knowledge, there are
not now and never have been any underground or above ground storage tanks or
other containment facilities of any kind on the Real Property which contain or
contained any Hazardous Substances.
(f) Except as set forth on Schedule 3.14, none of the Real Property is or
has been listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System or
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any similar federal, state, local or foreign list, schedule, log, inventory or
database of sites or facilities with potential, threatened, suspected or
actual releases of Hazardous Substances.
(g) Schedule 3.14 identifies, and Seller has provided to TH USA and THEH
true and correct copies of, all environmental audits or assessments relating
in whole or in part to any of the Companies or the Subsidiaries undertaken by
or on behalf of any of the Seller Affiliates, or, to Seller's knowledge, by
Governmental Authorities or other third parties, and any written
communications by the Companies or the Subsidiaries or, to Seller's knowledge,
relating in whole or in part to any of the Companies or the Subsidiaries with
environmental agencies, within the past six years which describe the status of
any Real Property or the compliance of the owners or lessees thereof with
respect to any Environmental Law.
(h) Except as set forth on Schedule 3.14, no Seller Affiliate has received
any written notice from any Governmental Authority or other third party that
any of the Companies or Subsidiaries or any of their predecessors is or may be
a potentially responsible party or may otherwise bear liability for any actual
or threatened release of Hazardous Substances at or from any site or facility
other than the Real Property.
Section 3.15. Undisclosed Liabilities. Except (a) as disclosed in Schedule
3.15 hereto, (b) obligations to consummate the Canada Purchase pursuant to the
Canada Purchase Agreement, (c) as and to the extent disclosed or reserved
against on the Pepe Balance Sheet or identified in the notes thereto, (d) as
and to the extent disclosed on the face of the Pepe Year-End Balance Sheet or
identified in the notes thereto, (e) as incurred after the date of the Pepe
Balance Sheet in the ordinary course of business consistent with prior
practice and not prohibited by this Agreement or (f) liabilities or
obligations relating to Actions, contracts, agreements or environmental
matters disclosed on or not required to be disclosed on Schedules 3.6, 3.11 or
3.14, respectively, the Companies and Subsidiaries do not have any liabilities
or obligations of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due.
Section 3.16. Proxy Statement. The information supplied by Seller, the
Companies or the Subsidiaries for inclusion in the Proxy Statement (as defined
in Section 5.12) to be sent to the stockholders of Parent in connection with
the meeting of the stockholders of Parent to consider this Agreement (the
"Parent Stockholders Meeting"), will not, on the date the Proxy Statement (or
any amendment thereof or supplement thereto) is first mailed to the
stockholders of Parent, at the time of the Parent Stockholders Meeting or on
the Closing Date, contain any statement which, at such time and in light of
the circumstances under which it shall be made, is false or misleading with
respect to any material fact, or shall omit to state any material fact
necessary in order to make the statements made therein not false or
misleading. If at any time prior to the Closing Date any event relating to
Seller or any of the Companies or Subsidiaries or any of their respective
Affiliates, officers or directors should be discovered by Seller, any of the
Companies or any of the Subsidiaries which should be set forth in an amendment
or supplement to the Proxy Statement, Seller shall promptly inform Parent.
Section 3.17. Acquisition of Shares for Investment. Seller has such
knowledge and experience in financial and business matters that it is capable
of evaluating the merits and risks of Seller's acquisition of the Purchase
Price Shares and has been provided access to personnel and books of Parent and
its subsidiaries for purposes of making its evaluation. Seller is acquiring
the Purchase Price Shares for investment and not with a view toward or for
sale in connection with any distribution thereof, or with any present
intention of distributing or selling the Purchase Price Shares. Seller agrees
that the Purchase Price Shares may not be sold, transferred, offered for sale,
pledged, hypothecated or otherwise disposed of without registration under the
Securities Act, except pursuant to an exemption from such registration
available under the Securities Act.
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ARTICLE IV
Representations and Warranties of Parent
Parent hereby represents and warrants to Seller as follows:
Section 4.1. Incorporation; Authorization; etc. (a) Parent has been duly
incorporated and is validly existing as a company limited by shares in good
standing under the laws of the British Virgin Islands. Each of TH USA and THEH
has been duly incorporated and is validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Parent has full corporate
power and authority to own its property and to conduct its business as it is
now being conducted and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which the conduct of
its business or ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on Parent and its
subsidiaries, taken as a whole. Parent and each subsidiary of Parent which is
a party to this Agreement or any of the Ancillary Agreements has full
corporate power and authority to execute and deliver this Agreement and each
of the Ancillary Agreements to which Parent or such subsidiary is a party, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Each of (i) the execution and
delivery of this Agreement and each of the Ancillary Agreements to which
Parent or any of its subsidiaries is a party, and the performance by Parent or
such subsidiaries of their respective obligations hereunder and thereunder and
the consummation of the transactions contemplated hereby and thereby by Parent
or such subsidiaries and (ii) an amendment to the memorandum of association of
Parent to increase the number of authorized Parent Shares to 75,000,000 (the
"Memorandum Amendment") have been duly authorized by the Board of Directors of
Parent and each such subsidiary, as applicable, and no other corporate
proceedings on the part of Parent or its subsidiaries or their respective
Boards of Directors or stockholders are necessary therefor, other than the
approval of this Agreement by a majority of the votes cast at the Parent
Stockholders Meeting. The Board of Directors of Parent has directed that this
Agreement be submitted to Parent's stockholders for approval at the Parent
Stockholders Meeting and has recommended that Parent's stockholders approve
this Agreement.
(b) The execution, delivery and performance by Parent and its subsidiaries
of this Agreement and each of the Ancillary Agreements to which Parent or any
such subsidiary is a party will not (i) (assuming the stockholder approval set
forth in Section 4.1(a) is obtained and the Memorandum Amendment has become
effective) violate or conflict with any provision of the memorandum of
association or articles of association (or similar instruments) of Parent or
such subsidiaries, (ii) except as set forth on Schedule 4.1(b), conflict with,
violate or constitute a default under any provision of, or be an event that is
(or with the giving of notice or passage of time or both will result in) a
violation of or default under, or result in the acceleration of or entitle any
party to accelerate (whether after the giving of notice or lapse of time or
both) any obligation or right under, or result in the imposition of any lien
upon or the creation of a security interest in any of the Purchase Price
Shares or any of the assets or properties of Parent or its subsidiaries
pursuant to, or require a consent or create a penalty or increase Parent's or
any of its subsidiary's payment or performance obligations under, any material
mortgage, lien, lease, instrument, order, arbitration award, judgment or
decree, or any material contract, agreement, license or permit, to which
Parent or any of its subsidiaries is a party or by which any of them or any of
their property is bound, or (iii) assuming that all consents, approvals,
authorizations and other actions described in Section 4.3 have been obtained
and all filings and obligations set forth in Section 4.3 have been made,
violate or conflict with in any material respect, or result in the imposition
of any material lien (other than liens arising from any actions taken or
arrangements made by any Seller Affiliate) upon any of the Purchase Price
Shares, or any of the assets or properties of Parent or any of its
subsidiaries pursuant to, any provision of law, regulation, rule, writ,
injunction, decree, statute, order, judgment or ruling of any Governmental
Authority or any other material restriction of any kind or character to which
Parent or any of its subsidiaries is or may be subject or by which any of them
or any of their property is or may be bound. This Agreement and the Lock-Up
Agreement have been, and, as of the Closing, the Registration Rights Agreement
and the Amended European License Agreement will be, duly executed and
delivered by Parent and each of its subsidiaries parties to such agreements
and, assuming the due execution hereof and thereof by Seller and the
subsidiaries of Seller parties to such agreements,
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this Agreement and the Lock-Up Agreement constitute, and as of the Closing the
Registration Rights Agreement and the Amended European License Agreement will
constitute, the legal, valid and binding obligations of Parent and such
subsidiaries enforceable against such parties in accordance with their
respective terms except, in each case, as such enforceability may be limited
by any applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally, and except as the
availability of equitable remedies may be limited by the application of
general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity).
(c) Upon consummation of the Stock Purchases at the Closing, as contemplated
by this Agreement, Parent will deliver to TH USA and TH USA will deliver to
Seller good and valid title to the Purchase Price Shares free and clear of any
liens, claims, charges, security interests, options or other legal or
equitable encumbrances or other rights of third parties (except those imposed
by the federal securities laws or any action taken or arrangement made by any
Continuing Affiliate).
Section 4.2. Capitalization. (a) As of January 30, 1998, the authorized
capital stock of Parent consisted of (i) 50,000,000 Ordinary Shares, $.01 par
value per share ("Parent Shares"), of which: 37,436,929 shares were issued and
outstanding, all of which are validly issued, fully paid and nonassessable, no
shares were held in treasury, 2,769,410 shares were reserved for future
issuance upon exercise of outstanding options to purchase Parent Shares under
the TH Incentive Plans, and an additional 775,085 shares were reserved for
issuance under the TH Incentive Plans; and (ii) 5,000,000 Preference Shares,
$.01 par value per share, of which no shares were issued and outstanding.
(b) Except (i) as set forth on Schedule 4.2(b) or in the Parent SEC Reports,
(ii) as contemplated by this Agreement and (iii) for stock options issued
pursuant to the TH Incentive Plans, there are no outstanding options,
warrants, subscriptions or other rights of any kind to acquire, or obligations
to issue, shares of capital stock of any class of, or other equity interests
in, Parent or any securities convertible into or exchangeable or exercisable
for any shares of capital stock of any class of, or other equity interests in,
Parent. The Purchase Price Shares, when issued as contemplated herein, will be
duly authorized, validly issued, fully paid and nonassessable, and will not
have been issued in violation of, or be subject to, any preemptive rights.
Section 4.3. Other Authorizations, Consents, Reports, etc. Except (a) as set
forth on Schedule 4.3 hereto, (b) for applicable requirements, if any, of the
Securities Act, the Exchange Act, the Blue Sky Laws, the pre-merger
notification requirements of the HSR Act, any necessary approvals or filings
under the Competition Act (Canada) or the Investment Canada Act, the filing of
an amendment to Parent's Memorandum of Association evidencing the Memorandum
Amendment and the listing requirements of the NYSE and (c) those the failure
to make, file, give or obtain which would not have a material adverse effect
on Parent and its subsidiaries taken as a whole or prevent the consummation of
the Stock Purchases and the other transactions contemplated hereby, there are
no Licenses required to be made, filed, given or obtained by Parent with, to
or from any Governmental Authority in connection with the consummation of the
Stock Purchases and the transactions contemplated under this Agreement or any
of the Ancillary Agreements.
Section 4.4. Brokers, Finders, etc. Except for the services of Morgan
Stanley & Co. Incorporated and Wasserstein Perella & Co., Inc., Parent has not
employed, nor is Parent subject to any valid claim of, any broker, finder, or
other similar intermediary in connection with the transactions contemplated by
this Agreement who might be entitled to a fee or commission in connection with
such transactions. No Continuing Affiliate has or will have any obligations to
Morgan Stanley & Co. Incorporated and Wasserstein Perella & Co., Inc. with
respect to the transactions contemplated by this Agreement or the Ancillary
Agreements.
Section 4.5. Acquisition of Shares for Investment. Each of TH USA and THEH
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of its purchase of the Shares and
has been provided access to personnel and books of the Companies and the
Subsidiaries for purposes of making its evaluation. Each of TH USA and THEH is
acquiring the Shares for investment and not with a view toward or for sale in
connection with any distribution thereof, or with any present intention of
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distributing or selling the Shares. Each of TH USA and THEH agrees that the
Shares may not be sold, transferred, offered for sale, pledged, hypothecated
or otherwise disposed of without registration under the Securities Act, except
pursuant to an exemption from such registration available under the Securities
Act.
Section 4.6. SEC Filings; Financial Statements. (a) Parent has filed all
forms, reports, statements and other documents required to be filed by it with
the SEC since March 31, 1996 (such forms, reports, statements and other
documents are hereinafter referred to as the "Parent SEC Reports"). Except as
disclosed in Schedule 4.6 hereto, the Parent SEC Reports (i) were prepared in
all material respects in accordance with the applicable requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements (including, in each case, any
notes thereto) contained in the Parent SEC Reports were prepared in accordance
with GAAP applied on a consistent basis throughout the periods involved
(except as may be indicated therein or in the notes thereto) and fairly
presented in all material respects the consolidated financial position,
results of operations and cash flows of Parent and its consolidated
subsidiaries as at the respective dates thereof, except that the unaudited
interim financial statements were or are subject to normal and recurring year-
end adjustments.
Section 4.7. Proxy Statement. The information supplied by Parent for
inclusion in the Proxy Statement to be sent to the stockholders of Parent in
connection with the Parent Stockholders Meeting, will not, on the date the
Proxy Statement (or any amendment thereof or supplement thereto) is first
mailed to the stockholders of Parent, at the time of the Parent Stockholders
Meeting or on the Closing Date, contain any statement which, at such time and
in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or shall omit to state any
material fact necessary in order to make the statements made therein not false
or misleading. Notwithstanding the foregoing, Parent makes no representation
or warranty with respect to any information supplied by Seller which is
contained or incorporated by reference in the Proxy Statement or any amendment
or supplement thereto.
ARTICLE V
Covenants of Seller and Parent
Section 5.1. Investigation of Business; Access to Properties and
Records. (a) Prior to the Closing Date, Seller shall and shall cause the
Companies and the Subsidiaries to, and Parent shall, afford to representatives
of the other party full access to their respective personnel, offices, plants,
properties, books and records during normal business hours, in order that
Seller and Parent may have full opportunity to make such investigations as
such party desires of the affairs and assets of Parent, on the one hand, or
the Companies and Subsidiaries on the other hand; provided, however, that such
investigation by Seller and Parent shall not unreasonably disrupt the
personnel and operations of Parent, on the one hand, or the Companies or
Subsidiaries, on the other hand.
(b) At the Closing or as soon thereafter as practicable, Seller will deliver
or cause to be delivered to TH USA and THEH all corporate records of the
Companies and Subsidiaries, and all other original (or copies thereof, if
originals are not immediately available) agreements, documents, books and
records relating to the businesses of the Companies and the Subsidiaries.
(c) Except as required by law and except to the extent such information
becomes publicly available other than as a result of any action taken by any
Continuing Affiliate, from and after the Closing Date, the Continuing
Affiliates shall maintain the confidentiality of non-public information with
respect to the Companies and Subsidiaries. In the event that any of the
Continuing Affiliates after the Closing Date is requested, or becomes
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required by law, to disclose any confidential information relating to the
Companies and the Subsidiaries, Seller will provide Parent with prompt notice
thereof (before such information is disclosed if practicable) so that Parent
may seek a protective order or other appropriate remedy and/or waive
compliance with the terms of this Section 5.1(c).
Section 5.2. Efforts; Obtaining Consents. (a) Subject to the terms and
conditions herein provided, each of Seller and Parent agrees to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by
this Agreement and to cooperate with the other in connection with the
foregoing, including using its reasonable efforts (i) to obtain all waivers,
consents and approvals from other parties to loan agreements, leases,
mortgages and other contracts necessary for the consummation of the
transactions contemplated hereby including, without limitation, the credit
agreements listed on Schedule 5.2 hereto, (ii) to make all filings with, and
to obtain all consents, approvals and authorizations that are required to be
obtained from, Governmental Authorities, including without limitation the
filing by or on behalf of Parent with the Registrar of Companies of the
British Virgin Islands of a notice of amendment to the Memorandum of
Association of Parent to reflect the Memorandum Amendment, (iii) to lift or
rescind any injunction, restraining order, decree or other order adversely
affecting the ability of the parties hereto to consummate the transactions
contemplated hereby, (iv) to effect all necessary registrations and filings
and submissions of information requested by Governmental Authorities, and (v)
to fulfill all conditions to this Agreement. Each of Seller and Parent shall
use all reasonable efforts to prevent the entry, enactment or promulgation of
any threatened or pending preliminary or permanent injunction or other order,
decree or ruling or statute, rule, regulation or executive order that would
adversely affect the ability of the parties hereto to consummate the
transactions contemplated hereby.
(b) Seller and Parent shall promptly file or cause to be filed with the
Antitrust Division of the United States Department of Justice and the Federal
Trade Commission pursuant to the HSR Act all requisite documents and
notifications in connection with the transactions contemplated by this
Agreement. Parent shall pay the filing fee incurred in connection with such
filings under the HSR Act. Each party hereto shall promptly inform the other
of any material communication from the Federal Trade Commission, the
Department of Justice or any other Governmental Authority regarding any of the
transactions contemplated hereby. If either Parent or Seller or any Affiliate
thereof receives a request for additional information or documentary material
from any such government or Governmental Authority with respect to the
transactions contemplated hereby, then such party shall endeavor in good faith
to make, or cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response in compliance with
such request. Each of Parent and Seller will advise the other promptly in
respect of any understandings, undertakings or agreements (oral or written)
which it proposes to make or enter into with the Federal Trade Commission, the
Department of Justice or any other Governmental Authority in connection with
the transactions contemplated hereby.
Section 5.3. Further Assurances. Seller, Parent, TH USA and THEH agree that,
from time to time, whether before, at or after the Closing Date, each of them
will take such other action (including, on the part of Seller, using its best
efforts to cause the Continuing Affiliates to take such action and, on the
part of Parent, using its best efforts to cause its subsidiaries to take such
action) as may be necessary to carry out the purposes and intents of this
Agreement and the Ancillary Agreements including, without limitation, Parent
and TH USA taking such actions as may be necessary to enable TH USA to deliver
to Seller the Purchase Price Shares.
Section 5.4. Conduct of Business by Seller. From the date hereof through the
Closing, except as disclosed on Schedule 5.4 hereto or otherwise provided for
in this Agreement, and, except as consented to or approved by Parent in
writing, Seller covenants and agrees that:
(a) each of the Companies and the Subsidiaries shall operate its business in
the ordinary and usual course in accordance with past practices;
(b) neither any Company nor any Subsidiary shall issue, sell or agree to
issue or sell (i) any shares of its capital stock, or (ii) any securities
convertible into, or options with respect to, or warrants to purchase or
rights
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to subscribe for, any shares of its capital stock or make any change in its
issued and outstanding capital stock or redeem, purchase or otherwise acquire
any of its capital stock;
(c) neither any Company nor any Subsidiary shall (i) increase in any manner
the compensation of, or enter into any new bonus or incentive agreement or
arrangement with, any of its directors, officers or other employees other than
increases in compensation in the ordinary course of business and consistent
with past practice and which are not material in the aggregate; (ii) pay or
agree to pay any pension, retirement allowance or other employee benefit to
any director, officer or employee, whether past or present, other than as
required by applicable law, contracts or plan documents in effect on the date
of this Agreement; (iii) enter into any new employment, severance, consulting,
or other compensation agreement with any director, officer or employee or
other person other than in connection with any new hires or promotions in the
ordinary course and consistent with past practice; or (iv) commit itself to
any additional pension, profit-sharing, deferred compensation, group
insurance, severance pay, retirement or other employee benefit plan, fund or
similar arrangement or adopt or amend or commit itself to adopt or amend any
of such plans, funds or similar arrangements in existence on the date hereof;
(d) neither any Company nor any Subsidiary shall (i) amend its memorandum or
articles of association (or similar instruments), (ii) declare any dividend or
make any distribution with respect to its capital stock, (iii) assume, incur
or guarantee any obligation for borrowed money other than trade payables in
the ordinary course of business consistent with past practice, (iv) cancel or
compromise, except for compromises of current or former short-term trade
receivables or other current assets in the ordinary course of business
consistent with past practice, any debts owed to it, or (v) waive or release
any rights of material value;
(e) neither any Company nor any Subsidiary shall (i) sell, transfer, lease
or otherwise dispose of any of its assets other than inventory, accounts
receivable or fixtures in the ordinary course of business consistent with
prior practice, (ii) create or permit to exist any new security interest, lien
or encumbrance on any of its properties or assets, other than Permitted
Exceptions, (iii) enter into any joint venture, partnership or other similar
arrangement, (iv) make any investment in or purchase any securities of any
Person other than in connection with (A) the cash management activities of the
Companies and the Subsidiaries in the ordinary course of business consistent
with past practice or (B) the formation of a wholly owned subsidiary or (v)
purchase any assets of any Person other than in the ordinary course of
business consistent with past practice;
(f) neither any Company nor any Subsidiary shall permit a change in its
methods of maintaining its books, accounts or business records or, except as
required by GAAP (in which event prior notice shall be given to Parent),
change any of its accounting principles or the methods by which such
principles are applied for tax or financial reporting purposes;
(g) the Companies and the Subsidiaries together shall incur capital
expenditures only in the ordinary course of business consistent with prior
practice and not in excess of the capital budget provided to Parent prior to
the date hereof;
(h) neither any of the Companies nor any of the Subsidiaries shall (i) enter
into or terminate any material lease, contract or agreement, or make any
change in any of their material leases, contracts and agreements, (ii) enter
into any transaction with any Continuing Affiliate or any director, officer or
shareholder of any Continuing Affiliate other than as contemplated by Sections
5.11 and 5.16, (iii) reclassify any assets or liabilities, or (iv) do any
other act that (A) would cause any representation or warranty of Seller in
this Agreement to be or become untrue in any material respect or (B) could
reasonably be expected to have a Company Material Adverse Effect;
(i) the Companies and Subsidiaries will comply in all material respects with
all material laws and regulations applicable to them;
(j) the Canada Purchase Agreement and the Bentley Trust Guarantee shall not
be amended nor shall any obligations of the parties thereunder be waived;
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(k) neither any of the Companies nor any of the Subsidiaries will make any
payment of interest on or principal of any intercompany indebtedness to any
Continuing Affiliate, other than payment of accrued interest on the Retained
Note;
(l) neither any of the Companies nor any of the Subsidiaries shall make any
election with respect to Taxes, consent to any waiver or extension of time to
assess or collect any Taxes without the consent of Parent (which consent shall
not be unreasonably withheld) or file any Return other than a Return filed in
the ordinary course of business and prepared in a manner consistent with past
practice; and
(m) neither any of the Companies nor any of the Subsidiaries shall agree to
take any action prohibited by this Section 5.4.
Section 5.5. Conduct of Business by Parent. From the date hereof through the
Closing, except as otherwise contemplated in this Agreement and except as
consented to or approved by Seller in writing, Parent covenants and agrees
that it shall not (a) except for issuances of Parent Shares upon exercise of
outstanding stock options under the TH Incentive Plans and grants of stock
options pursuant to the TH Incentive Plans, issue, sell or agree to issue or
sell (i) any shares of its capital stock or (ii) any securities convertible
into, or options with respect to, or warrants to purchase or rights to
subscribe for, any shares of its capital stock or make any change in its
issued and outstanding capital stock or redeem, purchase or otherwise acquire
any of its capital stock; (b) except pursuant to the Memorandum Amendment,
amend its memorandum or articles of association; (c) declare any dividend or
make any distribution with respect to its capital stock; or (d) purchase any
Parent Shares other than in open market transactions.
Section 5.6. Preservation of Business. From the date hereof until the
Closing, subject to the terms and conditions of this Agreement, Seller and
Parent shall, and shall cause each of their respective subsidiaries to, use
all reasonable efforts to preserve the business of the Companies and
Subsidiaries intact, to preserve the good will of customers, suppliers,
employees and others having business relations with the Companies and
Subsidiaries, to retain its key employees, and to maintain insurance in full
force and effect.
Section 5.7. Non-Solicitation. Except with respect to the Canada Purchase or
as otherwise contemplated in this Agreement, the Continuing Affiliates shall
not, and shall not permit the Companies or Subsidiaries to, directly or
indirectly, (a) solicit any inquiries or proposals for, or enter into or
continue or resume any discussions with respect to or enter into any
negotiations or agreements relating to the sale or exchange of any Shares, any
shares of capital stock of any Subsidiary or all, or a substantial part, of
the assets of any of the Companies or Subsidiaries or (b) furnish or cause to
be furnished any non-public information concerning the business and operations
of the Companies or Subsidiaries to any Person (other than to or at the
request of Parent and its representatives) other than in the ordinary course
of business consistent with past practice.
Section 5.8. Notice of Developments. Each party shall promptly notify the
other party in writing of any events, facts and occurrences which would result
in any breach of any representation or warranty or breach of any covenant by
such party contained in this Agreement.
Section 5.9. License Agreements. (a) At the Closing, Parent shall cause
Tommy Hilfiger Licensing, Inc. to, and Seller shall and shall cause TH Europe
to, execute and deliver the Amended European License Agreement.
(b) Effective as of the consummation of the Stock Purchases and the
execution and delivery of the Amended European License Agreement, Seller shall
and shall cause T.H. International N.V. to, and Parent shall cause Tommy
Hilfiger Licensing, Inc. to, cancel the International License Agreement and
any sublicenses thereunder.
Section 5.10. Financial Statements. Prior to the Closing, Seller shall
deliver to Parent promptly after they are prepared such monthly or other
financial statements or financial reports of the Companies and the
Subsidiaries as are prepared by or relating to the Companies, the Subsidiaries
and the Canadian Subsidiaries in the ordinary course of business and such
other financial information as Parent may reasonably request, promptly
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after such request. Seller shall use its reasonable efforts to have Price
Waterhouse's and Ptack Schnarch Basevitz's consent to Parent's use of and
reliance on the Financial Statements and such other financial statements of
the Companies, the Subsidiaries and the Canadian Subsidiaries as may be
required in connection with filings under the federal securities laws.
Section 5.11. Intercompany Accounts; Indebtedness. Except for the Retained
Note and the Blackwatch Note, all intercompany and intracompany payables and
receivables (other than payables and receivables for goods and services,
including buying office commissions, in the ordinary course) and loans between
the Companies and the Subsidiaries, on the one hand, and the Continuing
Affiliates, on the other hand, shall be eliminated, released or forgiven,
without the transfer of any cash and without the need for any further
documentation, by dividends or capital contributions, as appropriate,
immediately prior to the Closing. The note outstanding from AIHL to Tommy
Hilfiger Licensing, Inc. dated August 28, 1995 in the face amount of $5
million shall be cancelled as of the Closing without the transfer of any cash
and without the need for any further documentation.
Section 5.12. Proxy Statement. (a) As promptly as practicable after the
execution of this Agreement, Parent shall prepare and file with the SEC (with
appropriate requests for confidential treatment) under the Exchange Act a
proxy statement and a form of proxy (such proxy statement, together with any
amendments thereof or supplements thereto, in the form delivered to the
stockholders of Parent, the "Proxy Statement") relating to Parent Stockholders
Meeting and the vote of the stockholders of Parent with respect to this
Agreement and the transactions contemplated hereby. Parent will cause the
Proxy Statement to comply as to form in all material respects with the
Exchange Act and the rules and regulations thereunder. Parent shall use all
reasonable efforts to cause the Proxy Statement to be cleared with the SEC as
promptly as reasonably practicable thereafter, and shall take any and all
actions required under any applicable federal or state securities or Blue Sky
Laws in connection with the issuance of the Purchase Price Shares. Parent
shall provide Seller an opportunity to review and comment upon the Proxy
Statement prior to any filing with the SEC. Seller shall use all reasonable
efforts to cooperate with Parent in connection with the preparation and
clearance of the Proxy Statement. Without limiting the generality of the
foregoing, Parent and Seller shall each notify the other as promptly as
practicable upon becoming aware of any event or circumstance which should be
described in an amendment of, or a supplement to, the Proxy Statement. To the
extent required to comply with the federal securities laws, upon notification
by Seller to Parent pursuant to the preceding sentence and prior to the Parent
Stockholders Meeting, Parent shall use all reasonable efforts to prepare and
file with the SEC an amendment or supplement to the Proxy Statement reflecting
such event or circumstance.
(b) The Proxy Statement shall include the recommendation of the Board of
Directors of Parent in favor of this Agreement.
Section 5.13. Stockholders Meeting. Parent shall cause the Parent
Stockholders Meeting to be held as promptly as reasonably practicable and in
accordance with applicable laws for the purpose of voting upon the approval of
this Agreement. Parent shall use all reasonable efforts to hold such
stockholders meeting as soon as reasonably practicable after the date on which
the Proxy Statement is cleared by the SEC.
Section 5.14. NYSE Listing. Parent shall promptly prepare and submit to the
NYSE a supplemental listing application covering the Purchase Price Shares,
and shall use all reasonable efforts to cause such shares to be approved for
listing on the NYSE, subject to official notice of issuance, prior to the
consummation of the Stock Purchases.
Section 5.15. Financing. (a) Parent shall, and shall cause its subsidiaries
to, use all reasonable efforts to obtain the financing for the Purchase Price
Cash Amount and to enter into appropriate documentation with respect thereto.
(b) Parent and Seller shall, and shall cause their respective subsidiaries
to, cooperate with each other to arrange the financing for the Purchase Price
Cash Amount and to provide such information as Parent's financing sources
shall reasonably request or that Parent shall reasonably request in connection
with such financing.
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Section 5.16. Blackwatch Note. Immediately prior to the transaction
contemplated by the next sentence, Blackwatch shall deliver to Seller an
interest-bearing demand note of Blackwatch to Seller in the principal amount
of the Purchase Price (as defined in the Canada Purchase Agreement) (the
"Blackwatch Note") in exchange for a demand note of Seller in the principal
amount and with the interest rate of the Blackwatch Note (the "Seller Note").
Immediately prior to the Closing, Seller shall make a capital contribution to
Pepe USA of the Blackwatch Note. Immediately after the Closing, Seller shall
repay the Seller Note in full and Blackwatch shall repay the Blackwatch Note
in full.
Section 5.17. Resignation of Directors. At the Closing, Seller shall cause
to be delivered to Parent duly signed resignations, effective as of the
Closing, of all directors and officers of all of the Companies and
Subsidiaries designated in writing by Parent to Seller at least five business
days prior to the Closing Date, or shall take such other action as is
necessary to ensure that such persons are not directors or officers of the
Companies or Subsidiaries after the Closing.
ARTICLE VI
Employee Benefits
Section 6.1. Employee Benefit Plans. Seller hereby represents and warrants
to Parent as follows:
(a) Schedule 6.1(a) includes a complete list of all employee benefit plans,
programs, policies, practices, and other arrangements providing benefits to
any employee or former employee primarily employed in the United States or
subject to the laws of the United States or any state or jurisdiction thereof
or any beneficiary or dependent thereof, whether covering one person or more
than one person, sponsored or maintained by any of the Companies or the
Subsidiaries or to which any of the Companies or the Subsidiaries contribute
or are obligated to contribute, other than solely by reason of being an ERISA
Affiliate of another entity (collectively, "Company Employee Benefit Plans").
Without limiting the generality of the foregoing, the term "Company Employee
Benefit Plans" includes all employee welfare benefit plans within the meaning
of Section 3(1) of ERISA and all employee pension benefit plans within the
meaning of Section 3(2) of ERISA. Schedule 6.1(a) also includes a complete
list of all employee benefit plans, programs, policies, retirement schemes,
practices, and other arrangements for any employee or former employee
(including arrangements for the payment to employees or their retirement or
death or on the occurrence of any permanent or temporary disability) primarily
employed in countries other than the United States or subject to the laws of
countries other than the United States or any beneficiary or dependent
thereof, whether covering one person or more than one person, sponsored or
maintained by any of the Companies or the Subsidiaries or to which any of the
Companies or the Subsidiaries contribute or are obligated to contribute
(collectively, "Non-U.S. Company Employee Benefit Plans").
(b) With respect to each Company Employee Benefit Plan and Non-U.S. Company
Employee Benefit Plan, Seller has delivered or made available to Parent a
true, correct and complete copy of (i) each writing constituting a part of
such Company Employee Benefit Plan and Non-U.S. Company Employee Benefit Plan,
including without limitation all plan documents, benefit schedules,
participant agreements, trust agreements, and insurance contracts and other
funding vehicles; (ii) the three most recent Annual Reports (Form 5500 Series
where applicable) and accompanying schedules, if any; (iii) the current
summary plan description, if any; (iv) the most recent annual financial
report, if any; and (v) the most recent determination letter from the IRS or
other relevant Taxing Authority, if any. Except as specifically provided in
the foregoing documents delivered or made available to Parent, there are no
amendments to any Company Employee Benefit Plan or Non-U.S. Company Employee
Benefit Plan that have been adopted or approved nor has Seller or any Company
or Subsidiary taken any formal steps to make any such amendments.
(c) Schedule 6.1(a) identifies each Company Employee Benefit Plan that is
intended to be a "qualified plan" satisfying the requirements of Section
401(a) of the Code (a "Company Pension Plan").
(d) Except as otherwise set forth in Schedule 6.1(d) hereto, none of the
execution and delivery of this Agreement, the Ancillary Agreements or the
consummation of the transactions contemplated hereby or thereby
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will (either alone or in conjunction with any related event, including without
limitation, termination of employment) (i) result in any payment (including,
without limitation, severance, unemployment compensation, an "excess parachute
payment" (as defined in Section 280G of the Code) or otherwise) becoming due
from the Companies or the Subsidiaries under any Company Employee Benefit Plan
or Non-U.S. Company Employee Benefit Plan or any collective bargaining
agreement, (ii) increase any compensation or benefits otherwise payable under
any such Company Employee Benefit Plan or Non-U.S. Company Employee Benefit
Plan or collective bargaining agreement or (iii) accelerate any liability
under any Company Employee Benefit Plan or Non-U.S. Company Employee Benefit
Plan because of an acceleration of the time of payment or vesting of any
rights or benefits to which employees may be entitled thereunder.
Section 6.2. Company Employee Benefit Plans. Seller hereby represents and
warrants to Parent as follows: (a) All Company Employee Benefit Plans which
are "employee benefit plans," as defined in Section 3(3) of ERISA, are in
compliance with and have been administered in all material respects in
compliance with their terms and with all applicable requirements of law,
including but not limited to the Code and ERISA, and all contributions
required to be made to each such plan under the terms of such plan, ERISA or
the Code for all periods of time prior to the Closing Date will by the Closing
Date be timely made or paid in full or, to the extent not required to be made
or paid to each such Plan on or before the Closing Date, have been fully
reflected on the Pepe Balance Sheet or the balance sheets of the Companies and
the Subsidiaries as of the Closing Date.
(b) A favorable determination letter as to the qualification of each Company
Pension Plan under Section 401(a) of the Code has been issued and remains in
effect and the related trust has been determined to be exempt from taxation
under Section 501(a) of the Code and any amendment made or event relating to
such Company Pension Plan subsequent to the date of such determination letter
has not adversely affected the qualified status of such Company Pension Plan.
No issue concerning qualification of any Company Pension Plan is pending
before or, to the best knowledge and belief of Seller, threatened by, the IRS.
None of Seller, the Companies or the Subsidiaries or any other "disqualified
person" (as defined in Section 4975 of the Code) or "party-in-interest" (as
defined in Section 3(14) of ERISA) has engaged in any nonexempt "prohibited
transaction" (as such term is defined in Section 4975 of the Code or Section
406 of ERISA), which could subject any Company Employee Benefit Plan (or its
related trust), the Companies or the Subsidiaries or any officer, director or
employee of the Companies or the Subsidiaries to tax or penalty imposed under
Section 4975 of the Code. The Companies and the Subsidiaries have not
incurred, and do not reasonably expect to incur, any material liability to the
Pension Benefit Guaranty Corporation (except for required premium payments and
contributions, which payments and contributions have been made when due).
(c) No Company Employee Benefit Plan is subject to Title IV or Section 302
of ERISA or Section 412 or 4971 of the Code (including any Multiemployer
Plan).
(d) There does not now exist, nor do any circumstances exist that could
result in, any Controlled Group Liability that would be a material liability
of the Companies or the Subsidiaries following the Closing. "Controlled Group
Liability" means any and all liabilities under (i) Title IV of ERISA, (ii)
section 302 of ERISA, (iii) sections 412 and 4971 of the Code, (iv) the
continuation coverage requirements of section 601 et seq. of ERISA and section
4980B of the Code, and (v) corresponding or similar provisions of foreign laws
or regulations, other than such liabilities that arise solely out of, or
relate solely to, the Company Employee Benefit Plans. For purposes of this
Section 6.2, "ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a
member of the same "controlled group" as the first entity, trade or business
pursuant to Section 4001(a)(14) of ERISA.
(e) There are no pending or, to Seller's knowledge, threatened claims (other
than claims for benefits in the ordinary course), lawsuits, audits,
investigations or arbitrations which have been threatened, asserted or
instituted against the Company Employee Benefit Plans, any fiduciaries thereof
with respect to their duties to the Company Employee Benefit Plans or the
assets of any of the trusts under any of the Company Employee Benefit Plans
which could reasonably be expected to result in any material liability of the
Companies or the Subsidiaries to the
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Pension Benefit Guaranty Corporation, the Department of Treasury, the
Department of Labor or any Multiemployer Plan.
Section 6.3. Non-U.S. Company Employee Benefit Plans. Seller hereby
represents and warrants to Parent as follows:
(a) The Non-U.S. Company Employee Benefit Plans comply in all material
respects with, and have been managed in accordance with, their terms and all
applicable laws, regulations and requirements.
(b) Where Non-U.S. Company Employee Benefit Plans are funded or insured, all
contributions and other amounts due to or in respect of them or any state
pension arrangements by the Companies and the Subsidiaries have been fully
paid at Closing. Where such Non-U.S. Company Employee Benefit Plans are
unfunded or underfunded, appropriate reserves are established therefor in the
Financial Statements. The Companies and the Subsidiaries have not by any act
or omission, direct or indirect, materially increased their liabilities or
obligations to the Non-U.S. Company Employee Benefit Plans since the date of
the last actuary's report described in Section 6.3(c) below.
(c) Seller has given or made available to Parent the actuary's report on the
latest actuarial valuation of each of the Non-U.S. Company Employee Benefit
Plans or such other information which accurately describes the financial
position of each of the Non-U.S. Company Employee Benefit Plans. Nothing has
happened since the date of that information which would adversely affect the
funding position of the Non-U.S. Company Employee Benefit Plans in a material
way.
(d) There is no material dispute about the entitlements or benefits payable
under any of the Non-U.S. Company Employee Benefit Plans, no material claim by
or against the managers or administrators of the Non-U.S. Company Employee
Benefit Plans or any of the Companies or the Subsidiaries has been made or
threatened, and there are no circumstances which would reasonably be expected
to give rise to any such claim.
Section 6.4. Administration. Seller and Parent shall each make their
appropriate employees available to the other at such reasonable times as may
be necessary for the proper administration by the other of any and all matters
relating to employee benefits affecting employees of the Companies and the
Subsidiaries, including benefits to which such employees may become entitled
after the Closing Date under any tax-qualified retirement plan maintained by
the Continuing Affiliates.
Section 6.5. Reportable Event. Seller represents and warrants that the
consummation of the transactions contemplated hereby will not result in a
reportable event within the meaning of Section 4043 of ERISA with respect to
either (a) a Company Employee Benefit Plan, or (b) any other employee benefit
plan sponsored by or maintained by Seller, the Companies, the Subsidiaries or
any of their respective ERISA Affiliates to which Section 4043(b) of ERISA is
applicable. Seller shall not give any notice of a reportable event pursuant to
Section 4043 of ERISA before the Closing.
ARTICLE VII
Tax Matters
Section 7.1. Tax Returns of the Companies and the Subsidiaries. Seller
represents and warrants to Parent that:
(a) Except as set forth in Schedule 7.1(a) (i) all Income Tax Returns
required to be filed for taxable periods ending on or prior to the Closing
Date by the Companies or the Subsidiaries have been or will be timely filed
and all Taxes shown to be due on such Income Tax Returns have been or will be
paid and (ii) all other material Returns required to be filed before the
Closing Date by the Companies or the Subsidiaries have been or will be timely
filed and all Taxes shown as due on such Returns have been or will be paid.
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(b) Except as set forth on Schedule 7.1(b), (i) to the knowledge of Seller,
no claim has been made by any authority in a jurisdiction where the Companies
or the Subsidiaries do not file Returns that any of the Companies or the
Subsidiaries are or may be subject to taxation by that jurisdiction; (ii)
except for Taxes being contested in good faith and by appropriate proceedings
and for which appropriate reserves are established on the Pepe Year-End
Balance Sheet, all Taxes owed by any of the Companies and the Subsidiaries
with respect to any taxable period (or portion thereof) ending on or prior to
December 31, 1997 (whether or not shown on any Return) have (or by the Closing
Date will have) been duly and timely paid; and (iii) all material Taxes
required to be withheld from employee salaries, wages and other compensation
and from royalty payments by or on behalf of each of the Companies and the
Subsidiaries with respect to periods for which the statute of limitations has
not expired have been withheld, and such withheld Taxes have been duly and
timely paid to the proper Taxing Authorities.
(c) Except as set forth on Schedule 7.1(c), no agreement or other document
extending, or having the effect of extending, the period of assessment,
payment or collection of any material Taxes for which any of the Companies or
the Subsidiaries or any of their predecessors may be held liable and no power
of attorney with respect to any such material Taxes have been executed or
filed with the IRS or any other Taxing Authority.
(d) Seller has provided to Parent copies of all federal, state and local
Income Tax Returns that have been filed for all taxable periods for which the
statute of limitations has not expired, examination reports, and statements of
deficiencies assessed against or agreed to by any of the Companies or the
Subsidiaries. Except as set forth on Schedule 7.1(d), (i) no lien exists with
respect to any asset of any of the Companies or the Subsidiaries that arose in
connection with any failure to pay Taxes (other than for Taxes not yet due and
payable); (ii) there are no material Taxes for which any of the Companies or
the Subsidiaries could be held liable which have been asserted in writing by
any Taxing Authority to be due; and (iii) there are no pending audits,
examinations, or investigations with respect to any material Taxes of any of
the Companies or the Subsidiaries.
(e) No consent or election has been made to have the provisions of Section
341(f) of the Code apply to any of the Companies or the Subsidiaries.
(f) None of the Companies or the Subsidiaries is party to or bound by any
closing agreement, gain recognition agreement, tax sharing, tax indemnity, tax
allocation or similar agreement or arrangement.
Section 7.2. Allocation of Certain Taxes. Each of Parent and Seller agrees
that if any of the Companies are permitted but not required under applicable
state or local Income Tax laws to treat the Closing Date as the last day of a
taxable period, Parent and Seller shall treat such day as the last day of a
taxable period.
Section 7.3. Filing Responsibility. (a) Seller shall prepare and file or
shall cause each of the Companies and the Subsidiaries to prepare and file all
Returns with respect to each of the Companies and the Subsidiaries required to
be filed (taking into account any extension of time within which to file) on
or before the Closing Date. Seller shall prepare and file or shall cause to be
filed any consolidated, combined, unitary or group relief system Returns
(other than any consolidated, combined, unitary or group relief system Returns
of an affiliated group (within the meaning of Section 1504(a) of the Code
without regard to the limitations of Section 1504(b) of the Code) of which any
of the Companies or the Subsidiaries is the common parent (each, a "Company
Group")).
(b) Parent, the Companies and the Subsidiaries shall file all other Returns
with respect to the Companies and the Subsidiaries.
(c) With respect to any state, local or foreign Income Tax Return for
taxable periods beginning before the Closing Date and ending after the Closing
Date, Parent shall cause each of the Companies and the Subsidiaries to consult
with Seller concerning such Return. Each of the Companies and the Subsidiaries
shall provide Seller a copy of its proposed Return to review and comment upon
at least 30 days prior to the filing of such Return, and Seller may provide
comments to each of the Companies and the Subsidiaries, which comments shall
be delivered to each of the Companies and the Subsidiaries within 10 days of
receiving such copies from each of the
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Companies and the Subsidiaries. The Companies and the Subsidiaries shall make
such revisions to such Tax Returns as are reasonably requested by Seller.
Section 7.4. Refunds and Carrybacks. (a) Seller shall be entitled to any
refunds or amounts credited against Taxes for which Seller is liable (except
for refunds or credits accrued on the Pepe Year-End Balance Sheet) pursuant to
Section 7.6.
(b) Parent, the Companies or the Subsidiaries, as the case may be, shall be
entitled to all other refunds or credits of Taxes other than refunds or
credits of consolidated, combined, unitary or group relief system Taxes for a
Tax year in which the Companies or the Subsidiaries were included in a
consolidated, combined, unitary or group relief system Return, unless such
Return is a Return of a Company Group.
(c) Parent shall cause each of the Companies and the Subsidiaries promptly
to forward to Seller or to reimburse Seller for any refunds or credits due
Seller (pursuant to the terms of this Article VII) after receipt thereof, and
Seller shall promptly forward to Parent or reimburse Parent for any refunds or
credits due Parent (pursuant to the terms of this Article VII) after receipt
thereof.
(d) Except (i) as required by a Determination, (ii) as otherwise required by
applicable law, or (iii) in connection with a matter described in the second
sentence of Section 7.5(d), none of Parent, the Companies nor the Subsidiaries
will, after the Closing Date, amend any tax return relating to a period ending
on or before the Closing Date without the prior written consent of Seller,
which consent will not unreasonably be withheld.
Section 7.5. Cooperation and Exchange of Information. (a) Seller shall
prepare and submit to Parent no later than three months after the Closing
Date, 1997 blank tax return workpaper packages for Tax Returns for which
Parent has responsibility to prepare pursuant to Section 7.3. Parent shall and
shall cause each of the Companies and the Subsidiaries to prepare completely
and accurately and to submit to Seller within three months of receipt all
information as Seller shall reasonably request in such tax return workpaper
packages.
(b) As soon as practicable, but in any event within 30 days after Seller's
request, from and after the Closing Date, Parent shall provide Seller with
such cooperation and shall deliver to Seller such information and data
concerning the pre-Closing operations of each of the Companies and the
Subsidiaries and make available such knowledgeable employees of the Companies
and the Subsidiaries as Seller may reasonably request, including providing the
information and data required by Seller's customary tax and accounting
questionnaires, in order to enable Seller to complete and file all Returns
which it may be required to file with respect to the operations and business
of each of the Companies and the Subsidiaries through the Closing Date or to
respond to audits by any Taxing Authorities with respect to such operations
and to otherwise enable Seller to satisfy its internal accounting, tax and
other legitimate requirements. Such cooperation and information shall include
without limitation provision of powers of attorney for the purpose of signing
Returns and defending audits and promptly forwarding copies of appropriate
notices and forms or other communications received from or sent to any Taxing
Authority which relate to each of the Companies and the Subsidiaries, and
providing copies of all relevant Returns, together with accompanying schedules
and related workpapers, documents relating to rulings or other determinations
by any Taxing Authority and records concerning the ownership and tax basis of
property, which Parent, the Companies and the Subsidiaries may possess.
Parent, the Companies and the Subsidiaries shall make their employees and
facilities available on a mutually convenient basis to provide explanation of
any documents or information provided hereunder.
(c) Parent and Seller and their respective Affiliates shall cooperate in the
preparation of all Returns relating in whole or in part to taxable periods
ending on or before or including the Closing Date that are required to be
filed after such date. Such cooperation shall include, but not be limited to,
furnishing prior years' Returns or return preparation packages illustrating
previous reporting practices or containing historical information relevant to
the preparation of such Returns, and furnishing such other information within
such party's possession requested by the party filing such Returns as is
relevant to their preparation. In the case of any state, local or foreign
joint, consolidated, combined, unitary or group relief system Returns, such
cooperation shall also relate to any other taxable periods in which one party
could reasonably require the assistance of the other party in obtaining any
necessary information.
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(d) Seller shall have the right, at its own expense, to control any audit or
examination by any Taxing Authority ("Tax Audit"), initiate any claim for
refund, contest, resolve and defend against any assessment, notice of
deficiency, or other adjustment or proposed adjustment which in any such case
relates to Taxes for which Seller is liable pursuant to Section 7.6, with
respect to each of the Companies and the Subsidiaries; provided, however, that
no claim, contest or settlement shall be resolved by Seller if such claim,
contest, or settlement could reasonably be expected to have a material adverse
effect on such Companies or Subsidiaries after the Closing. Parent shall have
the right, at its own expense, to control any other Tax Audit, initiate any
other claim for refund, and contest, resolve and defend against any other
assessment, notice of deficiency, or other adjustment or proposed adjustment;
provided, however, any such resolution shall not have a material adverse
effect on the Seller. Seller shall furnish Parent and each of the Companies
and the Subsidiaries with its cooperation in a manner comparable to that
described in Section 7.5(b) hereof to effect the purposes of this Section
7.5(d).
Section 7.6. Tax Indemnification by Seller. Seller shall be liable for, and
shall hold Parent and each of the Companies and the Subsidiaries and any
successor corporations thereto or Affiliates thereof harmless from and
against, on a Net After-Tax Basis, the following Taxes:
(a) any and all Taxes imposed upon, or with respect to the income or
operations of, any of the Companies or the Subsidiaries (i) with respect to
any taxable period ending on or before December 31, 1997 and (ii) in the case
of any taxable period beginning before and ending after December 31, 1997,
allocable to the portion of such period beginning before and ending on
December 31, 1997, in each case to the extent such Taxes are not reflected in
the reserve for Tax liabilities (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown
on the Pepe Year-End Balance Sheet; and
(b) any and all Taxes attributable to the operations of an entity (other
than the Companies and the Subsidiaries or any of their predecessors) for
which the Companies or the Subsidiaries may be held liable by virtue of a
relationship to or affiliation with such entity under Treasury Regulation
Section 1.1502-6 (relating to several liability) or any comparable or similar
provision providing for joint and/or several liability under state, local or
foreign Tax Laws.
Section 7.7. Tax Certification. On or before the Closing Date, Seller shall
provide Parent a copy of a statement, dated not more than 30 days prior to the
Closing Date, issued by Pepe USA, meeting the requirements of Treasury
Regulation Sections 1.897-2(h) and 1.1445-2(c)(3), substantially in the form
of the sample certification set forth therein.
Section 7.8. Definitions. For purposes of this Article VII, the following
terms shall have the meanings ascribed to them below:
(a) "Determination" means a determination as defined by Section 1313(a) of
the Code.
(b) "Income Tax Returns" means federal, state, local or foreign Returns
relating to Income Taxes required to be filed with any Taxing Authority that
include any of the Companies or the Subsidiaries.
(c) "Income Taxes" means federal, state, local or foreign income, profits,
capital gains, franchise taxes or other taxes measured by reference to income,
profits, capital gains and all other taxes reported on any Returns, together
with any interest, penalties, charges or fees imposed with respect thereto.
(d) "IRS" means the United States Internal Revenue Service.
(e) "Other Taxes" means all Taxes which are not Income Taxes.
(f) "Returns" means returns, reports and forms required to be filed with any
Taxing Authority.
(g) "Tax Laws" means the Code, federal, state, county, local, or foreign
laws relating to Taxes and any regulations or official administrative
pronouncements released thereunder.
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(h) "Taxes" means all taxes (whether federal, state, local or foreign) based
upon or measured by income and any other tax whatsoever, including, without
limitation, gross receipts, profits, sales, levies, imposts, deductions,
charges, rates, duties, use, occupation, value added, ad valorem, transfer,
franchise, withholding, payroll and social security, employment, excise, stamp
duty or property taxes, together with any interest, penalties, charges or fees
imposed with respect thereto.
(i) "Taxing Authority" means any Governmental Authority including social
security administration, domestic or foreign, having responsibility for or
jurisdiction over the assessment, determination, collection, or other
imposition of Tax.
ARTICLE VIII
Conditions to Parent's, TH USA's and THEH's
Obligations to Close
The respective obligations of Parent, TH USA and THEH to consummate the
Stock Purchases shall be subject to the satisfaction on or prior to the
Closing Date of all of the following conditions:
Section 8.1. Representations, Warranties and Covenants of Seller. The
representations and warranties of Seller contained in this Agreement shall be
true and correct when made and, except for representations and warranties that
speak as of a specific date or time (which need only be true and correct as of
such date or time), 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 for such inaccuracies or breaches as would not, individually or
in the aggregate, have a Company Material Adverse Effect, and the covenants
and agreements of Seller contained in this Agreement to be performed on or
before the Closing Date in accordance with this Agreement shall have been duly
performed in all material respects, and Parent shall have received at the
Closing a certificate to the effect of the foregoing dated the Closing Date
and validly executed by the President or a Vice President of Seller.
Section 8.2. Regulatory Approvals. (a) All applicable waiting periods under
the HSR Act shall have expired or been terminated, (b) a notice of amendment
to the Memorandum of Association of Parent to reflect the Memorandum Amendment
shall have been filed by or on behalf of Parent with the Registrar of
Companies of the British Virgin Islands and (c) any necessary approvals or
filings under the Competition Act (Canada) or the Investment Canada Act shall
have been obtained or made.
Section 8.3. No Orders or Injunctions. No order or injunction shall have
been issued by any Governmental Authority which prevents or prohibits the
consummation of the Stock Purchases or any other transaction contemplated by
this Agreement.
Section 8.4. Opinions of Seller's Counsel. Parent shall have received at
Closing opinions addressed to Parent and dated the Closing Date from counsel
to Seller in form and substance reasonably satisfactory to Parent with respect
to certain corporate matters in Sections 3.1 and 3.2.
Section 8.5. Certain Agreements. The International License and any
sublicenses thereunder shall have been cancelled, the Amended European License
Agreement shall have been executed and delivered by TH Europe and Seller, the
Non-Competition Agreement shall have been executed and delivered by the
parties thereto other than Parent, and the Bentley Trust Guarantee and the
AIHL Guarantee shall be in full force and effect.
Section 8.6. Stockholder Approval. This Agreement shall have been approved
by a majority of the votes cast at the Parent Stockholders Meeting.
Section 8.7. Canada Purchase. All of the conditions to Pepe USA's and
Lawvest's respective obligations to consummate the transactions contemplated
by the Canada Purchase Agreement, other than the delivery by Lawvest of the
Tomcan Shares and the delivery by Pepe USA of the Purchase Price (as defined
in the Canada Purchase Agreement) pursuant to Article II thereof, shall have
been satisfied, without any waiver
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thereof and Parent shall have received at the Closing a certificate to such
effect dated the Closing Date and validly executed by the President, a Vice
President or other senior officer of each of Lawvest and Seller.
Section 8.8. NYSE Listing. The Purchase Price Shares shall have been
approved for listing on the NYSE, subject to official notice of issuance.
Section 8.9. Parent Financing. Parent and/or its subsidiaries shall have
received the financing for the Purchase Price Cash Amount on terms and
conditions reasonably satisfactory to Parent.
Section 8.10. Consents. All consents or waivers of the parties to (i) the
credit agreements set forth on Schedule 5.2 hereto shall have been obtained or
such credit agreements shall have been renegotiated on terms reasonably
satisfactory to Parent and (ii) the agreements listed on Schedule 3.1(d)
reasonably requested by Parent shall have been obtained.
ARTICLE IX
Conditions to Seller's Obligation to Close
Seller's obligation to consummate the Stock Purchases shall be subject to
the satisfaction on or prior to the Closing Date of all of the following
conditions:
Section 9.1. Representations, Warranties and Covenants of Parent. The
representations and warranties of Parent contained in this Agreement shall be
true and correct when made and, except for representations and warranties that
speak as of a specific date or time (which need only be true and correct as of
such date or time), 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 for such inaccuracies or breaches as would not, individually or
in the aggregate, have a material adverse effect on Parent and its
subsidiaries taken as a whole, and the covenants and agreements of Parent
contained in this Agreement to be performed on or before the Closing Date in
accordance with this Agreement shall have been duly performed in all material
respects, and Seller shall have received at the Closing a certificate to the
effect of the foregoing dated the Closing Date and validly executed by the
President, a Vice President or other senior officer of Parent.
Section 9.2. Regulatory Approvals. (a) All applicable waiting periods under
the HSR Act shall have expired or been terminated, (b) a notice of amendment
to the Memorandum of Association of Parent to reflect the Memorandum Amendment
shall have been filed by or on behalf of Parent with the Registrar of
Companies of the British Virgin Islands and (c) any necessary approvals or
filings under the Competition Act (Canada) or the Investment Canada Act shall
have been obtained or made.
Section 9.3. No Orders or Injunctions. No order or injunction shall have
been issued by any Governmental Authority which prevents or prohibits the
consummation of the Stock Purchases or any other transaction contemplated by
this Agreement.
Section 9.4. Opinions of Parent's Counsel. Seller shall have received at
Closing opinions from counsel to Parent in form and substance reasonably
satisfactory to Seller with respect to certain corporate matters in Sections
4.1 and 4.2.
Section 9.5. Certain Agreements. Tommy Hilfiger Licensing, Inc. shall have
executed and delivered the Amended European License Agreement and Parent shall
have executed and delivered the Registration Rights Agreement.
Section 9.6. Stockholder Approval. This Agreement shall have been approved
by a majority of the votes cast at the Parent Stockholders Meeting.
Section 9.7. NYSE Listing. The Purchase Price Shares shall have been
approved for listing on the NYSE, subject to official notice of issuance.
Section 9.8. Consents. All consents or waivers of the parties to the credit
agreements set forth on Schedule 5.2 hereto to which any of the Companies or
Subsidiaries is a party shall have been obtained or such credit agreements
shall have been renegotiated on terms reasonably satisfactory to Seller.
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ARTICLE X
Survival; Indemnification
Section 10.1. Survival. (a) The representations and warranties of Seller
contained in this Agreement shall survive the Closing until September 30,
1999, except the representations and warranties set forth (i) in Sections
3.1(e) and 3.2(a) which shall survive the Closing indefinitely, (ii) in
Section 3.14 which shall survive the Closing until the third anniversary of
the Closing Date and (iii) in Article VII which shall survive the Closing
until expiration of the relevant statute of limitations (including any
extensions thereof) or, if later, until resolution of any disputes arising
during such period applicable to the income tax return (the "Applicable
Return") of each of the Companies and Subsidiaries for the period ending on
the Closing Date (such later date being the "Expiration Date").
(b) The covenants and agreements contained in this Agreement which by their
terms do not contemplate performance after the Closing Date shall survive the
Closing until September 30, 1999. The covenants and agreements contained in
this Agreement which by their terms contemplate performance after the Closing
Date (including but not limited to the indemnities) shall survive the
completion of the transactions contemplated herein.
Section 10.2. Indemnification by Seller. (a) Subject to Section 10.4 hereof,
from and after the Closing Date, Seller shall indemnify and hold harmless
Parent and its subsidiaries and their respective officers and directors
(collectively, the "Indemnified Parties"), on a Net After-Tax Basis, from and
against any and all Covered Losses suffered by such Indemnified Parties
resulting from or arising out of (i) any inaccuracy in or breach of any of the
representations or warranties of Seller when made, and, except for
representations and warranties that speak of a specific date or time (which
need only be true and correct as of such date and time), on and as of the
Closing Date, (ii) any breach or nonfulfillment of any covenants or agreements
made by any Seller Affiliate herein, (iii) any liability or obligation of the
Companies or Subsidiaries arising from or relating to any business other than
the business of the Companies, the Subsidiaries, Tomcan and TH Canada
conducted under the TH Licenses, including without limitation all liabilities
and obligations of the Companies and Subsidiaries, if any, under the Actions
set forth on Schedule 10.2(a) hereto (collectively, "Retained Liabilities")
and (iv) the failure by Lawvest or the Guarantor (as defined in the Bentley
Trust Guarantee) to timely satisfy upon demand therefor its liabilities and
obligations to Pepe USA pursuant to the indemnification provisions of the
Canada Purchase Agreement or the Bentley Trust Guarantee, as applicable
("Canadian Liabilities"). The indemnity by Seller under this Section 10.2
shall not affect or limit the indemnification provided by Seller under Section
7.6.
(b) The Indemnified Parties shall not be entitled to assert any
indemnification pursuant to clause (i) or (ii) (in the case of covenants and
agreements which by their terms do not contemplate performance after the
Closing Date) of Section 10.2(a): (i) after the Expiration Date, with respect
to inaccuracies in or breaches of the representations and warranties by Seller
contained in Article VII, (ii) after the third anniversary of the Closing
Date, with respect to such covenant breaches or inaccuracies in or breaches of
the representations and warranties by Seller contained in Section 3.14 or
(iii) after September 30, 1999, with respect to all other inaccuracies in or
breaches of the representations and warranties by Seller contained in any
other Section hereof (other than Sections 3.1(e) and 3.2(a), which shall have
no such limitation) or any breach or nonfulfillment of any covenants or
agreements made by Seller herein which by their terms were required to be
performed prior to the Closing Date; provided that if on or prior to such
Expiration Date, third anniversary of the Closing Date or September 30, 1999,
as the case may be, a Notice of Claim shall have been given to Seller pursuant
to Section 10.3 hereof for such indemnification, the Indemnified Parties shall
continue to have the right to be indemnified on a Net After-Tax Basis with
respect to such indemnification claim until such claim for indemnification has
been satisfied or otherwise resolved as provided in this Article X.
Section 10.3. Indemnification Procedures. (a) Upon obtaining knowledge of
any claim or demand which has given rise to, or is expected to give rise to, a
claim for indemnification hereunder, Parent shall give written notice ("Notice
of Claim") of such claim or demand to Seller. Parent shall furnish to Seller
in reasonable detail
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such information as the Indemnified Parties may have with respect to such
indemnification claim (including copies of any summons, complaint or other
pleading which may have been served on it and any written claim, demand,
invoice, billing or other document evidencing or asserting the same). Subject
to the limitations set forth in Section 10.2(b) hereof, no failure or delay by
Parent in the performance of the foregoing shall reduce or otherwise affect
the obligation of Seller to indemnify and hold the Indemnified Parties
harmless on a Net After-Tax Basis, except to the extent that such failure or
delay shall have actually adversely affected Seller's ability to defend
against, settle or satisfy any Losses for which the Indemnified Parties are
entitled to indemnification hereunder.
(b) If the claim or demand set forth in the Notice of Claim given by Parent
pursuant to Section 10.3(a) hereof is a claim or demand asserted by a third
party, Seller shall have 15 days after the date on which Notice of Claim is
given to notify Parent in writing of its election to defend such third party
claim or demand on behalf of the Indemnified Party. If Seller elects to defend
such third party claim or demand, Parent shall make available to Seller and
its agents and representatives all records and other materials which are
reasonably required in the defense of such third party claim or demand and
shall otherwise cooperate with, and assist Seller in the defense of, such
third party claim or demand, and so long as Seller is defending such third
party claim in good faith, the Indemnified Parties shall not pay, settle or
compromise such third party claim or demand. If Seller elects to defend such
third party claim or demand, the Indemnified Party shall have the right to
participate in the defense of such third party claim or demand, at such
Indemnified Party's own expense. In the event, however, that such Indemnified
Party reasonably determines that representation by counsel to Seller of both
Seller and such Indemnified Party could reasonably be expected to present such
counsel with a conflict of interest, then the Indemnified Party may employ
separate counsel to represent or defend it in any such action or proceeding
and Seller will pay the fees and expenses of such counsel; provided, that
Seller shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm of attorneys (in addition to local counsel) at any time for all
Indemnified Parties. If Seller does not elect to defend such third party claim
or demand or does not defend such third party claim or demand in good faith,
the Indemnified Party shall have the right, in addition to any other right or
remedy it may have hereunder, at Seller's expense, to defend such third party
claim or demand; provided, however, that (i) such Indemnified Party shall not
have any obligation to participate in the defense of, or defend, any such
third party claim or demand; (ii) such Indemnified Party's defense of or its
participation in the defense of any such third party claim or demand shall not
in any way diminish or lessen the obligations of Seller under the agreements
of indemnification set forth in this Article X; and (iii) such Indemnified
Party may not settle any claim without the consent of Seller (which consent
shall not be unreasonably withheld or delayed).
(c) Seller and Parent shall cooperate in the defense of any claim or
litigation subject to this Article X and the records of each shall be
available to the other with respect to such defense.
(d) Except for third party claims being defended in good faith, Seller shall
satisfy its obligations under this Article X in respect of a valid claim for
indemnification hereunder which is not contested by Seller in good faith in
cash within 30 days after the date on which Notice of Claim is given.
Section 10.4. Limits on Indemnification. Seller shall have no liability for
indemnification pursuant to this Article X with respect to Covered Losses
unless such Covered Losses exceed in the aggregate $500,000 (the
"Indemnification Threshold"); provided, however, that in the event that
Covered Losses shall exceed in the aggregate the Indemnification Threshold,
Seller shall be liable hereunder for all such Covered Losses; and provided,
further, that Covered Losses with respect to Retained Liabilities or the
Canadian Liabilities shall not be subject to the Indemnification Threshold.
Notwithstanding anything herein to the contrary, in no event shall Seller be
required to indemnify Parent and its subsidiaries pursuant to this Article X
for Covered Losses in excess of $1,128,000,000.00; provided, however, that
Seller shall be entitled to satisfy in full its obligations under this Article
X by delivery to the Indemnified Parties of the Purchase Price Cash Amount and
the Purchase Price Shares.
Section 10.5. Losses Net of Insurance. The amount of any Covered Loss for
which indemnification is provided under this Article X shall be net of any
amounts recovered by the Indemnified Parties under insurance
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policies with respect to such Covered Loss. In the event that the Indemnified
Parties shall later collect any such amounts recovered under insurance
policies with respect to any Covered Loss for which any of them has previously
received payments under this Article X from Seller, such Indemnified Party
shall promptly repay to Seller such amount recovered.
ARTICLE XI
Termination
Section 11.1. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual consent of Seller and Parent;
(b) by either Seller or Parent, if any Governmental Authority of competent
jurisdiction shall have issued an injunction, restraining order or decree that
restrains or prohibits the consummation of the Stock Purchases or the
performance by the parties hereto of the other obligations hereunder, and such
injunction, restraining order or decree shall have become final and
nonappealable;
(c) by either Seller or Parent, if the Closing has not occurred by the close
of business on September 30, 1998, unless the failure of the Closing to occur
by such date shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe in all material respects the covenants
and agreements of such party set forth herein; or
(d) by either Seller or Parent if this Agreement shall not have been
approved by a majority of the votes cast at the Parent Stockholders Meeting.
Section 11.2. Procedure and Effect of Termination. In the event of
termination of this Agreement by either or both of Seller and Parent pursuant
to Section 11.1, written notice thereof shall forthwith be given by the
terminating party or parties to the other party or parties hereto, and this
Agreement shall thereupon terminate and become void and have no effect, and
the transactions contemplated hereby shall be abandoned without further action
by the parties hereto, except that the provisions of Section 12.5 shall
survive the termination of this Agreement; provided, however, that such
termination shall not relieve any party hereto of any liability for any wilful
breach of this Agreement (other than a breach of a representation, as to which
no party shall be liable hereunder). If this Agreement is terminated as
provided herein all filings, applications and other submissions contemplated
by Sections 3.7 and 4.3 and Article V shall, to the extent practicable, be
withdrawn from the agency or other persons to which they were made.
ARTICLE XII
Miscellaneous
Section 12.1. 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 party.
Section 12.2. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York as applied to
contracts to be performed in New York.
Section 12.3. Jurisdiction; Waiver of Trial by Jury. The parties hereby
consent to the jurisdiction of the United States District Court for the
Southern District of New York and any of the courts of the state of New York
in any dispute arising under this Agreement and agree further that service of
process or notice in any such action, suit or proceeding shall be effective if
in writing and delivered in person or sent as provided in Section 12.6 hereof.
ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION ARISING OUT OF
THIS AGREEMENT OR IN CONNECTION HEREWITH IS HEREBY WAIVED.
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Section 12.4. Entire Agreement. This Agreement (including the Ancillary
Agreements) and the Schedules and Exhibits hereto contain the entire agreement
between the parties with respect to the subject matter hereof and there are no
agreements, understandings, representations or warranties between the parties
other than those set forth or referred to herein. Except for the provisions of
Article X, which are intended to benefit, and to be enforceable by, any of the
Indemnified Parties, this Agreement is not intended to confer and shall not
confer upon any Person not a party hereto any rights or remedies hereunder.
Section 12.5. Expenses. Except as otherwise set forth in this Agreement, if
the transactions contemplated hereby are not consummated, all legal and other
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
costs and expenses. If the transactions contemplated hereby are consummated,
the legal and other expenses incurred in connection with this Agreement shall
be paid by Pepe USA and TH USA.
Section 12.6. Notices. All notices hereunder shall be sufficiently given for
all purposes hereunder if in writing and delivered personally, sent by
documented overnight delivery service or, to the extent receipt is confirmed,
telecopy, telefax or other electronic transmission service to the appropriate
address or number as set forth below. Notices to Seller shall be addressed to:
Pepe Jeans London Corporation
11 Lower Square
Old Isleworth
Middlesex
United Kingdom
Attn: Sydney R. Neil
Telecopier No.: 44-181-568-4111
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attn: Gary I. Horowitz
Telecopier No.: (212) 455-2502
or at such other address and to the attention of such other person as Seller
may designate by written notice to Parent.
Notices to Parent, TH USA or THEH shall be made to Parent and shall be
addressed to:
Tommy Hilfiger Corporation
c/o Tommy Hilfiger U.S.A., Inc.
25 West 39th Street
New York, New York 10018,
Attn: Joel J. Horowitz
Telecopier No.: (212) 548-1818
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attn: Eric S. Robinson
Telecopier No: (212) 403-2000
or at such other address and to the attention of such other person as Parent
may designate by written notice to Seller.
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Section 12.7. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that no party hereto will assign its rights or
delegate its obligations under this Agreement without the express prior
written consent of each other party hereto. Notwithstanding the foregoing,
Parent may assign its rights under this Agreement to any wholly-owned
subsidiary of Parent; provided that no such assignment by Parent of its rights
hereunder to any wholly-owned subsidiary shall in any way affect Parent's
obligations or liabilities under this Agreement.
Section 12.8. Headings; Definitions. The Section and Article headings
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement. All
references to Sections or Articles contained herein mean Sections or Articles
of this Agreement unless otherwise stated. All capitalized terms defined
herein are equally applicable to both the singular and plural forms of such
terms.
Section 12.9. Amendments and Waivers. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Any
party hereto may, only by an instrument in writing waive compliance by the
other parties hereto with any term or provision of this Agreement on the part
of such other parties hereto to be performed or complied with. The waiver by
any party hereto of a breach of any term or provision of this Agreement shall
not be construed as a waiver of any subsequent breach.
Section 12.10. Severability. In the event that this Agreement, or any of its
provisions, or the performance of any provision, is found to be illegal or
unenforceable under applicable law now or hereafter in effect, the parties
shall be excused from performance of such portions of this Agreement as shall
be found to be illegal or unenforceable under the applicable laws or
regulations without affecting the validity of the remaining provisions of the
Agreement; provided that (i) the remaining provisions of the Agreement shall
in their totality constitute a commercially reasonable agreement, and (ii)
should any method of termination of this Agreement or a portion thereof be
found to be illegal or unenforceable, such method shall be reformed to comply
with the requirements of applicable law so as, to the greatest extent
possible, to allow termination by that method. Nothing herein shall be
construed as a waiver of any party's right to challenge the validity of such
law.
Section 12.11. Interpretation. For the purposes of this Agreement, (i) a
"subsidiary" of an entity means any entity more than 50% of the voting power
of whose outstanding voting securities or equity interests are directly or
indirectly owned by such other entity, and (ii) "including" shall mean
"including without limitation."
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In Witness Whereof, this Agreement has been signed by or on behalf of each
of the parties as of the day first above written.
TOMMY HILFIGER CORPORATION
By: /s/ Joel J. Horowitz
-------------------------------------------
Name: Joel J. Horowitz
Title: Chief Executive Officer and
President
TOMMY HILFIGER U.S.A., INC.
By: /s/ Joel J. Horowitz
-------------------------------------------
Name: Joel J. Horowitz
Title: Chief Executive Officer
TOMMY HILFIGER (EASTERN HEMISPHERE) LIMITED
By: /s/ Joel J. Horowitz
-------------------------------------------
Name: Joel J. Horowitz
Title: Chief Executive Officer and
President
PEPE JEANS LONDON CORPORATION
By: /s/ Lawrence S. Stroll
-------------------------------------------
Name: Lawrence S. Stroll
Title: Group CEO
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EXHIBIT 3
TERRITORY OF THE BRITISH VIRGIN ISLANDS
THE INTERNATIONAL BUSINESS COMPANIES ACT
(CAP. 291)
MEMORANDUM OF ASSOCIATION
OF
TOMMY HILFIGER CORPORATION
NAME
1. The name of the Company is Tommy Hilfiger Corporation.
REGISTERED OFFICE
2. The Registered Office of the Company will be at Craigmuir Chambers, P.O.
Box 71, Road Town, Tortola, British Virgin Islands.
REGISTERED AGENT
3. The Registered Agent of the Company will be HWR Services Limited of P.O.
Box 71, Craigmuir Chambers, Road Town, Tortola, British Virgin Islands.
GENERAL OBJECTS AND POWERS
4. (1) The object of the Company is to engage in any act or activity
that is not prohibited under any law for the time being in force in
the British Virgin Islands.
(2) The Company may not
(a) carry on business with persons resident in the British Virgin
Islands;
(b) own an interest in real property situate in the British Virgin
Islands, other than a lease referred to in paragraph (e) of
subclause (3);
(c) carry on banking or trust business unless it is licensed to do so
under the Banks and Trust Companies Act, 1990;
(d) carry on business as an insurance or reinsurance company,
insurance agent or insurance broker,
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unless it is licensed under an enactment authorizing it to carry
on that business;
(e) carry on the business of company management, unless it is
licensed under the Company Management Act, l990; or
(f) carry on the business of providing the registered office or the
registered agent for companies incorporated in the British Virgin
Islands.
(3) For purposes of paragraph (a) of subclause (2), the Company shall not
be treated as carrying on business with persons resident in the
British Virgin Islands by reason only that
(a) it makes or maintains deposits with a person carrying on banking
business within the British Virgin Islands;
(b) it makes or maintains professional contact with solicitors,
barristers, accountants, bookkeepers, trust companies,
administration companies, investment advisers or other similar
persons carrying on business within the British Virgin Islands;
(c) it prepares or maintains books and records within the British
Virgin Islands;
(d) it holds, within the British Virgin Islands, meetings of its
directors or members;
(e) it holds a lease of property for use as an office from which to
communicate with members or where books and records of the
Company are prepared or maintained;
(f) it holds shares, debt obligations or other securities in a
company incorporated under the International Business Companies
Act or under the Companies Act; or
(g) shares, debt obligations or other securities in the Company are
owned by any person resident in the British Virgin Islands or by
any company incorporated under the International Business
Companies Act or under the Companies Act.
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(4) The Company shall have all such powers as are permitted by law for the
time being in force in the British Virgin Islands, irrespective of
corporate benefit, to perform all acts and engage in all activities
necessary or conducive to the conduct, promotion or attainment of the
object of the Company.
CURRENCY
5. Shares in the Company shall be issued in the currency of the United States
of America.
AUTHORIZED CAPITAL
6. The authorized capital of the Company is US$800,000.00.
CLASSES, NUMBER AND PAR VALUE OF SHARES
7. The authorized capital is made up of one class of Ordinary Shares divided
into 75,000,000 shares of US$0.01 par value and one class of Preference
Shares divided into 5,000,000 shares of US$0.01 par value.
DESIGNATIONS, POWERS, PREFERENCES, ETC. OF SHARES
8. All Ordinary Shares shall
(a) have one vote each;
(b) be subject to redemption, purchase or acquisition by the Company for
fair value; and
(c) have the same rights with regard to dividends and distributions upon
liquidation of the Company.
The Preference Shares may be issued in one or more series. The board of
Directors may from time to time provide for the issuance of Preference
Shares in series, establish the number of shares to be included in each
such series and fix the designation, powers, preferences and rights of the
shares of each such series and the qualifications, limitations and
restrictions thereon.
VARIATION OF CLASS RIGHTS
9. If at any time the authorized capital is divided into different classes or
series of shares, the rights attached
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to any class or series (unless otherwise provided by the terms of issue of
the shares of that class or series) may, whether or not the Company is
being wound up, be varied with the consent in writing of the holders of not
less than three-fourths of the issued shares of that class or series and of
the holders of not less than three-fourths of the issued shares of any
other class or series of shares which may be affected by such variation.
RIGHTS NOT VARIED BY THE ISSUE OF SHARES PARI PASSU
10. The rights conferred upon the holders of the shares of any class issued
with preferred or other rights shall not, unless otherwise expressly
provided by the terms of issue of the shares of that class, be deemed to be
varied by the creation or issue of further shares ranking pari passu
therewith.
REGISTERED SHARES
11. Shares in the Company may only be issued as registered shares and may not
be exchanged for shares issued to bearer.
AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION
12. The Company may amend its Memorandum of Association and Articles of
Association by a resolution of members or by a resolution of directors.
DEFINITIONS
13. The meanings of words in this Memorandum of Association are as defined in
the Articles of Association.
We, HWR SERVICES LIMITED of Craigmuir Chambers, Road Town, Tortola, British
Virgin Islands for the purpose of incorporating an International Business
Company under the laws of the British Virgin Islands hereby subscribe our name
to this Memorandum of Association the 10th day of June, 1992 in the presence of:
Witness Subscriber
(Sgd) Elena Ruffel-Smith (Sgd) Hazel Dawn Hewlett
........................ ...........................
Craigmuir Chambers Authorized Signatory
Road Town, Tortola HWR Services Limited
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TERRITORY OF THE BRITISH VIRGIN ISLANDS
THE INTERNATIONAL BUSINESS COMPANIES ACT
(NO. 8 OF 1984)
ARTICLES OF ASSOCIATION
OF
TOMMY HILFIGER CORPORATION
PRELIMINARY
1. In these Articles, if not inconsistent with the subject or context, the
words and expressions standing in the first column of the following table
shall bear the meanings set opposite them respectively in the second column
thereof.
Words MEANING
----- -------
capital The sum of the aggregate par value of all
outstanding shares with par value of the Company
and shares with par value held by the Company as
treasury shares plus
(a) the aggregate of the amounts designated as
capital of all outstanding shares without
par value of the Company and shares without
par value held by the Company as treasury
shares, and
(b) the amounts as are from time to time
transferred from surplus to capital by a
resolution of directors.
member A person who holds shares in the Company.
person An individual, a corporation, a trust, the estate
of a deceased individual, a partnership or an
unincorporated association of persons.
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resolution of (a) A resolution approved at a duly convened and
directors constituted meeting of directors of the
Company or of a committee of directors of
the Company by the affirmative vote of a
simple majority of the directors present at
the meeting who voted and did not abstain;
or
(b) a resolution consented to in writing by not
less than two-thirds of all directors or not
less than two-thirds of all members of the
committee, as the case may be;
except that where a director is given more than
one vote, he shall be counted by the number of
votes he casts for the purpose of establishing a
majority.
resolution of (a) A resolution approved at a duly convened
members and constituted meeting of the members of
the Company by the affirmative vote of
(i) a simple majority of the votes of the
shares entitled to vote thereon which
were present at the meeting and were
voted and not abstained, or
(ii) a simple majority of the votes of each
class or series of shares which were
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present at the meeting and entitled to
vote thereon as a class or series and
were voted and not abstained and of a
simple majority of the votes of the
remaining shares entitled to vote
thereon which were present at the
meeting and were voted and not
abstained; or
(b) a resolution consented to in writing by
(i) an absolute majority of the votes of
shares entitled to vote thereon, or
(ii) an absolute majority of the votes of
each class or series of shares entitled
to vote thereon as a class or series
and of an absolute majority of the
votes of the remaining shares entitled
to vote thereon;
securities Shares and debt obligations of every kind, and
options, warrants and rights to acquire shares, or
debt obligations.
surplus The excess, if any, at the time of the
determination of the total assets of the Company
over the aggregate of its total liabilities, as
shown in its books of account, plus the Company's
capital.
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the Act The International Business Companies Act (No. 8 of
1984) including any modification, extension, re-
enactment or renewal thereof and any regulations
made thereunder.
the Memorandum the Memorandum of Association of the Company as
originally framed or as from time to time amended.
the Seal any Seal which has been duly adopted as the Seal
of the Company.
these Articles these Articles of Association as originally framed
or as from time to time amended.
treasury shares Shares in the Company that were previously issued
but were repurchased, redeemed or otherwise
acquired by the Company and not cancelled.
2. "Written" or any term of like import includes words typewritten, printed,
painted, engraved, lithographed, photographed or represented or reproduced
by any mode of reproducing words in a visible form, including telex,
facsimile, telegram, cable or other form of writing produced by electronic
communication.
3. Save as aforesaid any words or expressions defined in the Act shall bear
the same meaning in these Articles.
4. Whenever the singular or plural number, or the masculine, feminine or
neuter gender is used in these Articles, it shall equally, where the
context admits, include the others.
5. A reference in these Articles to voting in relation to shares shall be
construed as a reference to voting by members holding the shares except
that it is the votes allocated to the shares that shall be counted and not
the number of members who actually voted and a reference to shares being
present at a meeting shall be given a corresponding construction.
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6. A reference to money in these Articles is, unless otherwise stated, a
reference to the currency in which shares in the Company shall be issued
according to the provisions of the Memorandum.
REGISTERED SHARES
7. Every member holding registered shares in the Company shall be entitled to
a certificate signed by a director or officer of the Company and under the
Seal specifying the share or shares held by him and the signature of the
director or officer and the Seal may be facsimiles.
8. Any member receiving a share certificate for registered shares shall
indemnify and hold the Company and its directors and officers harmless from
any loss or liability which it or they may incur by reason of any wrongful
or fraudulent use or representation made by any person by virtue of the
possession thereof. If a share certificate for registered shares is worn
out or lost it may be renewed on production of the worn out certificate or
on satisfactory proof of its loss together with such indemnity as may be
required by a resolution of directors.
9. If several persons are registered as joint holders of any shares, any one
of such persons may give an effectual receipt for any dividend payable in
respect of such shares.
SHARES, AUTHORIZED CAPITAL, CAPITAL AND SURPLUS
10. Subject to the provisions of these Articles and any resolution of members,
the unissued shares of the Company shall be at the disposal of the
directors who may, without limiting or affecting any rights previously
conferred on the holders of any existing shares or class or series of
shares, offer, allot, grant options over or otherwise dispose of shares to
such persons, at such times and upon such terms and conditions as the
Company may by resolution of directors determine.
11. No share in the Company may be issued until the consideration in respect
thereof is fully paid, and when issued the share is for all purposes fully
paid and non-assessable save that a share issued for a promissory note or
other written obligation for payment of a debt may be issued subject to
forfeiture in the manner prescribed in these Articles.
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12. Shares in the Company shall be issued for money, services rendered,
personal property, an estate in real property, a promissory note or other
binding obligation to contribute money or property or any combination of
the foregoing as shall be determined by a resolution of directors.
13. Shares in the Company may be issued for such amount of consideration as the
directors may from time to time by resolution of directors determine,
except that in the case of shares with par value, the amount shall not be
less than the par value, and in the absence of fraud the decision of the
directors as to the value of the consideration received by the Company in
respect of the issue is conclusive unless a question of law is involved.
The consideration in respect of the shares constitutes capital to the
extent of the par value and the excess constitutes surplus.
14. A share issued by the Company upon conversion of, or in exchange for,
another share or a debt obligation or other security in the Company, shall
be treated for all purposes as having been issued for money equal to the
consideration received or deemed to have been received by the Company in
respect of the other share, debt obligation or security.
15. Treasury shares may be disposed of by the Company on such terms and
conditions (not otherwise inconsistent with these Articles) as the Company
may by resolution of directors determine.
16. The Company may issue fractions of a share and a fractional share shall
have the same corresponding fractional liabilities, limitations,
preferences, privileges, qualifications, restrictions, rights and other
attributes of a whole share of the same class or series of shares.
17. Upon the issue by the Company of a share without par value, if an amount is
stated in the Memorandum to be authorized capital represented by such
shares then each share shall be issued for no less than the appropriate
proportion of such amount which shall constitute capital, otherwise the
consideration in respect of the share constitutes capital to the extent
designated by the directors and the excess constitutes surplus, except that
the directors must designate as capital an amount of the
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<PAGE>
consideration that is at least equal to the amount that the share is
entitled to as a preference, if any, in the assets of the Company upon
liquidation of the Company.
18. The Company may purchase, redeem or otherwise acquire and hold its own
shares but only out of surplus or in exchange for newly issued shares of
equal value.
19. Subject to provisions to the contrary in
(a) the memorandum or these articles;
(b) the designations, powers, preferences, rights, qualifications,
limitations and restrictions with which the shares were issued; or
(c) the subscription agreement for the issue of the shares,
the Company may not purchase, redeem or otherwise acquire its own shares
without the consent of members whose shares are to be purchased, redeemed
or otherwise acquired.
20. No purchase, redemption or other acquisition of shares shall be made unless
the directors determine that immediately after the purchase, redemption or
other acquisition the Company will be able to satisfy its liabilities as
they become due in the ordinary course of its business and the realizable
value of the assets of the Company will not be less than the sum of its
total liabilities, other than deferred taxes, as shown in the books of
account, and its capital and, in the absence of fraud, the decision of the
directors as to the realizable value of the assets of the Company is
conclusive, unless a question of law is involved.
21. A determination by the directors under the preceding Regulation is not
required where shares are purchased, redeemed or otherwise acquired
(a) pursuant to a right of a member to have his shares redeemed or to have
his shares exchanged for money or other property of the Company;
(b) by virtue of a transfer of capital pursuant to Regulation 49;
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(c) by virtue of the provisions of Section 83 of the Act; or
(d) pursuant to an order of the court.
22. Shares that the Company purchases, redeems or otherwise acquires pursuant
to the preceding Regulation may be cancelled or held as treasury shares
except to the extent that such shares are in excess of 80 percent of the
issued shares of the Company in which case they shall be cancelled but they
shall be available for reissue.
23. Where shares in the Company are held by the Company as treasury shares or
are held by another company of which the Company holds, directly or
indirectly, shares having more than 50 percent of the votes in the election
of directors of the other company, such shares of the Company are not
entitled to vote or to have dividends paid thereon and shall not be treated
as outstanding for any purpose except for purposes of determining the
capital of the Company.
24. The Company may purchase, redeem or otherwise acquire its shares at a price
lower than the fair value if permitted by, and then only in accordance
with, the terms of
(a) the memorandum or these articles; or
(b) a written agreement for the subscription for the shares to be
purchased, redeemed or otherwise acquired.
25. The Company may by a resolution of directors include in the computation of
surplus for any purpose the unrealized appreciation of the assets of the
Company, and, in the absence of fraud, the decision of the directors as to
the value of the assets is conclusive, unless a question of law is
involved.
MORTGAGES AND CHARGES OF REGISTERED SHARES
26. Members may mortgage or charge their registered shares in the Company and
upon satisfactory evidence thereof the Company shall give effect to the
terms of any valid mortgage or charge except insofar as it may conflict
with any requirements herein contained for consent to the transfer of
shares.
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27. In the case of the mortgage or charge of registered shares there may be
entered in the share register of the Company at the request of the
registered holder of such shares
(a) a statement that the shares are mortgaged or charged;
(b) the name of the mortgagee or chargee; and
(c) the date on which the aforesaid particulars are entered in the share
register.
28. Where particulars of a mortgage or charge are registered, such particulars
shall be cancelled
(a) with the consent of the named mortgagee or chargee or anyone authorized
to act on his behalf; or
(b) upon evidence satisfactory to the directors of the discharge of the
liability secured by the mortgage or charge and the issue of such
indemnities as the directors shall consider necessary or desirable.
29. Whilst particulars of a mortgage or charge are registered, no transfer of
any share comprised therein shall be effected without the written consent
of the named mortgagee or chargee or anyone authorized to act on his
behalf.
FORFEITURE
30. When shares issued for a promissory note or other written obligation for
payment of a debt have been issued subject to forfeiture, the following
provisions shall apply.
31. Written notice specifying a date for payment to be made and the shares in
respect of which payment is to be made shall be served on the member who
defaults in making payment pursuant to a promissory note or other written
obligations to pay a debt.
32. The written notice specifying a date for payment shall
(a) name a further date not earlier than the expiration of 14 days from the
date of service of the notice on or before which payment required by
the notice is to be made; and
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(b) contain a statement that in the event of non-payment at or before the
time named in the notice the shares, or any of them, in respect of
which payment is not made will be liable to be forfeited.
33. Where a written notice has been issued and the requirements have not been
complied with within the prescribed time, the directors may at any time
before tender of payment forfeit and cancel the shares to which the notice
relates.
34. The Company is under no obligation to refund any moneys to the member whose
shares have been forfeited and cancelled pursuant to these provisions.
Upon forfeiture and cancellation of the shares the member is discharged
from any further obligation to the Company with respect to the shares
forfeited and cancelled.
LIEN
35. The Company shall have a first and paramount lien on every share issued for
a promissory note or for any other binding obligation to contribute money
or property or any combination thereof to the Company, and the Company
shall also have a first and paramount lien on every share standing
registered in the name of a member, whether singly or jointly with any
other person or persons, for all the debts and liabilities of such member
or his estate to the Company, whether the same shall have been incurred
before or after notice to the Company of any interest of any person other
than such member, and whether the time for the payment or discharge of the
same shall have actually arrived or not, and notwithstanding that the same
are joint debts or liabilities of such member or his estate and any other
person, whether a member of the Company or not. The Company's lien on a
share shall extend to all dividends payable thereon. The directors may at
any time either generally, or in any particular case, waive any lien that
has arisen or declare any share to be wholly or in part exempt from the
provisions of this Regulation.
36. In the absence of express provisions regarding sale in the promissory note
or other binding obligation to contribute money or property, the Company
may sell, in such manner as the directors may by resolution of directors
determine, any share on which the Company has a lien, but no sale shall be
made unless some sum in respect of which the lien exists is presently
payable nor
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until the expiration of twenty-one days after a notice in writing, stating
and demanding payment of the sum presently payable and giving notice of the
intention to sell in default of such payment, has been served on the holder
for the time being of the share.
37. The net proceeds of the sale by the Company of any shares on which it has a
lien shall be applied in or towards payment of discharge of the promissory
note or other binding obligation to contribute money or property or any
combination thereof in respect of which the lien exists so far as the same
is presently payable and any residue shall (subject to a like lien for
debts or liabilities not presently payable as existed upon the share prior
to the sale) be paid to the holder of the share immediately before such
sale. For giving effect to any such sale the directors may authorize some
person to transfer the share sold to the purchaser thereof. The purchaser
shall be registered as the holder of the share and he shall not be bound to
see to the application of the purchase money, nor shall his title to the
share be affected by any irregularity or invalidity in the proceedings in
reference to the sale.
TRANSFER OF SHARES
38. Subject to any limitations in the Memorandum, registered shares in the
Company may be transferred by a written instrument of transfer signed by
the transferor and containing the name and address of the transferee, but
in the absence of such written instrument of transfer the directors may
accept such evidence of a transfer of shares as they consider appropriate.
39. The Company shall not be required to treat a transferee of a registered
share in the Company as a member until the transferee's name has been
entered in the share register.
40. Subject to any limitations in the Memorandum, the Company must on the
application of the transferor or transferee of a registered share in the
Company enter in the share register the name of the transferee of the share
save that the registration of transfers may be suspended and the share
register closed at such times and for such periods as the Company may from
time to time by resolution of directors determine provided always that such
registration shall not be suspended and the share
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register closed for more than 60 days in any period of 12 months.
TRANSMISSION OF SHARES
4l. The executor or administrator of a deceased member, the guardian of an
incompetent member or the trustee of a bankrupt member shall be the only
person recognized by the Company as having any title to his share but they
shall not be entitled to exercise any rights as a member of the Company
until they have proceeded as set forth in the next following three
Regulations.
42. The production to the Company of any document which is evidence of probate
of the will, or letters of administration of the estate, or confirmation as
executor, of a deceased member or of the appointment of a guardian of an
incompetent member or the trustee of a bankrupt member shall be accepted by
the Company even if the deceased, incompetent or bankrupt member is
domiciled outside the British Virgin Islands if the document evidencing the
grant of probate or letters of administration, confirmation as executor,
appointment as guardian or trustee in bankruptcy is issued by a foreign
court which had competent jurisdiction in the matter. For the purpose of
establishing whether or not a foreign court had competent jurisdiction in
such a matter the directors may obtain appropriate legal advice. The
directors may also require an indemnity to be given by the executor,
administrator, guardian or trustee in bankruptcy.
43. Any person becoming entitled by operation of law or otherwise to a share or
shares in consequence of the death, incompetence or bankruptcy of any
member may be registered as a member upon such evidence being produced as
may reasonably be required by the directors. An application by any such
person to be registered as a member shall for all purposes be deemed to be
a transfer of shares of the deceased, incompetent or bankrupt member and
the directors shall treat it as such.
44. Any person who has become entitled to a share or shares in consequence of
the death, incompetence or bankruptcy of any member may, instead of being
registered himself, request in writing that some person to be named by him
be registered as the transferee of such share or shares and such request
shall likewise be treated as if it were a transfer.
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45. What amounts to incompetence on the part of a person is a matter to be
determined by the court having regard to all the relevant evidence and the
circumstances of the case.
REDUCTION OR INCREASE IN AUTHORIZED CAPITAL OR CAPITAL
46. The Company may by a resolution of directors amend the Memorandum to
increase or reduce its authorized capital and in connection therewith the
Company may in respect of any unissued shares increase or reduce the number
of such shares, increase or reduce the par value of any such shares or
effect any combination of the foregoing.
47. The Company may amend the Memorandum to
(a) divide the shares, including issued shares, of a class or series into a
larger number of shares of the same class or series; or
(b) combine the shares, including issued shares, of a class or series
into a smaller number of shares of the same class or series,
provided, however, that where shares are divided or combined under (a)
or (b) of this Regulation, the aggregate par value of the new shares
must be equal to the aggregate par value of the original shares.
48. The capital of the Company may by a resolution of directors be increased by
transferring an amount of the surplus of the Company to capital.
49. Subject to the provisions of the two next succeeding Regulations, the
capital of the Company may by resolution of directors be reduced by
transferring an amount of the capital of the Company to surplus.
50. No reduction of capital shall be effected that reduces the capital of the
Company to an amount that immediately after the reduction is less than the
aggregate par value of all outstanding shares with par value and all shares
with par value held by the Company as treasury shares and the aggregate of
the amounts designated as capital of all outstanding shares without par
value and all shares without par value held by the Company as treasury
shares that are entitled to a preference, if any, in the assets of the
Company upon liquidation of the Company.
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51. No reduction of capital shall be effected unless the directors determine
that immediately after the reduction the Company will be able to satisfy
its liabilities as they become due in the ordinary course of its business
and that the realizable assets of the Company will not be less than its
total liabilities, other than deferred taxes, as shown in the books of the
Company and its remaining capital, and, in the absence of fraud, the
decision of the directors as to the realizable value of the assets of the
Company is conclusive, unless a question of law is involved.
MEETINGS AND CONSENTS OF MEMBERS
52. The directors of the Company shall convene an annual meeting of the members
of the Company for the election of directors and such other matters as the
directors of the Company shall propose for consideration. In addition, the
directors of the Company may convene such other meetings of the members of
the Company at such times as the directors shall consider necessary or
desirable. Any meeting of the members may be held at such times and in
such manner within or outside the British Virgin Islands as the directors
may determine.
53. Upon the written request of members holding 50 percent or more of the
outstanding voting shares in the Company the directors shall convene a
meeting of members.
54. The directors shall give not less than ten days' notice of meetings of
members to those persons whose names on the date the notice is given appear
as members in the share register of the Company and are entitled to vote at
the meeting.
55. The directors may fix the date notice is given of a meeting of members as
the record date for determining those shares that are entitled to vote at
the meeting.
56. Notwithstanding any provision to the contrary in the Act a meeting of
members may not be called on less than ten days' notice.
57. The inadvertent failure of the directors to give notice of a meeting to a
member, or the fact that a member has not received notice, does not
invalidate the meeting.
58. A member may be represented at a meeting of members by a proxy who may
speak and vote on behalf of the member.
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59. The instrument appointing a proxy shall be produced at the place appointed
for the meeting before the time for holding the meeting at which the person
named in such instrument proposes to vote.
60. An instrument appointing a proxy shall be in substantially the following
form or such other form as the Chairman of the meeting shall accept as
properly evidencing the wishes of the member appointing the proxy.
(Name of Company)
I/We being a member of the above
Company with shares HEREBY APPOINT
of or failing him
of to be my/our proxy to vote for me/us at the
meeting of members to be held on the day of and at
any adjournment thereof.
(Any restrictions on voting to be inserted here.)
Signed this day of
.............................
Member
6l. The following shall apply in respect of joint ownership of shares:
(a) if two or more persons hold shares jointly each of them may be present
in person or by proxy at a meeting of members and may speak as a
member;
(b) if only one of the joint owners is present in person or by proxy he
may vote on behalf of all joint owners, and
(c) if two or more of the joint owners are present in person or by proxy
they must vote as one.
62. A member shall be deemed to be present at a meeting of members if he
participates by telephone or other electronic means and all members
participating in the meeting are able to hear each other.
63. A meeting of members is duly constituted if, at the commencement of the
meeting, there are present in person
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or by proxy not less than 50 percent of the votes of the shares or class or
series of shares entitled to vote on resolutions of members to be
considered at the meeting. If a quorum be present, notwithstanding the fact
that such quorum may be represented by only one person then such person may
resolve any matter and a certificate signed by such person accompanied
where such person be a proxy by a copy of the proxy form shall constitute a
valid resolution of members.
64. If within two hours from the time appointed for the meeting a quorum is not
present, the meeting, if convened upon the requisition of members, shall be
dissolved; in any other case it shall stand adjourned to the next business
day at the same time and place or to such other time and place as the
directors may determine, and if at the adjourned meeting there are present
within one hour from the time appointed for the meeting in person or by
proxy not less than one third of the votes of the shares or each class or
series of shares entitled to vote on the resolutions to be considered by
the meeting, those present shall constitute a quorum but otherwise the
meeting shall be dissolved.
65. At every meeting of members, the Chairman of the Board of Directors shall
preside as chairman of the meeting. If there is no Chairman of the Board
of Directors or if the Chairman of the Board of Directors is not present at
the meeting, the Vice Chairman of the Board, or such other person as may be
designated by the directors to preside shall be Chairman of the meeting.
66. The chairman may, with the consent of the meeting, adjourn any meeting from
time to time, and from place to place, but no business shall be transacted
at any adjourned meeting other than the business left unfinished at the
meeting from which the adjournment took place.
67. At any meeting of the members the chairman shall be responsible for
deciding in such manner as he shall consider appropriate whether any
resolution has been carried or not and the result of his decision shall be
announced to the meeting and recorded in the minutes thereof. If the
chairman shall have any doubt as to the outcome of any resolution put to
the vote, he shall cause a poll to be taken of all votes cast upon such
resolution, but if the chairman shall fail to take a poll then any member
present in person or by proxy who disputes the announcement by the chairman
of the result
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of any vote may immediately following such announcement demand that a poll
be taken and the chairman shall thereupon cause a poll to be taken. If a
poll is taken at any meeting, the result thereof shall be duly recorded in
the minutes of that meeting by the chairman.
68. Any person other than an individual shall be regarded as one member and
subject to the specific provisions hereinafter contained for the
appointment of representatives of such persons the right of any individual
to speak for or represent such member shall be determined by the law of the
jurisdiction where, and by the documents by which, the person is
constituted or derives its existence. In case of doubt, the directors may
in good faith seek legal advice from any qualified person and unless and
until a court of competent jurisdiction shall otherwise rule, the directors
may rely and act upon such advice without incurring any liability to any
member.
69. Any person other than an individual which is a member of the Company may by
resolution of its directors or other governing body authorize such person
as it thinks fit to act as its representative at any meeting of the Company
or of any class of members of the Company, and the person so authorized
shall be entitled to exercise the same powers on behalf of the person which
he represents as that person could exercise if it were an individual member
of the Company.
70. The chairman of any meeting at which a vote is cast by proxy or on behalf
of any person other than an individual may call for a notarially certified
copy of such proxy or authority which shall be produced within 7 days of
being so requested or the votes cast by such proxy or on behalf of such
person shall be disregarded.
71. Directors of the Company may attend and speak at any meeting of members of
the Company and at any separate meeting of the holders of any class or
series of shares in the Company.
72. An action that may be taken by the members at a meeting may also be taken
by a resolution of members consented to in writing or by telex, telegram,
cable, facsimile or other written electronic communication, without the
need for any notice, but if any resolution of members is adopted otherwise
than by the unanimous written consent of all members, a copy of such
resolution shall forthwith
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be sent to all members not consenting to such resolution. The consent may
be in the form of counterparts, each counterpart being signed by one or
more members.
DIRECTORS
73. The first directors of the Company shall be appointed by the subscribers to
the Memorandum; and at the first meeting of members at which directors are
to be elected, the directors shall be divided into three classes, as nearly
equal in number as possible. One class of directors shall be initially
elected for a one-year term, another class shall be initially elected for a
two-year term and another class shall be initially elected for a three-year
term. At each succeeding meeting at which directors are to be elected, the
successors of the class of directors whose term expires at that meeting
shall be elected by a plurality vote of all votes cast at such meeting to
hold office for a three-year term.
74. The minimum number of directors shall be three and the maximum number shall
be twelve.
75. Each director shall hold office until his successor is elected or until his
earlier death, resignation or removal.
76. A director may be removed from office, with cause, by a resolution of
members or by a resolution of directors.
77. A director may resign his office by giving written notice of his
resignation to the Company and the resignation shall have effect from the
date the notice is received by the Company or from such later date as may
be specified in the notice.
78. The directors may at any time appoint any person to be a director either to
fill a vacancy or as an addition to the existing directors. A vacancy
occurs through the death, resignation or removal of a director, but a
vacancy or vacancies shall not be deemed to exist where one or more
directors shall resign after having appointed his or their successor or
successors.
79. The Company may determine by resolution of directors to keep a register of
directors containing
(a) the names and addresses of the persons who are directors of the
Company;
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(b) the date on which each person whose name is entered in the
register was appointed as a director of the Company; and
(c) the date on which each person named as a director ceased to be a
director of the Company.
80. If the directors determine to maintain a register of directors, a copy
thereof shall be kept at the registered office of the Company and the
Company may determine by resolution of directors to register a copy of the
register with the Registrar of Companies.
8l. The directors may, by a resolution of directors, fix the emoluments of
directors with respect to services to be rendered in any capacity to the
Company.
82. A director shall not require a share qualification.
POWERS OF DIRECTORS
83. The business and affairs of the Company shall be managed by the directors
who may pay all expenses incurred preliminary to and in connection with the
formation and registration of the Company and may exercise all such powers
of the Company as are not by the Act or by the Memorandum or these Articles
required to be exercised by the members of the Company, subject to any
delegation of such powers as may be authorized by these Articles and to
such requirements as may be prescribed by a resolution of members; but no
requirement made by a resolution of members shall prevail if it be
inconsistent with these Articles nor shall such requirement invalidate any
prior act of the directors which would have been valid if such requirement
had not been made.
84. The directors may, by a resolution of directors, appoint any person,
including a person who is a director, to be an officer or agent of the
Company. The resolution of directors appointing an agent may authorize the
agent to appoint one or more substitutes or delegates to exercise some
or all of the powers conferred on the agent by the Company.
85. Every officer or agent of the Company has such powers and authority of the
directors, including the power and authority to affix the Seal, as are set
forth in these Articles or in the resolution of directors appointing the
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officer or agent, except that no officer or agent has any power or
authority with respect to the matters requiring a resolution of directors
under the Act.
86. Any director which is a body corporate may appoint any person its duly
authorized representative for the purpose of representing it at meetings of
the Board of Directors or with respect to unanimous written consents.
87. The continuing directors may act notwithstanding any vacancy in their body,
save that if their number is reduced to their knowledge below the number
fixed by or pursuant to these Articles as the necessary quorum for a
meeting of directors, the continuing directors or director may act only for
the purpose of appointing directors to fill any vacancy that has arisen or
for summoning a meeting of members.
88. The directors may by resolution of directors exercise all the powers of the
Company to borrow money and to mortgage or charge its undertakings and
property or any part thereof, to issue debentures, debenture stock and
other securities whenever money is borrowed or as security for any debt,
liability or obligation of the Company or of any third party.
89. All cheques, promissory notes, drafts, bills of exchange and other
negotiable instruments and all receipts for moneys paid to the Company,
shall be signed, drawn, accepted, endorsed or otherwise executed, as the
case may be, in such manner as shall from time to time be determined by
resolution of directors.
90. The Company may determine by resolution of directors to maintain at its
registered office a register of mortgages, charges and other encumbrances
in which there shall be entered the following particulars regarding each
mortgage, charge and other encumbrance:
(a) the sum secured;
(b) the assets secured;
(c) the name and address of the mortgagee, chargee or other
encumbrancer;
(d) the date of creation of the mortgage, charge or other encumbrance;
and
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(e) the date on which the particulars specified above in respect of
the mortgage, charge or other encumbrance are entered in the register.
9l. The Company may further determine by a resolution of directors to register
a copy of the register of mortgages, charges or other encumbrances with the
Registrar of Companies.
PROCEEDINGS OF DIRECTORS
92. The directors of the Company or any committee thereof may meet at such
times and in such manner and places within or outside the British Virgin
Islands as the directors may determine to be necessary or desirable.
93. A director shall be deemed to be present at a meeting of directors if he
participates by telephone or other electronic means and all directors
participating in the meeting are able to hear each other.
94. A director shall be given not less than 3 days notice of meetings of
directors, but a meeting of directors held without 3 days notice having
been given to all directors shall be valid if all the directors entitled to
vote at the meeting who do not attend, waive notice of the meeting and for
this purpose, the presence of a director at a meeting shall constitute
waiver on his part. The inadvertent failure to give notice of a meeting to
a director, or the fact that a director has not received the notice, does
not invalidate the meeting.
95. A director may by a written instrument appoint an alternate who need not be
a director and an alternate is entitled to attend meetings in the absence
of the director who appointed him and to vote or consent in place of the
director.
96. A meeting of directors is duly constituted for all purposes if at the
commencement of the meeting there are present in person or by alternate not
less than one-half of the total number of directors.
97. At every meeting of the directors the Chairman of the Board of Directors
shall preside as chairman of the meeting. If there is no Chairman of the
Board of Directors or if the Chairman of the Board of Directors is not
present at the meeting the Vice-Chairman of the Board of Directors shall
preside. If there is no Vice-Chairman of the Board of Directors or if the
Vice-
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Chairman of the Board of Directors is not present at the meeting the
directors present shall choose some one of their number to be chairman of
the meeting.
98. An action that may be taken by the directors or a committee of directors at
a meeting may also be taken by a resolution of directors or a committee of
directors consented to in writing or by telex, telegram, cable, facsimile
or other written electronic communication by not less than two-thirds of
all directors or not less than two-thirds of all members of the committee
as the case may be, without the need for any notice. The consent may be in
the form of counterparts, each counterpart being signed by one or more
directors.
99. The directors shall cause the following corporate records to be kept:
(a) minutes of all meetings of directors, members, committees of
directors, committees of officers and committees of members;
(b) copies of all resolutions consented to by directors, members,
committees of directors, committees of officers and committees of
members; and
(c) such other accounts and records as the directors by resolution of
directors consider necessary or desirable in order to reflect the
financial position of the Company.
100. The books, records and minutes shall be kept at the registered office of
the Company, its principal place of business or at such other place as the
directors determine.
101. The directors may, by resolution of directors, designate one or more
committees, each consisting of one or more directors.
102. Each committee of directors has such powers and authorities of the
directors, including the power and authority to affix the Seal, as are set
forth in the resolution of directors establishing the committee, except
that no committee has any power or authority to amend the Memorandum or
these Articles, to appoint directors or fix their emoluments, or to
appoint officers or agents of the Company.
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103. The meetings and proceedings of each committee of directors consisting of
2 or more directors shall be governed mutatis mutandis by the provisions
of these Articles regulating the proceedings of directors so far as the
same are not superseded by any provisions in the resolution establishing
the committee.
OFFICERS
104. The Company may by resolution of directors appoint officers of the Company
at such times as shall be considered necessary or expedient. Such officers
may consist of a Chairman of the Board of Directors, a Vice-Chairman of
the Board of Directors, a President and one or more Vice-Presidents,
Secretaries and Treasurers and such other officers as may from time to
time be deemed desirable. Any number of offices may be held by the same
person.
105. The officers shall perform such duties as shall be prescribed at the time
of their appointment subject to any modification in such duties as may be
prescribed thereafter by resolution of directors or resolution of members,
but in the absence of any specific allocation of duties it shall be the
responsibility of the Chairman of the Board of Directors to preside at
meetings of directors and members, the Vice-Chairman to act in the absence
of the Chairman, the President to manage the day to day affairs of the
Company, the Vice-Presidents to act in order of seniority in the absence
of the President but otherwise to perform such duties as may be delegated
to them by the President, the Secretaries to maintain the share register,
minute books and records (other than financial records) of the Company and
to ensure compliance with all procedural requirements imposed on the
Company by applicable law, and the Treasurer to be responsible for the
financial affairs of the Company.
106. The emoluments of all officers shall be fixed by resolution of directors.
107. The officers of the Company shall hold office until their successors are
duly elected and qualified, but any officer elected or appointed by the
directors may be removed at any time, with or without cause, by resolution
of directors. Any vacancy occurring in any office of the Company may be
filled by resolution of directors.
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CONFLICT OF INTERESTS
108. No agreement or transaction between the Company and one or more of its
directors or any person in which any director has a financial interest or
to whom any director is related, including as a director of that other
person, is void or voidable for this reason only or by reason only that
the director is present at the meeting of directors or at the meeting of
the committee of directors that approves the agreement or transaction or
that the vote or consent of the director is counted for that purpose if
(i) the material facts of the interest of each director in the agreement
or transaction and his interest in or relationship to any other party to
the agreement or transaction are disclosed in good faith or are known by
the other directors and (ii) the agreement or transaction is approved or
ratified by a majority of the disinterested directors of the Company or is
otherwise fair to the Company.
109. A director who has an interest in any particular business to be
considered at a meeting of directors or members may be counted for
purposes of determining whether the meeting is duly constituted.
INDEMNIFICATION
110. Subject to the limitations hereinafter provided the Company may indemnify
against all expenses, including legal fees, and against all judgments,
fines and amounts paid in settlement and reasonably incurred in connection
with legal, administrative or investigative proceedings any person who
(a) is or was a party or is threatened to be made a party to any
threatened, pending or completed proceedings, whether civil,
criminal, administrative or investigative, by reason of the fact
that the person is or was a director, an officer or a liquidator
of the Company; or
(b) is or was, at the request of the Company, serving as a director,
officer or liquidator of, or in any other capacity is or was
acting for, another company or a partnership, joint venture, trust
or other enterprise.
111. The Company may only indemnify a person if the person acted honestly and
in good faith with a view to the best
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interests of the Company and, in the case of criminal proceedings, the
person had no reasonable cause to believe that his conduct was unlawful.
112. The decision of the directors as to whether the person acted honestly and
in good faith and with a view to the best interests of the Company and as
to whether the person had no reasonable cause to believe that his conduct
was unlawful is, in the absence of fraud, sufficient for the purposes of
these Articles, unless a question of law is involved.
113. The termination of any proceedings by any judgment, order, settlement,
conviction or the entering of a nolle prosequi does not, by itself, create
a presumption that the person did not act honestly and in good faith and
with a view to the best interests of the Company or that the person had
reasonable cause to believe that his conduct was unlawful.
114. If a person to be indemnified has been successful in defence of any
proceedings referred to above the person is entitled to be indemnified
against all expenses, including legal fees, and against all judgments,
fines and amounts paid in settlement and reasonably incurred by the person
in connection with the proceedings.
115. The Company may purchase and maintain insurance in relation to any person
who is or was a director, an officer or a liquidator of the Company, or
who at the request of the Company is or was serving as a director, an
officer or a liquidator of, or in any other capacity is or was acting for,
another company or a partnership, joint venture, trust or other
enterprise, against any liability asserted against the person and incurred
by the person in that capacity, whether or not the Company has or would
have had the power to indemnify the person against the liability as
provided in these Articles.
SEAL
116. The Company may have more than one Seal and references herein to the Seal
shall be references to every Seal which shall have been duly adopted by
resolution of directors. The directors shall provide for the safe custody
of the Seal and for an imprint thereof to be kept at the Registered
Office. Except as otherwise expressly provided herein the Seal when
affixed to any written instrument shall be witnessed and attested to by
the
25
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signature of a director or any other person so authorized from time to
time by resolution of directors. Such authorization may be before or after
the Seal is affixed, may be general or specific and may refer to any
number of sealings. The Directors may provide for a facsimile of the Seal
and of the signature of any director or authorized person which may be
reproduced by printing or other means on any instrument and it shall have
the same force and validity as if the Seal had been affixed to such
instrument and the same had been signed as hereinbefore described.
DIVIDENDS
117. The Company may by a resolution of directors declare and pay dividends in
money, shares, or other property, but dividends shall only be declared and
paid out of surplus. In the event that dividends are paid in specie the
directors shall have responsibility for establishing and recording in the
resolution of directors authorizing the dividends, a fair and proper value
for the assets to be so distributed.
118. The directors may from time to time pay to the members such interim
dividends as appear to the directors to be justified by the profits of the
Company.
119. The directors may, before declaring any dividend, set aside out of the
profits of the Company such sum as they think proper as a reserve fund,
and may invest the sum so set aside as a reserve fund upon such securities
as they may select.
120. No dividend shall be declared and paid unless the directors determine that
immediately after the payment of the dividend the Company will be able to
satisfy its liabilities as they become due in the ordinary course of its
business and the realizable value of the assets of the Company will not be
less than the sum of its total liabilities, other than deferred taxes, as
shown in its books of account, and its capital. In the absence of fraud,
the decision of the directors as to the realizable value of the assets of
the Company is conclusive, unless a question of law is involved.
121. Notice of any dividend that may have been declared shall be given to each
member in manner hereinafter mentioned
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and all dividends unclaimed for 3 years after having been declared may be
forfeited by resolution of directors for the benefit of the Company.
122. No dividend shall bear interest as against the Company and no dividend
shall be paid on treasury shares or shares held by another company of
which the Company holds, directly or indirectly, shares having more than
50 percent of the vote in electing directors.
123. A share issued as a dividend by the Company shall be treated for all
purposes as having been issued for money equal to the surplus that is
transferred to capital upon the issue of the share.
124. In the case of a dividend of authorized but unissued shares with par
value, an amount equal to the aggregate par value of the shares shall be
transferred from surplus to capital at the time of the distribution.
125. In the case of a dividend of authorized but unissued shares without par
value, the amount designated by the directors shall be transferred from
surplus to capital at the time of the distribution, except that the
directors must designate as capital an amount that is at least equal to
the amount that the shares are entitled to as a preference, if any, in the
assets of the Company upon liquidation of the Company.
126. A division of the issued and outstanding shares of a class or series of
shares into a larger number of shares of the same class or series having a
proportionately smaller par value does not constitute a dividend of
shares.
ACCOUNTS AND AUDIT
127. The Company may by resolution of members call for the directors to prepare
periodically a profit and loss account and a balance sheet. The profit and
loss account and balance sheet shall be drawn up so as to give
respectively a true and fair view of the profit and loss of the Company
for the financial period and a true and fair view of the state of affairs
of the Company as at the end of the financial period.
128. The Company may by resolution of members call for the accounts to be
examined by auditors.
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129. The first auditors shall be appointed by resolution of directors;
subsequent auditors shall be appointed by a resolution of members.
130. The auditors may be members of the Company but no director or other
officer shall be eligible to be an auditor of the Company during his
continuance in office.
131. The remuneration of the auditors of the Company
(a) in the case of auditors appointed by the directors, may be fixed
by resolution of directors; and
(b) subject to the foregoing, shall be fixed by resolution of members
or in such manner as the Company may by resolution of members
determine.
132. The auditors shall examine each profit and loss account and balance sheet
required to be served on every member of the Company or laid before a
meeting of the members of the Company and shall state in a written report
whether or not
(a) in their opinion the profit and loss account and balance sheet
give a true and fair view respectively of the profit and loss for
the period covered by the accounts, and of the state of affairs
of the Company at the end of that period; and
(b) all the information and explanations required by the auditors
have been obtained.
133. The report of the auditors shall be annexed to the accounts and shall be
read at the meeting of members at which the accounts are laid before the
Company or shall be served on the members.
134. Every auditor of the Company shall have a right of access at all times to
the books of account and vouchers of the Company, and shall be entitled to
require from the directors and officers of the Company such information
and explanations as he thinks necessary for the performance of the duties
of the auditors.
135. The auditors of the Company shall be entitled to receive notice of, and to
attend any meetings of members of the Company at which the Company's
profit and loss account and balance sheet are to be presented.
28
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NOTICES
136. Any notice, information or written statement to be given by the Company to
members may be served in the case of members holding registered shares in
any way by which it can reasonably be expected to reach each member or by
mail addressed to each member at the address shown in the share register.
137. Any summons, notice, order, document, process, information or written
statement to be served on the Company may be served by leaving it, or by
sending it by registered mail addressed to the Company, at its registered
office, or by leaving it with, or by sending it by registered mail to, the
registered agent of the Company.
138. Service of any summons, notice, order, document, process, information or
written statement to be served on the Company may be proved by showing
that the summons, notice, order, document, process, information or written
statement was delivered to the registered office or the registered agent
of the Company or that it was mailed in such time as to admit to its being
delivered to the registered office or the registered agent of the Company
in the normal course of delivery within the period prescribed for service
and was correctly addressed and the postage was prepaid.
PENSION AND SUPERANNUATION FUNDS
139. The directors may establish and maintain or procure the establishment and
maintenance of any non-contributory or contributory pension or
superannuation funds for the benefit of, and give or procure the giving of
donations, gratuities, pensions, allowances or emoluments to, any persons
who are or were at any time in the employment or service of the Company or
any company which is a subsidiary of the Company or is allied to or
associated with the Company or with any such subsidiary, or who are or
were at any time directors or officers of the Company or of any such other
company as aforesaid or who hold or held any salaried employment or office
in the Company or such other company, or any persons in whose welfare the
Company or any such other company as aforesaid is or has been at any time
interested, and to the wives, widows, families and dependents of any such
person, and may make payments for or towards the insurance of any such
persons
29
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as aforesaid, and may do any of the matters aforesaid either alone or in
conjunction with any such other company as aforesaid. Subject always to
the proposal being approved by resolution of members, a director holding
any such employment or office shall be entitled to participate in and
retain for his own benefit any such donation, gratuity, pension allowance
or emolument.
ARBITRATION
140. Whenever any difference arises between the Company on the one hand and any
of the members or their executors, administrators or assigns on the other
hand, touching the true intent and construction or the incidence or
consequences of these Articles or of the Act, touching anything done or
executed, omitted or suffered in pursuance of the Act or touching any
breach or alleged breach or otherwise relating to the premises or to these
Articles, or to any Act or Ordinance affecting the Company or to any of
the affairs of the Company such difference shall, unless the parties agree
to refer the same to a single arbitrator, be referred to 2 arbitrators one
to be chosen by each of the parties to the difference and the arbitrators
shall before entering on the reference appoint an umpire.
141. If either party to the reference makes default in appointing an arbitrator
either originally or by way of substitution (in the event that an
appointed arbitrator shall die, be incapable of acting or refuse to act)
for 10 days after the other party has given him notice to appoint the
same, such other party may appoint an arbitrator to act in the place of
the arbitrator of the defaulting party.
VOLUNTARY WINDING UP AND DISSOLUTION
142. The Company may voluntarily commence to wind up and dissolve by a
resolution of members but if the Company has never issued shares it may
voluntarily commence to wind up and dissolve by resolution of director.
CONTINUATION
143. The Company may by resolution of members or by a resolution passed
unanimously by all directors of the Company continue as a company
incorporated under the laws
30
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of a jurisdiction outside the British Virgin Islands in the manner
provided under those laws.
We, HWR SERVICES LIMITED, OF Craigmuir Chambers, Road Town, Tortola,
British Virgin Islands for the purpose of incorporating an International
Business Company under the laws of the British Virgin Islands hereby subscribe
our name to these Articles of Association the 10th day of June, 1992 in the
presence of:
Witness Subscriber
(Sgd.) Elena Ruffell Smith (Sgd.) Hazel Dawn Hewlett
........................... .......................
Craigmuir Chambers Authorized Signatory
Road Town, Tortola HWR Services Limited
Company Administrator
31
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EXHIBIT 4.2
TOMMY HILFIGER U.S.A., INC.
Issuer
TOMMY HILFIGER CORPORATION
Guarantor
and
THE CHASE MANHATTAN BANK
Trustee
_______________
INDENTURE
Dated as of May 1, 1998
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TABLE OF CONTENTS
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Recitals of the Company................................................. 1
ARTICLE ONE
Definitions and Other Provisions
of General Application....................... 1
Section 101. Definitions...................................... 1
Act.............................................. 2
Affiliate........................................ 2
Attributable Debt................................ 2
Authenticating Agent............................. 2
Bankruptcy Law................................... 2
Board of Directors............................... 3
Board Resolution................................. 3
Business Day..................................... 3
Canada Loan Agreement............................ 3
Capitalized Lease Obligations.................... 3
Commission....................................... 3
Company.......................................... 3
Company Request.................................. 3
Company Order.................................... 3
Consolidated Stockholders Equity................. 3
Corporate Trust Office........................... 3
corporation...................................... 4
Custodian........................................ 4
Defaulted Interest............................... 4
Event of Default................................. 4
Exempted Debt.................................... 4
Foreign Currency................................. 4
Foreign Government Securities.................... 4
Funded Debt...................................... 4
Global Note...................................... 5
Guarantee........................................ 5
Guarantor........................................ 5
Holder........................................... 5
Indebtedness..................................... 5
Indenture........................................ 5
interest......................................... 5
Interest Payment Date............................ 5
Lien............................................. 6
Market Exchange Rate............................. 6
Maturity......................................... 6
Officers' Certificate............................ 6
Opinion of Counsel............................... 7
Original Issue Discount Security................. 7
Outstanding...................................... 7
Paying Agent..................................... 8
Periodic Offering................................ 8
Permitted Liens.................................. 8
Person........................................... 9
Place of Payment................................. 9
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Predecessor Security............................... 10
Redemption Date.................................... 10
Redemption Price................................... 10
Regular Record Date................................ 10
Responsible Officer................................ 10
Restricted Subsidiary.............................. 10
Securities......................................... 10
Securities Exchange Act of 1934.................... 10
Security Register.................................. 10
Security Registrar................................. 10
Senior Funded Debt................................. 10
Special Record Date................................ 11
Specified Indebtedness............................. 11
Stated Maturity.................................... 11
Subordinated Funded Debt........................... 11
Subsidiary......................................... 13
TIA................................................ 13
Trustee............................................ 13
Trust Indenture Act................................ 13
U.S. Depositary.................................... 13
U.S. Government Obligations........................ 13
Vice President..................................... 14
Wholly-owned Restricted Subsidiary................. 14
Section 102. Compliance Certificates and Opinions............... 14
Section 103. Form of Documents Delivered to Trustee............. 15
Section 104. Acts of Holders.................................... 15
Section 105. Notices, Etc., to Trustee, Company and Guarantor... 16
Section 106. Notice to Holders; Waiver.......................... 17
Section 107. Conflict with Trust Indenture Act.................. 17
Section 108. Effect of Headings and Table of Contents........... 17
Section 109. Successors and Assigns............................. 17
Section 110. Separability Clause................................ 17
Section 111. Benefits of Indenture.............................. 18
Section 112. Governing Law...................................... 18
Section 113. Legal Holidays..................................... 18
ARTICLE TWO
Security Forms............................. 18
Section 201. Forms Generally.................................... 18
Section 202. Form of Face of Security........................... 19
Section 203. Form of Reverse of Security........................ 21
Section 204. Additional Provisions Required in Global Notes..... 26
Section 205. Form of Trustee's Certificate of Authentication.... 26
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ARTICLE THREE
The Securities................................ 26
Section 301. Amount Unlimited; Issuable in Series.................... 26
Section 302. Denominations........................................... 29
Section 303. Execution, Authentication, Delivery and Dating.......... 29
Section 304. Temporary Securities.................................... 31
Section 305. Registration, Registration of Transfer and Exchange..... 34
Section 306. Mutilated, Destroyed, Lost and Stolen Securities........ 35
Section 307. Payment of Interest; Interest Rights Preserved.......... 36
Section 308. Persons Deemed Owners................................... 37
Section 309. Cancellation............................................ 37
Section 310. Computation of Interest................................. 38
Section 311. Judgments............................................... 38
ARTICLE FOUR
Satisfaction and Discharge............................ 39
Section 401. Satisfaction and Discharge of Indenture................. 39
Section 402. Application of Trust Funds; Indemnification............. 40
Section 403. Satisfaction, Discharge and Defeasance
of Securities of any Series............................. 41
ARTICLE FIVE
Remedies.................................. 43
Section 501. Events of Default....................................... 43
Section 502. Acceleration of Maturity; Rescission and
Annulment............................................... 45
Section 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.................................. 47
Section 504. Trustee May File Proofs of Claim........................ 48
Section 505. Trustee May Enforce Claims Without
Possession of Securities................................ 48
Section 506. Application of Money Collected.......................... 49
Section 507. Limitation on Suits..................................... 49
Section 508. Unconditional Right of Holders to
Receive Principal, Premium and Interest................. 50
Section 509. Restoration of Rights and Remedies...................... 50
Section 510. Rights and Remedies Cumulative.......................... 50
Section 511. Delay or Omission Not Waiver............................ 51
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Section 512. Control by Holders......................................... 51
Section 513. Waiver of Past Defaults.................................... 52
Section 514. Undertaking for Costs...................................... 52
Section 515. Waiver of Stay or Extension Laws........................... 53
ARTICLE SIX
The Trustee...................................... 53
Section 601. Certain Duties and Responsibilities........................ 53
Section 602. Notice of Defaults......................................... 54
Section 603. Certain Rights of Trustee.................................. 55
Section 604. Not Responsible for Recitals or Issuance
of Securities.............................................. 56
Section 605. May Hold Securities........................................ 56
Section 606. Money Held in Trust........................................ 56
Section 607. Compensation and Reimbursement............................. 56
Section 608. Disqualification; Conflicting Interests.................... 57
Section 609. Corporate Trustee Required; Eligibility.................... 63
Section 610. Resignation and Removal; Appointment of
Successor.................................................. 64
Section 611. Acceptance of Appointment by Successor..................... 65
Section 612. Merger, Conversion, Consolidation or Succession to Business 67
Section 613. Preferential Collection of Claims Against Company.......... 67
Section 614. Appointment of Authenticating Agent........................ 71
Section 615. Investment of Certain Payments Held by the Trustee......... 73
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company .................. 74
Section 701. Company to Furnish Trustee Names and
Addresses of Holders....................................... 74
Section 702. Preservation of Information;
Communications to Holders.................................. 74
Section 703. Reports by Trustee......................................... 76
Section 704. Reports by Guarantor....................................... 77
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease.................. 78
Section 801. Company May Consolidate, Etc., Only on Certain Terms....... 78
Section 802. Successor Corporation Substituted.......................... 79
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ARTICLE NINE
Supplemental Indentures 79
Section 901. Supplemental Indentures Without Consent of Holders........ 79
Section 902. Supplemental Indentures with Consent of Holders........... 80
Section 903. Execution of Supplemental Indentures...................... 81
Section 904. Effect of Supplemental Indentures......................... 82
Section 905. Conformity with Trust Indenture Act....................... 82
Section 906. Reference in Securities to Supplemental Indentures........ 82
ARTICLE TEN
Covenants...................................... 82
Section 1001. Payment of Principal, Premium and Interest................ 82
Section 1002. Maintenance of Office or Agency........................... 82
Section 1003. Money for Securities Payments to Be Held in Trust......... 83
Section 1004. Corporate Existence....................................... 85
Section 1005. Maintenance of Properties................................. 85
Section 1006. Payment of Taxes and Other Claims......................... 85
Section 1007. Limitation Upon Liens..................................... 85
Section 1008. Limitation Upon Sale and Leaseback Transactions........... 86
Section 1009. Restriction on Indebtedness of Restricted Subsidiaries.... 87
Section 1010. Defeasance of Certain Obligations......................... 88
Section 1011. Statement by Officers as to Default....................... 89
Section 1012. Waiver of Certain Covenants............................... 89
ARTICLE ELEVEN
Redemption of Securities............................... 90
Section 1101. Applicability of Article.................................. 90
Section 1102. Election to Redeem: Notice to Trustee..................... 90
Section 1103. Selection by Trustee of Securities to Be Redeemed......... 90
Section 1104. Notice of Redemption...................................... 91
Section 1105. Deposit of Redemption Price............................... 91
Section 1106. Securities Payable on Redemption Date..................... 91
Section 1107. Securities Redeemed in Part............................... 92
ARTICLE TWELVE
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Sinking Funds 92
Section 1201. Applicability of Article................................... 92
Section 1202. Satisfaction of Sinking Fund Payments with Securities...... 93
Section 1203. Redemption of Securities for Sinking Fund.................. 93
ARTICLE THIRTEEN
Guarantee....................................... 93
Section 1301. Guarantee.................................................. 93
Section 1302. Execution and Delivery of Guarantee........................ 95
Section 1303. Guarantor May Consolidate, etc., on Certain Terms.......... 95
Section 1304. [Intentionally omitted].................................... 96
Section 1305. Optional Tax Redemption.................................... 96
Section 1306. Payment of Additional Amounts.............................. 97
Section 1307. "Trustee" to Include Paying Agent.......................... 99
ARTICLE FOURTEEN
Immunity of Incorporators, Stockholders,
Officers, Directors and Employees.......................... 99
Section 1401. Exemption from Individual Liability........................ 99
ARTICLE FIFTEEN
Miscellaneous..................................... 100
Section 1501. Consent to Jurisdiction, Etc............................... 100
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INDENTURE, dated as of May 1, 1998, by and among Tommy Hilfiger
U.S.A., Inc., a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
25 West 39th Street, New York, New York 10018, Tommy Hilfiger Corporation, a
corporation duly organized and existing under the laws of the British Virgin
Islands (herein called the "Guarantor"), having its principal executive offices
at 6/F Precious Industrial Center, 18 Cheung Yue Street, Cheung Sha Wan,
Kowloon, Hong Kong, and The Chase Manhattan Bank, a banking corporation duly
organized and existing under the laws of the State of New York, Trustee (herein
called the "Trustee").
Recitals of the Company
The Company and the Guarantor have duly authorized the execution and
delivery of this Indenture to provide for the issuance from time to time of its
unsecured debentures, notes or other evidences of indebtedness (herein called
the "Securities"), to be issued in one or more series as in this Indenture
provided.
All things necessary to make this Indenture a valid agreement of the
Company and the Guarantor, in accordance with its terms, have been done.
Now, Therefore, This Indenture Witnesseth:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed for the
equal and proportionate benefit of all Holders of the Securities or of a series
thereof, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except otherwise herein expressly provided, the term
"generally
<PAGE>
2
accepted accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted at the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Attributable Debt" means in respect of a Sale and Leaseback
Transaction referred to in Section 1008, at the time of determination, the
present value (discounted at the actual rate of interest of such transaction) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such arrangement (including any period for which such
lease has been extended or may, at the option of the lessor, be extended). The
term "net rental payments" under any lease for any period shall mean the sum of
the rental and other payments required to be paid in such period by the lessee
thereunder, not including, however, any amounts required to be paid by such
lessee (whether or not designated as rental or additional rental) on account of
maintenance and repairs, insurance, taxes, assessments, water rates or similar
charges required to be paid by such lessee thereunder or any amounts required to
be paid by such lessee thereunder contingent upon the amount of sales,
maintenance and repairs, insurance, taxes, assessments, water rates or similar
charges.
"Authenticating Agent" means any Person authorized by the Trustee to
act on behalf of the Trustee to authenticate Securities.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
<PAGE>
3
"Board of Directors" means either the board of directors of the
Company or of the Guarantor, as applicable, or any duly authorized committee of
that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized or obligated by law
to close.
"Canada Loan Agreement" means the Factoring, Security and Loan
Agreement (Non-Processed), dated June 5, 1996, as amended or supplemented, by
and between BNY Financial Corporation - Canada/Corporation Financiere BNY -
Canada and Tommy Hilfiger Canada Inc.
"Capitalized Lease Obligations" means obligations created pursuant to
leases which are required to be shown on the liability side of the balance sheet
in accordance with generally accepted accounting principles.
"Commission" means the Securities Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, or, if
at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" or " Company Order" means a written request or
order signed in the name of the Company by its Chairman or Vice Chairman of the
Board, its Chief Executive Officer, its President or a Vice President, and by
its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary,
and delivered to the Trustee.
"Consolidated Stockholders Equity" means consolidated stockholders
equity of the Guarantor and its Subsidiaries as determined in accordance with
generally accepted accounting principles and reflected on the most recent
consolidated balance sheet delivered to the Trustee pursuant to Section 704
hereof.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust
<PAGE>
4
business shall be principally administered, which office at the date hereof is
located at 450 West 33rd Street, 15th Floor, New York, New York 10001-2697.
"corporation" includes corporations, associations, companies and
business trusts.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Defaulted Interest" has the meaning specified in Section 307.
"Event of Default" has the meaning specified in Section 501.
"Exempted Debt" means the sum of the following items outstanding as of
the date Exempted Debt is being determined: (i) Indebtedness for money borrowed
of the Company, the Guarantor and the Restricted Subsidiaries incurred after the
date of this Indenture and secured by Liens created or assumed or permitted to
exist pursuant to Section 1007(b), and (ii) Attributable Debt of the Company,
the Guarantor and the Restricted Subsidiaries in respect of all Sale and
Leaseback Transactions entered into pursuant to Section 1008(b).
"Foreign Currency" means a currency or cash issued by the government
of any country other than the United States of America or units based on or
relating to such currencies (including European Currency Units) (such Units,
including European Currency Units, being hereinafter referred to as "basket
currencies").
"Foreign Government Securities" means with respect to Securities of
any series that are denominated in a Foreign Currency, noncallable (i) direct
obligations of the government that issued such Foreign Currency, for the payment
of which obligations its full faith and credit is pledged or (ii) obligations of
a Person controlled or supervised by and acting as an agency or instrumentality
of such government, the payment of which obligations is unconditionally
guaranteed as a full faith and credit obligation of such government.
"Funded Debt" of any Person means Indebtedness, whether incurred,
assumed or guaranteed, maturing by its terms more than one year from the date of
creation thereof or which is extendable or renewable at the sole option of the
obligor in such manner that it may become payable more than one year from the
date of creation thereof; provided, however, that Funded Debt shall not include
-------- -------
obligations created pursuant to leases, or any Indebtedness or portion thereof
maturing by its terms within one year from the time of any computation of the
amount of outstanding Funded Debt unless such Indebtedness shall be
<PAGE>
5
extendable or renewable at the sole option of the obligor in such manner that it
may become payable more than one year from such time, or any Indebtedness for
the payment or redemption of which money in the necessary amount shall have been
deposited in trust either at or before the maturity or redemption date thereof.
"Global Note" means a registered Security evidencing all or part of a
series of Securities, including, without limitation, any temporary or permanent
Global Note.
"Guarantee" means the guarantee given by the Guarantor pursuant to
Article Thirteen hereof, including a notation in the securities substantially in
the form attached hereto as Exhibit A.
"Guarantor" means the Person named as the "Guarantor" in the first
paragraph of this instrument until a successor Guarantor shall have become such
pursuant to the applicable provisions of this Indenture and thereafter
"Guarantor" shall mean or include each Person who is then a Guarantor hereunder,
and if at any time there is more than one such Person, "Guarantor" as used with
respect to the Securities of any series shall mean the Guarantor with respect to
Securities of that series.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" of any Person means indebtedness for borrowed money
and all indebtedness under purchase money mortgages or other purchase money
liens or conditional sales or similar title retention agreements in each case
where such indebtedness has been created, incurred, assumed or guaranteed by
such Person or where such Person is otherwise liable therefor and indebtedness
for borrowed money secured by any mortgage, pledge or other lien or encumbrance
upon property owned by such Person even though such Person has not assumed or
become liable for the payment of such indebtedness.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of particular series of Securities established as
contemplated by Section 301.
"interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date", when used with respect to any Security means
the Stated Maturity of an installment of interest on such Security.
<PAGE>
6
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give any security interest in and any filing or other agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Market Exchange Rate" means (i) for any conversion involving a
currency unit on the one hand and U.S. Dollars or any Foreign Currency on the
other, the exchange rate between the relevant currency unit and U.S. Dollars or
such Foreign Currency calculated by the method specified pursuant to Section 301
for the securities of the relevant series, (ii) for any conversion of U.S.
Dollars into any Foreign Currency, the noon (New York City time) buying rate for
such Foreign Currency for cable transfers quoted in New York City as certified
for customs purposes by the Federal Reserve Bank of New York and (iii) for any
conversion of one Foreign Currency into U.S. Dollars or another Foreign
Currency, the spot rate at noon local time in the relevant market at which, in
accordance with normal banking procedures, the U.S. Dollars or Foreign Currency
into which conversion is being made could be purchased with the Foreign Currency
from which conversion is being made from major banks located in either New York
City, London or any other principal market for U.S. Dollars or such purchased
Foreign Currency. In the event of the unavailability of any of the exchange
rates provided for in the foregoing clauses (i), (ii) and (iii) the Trustee, or
such other Person appointed for such purpose pursuant to Section 301, shall use,
in its sole discretion and without liability on its part, such quotation of the
Federal Reserve Bank of New York as of the most recent available date, or
quotations from one or more major banks in New York City, London or other
principal market for such currency or currency unit in question, or such other
quotations as the Trustee, or such other Person, shall deem appropriate. Unless
there is more than one market for dealing in any currency or currency unit by
reason of foreign exchange regulations or otherwise, the market to be used in
respect of such currency or currency unit shall be that upon which a nonresident
issuer of securities designated in such currency or currency unit would purchase
such currency or currency unit in order to make payments in respect of such
securities.
"Maturity", when used with respect to any Security means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the Vice Chairman of the Board, the Chief Executive Officer, the
President or a Vice President, and
<PAGE>
7
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company or the Guarantor, as applicable, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company or the Guarantor, if applicable, and who shall be
reasonably acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
------
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption (a) money in the
necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities or (b)
obligations as contemplated by Section 403(d) in the necessary amount
have been theretofore deposited with the Trustee in trust, for the
Holders of such Securities; provided that, if such Securities are to
--------
be redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee has
been made; and
(iii) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder (i) the principal
amount of an Original Issue Discount Security that shall be deemed to be
Outstanding shall be the amount of the principal thereof that would be due and
payable as of the date of such determination
<PAGE>
8
upon acceleration of the Maturity thereof pursuant to Section 502 and (ii)
Securities owned by the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
------
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which a Responsible
Officer of the Trustee actually knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Periodic Offering" means an offering of Securities of a series from
time to time the specific terms of which Securities including without limitation
the rate or rates of interest, if any, thereon, the Stated Maturity or
Maturities thereof and the redemption provisions, if any, with respect thereto,
are to be determined by the Company or its agents upon the issuance of such
Securities.
"Permitted Liens" means (i) Liens on property of a corporation
existing at the time such corporation is merged into or consolidated with the
Company, the Guarantor or a Restricted Subsidiary or at the time of sale, lease
or other disposition of the properties of such corporation (or a division
thereof) as an entirety or substantially as an entirety to the Company, the
Guarantor or a Restricted Subsidiary, provided that no such Lien as a result of
--------
such merger, consolidation, sale, lease or other disposition is extended to
property owned by the Company, the Guarantor or such Restricted Subsidiary
immediately prior thereto; (ii) Liens on property or shares of equity interests
or evidences of indebtedness of a corporation existing at the time such
corporation becomes a Restricted Subsidiary; (iii) Liens securing Indebtedness
between a Restricted Subsidiary and the Company or the Guarantor, between
Restricted Subsidiaries, or between the Company and the Guarantor; (iv) Liens on
any property created, assumed or otherwise brought into existence in
contemplation of the sale or other disposition of the underlying property,
whether directly or indirectly, by way of share disposition or otherwise,
provided that the Company, the Guarantor or such Restricted Subsidiary, as
- --------
applicable, must have disposed of such property within 180 days after the
creation of such Liens and that any Indebtedness secured by such Liens shall be
without recourse to the Company, the Guarantor or any Restricted Subsidiary; (v)
Liens in favor of the United States of America or any State thereof, or any
department, agency or instrumentality or political subdivision thereof, to
secure partial, progress,
<PAGE>
9
advance or other payments; (vi) Liens arising solely by virtue of any statutory
or common law provision relating to banker's liens, rights of setoff or similar
rights and remedies, in each case as to deposit accounts or other funds
maintained with a creditor depository institution, provided that (A) such
--------
deposit account is not a dedicated cash collateral account and is not subject to
restrictions against access by the Company, the Guarantor or applicable
Restricted Subsidiary in excess of those set forth by regulations promulgated by
the Federal Reserve Board, and (B) such deposit account is not intended by the
Company or any Restricted Subsidiary to provide collateral to the depository
institution; (vii) Liens arising from Uniform Commercial Code financing
statements regarding leases; (viii) Liens on the Company's office facility
located at 25 West 39th Street, New York, New York; (ix) the giving,
simultaneously with or within 180 days after the latest of the date of this
Indenture, or the acquisition or construction of such property, of a purchase
money Lien on property acquired or constructed after the date of this Indenture,
or the acquisition after the date of this Indenture, of property subject to any
Lien which is limited to such property and which secures Indebtedness not in
excess of the lesser of the cost or fair market value of such property; (x) the
giving of a Lien on real property which is the sole security for Indebtedness
incurred within two years after the latest of the date of this Indenture, the
acquisition of the property or completion of the first substantial improvements
thereon, provided that the Indebtedness does not exceed the lesser of the cost
--------
of the property and improvements or their fair market value and the holder of
such Indebtedness is entitled to enforce its payment only by resorting to such
security; (xi) Liens arising under the Canada Loan Agreement securing
Indebtedness not to exceed Can. $25,000,000; (xii) Liens arising by the terms of
letters of credit entered into in the ordinary course of business to secure
reimbursement obligations thereunder; (xiii) Liens existing on the date hereof;
and (xiv) extension, renewal, replacement or refunding of any Lien existing on
the date hereof or referred to in clauses (i) to (iv) and (ix) to (xi), provided
--------
that the principal amount of Indebtedness secured thereby and not otherwise
authorized by clauses (i) to (iv) and (ix) to (xi) shall not exceed the
principal amount of Indebtedness, plus any premium or fee payable in connection
with any such extension, renewal, replacement or refunding, so secured at the
time of such extension, renewal, replacement or refunding.
"Person" means any individual, corporation. partnership, joint
venture, association, limited liability company, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Place of Payment", when used with respect to the Securities of any
series, means the place or places where the principal of (and premium, if any)
and interest on the Securities
<PAGE>
10
of that series are payable as specified as contemplated by Section 301.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date on the Securities of any series means the date specified for that
purpose as contemplated by Section 301.
"Responsible Officer", when used with respect to the Trustee, means
any officer assigned to the Corporate Trust Office, including any managing
director, vice president, assistant vice president, assistant treasurer,
assistant secretary or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
having direct responsibility for the administration of this Indenture, and also,
with respect to a particular matter, any other officer, to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Restricted Subsidiary" means, at any time, any Subsidiary of the
Guarantor, other than the Company, which would be a "Significant Subsidiary" at
such time, as such term is defined in Regulation S-X promulgated by the
Commission, as in effect on the date of this Indenture.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"Securities Exchange Act of 1934" means the Securities and Exchange
Act of 1934, as amended, or any successor thereto.
"Security Register" and " Security Registrar" have the respective
meanings specified in Section 305.
"Senior Funded Debt" means all Funded Debt of the Company or any
other Person, except Subordinated Funded Debt.
<PAGE>
11
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Specified Indebtedness" means any indebtedness of the Guarantor or
any Subsidiary of the Guarantor for borrowed money in an outstanding principal
amount in excess of $25,000,000.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subordinated Funded Debt" means any unsecured Indebtedness of the
Company which is expressly made subordinate and junior in rank and right of
payment to the Securities and such other Indebtedness of the Company as may be
specified or characterized in the instruments evidencing the Subordinated Funded
Debt or the indenture or other similar instrument under which it is issued
(which indenture or other instrument shall be binding on all holders of such
Subordinated Funded Debt) (the Securities and any other Indebtedness of the
Company to which the Subordinated Funded Debt is subordinate and junior being
hereinafter in this paragraph called "Superior Debt"), by provisions not
substantially more favorable to the holders of the Subordinated Funded Debt than
the following:
(i) In the event of any insolvency or bankruptcy proceedings,
any receivership, liquidation, reorganization or other similar proceedings
in connection therewith, relative to the Company or to its creditors, as
such, or to its property, and in the event of any proceedings for voluntary
liquidation, dissolution or other winding up of the Company, whether or not
involving insolvency or bankruptcy, then the holders of Superior Debt shall
be entitled to receive payment in full of all principal and interest on all
Superior Debt before the holders of the Subordinated Funded Debt are
entitled to receive any payment on account of principal or interest upon
the Subordinated Funded Debt, and to that end (but subject to the power of
a court of competent jurisdiction to make other equitable provision
reflecting the rights conferred by the provisions of the Subordinated
Funded Debt upon the Superior Debt and the holders thereof with respect to
the Subordinated Funded Debt and the holders thereof by a lawful plan or
reorganization under applicable bankruptcy or insolvency law) the holders
of Superior Debt shall be entitled to receive for application in payment
thereof any payment or distribution of any kind or character, whether in
cash or property or securities, which may be payable or deliverable in any
such proceedings in respect of the Subordinated Funded Debt, except
securities which are subordinate and junior in right of payment to the
payment of all Superior Debt then outstanding, (ii) in the event
<PAGE>
12
that any Subordinated Funded Debt is declared due and payable before its
expressed maturity because of the occurrence of an event of default with
respect to such Subordinated Funded Debt (under circumstances when the
provisions of the foregoing clause (i) shall not be applicable), the
holders of the Superior Debt outstanding at the time such Subordinated
Funded Debt so becomes due and payable because of such occurrence of such
an event of default shall be entitled to receive payment in full of all
principal and interest on all Superior Debt before the holders of such
Subordinated Funded Debt are entitled to receive any payment on account of
the principal or interest upon such Subordinated Funded Debt except
payments at the expressed maturity of such Subordinated Funded Debt,
current interest payments as provided in such Subordinated Funded Debt,
payments pursuant to any mandatory sinking fund (or analogous provision) in
respect of such Subordinated Funded Debt, and payments for the purpose of
curing any such event of default; (iii) in the event that (x) there shall
have occurred a default in the payment of the principal of or interest on
any Superior Debt, or (y) there shall have occurred any other event of
default with respect to any Superior Debt permitting the holders thereof to
accelerate the maturity thereof and if written notice thereof shall have
been given to the Company by a holder or holders of such Superior Debt or
their representative or representatives or trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Superior
Debt may have been issued, or (z) the payment hereinafter referred to would
itself constitute an event of default with respect to any Superior Debt,
then, in any such case, unless or until such event of default shall have
been cured or waived or shall have ceased to exist, no payment shall be
made by the Company on account of principal of or interest on any
Subordinated Funded Debt (whether pursuant to any sinking fund or
otherwise) or on account of the purchase or other acquisition of any
Subordinated Funded Debt; and (iv) no holder of Superior Debt or trustee
for such holder shall be prejudiced in his or her right to enforce
subordination of the Subordinated Funded Debt by any act or failure to act
on the part of the Company;
provided, however, that the Subordinated Funded Debt may provide that the
- -------- -------
foregoing provisions are solely for the purposes of defining the relative rights
of the holders of Superior Debt on the one hand, and the holders of the
Subordinated Funded Debt on the other hand, and that nothing therein shall
impair, as between the Company and the holders of the Subordinated Funded Debt,
the obligation of the Company, which is unconditional and absolute, to pay to
the holders thereof the principal thereof and interest thereon in accordance
with its terms, nor shall anything therein prevent the holders of the
Subordinated Funded Debt from exercising all remedies otherwise permitted by
applicable law or
<PAGE>
13
thereunder upon default thereunder, subject to the rights under clauses (i),
(ii) and (iii) above of holders of Superior Debt to receive cash, property or
securities otherwise payable or deliverable to the holders of the Subordinated
Funded Debt; and provided, further, that the Subordinated Funded Debt may
-------- -------
provide that, insofar as a trustee or paying agent for such Subordinated Funded
Debt is concerned, the foregoing provisions shall not prevent the application by
such trustee or paying agent of any moneys deposited with such trustee or paying
agent for the purpose of the payment of or on account of the principal and
interest on such Subordinated Funded Debt if such trustee or paying agent did
not have knowledge at the time of such application that such payment was
prohibited by the foregoing provisions.
"Subsidiary" as to any Person, means a corporation more than 50% of
the outstanding voting stock of which is owned, directly or indirectly, by such
Person or by one or more of its Subsidiaries, or by such Person and one or more
of its Subsidiaries. For the purposes of this definition "voting stock" means
stock which ordinarily has voting power for the election of directors, whether
at all times or only so long as no senior class of stock has such voting power
by reason of any contingency.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date of this Indenture.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture and thereafter "Trustee"
shall mean or include each Person who is then a Trustee hereunder, and if at any
time there is more than one such Person, "Trustee" as used with respect to the
Securities of any series shall mean the Trustee with respect to Securities of
that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed, except as provided
in Section 905.
"U.S. Depositary" means a clearing agency registered under the
Securities Exchange Act of 1934 which shall be designated by the Company
pursuant to Section 301 until a successor U.S. Depositary shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter "U.S.
Depositary" shall mean or include each Person who is then a U.S. Depositary
hereunder, and if at any time there is more than one such Person, "U.S.
Depositary" as used with respect to Securities of any series shall mean the U.S.
Depositary with respect to the Securities of that series.
"U.S. Government Obligations" means direct obligations of the United
States for the payment of which its full faith and
<PAGE>
14
credit is pledged or obligations of a person controlled or supervised by and
acting as an agency or instrumentality of the United States and the payment of
which is unconditionally guaranteed by the United States.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president whether or not designated by a number or a
word or words added before or after the title "vice president".
"Wholly-owned Restricted Subsidiary" means any Restricted Subsidiary
all of the outstanding Funded Debt and capital stock of which, other than
directors' qualifying shares, is owned by the Company and its other Wholly-owned
Restricted Subsidiaries.
Section 102. Compliance Certificates and Opinions.
Except as otherwise expressly provided by this Indenture, upon any
application or request by the Company or the Guarantor to the Trustee to take
any action under any provision of this Indenture, the Company or the Guarantor,
as applicable, shall furnish to the Trustee an Officers' Certificate stating
that all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or request,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
<PAGE>
15
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person it is not necessary that all such
matters be certified by or covered by the opinion of only one such Person, or
that they be so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and one or more
other such Persons as to other matters and any such Person may certify or give
an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company or the
Guarantor may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by counsel unless such officer
knows or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or Opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company or the Guarantor that the information with respect to such factual
matters is in the possession of the Company or the Guarantor, unless such
counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications requests consents, certificates, statements, opinions or other
instruments under this Indenture, they may but need not be consolidated and form
one instrument.
Section 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture
<PAGE>
16
and (subject to Section 601) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgements of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Security
Register.
(d) Any request, authorization, direction, notice, consent, waiver or
other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
Section 105. Notices, Etc., to Trustee, Company and Guarantor.
Any request demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company or the Guarantor
shall be sufficient for every purpose hereunder if made, given, furnished
or filed in writing to or with the Trustee at its principal Corporate Trust
Office, Attention: Global Trust Services, or
(2) the Company or the Guarantor by the Trustee or by any Holder
shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid,
to the Company of the Guarantor addressed to it at the address of its
principal office specified in the first paragraph of this instrument or at
any other address previously furnished in writing to the Trustee by the
Company or the Guarantor.
<PAGE>
17
Section 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event at his address as it appears in the Security Register, not later
than the latest date, and not earlier than the earliest date prescribed for the
giving of such notice. In any case where notice to Holders is given by mail,
neither the failure to mail such notice, nor any defect in any notice so mailed,
to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any actions taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Section 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by any of
the provisions of the Trust Indenture Act, such required provision shall
control.
Section 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company or the
Guarantor shall bind its respective successors and assigns, whether so expressed
or not.
Section 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
<PAGE>
18
Section 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
Section 112. Governing Law.
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York.
Section 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest or principal (and premium, if any) need not be
made at such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same force and effect
as if made on the Interest Payment Date or Redemption Date, or at the Stated
Maturity, provided that no interest shall accrue for the period from and after
--------
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be.
ARTICLE TWO
SECURITY FORMS
Section
201. Forms Generally.
The Securities of each series shall be in substantially the form set
forth in this Article, or in such other form as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental hereto,
in each case with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of the
Securities. If the form of Securities of any series is established by, or by
action taken pursuant to a Board Resolution, a copy of the Board Resolution
together with an appropriate record of any action taken pursuant thereto, which
Board Resolution or record of such action shall have attached thereto a true and
correct copy of the form of Security approved by or pursuant to such Board
Resolution, shall be certified by the Secretary or an Assistant Secretary of the
Company and
<PAGE>
19
delivered to the Trustee at or prior to the delivery of the Company Order
contemplated by Section 303 for the authentication and delivery of such
Securities.
The Guarantee shall be in substantially the form of Exhibit A, the
terms of which are incorporated herein and made a part of this Indenture.
The Trustee's certificates of authentication shall be in substantially
the form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved
on steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
Section 202. Form of Face of Security.
TOMMY HILFIGER U.S.A., INC.
[TITLE OF SERIES]
REGISTERED
REGISTERED
No. ...... $.........
CUSIP No. ......
Tommy Hilfiger U.S.A., Inc., a corporation duly organized and existing
under the laws of Delaware (herein called the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ................................ or
registered assigns, the principal sum of ........................ Dollars on
.................................................... [If the Security is to bear
interest prior to Maturity, insert __, and to pay interest thereon from
............. or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, semi-annually on ......... and ........ in
each year commencing ........ at the rate of .....% per annum, until the
principal hereof is paid or made available for payment [If applicable insert __,
and (to the extent that the payment of such interest shall be legally
enforceable) at the rate of .....% per annum on any overdue principal and
premium and on any overdue installment of interest]. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be the .... or ....
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more
<PAGE>
20
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed and
upon such notice as may be required by such exchange all as more fully provided
in said Indenture.]
[If the Security is not to bear interest prior to Maturity, insert __
The principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal of this Security shall bear
interest at the rate of ...% per annum (to the extent that the payment of such
interest shall be legally enforceable), which shall accrue from the date of such
default in payment to the date payment of such principal has been made or duly
provided for. Interest on any overdue principal and overdue interest shall be
payable on demand.]
Payment of the principal of (and premium, if any) and [If applicable,
insert __ any such] interest on this Security will be made at the office or
agency of the Company maintained for that purpose in .... in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts [if applicable, insert __
provided, however, that at the option of the Company payment of interest may be
- -------- -------
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register].
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE: See Exhibit A.]
<PAGE>
21
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
Tommy Hilfiger U.S.A., Inc.
By..................................
Attest:
......................................
Section 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of May 1, 1998 (herein called the
"Indenture"), among the Company, the Guarantor and The Chase Manhattan Bank,
Trustee (herein called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee and the
Holders of the Securities and the terms upon which the Securities are, and are
to be, authenticated and delivered. This Security is one of the series
designated on the face hereof [, limited in aggregate principal amount to $
].
[If applicable, insert __ The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, [if applicable, insert __
(1) on ................. in any year commencing with the year .... and ending
with the year .... through operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and (2)] at any time [on
or after .............. 19..], as a whole or in part, at the election of the
Company, at the following Redemption Prices (expressed as percentages of the
principal amount): If redeemed [on or before ............, ....%, and if
redeemed] during the 12-month period beginning .......... of the years
indicated,
<TABLE>
<CAPTION>
YEAR REDEMPTION YEAR REDEMPTION
PRICE PRICE
- ------------------------ ------------------- -------------- --------------
<S> <C> <C> <C>
[TAB SET] row does not print $000,000 $000,000 $000,000
</TABLE>
<PAGE>
22
and thereafter at a Redemption Price equal to ...% of the principal amount,
together in the case of any such redemption [if applicable, insert __ (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.]
[If applicable, insert __ The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, (1) on ............ in
any year commencing with the year .... and ending with the year .... through
operation of the sinking fund for this series at the Redemption Prices for
redemption through operation of the sinking fund (expressed as percentages of
the principal amount) set forth in the table below, and (2) at any time [on or
after ...........], as a whole or in part, at the election of the Company, at
the Redemption Prices for redemption otherwise than through operation of the
sinking fund (expressed as percentages of the principal amount) set forth in the
table below: If redeemed during the 12-month period beginning ............ of
the years indicated,
<TABLE>
<CAPTION>
REDEMPTION PRICE
FOR REDEMPTION REDEMPTION PRICE FOR
THROUGH OPERATION REDEMPTION OTHERWISE
OF THE THAN THROUGH OPERATION
YEAR SINKING FUND OF THE SINKING FUND
-------------------------- --------------------- ---------------------------
<S> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to % of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]
[Notwithstanding the foregoing, the Company may not, prior to
, redeem any Securities of this series as contemplated by [Clause (2) of] the
preceding paragraph as a part of, or in anticipation of, any refunding operation
by the application, directly or indirectly, of moneys borrowed having an
<PAGE>
23
interest cost to the Company (calculated in accordance with generally accepted
financial practice) of less than % per annum.]
[The sinking fund for this series provides for the redemption on
in each year beginning with the year and ending with the year of [not
less than] $.......... ("mandatory sinking fund") and not more than $ ]
aggregate principal amount of Securities of this series. [Securities of this
series acquired or redeemed by the Company otherwise than through [mandatory]
sinking fund payments may be credited against subsequent [mandatory] sinking
fund payments otherwise required to be made.]
[In the event of redemption of this Security in part only, a new
Security or Securities of this series and of like tenor for the unredeemed
portion will be issued to the Holder upon the cancellation hereof, and in event
of transfer or exchange a new Security or Securities of this series and of like
tenor and for a like aggregate principal amount will be issued to the Holder, in
case of exchange, or the designated transferee or transferees, in case of
transfer.]
Subject to the relevant provisions set forth in the Indenture, the
Securities are subject to redemption, in whole but not in part, at the option of
the Guarantor in the event the Guarantor becomes obligated, in respect of any
amounts to be paid under the Guarantee and as a result of changes in applicable
tax law, to pay additional amounts in respect of any tax, assessment or
governmental charge imposed on any Holder, and the payments of such additional
amounts cannot be avoided by any reasonable means.
[If the Security is not an Original Issue Discount Security, __ If an
Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, __ If an
Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to __ insert formula for determining the
amount. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal and overdue interest (in each case
to the extent that the payment of such interest shall be legally enforceable),
all of the Company's obligations in respect of the payment of the principal of
and interest, if any, on the Securities of this series shall terminate.]
<PAGE>
24
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of at least a majority in principal amount of the
Securities at the time Outstanding of each series to be affected. The Indenture
also contains provisions permitting the Holders of specified percentages in
principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding,
judicial or otherwise, with respect to the Indenture or for the appointment of a
receiver or trustee or for any other remedy thereunder, unless such Holder shall
have previously given the Trustee written notice of a continuing Event of
Default with respect to the Securities of this series, the Holders of not less
than 25% in principal amount of the Outstanding Securities of this series shall
have made written request to the Trustee to institute proceedings in respect of
such Event of Default as Trustee and offered the Trustee reasonable indemnity,
and the Trustee shall not have received from the Holders of a majority in
principal amount of Outstanding Securities of this series a direction
inconsistent with such request, and the Trustee shall have failed to institute
any such proceeding, for 60 days after receipt of such notice, request and offer
of indemnity. The foregoing shall not apply to any suit instituted by the
Holder of this Security for the enforcement of any payment of principal hereof
or any premium or interest hereon on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of (and
premium, if any) and interest on this Security are payable, duly endorsed by or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly
<PAGE>
25
executed by, the Holder hereof or his attorney duly authorized in writing and
thereupon one or more new Securities of this series and of like tenor, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate principal
amount of Securities of this series and of like tenor of a different authorized
denomination as requested by the Holder surrenders the same.
No service charge shall be made for any such registration of transfer
or exchange but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
No recourse shall be had for the payment of the principal of (or
premium, if any) or the interest on this Security, or for any claim based
hereon, or otherwise in respect hereof, or based on or in respect of the
Indenture or any indenture supplemental thereto, against any incorporator,
stockholder, officer, director or employee, as such, past, present or future, of
the Company or any successor Person, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
<PAGE>
26
Section 204. Additional Provisions Required in Global Notes.
Unless otherwise specified as contemplated by Section 301 for the
Securities evidenced thereby, any Global Notes issued hereunder shall, in
addition to the provisions contained in Sections 202 and 203, bear a legend in
substantially the following form:
This Security is a Global Note within the meaning of the Indenture
hereinafter referred to and is registered in the name of [Name of U.S.
Depositary] (the "Depositary") or a nominee of the Depositary. This Global
Note is exchangeable for Securities registered in the name of a person
other than the Depositary or its nominee only in the limited circumstances
described in the Indenture, and may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary.
Section 205. Form of Trustee's Certificate of Authentication.
This is one of the Securities of the series designated therein
referral to in the within-mentioned Indenture.
The Chase Manhattan Bank,
as Trustee
By.................................
Authorized Signatory
ARTICLE THREE
The Securities
Section
301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and, subject to Section 303,
set forth, or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from all other Securities);
<PAGE>
27
(2) any limit upon the aggregate principal amount of the Securities
of the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 304, 305, 306, 906 or 1107) and except for any
Securities which, pursuant to Section 303 of the Indenture, shall have not
been issued and sold by the Company and are therefore deemed never to have
been authenticated and delivered hereunder;
(3) the Person to whom any interest on a Security of the series shall
be payable, if other than the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest;
(4) the date or dates on which the principal of the Securities of the
series is payable;
(5) the rate or rates at which the Securities of the series shall
bear interest, if any, the date or dates from which such interest shall
accrue, the Interest Payment Dates on which such interest shall be payable
and the Regular Record Date for the interest payable on any Interest
Payment Date;
(6) the place or places where the principal of (and premium, if any)
and interest on Securities of the series shall be payable;
(7) the period or periods within which, the price or prices at which
and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which Securities of the series shall be redeemed or purchased, in
whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;
(10) the currency or currencies, including composite currencies, in
which payment of the principal of (and premium, if any) and interest on the
Securities of the series shall be payable (if other than the currency of
the United States of America);
<PAGE>
28
(11) if the amount of payments of principal of (and premium, if any)
or interest on the Securities of the series may be determined with
reference to an index, the manner in which such amounts shall be
determined;
(12) whether the Securities of the series are to be issued as Original
Issue Discount Securities and the amount of discount with which such
Securities may be issued and, if other than the principal amount thereof,
the portion of the principal amount of Securities of the series that shall
be payable upon declaration of acceleration of the Maturity thereof
pursuant to Section 502;
(13) any addition to, or modification or deletion of, any Events of
Default or covenants provided with respect to Securities of the series;
(14) whether the Securities of the series shall be issued in whole or
in part in the form of one or more Global Notes and, in such case, the U.S.
Depositary for such Global Note or Notes;
(15) whether Section 403 and/or 1010 providing for defeasance and
discharge and covenant defeasance, respectively, shall apply to Securities
of the series; and
(16) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 303) set
forth, or delivered in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
together with such Board Resolution shall be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Officers' Certificate setting forth the terms or the manner
of determining the terms of the series. With respect to Securities of a series
offered in a Periodic Offering, such Board Resolution or action may provide
general terms or parameters for Securities of such series and provide either
that the specific terms of particular Securities of such series shall be
specified in a Company Order or that such terms shall be determined by the
Company or its agents in accordance with a Company Order as contemplated by the
first proviso of the third paragraph of Section 303.
<PAGE>
29
Section 302. Denominations.
The Securities of each series shall be issuable in registered form
without coupons in such denominations as shall be specified as contemplated by
Section 301. In the absence of any such provisions with respect to the
Securities of any series, the Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple thereof.
Section 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its Chief Executive
Officer, its President or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company and having the Guarantees endorsed thereon to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities; provided, however, that,
-------- -------
with respect to Securities of a series offered in a Periodic Offering, (a) the
Trustee shall authenticate and deliver Securities of such series for original
issue from time to time, in an aggregate principal amount not exceeding the
aggregate principal amount established for such series, pursuant to a Company
Order or pursuant to such other procedures acceptable to the Trustee as may be
specified from time to time by a Company Order, (b) the maturity date or dates,
original issue date or dates, currency or currencies or composite currencies,
interest rate or rates and any other terms of the Securities of such series
shall be determined by Company Order or pursuant to such procedures and (c) if
provided for in such procedures, such Company Order may authorize authentication
and delivery pursuant to oral or electronic instructions from the Company or its
duly authorized agent or agents, which instructions shall be promptly confirmed
in writing. In authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to Section 601) shall be
fully protected in relying upon, an Opinion of Counsel stating,
<PAGE>
30
(a) that the form of such Securities has been established in
conformity with the provisions of this Indenture;
(b) that the terms of such Securities have been established in
conformity with the provisions of this Indenture;
(c) that such Securities, with the Guarantees endorsed thereon, when
authenticated and delivered by the Trustee and issued by the Company in the
manner and subject to any conditions specified in such Opinion of Counsel,
will constitute valid and legally binding obligations of the Company and
the Guarantor, enforceable in accordance with their terms, subject to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting the enforcement of creditors' rights
and to general equity principles; provided, however, that, with respect to
-------- -------
Securities of a series offered in a Periodic Offering, the Trustee shall be
entitled to receive such Opinion of Counsel in connection only with the
first authentication of Securities of such series and that the opinions
described in clauses (b) and (c) above may state, respectively;
(d) that, when the terms of such Securities shall have been
established pursuant to a Company Order or pursuant to such procedures as
may be specified from time to time by a Company Order, all as contemplated
by a Board Resolution or action taken pursuant thereto, such terms will
have been duly authorized by the Company and will have been established in
conformity with the provisions of this Indenture; and
(e) that such Securities, when (i) executed by the Company and having
Guarantees endorsed thereon, (ii) completed, authenticated and delivered by
the Trustee in accordance with this Indenture, (iii) issued and delivered
by the Company and (iv) paid for, all in accordance with any agreement of
the Company relating to the offering, issuance and sale of such Securities,
will have been duly issued under this Indenture and will constitute valid
and legally binding obligations of the Company and the Guarantor, entitled
to the benefits provided by the Indenture, and enforceable in accordance
with their terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
generally the enforcement of creditors' rights and to general principles of
equity.
With respect to Securities of a series offered in a Periodic Offering, the
Trustee may rely, as to the authorization by the Company of any of such
Securities, the form and terms thereof and the legality, validity, binding
effect and enforceability
<PAGE>
31
thereof, upon the Opinion of Counsel, Company Order and other documents
delivered pursuant to Sections 201 and 301 and this Section, as applicable,
delivered at or prior to the first authentication of Securities of such series
unless and until such opinion or other documents have been superseded or
revoked.
Notwithstanding the provisions of Section 301 and of the third
paragraph of this Section 303, if any Securities of a series are to be offered
in a Periodic Offering, it shall not be necessary to deliver the Opinion of
Counsel, Company Order and other documents otherwise required pursuant to
Sections 201 and 301 and this Section at or prior to the time of authentication
of each Security of such series if such documents are delivered at or prior to
the time of authentication upon original issuance of the first Security of such
series to be issued.
The Trustee shall not be required to authenticate such Securities if
the issue of such Securities pursuant to this Indenture will affect the
Trustee's own rights, duties, indemnities or immunities under the Securities and
this Indenture or otherwise in a manner which is not reasonably acceptable to
the Trustee.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder and is entitled to the
benefits of this Indenture. Notwithstanding the foregoing if any Security shall
have been authenticated and delivered hereunder but never issued and sold by the
Company, and the Company shall deliver such Security to the Trustee for
cancellation as provided in Section 309 together with a written statement (which
need not comply with Section 102 and need not be accompanied by an Opinion of
Counsel) stating that such Security has never been issued and sold by the
Company, for all purposes of this Indenture such Security shall be deemed never
to have been authenticated and delivered hereunder and shall never be entitled
to the benefits of this Indenture.
Section 304. Temporary Securities.
(a) Pending the preparation of definitive Securities of any series,
the Company may execute and upon Company Order the Trustee shall authenticate
and deliver temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination substantially
of the tenor of the definitive Securities in lieu of which they are issued and
with such appropriate insertions, omissions,
<PAGE>
32
substitutions and other variations as the officers executing such securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities of any series the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Securities of the same series and of like tenor of
authorized denominations. Until so exchanged the temporary Securities of any
series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of such series.
(b) If the Company shall establish pursuant to Section 301 that the
Securities of a series are to be issued in whole or in part in the form of one
or more Global Notes, then the Company shall execute and the Trustees shall, in
accordance with Section 303 and the Company Order with respect to such series,
authenticate and deliver one or more Global Notes in temporary or permanent form
that (i) shall represent and shall be denominated in an amount equal to the
aggregate principal amount of the Outstanding Securities of such series to be
represented by one or more Global Notes, (ii) shall be registered in the name of
the U.S. Depositary for such Global Note or Notes or the nominee of such
depositary, (iii) shall be delivered by the Trustee to such depositary or
pursuant to such depositary's written instruction and (iv) shall bear a legend
substantially to the following effect:
"Unless and until it is exchanged in whole or in part for Securities
in definitive form, this Security may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee
of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary."
Notwithstanding any other provisions of this Section or Section 305,
unless and until it is exchanged in whole or in part for Securities in
definitive form, a Global Note representing all or a portion of the Securities
of a series may not be transferred except as a whole by the U.S. Depositary for
such series to a nominee of such depositary or by a nominee of such depositary
to such depositary or another nominee of such depositary or by such
<PAGE>
33
depositary or any such nominee to a successor U.S. Depositary for such series or
a nominee of such successor depositary.
If at any time the U.S. Depositary for the Securities of a series
notifies the Company that it is unwilling or unable to continue as U.S.
Depositary for the Securities of such series or if at any time the U.S.
Depositary for Securities of a series shall no longer be registered or in good
standing under the Securities Exchange Act of 1934 or other applicable statute
or regulation, the Company shall appoint a successor U.S. Depositary with
respect to the Securities of such series.
If a successor U.S. Depositary for the Securities of such series is
not appointed by the Company within 90 days after the Company receives such
notice or becomes aware of such condition, the Company will execute, and the
Trustee, upon receipt of a Company Order for the authentication and delivery of
definitive Securities of such series, will authenticate and deliver, registered
Securities of such series in definitive form in an aggregate principal amount
equal to the principal amount of the Global Note or Notes representing such
series in exchange for such Global Note or Notes.
The Company may at any time and in its sole discretion determine that
the Securities of any series issued in the form of one or more Global Notes
shall no longer be represented by such Global Note or Notes. In such event, the
Company will execute, and the Trustee, upon receipt of a Company Order for the
authentication and delivery of definitive Securities of such series, will
authenticate and deliver, registered Securities of such series in definitive
form and in an aggregate principal amount equal to the principal amount of the
Global Note or Notes representing such series in exchange for such Global Notes
or Notes.
If specified by the Company pursuant to Section 301 with respect to
Securities of a series, the U.S. Depositary for such series of Securities may
surrender a Global Note for such series of Securities in exchange in whole or in
part for registered Securities of such series in definitive form on such terms
as are acceptable to the Company and such depositary. Thereupon, the Company
shall execute and the Trustee shall authenticate and deliver, without charge,
(i) to each Person specified by the U.S. Depositary a new registered
Security or Securities of the same series, of any authorized denomination
as requested by such Person in aggregate principal amount equal to and in
exchange for such Person's beneficial interest in the Global Note; and
(ii) to the U.S. Depositary a new Global Note in a denomination equal
to the difference, if any, between the principal amount of the surrendered
Global Note and the
<PAGE>
34
aggregate principal amount of registered Securities delivered to Holders
thereof.
Upon the exchange of a Global Note for Securities in definitive form, such
Global Note shall be cancelled by the Trustee. Debt Securities issued in
exchange for a Global Note pursuant to this subsection (b) shall be registered
in such names and in such authorized denomination as the U.S. Depositary for
such Global Note, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee in writing. The Trustee
shall deliver such Securities to the persons in whose names such Securities are
so registered.
Section 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the principal Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency of the Company in a Place of Payment being herein
sometimes collectively referred to as the "Security Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide
the registration of Securities and of transfers of Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of any
series at the office or agency in a Place of Payment for that series, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
the same series of any authorized denominations and of a like aggregate
principal amount and of like tenor.
At the option of the Holder, Securities of any series (except Global
Notes) may be exchanged for other Securities of the same series of like
aggregate principal amount and of a like Stated Maturity and with the like terms
and conditions, upon surrender of the Securities to be exchanged at such office
or agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt and entitled to the same benefits under this Indenture as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed or be accompanied by
<PAGE>
35
a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed, by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with the execution and delivery of the Securities or any registration of
transfer or exchange of Securities other than exchanges pursuant to Section 304,
906 or 1107 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange Securities of any series during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities of that series selected for redemption under Section 1103 and ending
at the close of business on the day of such mailing or (ii) to register the
transfer of or exchange any Security so selected for redemption in whole or in
part, except the unredeemed portion of any Security being redeemed in part.
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its written request the Trustee
shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
<PAGE>
36
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 307. Payment of Interest; Interest Rights Preserved.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.
Any interest on any Security of any series which is payable, but is
not punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company at its election in each case,
as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security of such series and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record
<PAGE>
37
Date and, in the name and at the expense of the Company, shall cause notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor to be mailed, first class postage prepaid, to each Holder of
Securities of such series at his address as it appears in the Security
Register, not less than 10 days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be paid
to the Persons in whose names the Securities of such series (or their
respective Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which such Securities may be
listed and upon such notice as may be required by such exchange, if, after
written notice given by the Company to the Trustee of the proposed payment
pursuant to this Clause, such manner of payment shall be deemed practicable
by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid and to accrue, which were carried by such other Security.
Section 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Section 307) interest on such Security and for all other
purposes whatsoever whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
Section 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner whatsoever
and may deliver to the Trustee (or to any other Person for delivery to the
Trustee) for
<PAGE>
38
cancellation any Securities previously authenticated hereunder which the Company
has not issued and sold, and all Securities so delivered shall be promptly
cancelled by the Trustee. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Securities held by the
Trustee shall be disposed of as directed by a Company Order.
Section 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
Section 311. Judgments.
If for the purpose of obtaining a judgment in any court with respect
to any obligation of the Company hereunder or under any Security, it shall
become necessary to convert into any other currency any amount in the currency
due hereunder or under such Security, then such conversion shall be made at the
market Exchange Rate as in effect on the date the Company shall make payment to
any person in satisfaction of such judgment. If pursuant to any such judgment,
conversion shall be made on a date other than the date payment is made and there
shall occur a change between such Market Exchange Rate and the Market Exchange
Rate as in effect on the date of payment, the Company agrees to pay such
additional amounts (if any) as may be necessary to ensure that the amount paid
is equal to the amount in such other currency which, when converted at the
Market Exchange Rate as in effect on the date of payment or distribution, is the
amount due hereunder or under such Security. Any amount due from the Company
under this Section 311 shall be due as a separate debt and is not to be affected
by or merged into any judgment being obtained for any other sums due hereunder
or in respect of any Security. In no event, however, shall the Company be
required to pay more in the currency or currency unit due hereunder or under
such Security at the Market Exchange Rate as in effect when payment is made than
the amount of currency stated to be due hereunder or under such Security so that
in any event the Company's obligations hereunder or under such Security will be
effectively maintained as obligations in such currency, and the Company shall be
entitled to withhold (or be reimbursed for, as the case may be) any excess of
the amount actually realized upon any such conversion over the amount due and
payable on the date of payment or distribution.
<PAGE>
39
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306 and
(ii) Securities for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are deemed paid and discharged pursuant to Section
403, as applicable,
and the Company in the case of (i) or (ii) above has deposited or
caused to be deposited with the Trustee as trust funds in trust for
the purpose an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation for principal (and premium, if any) and
interest to the date of such deposit (in the case of Securities which
become due and payable) or to the Stated Maturity or Redemption Date,
as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
<PAGE>
40
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section or if money or obligations shall have been deposited with or
received by the Trustee pursuant to Section 403, the obligations of the Trustee
under Section 402 and the last paragraph of Section 1003 shall survive.
Section 402. Application of Trust Funds; Indemnification.
(a) Subject to the provisions of the last paragraph of Section 1003
and subsection (c) of this Section 402 and Section 615, all money deposited with
the Trustee pursuant to Section 401, all money and U.S. Government Obligations
or Foreign Government Securities deposited with the Trustee pursuant to Section
403 or 1010 and all money received by the Trustee in respect of U.S. Government
Obligations or Foreign Government Securities deposited with the Trustee pursuant
to Section 403 or 1010, shall be held in trust and applied by it, in accordance
with the provisions of the Securities and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent as the Trustee may determine, to the Persons entitled thereto, of
the principal (and premium, if any) and interest for whose payment such money
has been deposited with or received by the Trustee or to make mandatory sinking
fund payments or analogous payments as contemplated by Section 403 or 1010.
(b) The Company shall pay and shall indemnify the Trustee and its
officers, directors, agents and employees against any tax, fee or other charge
imposed on or assessed against U.S. Government Obligations or Foreign Government
Securities deposited pursuant to Section 403 or 1010 or the interest and
principal received in respect of such obligations other than any payable by or
on behalf of Holders.
(c) The Trustee shall deliver or pay to the Company from time to time
upon Company Request any U.S. Government Obligations or Foreign Government
Securities or money held by it as provided in Section 403 or 1010 which, in the
opinion of a nationally recognized firm of independent certified public
accountants expressed in a written certification thereof delivered to the
Trustee, are then in excess of the amount thereof which then would have been
required to be deposited for the purpose for which such Obligations or Foreign
Government Securities or money were deposited or received. In the event such
firm requires the Trustee to agree to the procedures performed by such firm, the
Company shall direct the Trustee in writing to so agree; it being understood and
agreed that the Trustee will deliver such letter of agreement in conclusive
reliance upon the direction of the Company, and the Trustee makes no independent
inquiry or investigation as to, and shall have no
<PAGE>
41
obligation or liability in respect of, the sufficiency, validity or correctness
of such procedures. This provision shall not authorize the sale by the Trustee
of any U.S. Government Obligations or Foreign Government Securities held under
this Indenture.
Section 403. Satisfaction, Discharge and Defeasance of Securities of any
Series.
If this Section 403 is specified, as contemplated by Section 301, to
be applicable to Securities of any series the Company shall be deemed to have
paid and discharged the entire indebtedness on all the Outstanding Securities of
any such series on the 91st day after the date of the deposit referred to in
subparagraph (d) hereof, and the provisions of this Indenture, as it relates to
such Outstanding Securities of any such series, shall no longer be in effect
(and the Trustee, at the expense of the Company, shall at Company Request,
execute proper instruments acknowledging the same) except as to:
(a) the rights of Holders of Securities of such series to receive,
from the trust funds described in subparagraph (d) hereof (i) payment of
the principal of (and premium, if any) and each installment of principal of
(and premium. if any) or interest on the Outstanding Securities of such
series on the Stated Maturity of such principal or installment of principal
or interest and (ii) the benefit of any mandatory sinking fund payments
applicable to the Securities of such series on the day on which such
payments are due and payable in accordance with the terms of this Indenture
and the Securities of such series;
(b) the Company's obligations with respect to such Securities of such
series under Sections 305, 306, 1002 and 1003; and
(c) the rights, powers, trust, indemnities and immunities of the
Trustee hereunder and the duties of the Trustee under Section 402 and the
duty of the Trustee to authenticate Securities of such series issued on
registration of transfer or exchange;
provided that, the following conditions shall have been satisfied:
- --------
(d) the Company shall have deposited or caused to be deposited
irrevocably with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for and
dedicated solely to the benefit of the Holders of such Securities (i) in
the case of Securities of such series denominated in U.S. dollars, cash in
U.S. dollars (or such other money or currencies as shall then be legal
tender in the United States) and/or U.S. Government Obligations, or (ii) in
the
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42
case of Securities of such series denominated in a Foreign Currency (other
than a basket currency), money and/or Foreign Government Securities in the
same Foreign Currency, which through the payment of interest and principal
in respect thereof, in accordance with their terms, will provide (and
without reinvestment and assuming no tax liability will be imposed on such
Trustee), not later than one day before the due date of any payment of
money, an amount in cash, sufficient, in the opinion of a nationally
recognized firm of independent certified public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge each installment of principal (and premium, if any) (including
mandatory sinking fund or analogous payments) of and any interest on all
the Securities of such series on the dates such installments of interest or
principal are due;
(e) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(f) such provision would not cause any Outstanding Securities of such
series then listed on the New York Stock Exchange or other securities
exchange to be de-listed as a result thereof;
(g) no Event of Default or event which with notice or lapse of time
would become an Event of Default with respect to the Securities of such
series shall have occurred and be continuing on the date of such deposit or
during the period ending on the 91st day after such date;
(h) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel to the effect that (1) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling
to the effect that, and based thereon, such opinion shall confirm that
Holders of the Securities of such series will not recognize income, gain or
loss for Federal income tax purposes as a result of such deposits,
defeasance and discharge and will be subject to Federal income tax on the
same amount and in the same manner and at the same times, as would have
been the case if such deposit, defeasance and discharge had not occurred
and (2) upon the 91st day after the date of such deposit, the trust funds
would not be subject to being characterized as a preference for Bankruptcy
Law purposes; and
(i) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
relating to the defeasance contemplated by this Section have been complied
with.
<PAGE>
43
ARTICLE FIVE
Remedies
Section 501. Events of Default.
"Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for
such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default for
a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as
due by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or warranty
of the Company or the Guarantor in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with or which has expressly been included
in this Indenture solely for the benefit of series of Securities other than
that series), and continuance of such default or breach for a period of 60
days after there has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the Holders of
at least 25% in principal amount of the Outstanding Securities of that
series a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a "Notice of Default"
hereunder; or
(5) a default under any bond, debenture, note or other evidence of
Specified Indebtedness (including a default with respect to Securities of
any series other than that series) or under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured
or evidenced any Specified Indebtedness (including this Indenture), whether
such Specified Indebtedness now exists or shall hereafter be created, which
default (A) shall be caused by the Guarantor or a Subsidiary of the
Guarantor failing to make a principal or interest payment at final Stated
Maturity or (B) shall have resulted in such Specified Indebtedness becoming
or being declared due and payable prior to the date on which it would
otherwise have become
<PAGE>
44
due and payable, without such default having been cured or acceleration
having been rescinded or annulled, as the case may be, within a period of
10 days after there shall have been given, by registered or certified mail,
to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in principal amount of the Outstanding Securities
of that series a written notice requiring the Company to cause such default
to be cured or acceleration to be rescinded or annulled, as the case may
be, and stating that such notice is a "Notice of Default" hereunder,
provided, however, that, subject to the provisions of Sections 601 and 602,
-------- -------
the Trustee shall not be deemed to have knowledge of such default unless
either (A) a Responsible Officer of the Trustee in its principal Corporate
Trust Office shall have actual knowledge of such default or (B) the Trustee
shall have received written notice thereof at its principal Corporate Trust
Office from the Company, from any Holder, from the holder of any such
Specified Indebtedness or from the trustee under any such mortgage,
indenture or other instrument; or
(6) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Guarantor, the Company or any
Restricted Subsidiary in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or (B) a decree or order adjudging the Company or any
Restricted Subsidiary a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Guarantor, the Company or any
Restricted Subsidiary under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Guarantor, the Company or any
Restricted Subsidiary or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance
of any such decree or order for relief or any such other decree or order
unstayed and in effect for a period of 60 consecutive days; or
(7) the commencement by the Guarantor, the Company or any Restricted
Subsidiary of a voluntary case or proceeding under any applicable Federal
or State bankruptcy, insolvency, reorganization or other similar law or of
any other case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by it to the entry of a decree or order for relief in respect
of the Guarantor, the Company or any Restricted Subsidiary in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against it,
or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State laws, or the
consent by it to the filing of such petition or to the appointment of or
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45
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Guarantor, the Company or any
Restricted Subsidiary or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Guarantor, the
Company or any Restricted Subsidiary in furtherance of any such action; or
(8) the Guarantee with respect to that series shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect with respect to the Guarantor or the
Guarantor shall deny or disaffirm its obligations under the Guarantee; or
(9) any other Event of Default provided with respect to Securities of
that series.
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Securities of any series at the
time Outstanding occurs and is continuing, then in every such case the Trustee
or the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal amount (or, if any of the
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount of such Securities as may be specified in the terms
thereof) of all of the Securities of that series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal amount (or specified
amount) shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series had been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series,
<PAGE>
46
(B) the principal of (and premium, if, any on) any Securities of
that series which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate or rates prescribed
therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
which have become due solely by such declaration of acceleration have been
cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Upon receipt by the Trustee of any declaration of acceleration, or
rescission and annulment thereof, with respect to Securities of a series all or
part of which is represented by one or more Global Notes, the Trustee shall
establish a record date for determining Holders of Outstanding Securities of
such series entitled to join in such declaration of acceleration, or rescission
and annulment, as the case may be, which record date shall be at the close of
business on the day the Trustee receives such declaration of acceleration, or
rescission and annulment, as the case may be. The Holders on such record date,
or their duly designated proxies, and only such Persons, shall be entitled to
join in such declaration of acceleration, or rescission and annulment, as the
case may be, whether or not such Holders remain Holders after such record date;
provided that unless such declaration of acceleration, or rescission and
- --------
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having been obtained prior to the day which is 90 days
after such record date, such declaration of acceleration, or rescission and
annulment, as the case may be, shall automatically and without further action by
any Holder be cancelled and of no further effect. Nothing in this paragraph
shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of
such 90-day period, a new declaration of acceleration, or rescission or
annulment thereof, as the case may be, that is identical to a declaration of
acceleration, or rescission or annulment thereof, which has been cancelled
pursuant to the preceding sentence, in which event a new record date shall be
established pursuant to the provisions of this Section 502.
<PAGE>
47
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof, or
(3) default is made in the deposit of any sinking fund payment when
and as due by the terms of a Security,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
or rates prescribed therefor in such Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
<PAGE>
48
Section 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company or the Guarantor for the payment of overdue principal or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment
<PAGE>
49
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
Section 506. Application of Money Collected
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
First: To the payment of all amounts due the Trustee under Section
607; and
Second: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal (and premium, if
any) and interest, respectively.
Section 507. Limitation on Suits.
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day
<PAGE>
50
period by the Holders of a majority in principal amount of the Outstanding
Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all such
Holders.
Section 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 307) interest on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Guarantor, the Trustee and
the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
<PAGE>
51
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
Section 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) subject to the provisions of Section 601, the Trustee shall have
the right to decline to follow any such direction if the Trustee in good
faith shall, by a Responsible Officer or Officers of the Trustee, determine
that the proceeding so directed would involve the Trustee in personal
liability.
Upon receipt by the Trustee of any such direction with respect to
Securities of a series all or part of which is represented by one or more Global
Securities, the Trustee shall establish a record date for determining Holders of
Outstanding Securities of such series entitled to join in such direction, which
record date shall be at the close of business on the day the Trustee receives
such direction. The Holders on such record date, or their duly designated
proxies, and only such Persons, shall be entitled to join in such direction,
whether or not such Holders remain Holders after such record date; provided that
--------
unless such majority in principal amount shall have been obtained prior to the
day which is 90 days after such record date, such direction shall automatically
and without further action by any Holder be cancelled and of no further effect.
Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from
giving, after expiration of such 90-day period, a new direction identical to a
direction which has been cancelled pursuant to the preceding sentence, in which
event a new record date shall be established pursuant to the provisions of this
Section 512.
<PAGE>
52
Section 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to waive any past default
hereunder. If a record date is fixed, the Holders on such record date, or their
duly designated proxies, and only such Persons, shall be entitled to waive any
default hereunder, whether or not such Holders remain Holders after such record
date; provided that unless such majority in principal amount shall have been
--------
obtained prior to the date which is 90 days after such record date, any such
waiver previously given shall automatically and without further action by any
Holder be cancelled and of no further effect.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in principal
amount of the Outstanding Securities of any series, or to any suit instituted by
any Holder for the enforcement of the payment of the principal of (or premium,
if any) or interest on any Security on or after
<PAGE>
53
the Stated Maturity or Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
Section 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely and shall be fully protected in acting, as to the truth
of the statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty
to examine the same to determine whether or not they conform to the
requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
<PAGE>
54
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount of the Outstanding
Securities of any series, given pursuant to Section 512, relating to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Indenture with respect to the Securities of such
series; and
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
Section 602. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder with
respect to the Securities of any series, the Trustee shall transmit by mail to
all Holders of Securities of such series, as their names and addresses appear in
the Security Register, notice of such default hereunder actually known to a
Responsible Officer of the Trustee, unless such default shall have been cured or
waived; provided, however, that, except in the case of a default in the payment
-------- -------
of the principal of (or premium, if any) or interest on any Security of such
series or in the payment of any sinking fund installment with respect to
Securities of such series, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors and/or Responsible Officers of the Trustee in good
faith determine that the withholding of such notice is in the interests of the
Holders of Securities of such series; and provided, further, that in the case of
-------- -------
any default of the character specified in Section 501(4) with respect to
Securities of such series, no such notice to Holders shall be given until at
least 30 days after the occurrence thereof. For the purpose of this Section,
the term
<PAGE>
55
"default" means any event which is, or after notice or lapse of time or both
would become, an Event of Default with respect to Securities of such series.
Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order or as
otherwise expressly provided herein and any resolution of the Board of
Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and
<PAGE>
56
premises of the Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents,
attorneys, custodians or nominees and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent, attorney,
custodian or nominee appointed with due care by it hereunder.
(h) In the event that the Trustee is also acting as a Paying Agent,
Authenticating Agent, and/or Registrar hereunder, the rights and
protections afforded to the Trustee pursuant to this Article Six shall also
be afforded to such Paying Agent, Authenticating Agent, and/or Registrar.
Section 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. The
Trustee or any Authenticating Agent shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
Section 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
Section 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
Section 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder
<PAGE>
57
(which compensation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee and its officers, directors, employees
and agents for, and to hold them harmless against, any loss, liability or
expense incurred without negligence or bad faith on its part, arising out
of or in connection with the acceptance or administration of the trust or
trusts hereunder and in connection with the other transaction documents,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder and thereunder.
As security for the performance of the obligations of the Company
under this Section the Trustee shall have a lien prior to the Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the payment of principal of, premium, if any, or interest, if
any, on particular Securities. The Company's obligations under this Section
6.07 shall survive the earlier resignation or removal of the Trustee or the
discharge of this Indenture.
Section 608. Disqualification; Conflicting Interests.
(a) If the Trustee has or shall acquire any conflicting interest, as
defined in this Section, with respect to the Securities of any series, it
shall, within 90 days after ascertaining that it has such conflicting
interest, either eliminate such conflicting interest or resign with respect
to the Securities of that series in the manner and with the effect
hereinafter specified in this Article.
(b) In the event that the Trustee shall fail to comply with the
provisions of Subsection (a) of this Section with respect to the Securities
of any series, the Trustee shall, within 10 days after the expiration of
such 90-day period, transmit by mail to all Holders of Securities of that
series, as their names and addresses appear in the Security Register,
notice of such failure.
(c) For the purposes of this Section, the Trustee shall be deemed to
have a conflicting interest with respect to the Securities of any series if
<PAGE>
58
(1) the Trustee is trustee under this Indenture with respect to
the Outstanding Securities of any series other than that series or is
trustee under another indenture under which any other securities, or
certificates of interest or participation in any other securities, of the
Company or the Guarantor are outstanding, unless such other indenture is a
collateral trust indenture under which the only collateral consists of
Securities issued under this Indenture, provided that there shall be
--------
excluded from the operation of this paragraph this Indenture with respect
to the Securities of any series other than that series or any other
indenture or indentures under which other securities, or certificates of
interest or participation in other securities, of the Company or the
Guarantor are outstanding, if
(i) this Indenture and such other indenture or indentures are
wholly unsecured and such other indenture or indentures are hereafter
qualified under the Trust Indenture Act, unless the Commission shall
have found and declared by order pursuant to Section 305(b) or Section
307(c) of the Trust Indenture Act that differences exist between the
provisions of this Indenture with respect to Securities of that series
and one or more other series or the provisions of such other indenture
or indentures which are so likely to involve a material conflict of
interest as to make it necessary in the public interest or for the
protection of investors to disqualify the Trustee from acting as such
under this Indenture with respect to the Securities of that series and
such other series or under such other indenture or indentures, or
(ii) the Company shall have sustained the burden of proving, on
application to the Commission and after opportunity for hearing
thereon, that trusteeship under this Indenture with respect to the
Securities of that series and such other series or such other
indenture or indentures is not so likely to involve a material
conflict of interest as to make it necessary in the public interest or
for the protection of investors to disqualify the Trustee from acting
as such under this Indenture with respect to the Securities of that
series and such other series or under such other indenture or
indentures;
(2) the Trustee or any of its directors or executive officers is
an obligor upon the Securities or an underwriter for the Company or the
Guarantor;
<PAGE>
59
(3) the Trustee directly or indirectly controls or is directly
or indirectly controlled by or is under direct or indirect common control
with the Company or the Guarantor or an underwriter for the Company or the
Guarantor;
(4) the Trustee or any of its directors or executive officers is
a director, officer, partner, employee, appointee or representative of the
Company or the Guarantor, or of an underwriter (other than the Trustee
itself) for the Company or the Guarantor who is currently engaged in the
business of underwriting, except that (i) one individual may be a director
or an executive officer, or both, of the Trustee and a director or an
executive officer, or both, of the Company but may not be at the same time
an executive officer of both the Trustee and the Company or the Guarantor;
(ii) if and so long as the number of directors of the Trustee in office is
more than nine, one additional individual may be a director or an executive
officer, or both, of the Trustee and a director of the Company or the
Guarantor; and (iii) the Trustee may be designated by the Company or the
Guarantor or by any underwriter for the Company or the Guarantor to act in
the capacity of transfer agent, registrar, custodian, paying agent, fiscal
agent, escrow agent or depositary; or in any other similar capacity, or,
subject to the provisions of paragraph (1) of this Subsection, to act as
trustee, whether under an indenture or otherwise;
(5) 10% or more of the voting securities of the Trustee is
beneficially owned either by the Company or the Guarantor or by any
director or executive officer thereof, or 20% or more of such voting
securities is beneficially owned, collectively, by any two or more of such
persons; or 10% or more of the voting securities of the Trustee is
beneficially owned either by an underwriter for the Company or the
Guarantor or by any director or executive officer thereof, or is
beneficially owned, collectively, by any two or more such persons;
(6) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default (as hereinafter
in this Subsection defined), (i) 5% or more of the voting securities, or
10% or more of any other class of security, of the Company or the Guarantor
not including the Securities issued under this Indenture and securities
issued under any other indenture under which the Trustee is also trustee,
or (ii) 10% or more of any class of security of an underwriter for the
Company;
(7) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is
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in default (as hereinafter in this Subsection defined), 5% or more of the
voting securities of any person who, to the knowledge of the Trustee, owns
10% or more of the voting securities of, or controls directly or indirectly
or is under direct or indirect common control with, the Company or the
Guarantor;
(8) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default (as hereinafter
in this Subsection defined), 10% or more of any class of security of any
person who, to the knowledge of the Trustee, owns 50% or more of the voting
securities of the Company or the Guarantor; or
(9) the Trustee owns, on May 15 in any calendar year, in the
capacity of executor, administrator, testamentary or inter vivos trustee,
guardian, committee or conservator, or in any other similar capacity, an
aggregate of 25% or more of the voting securities, or of any class of
security, of any person, the beneficial ownership of a specified percentage
of which would have constituted a conflicting interest under paragraph (6),
(7) or (8) of this Subsection. As to any such securities of which the
Trustee acquired ownership through becoming executor, administrator or
testamentary trustee of an estate which included them, the provisions of
the preceding sentence shall not apply, for a period of two years from the
date of such acquisition, to the extent that such securities included in
such estate do not exceed 25% of such voting securities or 25% of any such
class of security. Promptly after May 15 in each calendar year, the Trustee
shall make a check of its holdings of such securities in any of the above-
mentioned capacities as of such May 15. If the Company or the Guarantor
fails to make payment in full of the principal of (or premium, if any) or
interest on any of the Securities when and as the same becomes due and
payable, and such failure continues for 30 days thereafter, the Trustee
shall make a prompt check of its holdings of such securities in any of the
above-mentioned capacities as of the date of the expiration of such 30-day
period, and after such date, notwithstanding the foregoing provisions of
this paragraph, all such securities so held by the Trustee, with sole or
joint control over such securities vested in it, shall, but only so long as
such failure shall continue, be considered as though beneficially owned by
the Trustee for the purposes of paragraphs (6), (7) and (8) of this
Subsection.
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The specification of percentages in paragraphs (5) to (9), inclusive,
of this Subsection shall not be construed as indicating that the ownership of
such percentages of the securities of a person is or is not necessary or
sufficient to constitute direct or indirect control for the purposes of
paragraph (3) or (7) of this Subsection.
For the purposes of paragraphs (6), (7), (8) and (9) of this
Subsection only, (i) the terms "security" and "securities" shall include only
such securities as are generally known as corporate securities, but shall not
include any note or other evidence of indebtedness issued to evidence an
obligation to repay moneys lent to a person by one or more banks, trust
companies or banking firms, or any certificate of interest or participation in
any such note or evidence of indebtedness; (ii) an obligation shall be deemed to
be "in default" when a default in payment of principal shall have continued for
30 days or more and shall not have been cured; and (iii) the Trustee shall not
be deemed to be the owner or holder of (A) any security which it holds as
collateral security, as trustee or otherwise, for an obligation which is not in
default as defined in clause (ii) above, or (B) any security which it holds as
collateral security under this Indenture, irrespective of any default hereunder,
or (C) any security which it holds as agent for collection, or as custodian,
escrow agent or depositary, or in any similar representative capacity.
(d) For the purposes of this Section:
(1) The term "underwriter", when used with reference to the
Company, means every person who, within three years prior to the time
as of which the determination is made, has purchased from the Company
or the Guarantor, as the case may be, with a view to, or has offered
or sold for the Company or the Guarantor, as the case may be, in
connection with, the distribution of any security of the Company or
the Guarantor, as the case may be, outstanding at such time, or has
participated or has had a direct or indirect participation in any such
undertaking, or has participated or has had a participation in the
direct or indirect underwriting of any such undertaking, but such term
shall not include a person whose interest was limited to a commission
from an underwriter or dealer not in excess of the usual and customary
distributors' or sellers' commission.
(2) The term "director" means any director of a corporation or
any individual performing similar functions with respect to any
organization, whether incorporated or unincorporated.
(3) The term "person" means an individual, a corporation, a
partnership, an association, a joint-
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stock company, a trust, an unincorporated organization or a government
or political subdivision thereof. As used in this paragraph, the term
"trust" shall include only a trust where the interest or interests of
the beneficiary or beneficiaries are evidenced by a security.
(4) The term "voting security" means any security presently
entitling the owner or holder thereof to vote in the direction or
management of the affairs of a person, or any security issued under or
pursuant to any trust, agreement or arrangement whereby a trustee or
trustees or agent or agents for the owner or holder of such security
are presently entitled to vote in the direction or management of the
affairs of a person.
(5) The term "Company" means any obligor upon the Securities.
(6) The term "executive officer" means the president, every vice
president, every trust officer, the cashier, the secretary and the
treasurer of a corporation, and any individual customarily performing
similar functions with respect to any organization whether
incorporated or unincorporated, but shall not include the chairman of
the board of directors.
(e) The percentages of voting securities and other securities
specified in this Section shall be calculated in accordance with the
following provisions:
(1) A specified percentage of the voting securities of the
Trustee, the Company, the Guarantor or any other person referred to in
this Section (each of whom is referred to as a "person" in this
paragraph) means such amount of the outstanding voting securities of
such person as entitles the holder or holders thereof to cast such
specified percentage of the aggregate votes which the holders of all
the outstanding voting securities of such person are entitled to cast
in the direction or management of the affairs of such person.
(2) A specified percentage of a class of securities of a person
means such percentage of the aggregate amount of securities of the
class outstanding.
(3) The term "amount", when used in regard to securities, means
the principal amount if relating to evidences of indebtedness, the
number of shares if relating to capital shares and the number of units
if relating to any other kind of security.
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(4) The term "outstanding" means issued and not held by or for
the account of the issuer. The following securities shall not be
deemed outstanding within the meaning of this definition:
(i) securities of an issuer held in a sinking fund
relating to securities of the issuer of the same class;
(ii) securities of an issuer held in a sinking fund
relating to another class of securities of the issuer, if the
obligation evidenced by such other class of securities is not in
default as to principal or interest or otherwise;
(iii) securities pledged by the issuer thereof as security
for an obligation of the issuer not in default as to principal or
interest or otherwise; and
(iv) securities held in escrow if placed in escrow by the
issuer thereof;
provided, however, that any voting securities of an issuer shall be
-------- -------
deemed outstanding if any person other than the issuer is entitled to
exercise the voting rights thereof.
(5) A security shall be deemed to be of the same class as anothe
security if both securities confer upon the holder or holders thereo
substantially the same rights and privileges; provided, however, that,
-------- -------
in the case of secured evidences of indebtedness, all of which are
issued under a single indenture, differences in the interest rates or
maturity dates of various series thereof shall not be deemed
sufficient to constitute such series different classes and provided,
--------
further, that, in the case of unsecured evidences of indebtedness,
-------
differences in the interest rates or maturity dates thereof shall not
be deemed sufficient to constitute them securities of different
classes, whether or not they are issued under a single indenture.
Section 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $100,000,000 subject to supervision or examination by Federal or
State authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for
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the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
Section 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of
a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If the instrument of acceptance by a successor Trustee required by
Section 611 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee with
respect to Securities of such series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series delivered to the Trustee and to the
Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608(a) after
written request therefor by the Company or by any Holder who has been
a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (ii)
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subject to Section 514, any Holder who has been a bona fide Holder of a Security
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee with respect to all Securities and the appointment of a successor
Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series) and shall comply with the
applicable requirements of Section 611. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment in accordance with the applicable requirements of Section
611, become the successor Trustee with respect to the Securities of such series
and to that extent supersede the successor Trustee appointed by the Company. If
no successor Trustee with respect to the Securities of any series shall have
been so appointed by the Company or the Holders and accepted appointment in the
manner required by Section 611, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to all
Holders of Securities of such series as their names and addresses appear in the
Security Register. Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its principal
Corporate Trust Office.
Section 611. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument
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66
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on the request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee
respect to the securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
trust and that each such Trustee shall be trustee of a trust hereunder separate
and apart from any trust or trusts hereunder administered by any other such
Trustee; and upon the execution and delivery of such supplemental indenture the
resignation or removal of the retiring Trustee shall become effective to the
extent provided therein and each such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates; but, on
request of the Company or any successor Trustee, such retiring Trustee shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder with respect to the Securities of
that or those series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all
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such rights, powers and trusts referred to in paragraph (a) or (b) of this
Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
Section 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
Section 613. Preferential Collection of Claims Against Company.
(a) Subject to Subsection (b) of this Section, if the Trustee shall
be or shall become a creditor, directly or indirectly, secured or unsecured, of
the Company within four months prior to a default, as defined in Subsection (c)
of this Section, or subsequent to such a default, then, unless and until such
default shall be cured, the Trustee shall set apart and hold in a special
account for the benefit of the Trustee individually, the Holders of the
Securities and the holders of other indenture securities, as defined in
Subsection (c) of this Section:
(1) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or interest,
effected after the beginning of such four months' period and valid as
against the Company and its other creditors, except any such reduction
resulting from the receipt or disposition of any property described in
paragraph (2) of this Subsection, or from the exercise of any right of set-
off which the Trustee could have exercised if a petition in bankruptcy had
been filed by or against the Company upon the date of such default; and
(2) all property received by the Trustee in respect of any claims as
such creditor, either as security therefor, or in satisfaction or
composition thereof, or otherwise, after the beginning of such four months'
period, or an amount equal to the proceeds of any such property, if
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68
disposed of, subject, however, to the rights, if any, of the Company and
its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee:
(A) to retain for its own account (i) payments made on account of any
such claim by any Person (other than the Company) who is liable thereon,
and (ii) the proceeds of the bona fide sale of any such claim by the
Trustee to a third Person, and (iii) distributions made in cash, securities
or other property in respect of claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to
the Federal Bankruptcy Act or applicable State law;
(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the
beginning of such four months' period;
(C) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security for
any such claim, if such claim was created after the beginning of such four
months' period and such property was received as security therefor
simultaneously with the creation thereof, and if the Trustee shall sustain
the burden of proving that at the time such property was so received the
Trustee had no reasonable cause to believe that a default, as defined in
Subsection (c) of this Section, would occur within four months; orf
(D) to receive payment on any claim referred to in paragraph (B) or
(C), against the release of any property held as security for such claim as
provided in paragraph (B) or (C), as the case may be, to the extent of the
fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted
after the beginning of such four months' period for property held as security at
the time of such substitution shall, to the extent of the fair value of the
property released, have the same status as the property released, and, to the
extent that any claim referred to in any of such paragraphs is created in
renewal of or in substitution for or for the purpose of repaying or refunding
any pre-existing claim of the Trustee as such creditor, such claim shall have
the same status as such pre-existing claim.
If the Trustee shall be required to account, the funds and property
held in such special account and the proceeds thereof shall be apportioned among
the Trustee, the Holders and the holders of other indenture securities in such
manner that the
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69
Trustee, the Holders and the holders of other indenture securities realize, as a
result of payments from such special account and payments of dividends on claims
filed against the Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Federal Bankruptcy Act or applicable State law,
the same percentage of their respective claims, figured before crediting to the
claim of the Trustee anything on account of the receipt by it from the Company
of the funds and property in such special account and before crediting to the
respective claims of the Trustee and the Holders and the holders of other
indenture securities dividends on claims filed against the Company in bankruptcy
or receivership or in proceedings for reorganization pursuant to the Federal
Bankruptcy Act or applicable State law, but after crediting thereon receipts on
account of the indebtedness represented by their respective claims from all
sources other than from such dividends and from the funds and property so held
in such special account. As used in this paragraph, with respect to any claim,
the term "dividends" shall include any distribution with respect to such claim,
in bankruptcy or receivership or proceedings for reorganization pursuant to the
Federal Bankruptcy Act or applicable State law, whether such distribution is
made in cash, securities or other property, but shall not include any such
distribution with respect to the secured portion, if any, of such claim. The
court in which such bankruptcy, receivership or proceedings for reorganization
is pending shall have jurisdiction (i) to apportion among the Trustee, the
Holders and the holders of other indenture securities, in accordance with the
provisions of this paragraph, the funds and property held in such special
account and proceeds thereof, or (ii) in lieu of such apportionment, in whole or
in part, to give to the provisions of this paragraph due consideration in
determining the fairness of the distributions to be made to the Trustee and the
Holders and the holders of other indenture securities with respect to their
respective claims, in which event it shall not be necessary to liquidate or to
appraise the value of any securities or other property held in such special
account or as security for any such claim, or to make a specific allocation of
such distributions as between the secured and unsecured portions of such claims,
or otherwise to apply the provisions of this paragraph as a mathematical
formula.
Any Trustee which has resigned or been removed after the beginning of
such four months' period shall be subject to the provisions of this Subsection
as though such resignation or removal had not occurred. If any Trustee has
resigned or been removed prior to the beginning of such four months' period, it
shall be subject to the provisions of this Subsection if and only if the
following conditions exist:
(i) the receipt of property or reduction of claim, which would have
given rise to the obligation to account, if such Trustee had continued as
Trustee, occurred after the beginning of such four months' period; and
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(ii) such receipt of property or reduction of claim occurred within
four months after such resignation or removal.
(b) There shall be excluded from the operation of Subsection (a) of
this Section a creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year or
more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction or by this Indenture, for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advances and of the circumstances surrounding
the making thereof is given to the Holders at the time and in the manner
provided in this Indenture;
(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction, as defined in Subsection (c) of this
Section;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25(a) of the Federal Reserve Act,
as amended, which is directly or indirectly a creditor of the Company; and
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper, as defined in Subsection (c) of
this Section.
(c) For the purposes of this Section only:
(1) the term "default" means any failure to make payment in full of
the principal of or interest on any of the Securities or upon the other
indenture securities when and as such principal or interest becomes due and
payable;
(2) the term "other indenture securities" means securities upon which
the Company is an obligor outstanding under any other indenture (i) under
which the Trustee is also trustee, (ii) which contains provisions
substantially similar to the provisions of this Section, and (iii) under
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which a default exists at the time of the apportionment of the funds and
property held in such special account;
(3) the term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand;
(4) the term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiation
or incurring of the draft, bill of exchange, acceptance or obligation;
(5) the term "Company" means any obligor upon the Securities; and
(6) the term "Federal Bankruptcy Act" means the Bankruptcy Act or
Title 11 of the United States Code.
Section 614. Appointment of Authenticating Agent.
At any time when any of the Securities remains Outstanding the Trustee
may appoint an Authenticating Agent or Agents with respect to one or more series
of Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series issued upon exchange, registration of
transfer or partial redemption thereof or pursuant to Section 306, and
Securities so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
having
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a combined capital and surplus of not less than $100,000,000 and subject to
supervision or examination by Federal or State authority. If such Authenticating
Agent publishes reports of condition at least annually, pursuant to law or to
the requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of
Securities of the series with respect to which such Authenticating Agent will
serve, as their names and addresses appear in the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment with respect to one or more series is made
pursuant to this Section, the Securities of such series may have endorsed
thereon, in addition to the Trustee's certificate of authentication, an
alternate certificate of authentication in the following form:
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73
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE CHASE MANHATTAN BANK, as Trustee
By__________________________________
As Authenticating Agent
By__________________________________
Authorized Signatory
Section 615. Investment of Certain Payments Held by the Trustee.
Any amounts deposited by the Company or the Guarantor and held by
the Trustee hereunder, other than pursuant to Section 403 or Section 1010
hereof, shall be invested by the Trustee from time to time at the written
direction of the Company or the Guarantor (as applicable) in such investments as
may be specified by the Company or the Guarantor (as applicable) and reasonably
agreed to by the Trustee from time to time; provided that no amounts deposited
--------
in respect of any payment on a Security shall be invested in an investment that
matures after the due date of such payment and that the Trustee shall have no
liability to the Company or the Guarantor for any loss on such investments;
provided, further, that in investing trust funds pursuant to the terms of this
- -------- -------
Section and liquidating any investments held in trust hereunder, the Trustee
may, to the extent permitted by law, purchase securities (including for the
purposes of this paragraph securities as to which the Trustee or a Trustee
Affiliate is the issuer or guarantor) from, and sell securities to, itself or
any Trustee Affiliate and purchase securities underwritten by, or in which a
market is made by, the Trustee or a Trustee Affiliate. For the purposes hereof,
a "Trustee Affiliate" shall mean an entity that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Trustee. Any income or gain realized as a result of any such
investment shall be promptly distributed (in no event later than the next
Business Day) to the Company after payment of any amounts required to be paid to
the Holders entitled thereto, except after the occurrence and during the
continuance of an Event of Default. The Trustee shall have no liability to the
Company or the Guarantor for the selection of investments or for any loss
resulting from any investment made in accordance with this Section, and shall
bear no expense in connection with any investment pursuant to this Section. The
Trustee shall have no liability in respect of losses incurred as a result of the
liquidation of any investments prior to its stated maturity or the failure of
the Company or the Guarantor to provide timely written investment directions.
Any such investment may be sold (without regard to maturity date) by the
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74
Trustee whenever necessary to make any distribution required by this Indenture.
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
with respect to Securities of each series
(a) semi-annually, not more than 15 days after the Regular Record
Date for the payment of interest in respect of the Securities of such
series, and on dates to be determined pursuant to Section 301 with respect
to Securities of any series which do not bear interest, a list, in such
form as the Trustee may reasonably require, of the names and addresses of
the Holders of such series as of a date not more than 15 days prior to the
time such information is furnished, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list
of similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, however, that so long as the Trustee is the Security Registrar for a
- -------- -------
particular series, no such list shall be required to be furnished with respect
to such series.
Section 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 701 and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) If three or more Holders (herein referred to as "applicants")
apply in writing to the Trustee, and furnish to the Trustee reasonable proof
that each such applicant has owned a Security for a period of at least six
months preceding the date of such application, and such application states that
the applicants desire to communicate with other Holders with respect to their
rights under this Indenture or under the Securities and is accompanied by a copy
of the form of proxy or other communication which such applicants propose to
transmit, then the
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75
Trustee shall, within five business days after the receipt of such application,
at its election, either
(i) afford such applicants access to the information preserved at
the time by the Trustee in accordance with Section 702(a), or
(ii) inform such applicants as to the approximate number of Holders
whose names and addresses appear in the information preserved at the time
by the Trustee in accordance with Section 702(a), and as to the approximate
cost of mailing to such Holders the form of proxy or other communication,
if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder whose name and address appear in the information
preserved at the time by the Trustee in accordance with Section 702(a) a copy of
the form of proxy or other communication which is specified in such request,
with reasonable promptness after a tender to the Trustee of the material to be
mailed and of payment, or provision for the payment, of the reasonable expenses
of mailing, unless within five days after such tender the Trustee shall mail to
such applicants and file with the Commission, together with a copy of the
material to be mailed, a written statement to the effect that, in the opinion of
the Trustee, such mailing would be contrary to the best interest of the Holders
or would be in violation of applicable law. Such written statement shall specify
the basis of such opinion. If the Commission, after opportunity for a hearing
upon the objections specified in the written statement so filed, shall enter an
order refusing to sustain any of such objections or if, after the entry of an
order sustaining or more of such objections, the Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met and shall enter an order so declaring, the Trustee shall mail copies of
such material to all such Holders with reasonable promptness after the entry of
such order and the renewal of such tender; otherwise the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company, the Guarantor and the Trustee that neither the Company,
the Guarantor nor the Trustee nor any agent of either of them shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Holders in accordance with Section 702(b), regardless of
the source from which such information was derived, and that the Trustee shall
not be held accountable by reason of mailing any material pursuant to a request
made under Section 702(b).
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76
Section 703. Reports by Trustee.
(a) Within 60 days after May 15 of each year commencing with the
year 1999, but only upon the occurrence within the previous 12 months of any
events specified in TIA (S)313(a), the Trustee shall transmit by mail to all
Holders, as their names and addresses appear in the Security Register, a brief
report dated as of such May 15 with respect to:
(1) its eligibility under Section 609 and its qualifications under
Section 608, or in lieu thereof, if to the best of its knowledge it has
continued to be eligible and qualified under said Sections, a written
statement to such effect;
(2) the character and amount of any advances (and if the Trustee
elects so to state, the circumstances surrounding the making thereof) made
by the Trustee (as such) which remain unpaid on the date of such report,
and for the reimbursement of which it claims or may claim a lien or charge,
prior to that of the Securities, on any property or funds held or collected
by it as Trustee, except that the Trustee shall not be required (but may
elect) to report such advances if such advances so remaining unpaid
aggregate not more than 1/2 of 1% of the principal amount of the Securities
Outstanding on the date of such report;
(3) the amount, interest rate and maturity date of all other
indebtedness owing by the Company (or by any other obligor on the
Securities) to the Trustee in its individual capacity, on the date of such
report, with a brief description of any property held as collateral
security therefor, except an indebtedness based upon a creditor
relationship arising in any manner described in Section 613(b)(2), (3), (4)
or (6);
(4) the property and funds, if any, physically in the possession of
the Trustee as such on the date of such report;
(5) any additional issue of Securities which the Trustee has not
previously reported; and
(6) any action taken by the Trustee in the performance of its duties
hereunder which it has not previously reported and which in its opinion
materially affects the Securities, except action in respect of a default,
notice of which has been or is to be withheld by the Trustee in accordance
with Section 602.
(b) The Trustee shall transmit by mail to all Holders, as their
names and addresses appear in the Security Register, a brief report with respect
to the character and amount of any advances (and if the Trustee elects so to
state, the
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77
circumstances surrounding the making thereof) made by the Trustee (as such)
since the date of the last report transmitted pursuant to Subsection (a) of this
Section (or if such report has yet been so transmitted, since the date of
execution of this instrument) for the reimbursement of which it claims or may
claim a lien or charge, prior to that of the Securities, on property or funds
held or collected by it as Trustee and which it has not previously reported
pursuant to this Subsection, except that the Trustee shall not be required (but
may elect) to report such advances if such advances remaining unpaid at any time
aggregate 10% or less of the principal amount of the Securities Outstanding at
such time, such report to be transmitted within 90 days after such time.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee in writing when any Securities are listed on any
stock exchange.
Section 704. Reports by Guarantor.
Whether or not required by the rules and regulations of the
Commission, so long as any Securities are outstanding, the Guarantor shall
furnish to the Trustee (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Guarantor were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Guarantor's certified independent accountants and (ii) all reports that
would be required to be filed with the Commission on Form 8-K if the Guarantor
were required to file such reports. In addition, whether or not required by the
rules and regulations of the Commission, the Guarantor shall file a copy of all
such information with the Commission for public availability (unless the
Commission will not accept such a filing) and shall promptly make such
information available to all securities analysts and prospective investors who
request it in writing. The Guarantor shall at all times comply with TIA (S)
314(a).
<PAGE>
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ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
Section 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other
corporation or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
corporation or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the corporation formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a corporation
organized and existing under the laws of the United States of America, any
State thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment of the
principal of (and premium, if any) and interest on all the Securities and
the performance of every covenant of this Indenture on the part of the
Company to be performed or observed;
(2) immediately after giving effect to such transaction and treating
any Indebtedness which becomes an obligation of the Company or a Subsidiary
of the Company as a result of such transaction as having been incurred by
the Company or such Subsidiary at the time of such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing;
(3) if, as a result of any such consolidation or merger or such
conveyance, transfer or lease, properties or assets of the Company would
become subject to a mortgage, pledge, lien, security interest or other
encumbrance which would not be permitted by this Indenture, the Company or
such successor corporation or Person, as the case may be, shall take such
steps as shall be necessary effectively to secure the Securities equally
and ratably with (or prior to) all indebtedness secured thereby; and
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is
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79
required in connection with such transaction, such supplemental indenture
complies with this Article and that all conditions precedent herein
provided for relating to such transaction have been complied with.
Section 802. Successor Corporation Substituted.
Upon any consolidation by the Company with or merger by the Company
into any other corporation or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 801, the successor corporation formed by such consolidation or into
which the Company is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor corporation had been named as the Company herein, and thereafter,
except in the case of a lease, the predecessor corporation shall be relieved of
all obligations and covenants under this Indenture and the Securities.
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by
a Board Resolution, the Guarantor and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default; or
(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form,
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registrable or not registrable as to principal, and with or without
interest coupons; or
(5) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only
--------
when there is no Security Outstanding of any series created prior to the
execution of such supplemental indenture which is entitled to the benefit
of such provision; or
(6) to secure the Securities pursuant to the requirements of Section
1008 or otherwise; or
(7) to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 611(b); or
(9) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture, provided such action shall not adversely affect the
--------
interests of the Holders of Securities of any series in any material
respect.
Section 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of a majority of the Outstanding
Securities of each series affected by such supplemental indenture, by Act of
said Holders delivered to the Company and the Trustee, the Company, when
authorized by a Board Resolution, the Guarantor and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; provided, however, that no such
-------- -------
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the principal
of an Original Issue Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section
502, or change any
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81
Place of Payment where, or the coin or currency in which, any Security or
any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1012, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby; provided, however, that this clause shall not be deemed to require
-------- -------
the consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section and Section 1012, or the
deletion of this proviso, in accordance with the requirements of Sections
611(b) and 901(8), or
(4) modify any of the substantive provisions of the Guarantees or
release or discharge the Guarantor thereunder.
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this
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Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties,
immunities or liabilities under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities of that series in accordance with the
terms of the Securities and this Indenture.
Section 1002. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the
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Company in respect of the Securities of that series and this Indenture may be
served. The Trustee is hereby initially appointed Paying Agent, and the
principal Corporate Trust Office of the Trustee is initially designated as the
office or agency where Securities may be presented or surrendered for payment.
The Company will give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
-------- -------
shall in any manner relieve the Company of its obligations to maintain an office
or agency in each Place of Payment for Securities of any series for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
Section 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee in writing
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of (and
premium, if any) or interest on any Securities of that series, deposit with a
Paying Agent a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such principal, premium or interest, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee in writing of
its action or failure so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree
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84
with the Trustee, subject to the provisions of this Section, that such Paying
Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities of that series in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities of that series) in the making of any
payment of principal (and premium, if any) or interest on the Securities of
that series; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or received
by the Trustee in respect of obligations deposited with the Trustee pursuant to
Section 403 or 1010, or then held by the Company, in trust for the payment of
the principal of (and premium, if any) or interest on any Security of any series
and remaining unclaimed for two years after such principal (and premium, if any)
or interest has become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such trust;
and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
-------- -------
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the Borough of Manhattan, The City
and State of New York, notice that such money remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
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Section 1004. Corporate Existence.
Subject to Article Eight, each of the Company and the Guarantor will
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence, rights (charter and statutory) and
franchises; provided, however, that neither the Company nor the Guarantor shall
-------- -------
be required to preserve any such right or franchise if its Board of Directors
shall determine that the preservation thereof is no longer desirable in the
conduct of its business and that the loss thereof is not disadvantageous in any
material respect to the Holders.
Section 1005. Maintenance of Properties.
Each of the Company and the Guarantor will cause all properties used
or useful in the conduct of its business or the business of any of its
Subsidiaries to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Guarantor or the Company, as the case may be, may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
-------- -------
nothing in this Section shall prevent the Company or the Guarantor from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company or the Guarantor, as the case
may be, desirable in the conduct of its business or the business of any
Subsidiary and not disadvantageous in any material respect to the Holders.
Section 1006. Payment of Taxes and Other Claims.
Each of the Guarantor and the Company will pay or discharge or cause
to be paid or discharged, before the same shall become delinquent, (1) all
taxes, assessments and governmental charges levied or imposed upon the
Guarantor, the Company or any of their respective Subsidiaries or upon the
income, profits or property of the Guarantor, the Company or any or any of their
respective Subsidiaries, and (2) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or the Guarantor or any or any of their respective Subsidiaries;
provided, however, that the Guarantor, the Company and such Subsidiary shall not
- -------- -------
be required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
Section 1007. Limitation Upon Liens.
(a) Neither the Guarantor nor the Company shall, and the Guarantor
and the Company shall not permit any Restricted
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86
Subsidiary to, create or suffer to exist any Lien to secure any Indebtedness of
the Guarantor, the Company or any Restricted Subsidiary on any property of or
any shares of equity interests or evidences of Indebtedness issued by the
Company, the Guarantor or any Restricted Subsidiary and owned by the Guarantor,
the Company or any Restricted Subsidiary, without making, or causing such
Restricted Subsidiary to make, effective provision to secure all of the
Securities issued hereunder and then outstanding by such Lien, equally and
ratably with any and all other such Indebtedness thereby secured, so long as
such other Indebtedness is so secured. The foregoing restrictions shall not
apply to Permitted Liens.
(b) Notwithstanding the provisions of subsection (a) of this Section
1007, the Guarantor, the Company or any Restricted Subsidiary may create or
suffer to exist Liens securing Indebtedness in addition to those permitted by
subsection (a) of this Section 1007, and renew, extend or replace such Liens
provided that, at the time such Indebtedness is incurred and after giving effect
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thereto, Exempted Debt does not exceed 10% of Consolidated Stockholders Equity.
Section 1008. Limitation Upon Sale and Leaseback Transactions.
(a) Neither the Guarantor nor the Company will, and the Guarantor and
the Company will not permit any Restricted Subsidiary to, enter into any
arrangements with any Person providing for the leasing by the Guarantor, the
Company or any Restricted Subsidiary of any property or asset now owned or
hereafter acquired which has been or is to be sold or transferred by the
Guarantor, the Company or such Restricted Subsidiary to such Person with the
intention of taking back a lease of such property (a "Sale and Leaseback
Transaction"), unless the net proceeds of such sale or transfer have been
determined by the Board of Directors of the Company or the Guarantor (as
applicable) to be at least equal to the fair value of such property or asset at
the time of such sale and transfer and either (i) the Guarantor, the Company or
a Restricted Subsidiary applies or causes to be applied an amount equal to the
net proceeds of such sale or transfer, within 180 days of receipt thereof, to
the retirement or prepayment (other than any mandatory retirement or prepayment)
of Senior Funded Debt of the Guarantor, the Company or any Restricted Subsidiary
or to the purchase of property or assets to be used in the ordinary course of
business, or (ii) the Guarantor, the Company or such Restricted Subsidiary
would, on the effective date of such sale or transfer, be entitled, pursuant to
Section 1007 hereof, to issue, assume or guarantee Indebtedness secured by a
Lien upon such property or asset at least equal in amount to the Attributable
Debt in respect of such Sale and Leaseback Transaction without equally and
ratably securing the Securities having the benefit of Section 1007. The
foregoing restriction shall not apply to any Sale and Leaseback Transaction (i)
between the Company and the Guarantor, between the Guarantor or the
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87
Company and a Restricted Subsidiary, or between Restricted Subsidiaries,
provided that the lessor shall be the Guarantor, the Company or a Wholly-owned
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Restricted Subsidiary or (ii) which has a lease of less than three years in
length.
(b) Notwithstanding the provisions of subsection (a) of this Section
1008, the Guarantor, the Company or any Restricted Subsidiary may enter into
Sale and Leaseback Transactions in addition to those permitted by paragraph (a)
of this Section 1008, and without any obligation to retire any Senior Funded
Debt of the Guarantor, the Company or a Restricted Subsidiary or to the purchase
of property or assets; provided that, at the time of entering into such Sale and
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Leaseback Transactions and after giving effect thereto, Exempted Debt does not
exceed 10% of Consolidated Stockholders Equity.
Section 1009. Restriction on Indebtedness of Restricted Subsidiaries.
The Company and the Guarantor shall not permit any Restricted
Subsidiary to create, incur, issue, assume or guaranty any Funded Debt, except:
(i) Funded Debt outstanding on the date of the Indenture; (ii) Funded Debt
issued to and held by the Company, the Guarantor or a Wholly-owned Restricted
Subsidiary; (iii) Funded Debt created, incurred, issued, assumed or guaranteed
by a Person prior to the time (A) such Person became a Restricted Subsidiary,
(B) such Person merges into or consolidates with a Restricted Subsidiary, or (C)
a Restricted Subsidiary merges into or consolidates with such Person (in a
transaction in which such Person becomes a Restricted Subsidiary) in the case of
each of clauses (A), (B) and (C), which Funded Debt was not incurred in
anticipation of such transaction and was outstanding prior to such transaction;
(iv) Funded Debt incurred to provide funds for all or part of the cost of
acquisition, construction, development or improvement of property (including
shares of equity interests), provided that the commitment of the creditor to
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extend the credit evidenced by such Funded Debt shall have been obtained not
later than 180 days after the later of (a) the completion of the acquisition,
construction, development or improvement of such property or (b) the placing in
operation of such property; (v) Funded Debt under the Canada Loan Agreement in a
principal amount not to exceed Can. $25,000,000; (vi) Funded Debt which is
exchanged for, or the proceeds of which are used to replace or refund, any
Funded Debt permitted to be outstanding pursuant to clauses (i) through (v)
above (or any extension or renewal thereof), in an aggregate principal amount
not to exceed the principal amount of the Indebtedness so exchanged, replaced or
refunded; (vii) Funded Debt not otherwise permitted pursuant to clauses (i)
through (v) above that, together with any other outstanding Funded Debt created,
incurred, issued, assumed or guaranteed pursuant to this clause (vii), has an
aggregate principal amount at any time outstanding that does not exceed 10% of
Consolidated Stockholders Equity; and (viii) Funded Debt which would be
permitted to be incurred under Section 1007(a).
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Section 1010. Defeasance of Certain Obligations.
If this Section is specified, as contemplated by Section 301, to be
applicable to Securities of any series, the Guarantor and the Company may omit
to comply with any term, provision or condition set forth in Sections 1007 to
1009, inclusive, with respect to the Securities of such series, provided that
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the following conditions shall have been satisfied:
(1) With reference to this Section 1010, the Company has deposited or
caused to be irrevocably deposited (except as provided in Section 403) with
the Trustee as trust funds in trust, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of such Securities (i)
in the case of Securities of such series denominated in U.S. dollars, cash
in U.S. dollars (or such other money or currencies as shall then be legal
tender in the United States) and/or U.S. Government obligations, or (ii) in
the case of Securities of such series denominated in a Foreign Currency
(other than a basket currency), money and/or Foreign Government Securities
in the same Foreign Currency, which through the payment of interest and
principal in respect thereof, in accordance with their terms, will provide
(and without reinvestment and assuming no tax liability will be imposed on
such Trustee), not later than one day before the due date of any payment of
money, an amount in cash, sufficient, in the opinion of a nationally
recognized firm of independent certified public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge each installment of principal (and premium, if any) (including
mandatory sinking fund or analogous payments) of and any interest on all
the Securities of such series on the dates such installments of interest or
principal are due;
(2) Such deposit shall not, in the Opinion of Counsel, cause the
Trustee with respect to the Securities of such series to have a conflicting
interest as defined in Section 608 and for purposes of the Trust Indenture
Act with respect to the Securities of such series;
(3) Such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(4) No Event of Default or event which with notice or lapse of time
would become an Event of Default with respect to the Securities of such
series shall have occurred and be continuing on the date of such deposit;
(5) The Company has delivered to the Trustee an Opinion of Counsel to
the effect that (x) Holders of the Securities of such series will not
recognize income gain or
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89
loss for Federal income tax purposes as a result of such deposit and
defeasance of certain obligations and will be subject to Federal income tax
on the same amount and in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred and (y)
upon the 91st day after the date of such deposit, the trust funds would not
be subject to being characterized as a preference for Bankruptcy Law
purposes; and
(6) The Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that all conditions precedent herein
provided for relating to the defeasance contemplated by this Section have
been complied with.
Section 1011. Statement by Officers as to Default.
Each of the Guarantor and the Company will deliver to the Trustee,
within 120 days after the end of each fiscal year of the Guarantor and the
Company ending after the date hereof, an Officers' Certificate stating whether
or not to the best knowledge of the signers thereof the Guarantor and the
Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture and if the Guarantor and the Company
shall be in default specifying all such defaults and the nature and status
thereof of which they may have knowledge.
Section 1012. Waiver of Certain Covenants.
The Guarantor and the Company may omit in any particular instance to
comply with any term, provision or condition set forth in Sections 1005 to 1009,
inclusive, with respect to the Securities of any series if before the time for
such compliance the Holders of at least a majority in principal amount of the
Outstanding Securities of such series shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
term, provision or condition but no such waiver shall extend to or affect such
term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Guarantor and
the Company and the duties of the Trustee in respect of any such term provision
or condition shall remain in full force and effect.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to waive compliance with any
covenant or condition hereunder. If a record date is fixed, the Holders on such
record date, or their duly designated proxies, and only such Persons, shall be
entitled to waive any such compliance, whether or not such Holders remain
Holders after such record date; provided that unless the Holders of at least a
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majority in principal amount of the Outstanding Securities of such series shall
have waived such compliance prior
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to the date which is 90 days after such record date, any such waiver previously
given shall automatically and without further action by any Holder be cancelled
and of no further effect.
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 301 for Securities of any series)
in accordance with this Article.
Section 1102. Election to Redeem: Notice to Trustee.
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution. In case of any redemption at the election of
the Company of less than all the Securities of any series, the Company shall, at
least 60 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Securities of such series to be
redeemed. In the case of any redemption of Securities prior to the expiration of
any restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction.
Section 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to the minimum authorized denomination for
Securities of that series or any integral multiple thereof) of the principal
amount of Securities of such series of a denomination larger than the minimum
authorized denomination for Securities of that series.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of
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Securities shall relate, in the case of any Securities redeemed or to be
redeemed only in part, to the portion of the principal amount of such Securities
which has been or is to be redeemed.
Section 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series are to
be redeemed, the identification (and, in the case of partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
Section 1105. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
Section 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in
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the payment of the Redemption Price and accrued interest) such Securities shall
cease to bear interest. Upon surrender of any such Security for redemption in
accordance with said notice, such Security shall be paid by the Company at the
Redemption Price, together with accrued interest to the Redemption Date:
provided, however, that installments of interest whose Stated Maturity is on or
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prior to the Redemption Date shall be payable to the Holders of such Securities,
or one or more Predecessor Securities, registered as such at the close of
business on the relevant Record Dates according to their terms and the
provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.
Section 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and of like tenor, of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
ARTICLE TWELVE
Sinking Funds
Section 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of a series except as otherwise specified as
contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment", and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "optional
sinking fund payment". If provided for by the terms of Securities of any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 1202. Each sinking fund payment shall be applied to the
redemption of
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Securities of any series as provided for by the terms of Securities of such
series.
Section 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company (1) may deliver Outstanding Securities of a series (other
than any previously called for redemption) and (2) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series; provided that such securities have not been previously so credited.
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Such Securities shall be received and credited for such purpose by the Trustee
at the Redemption Price specified in such Securities for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
Section 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 1202 and the basis for such credit and will also deliver to
the Trustee any Securities to be so delivered. Not less than 30 days before
each such sinking fund payment date the Trustee shall select the Securities to
be redeemed upon such sinking fund payment date in the manner specified in
Section 1103 and cause notice of the redemption thereof to be given in the name
of and at the expense of the Company in the manner provided in Section 1104.
Such notice having been duly given, the redemption of such Securities shall be
made upon the terms and in the manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
Guarantee
Section 1301. Guarantee.
The Guarantor hereby unconditionally guarantees to each Holder of a
Security authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Securities or the obligations of the Company hereunder or
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thereunder, that: (a) the principal of, and premium, if any, and interest
(including additional amounts, if any) on the Securities will be promptly paid
in full when due, whether at maturity, by acceleration, redemption or otherwise,
and interest on the overdue principal of, premium, if any, and interest on the
Securities, if any, if lawful, and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Securities or any of such
other obligations, the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed or any performance so guaranteed for whatever reason, the
Guarantor will be obligated to pay the same immediately. The Guarantor hereby
agrees that its obligations hereunder shall be absolute and unconditional,
irrespective of the validity, regularity or enforceability of the Securities or
this Indenture, the absence of any action to enforce the same, any waiver or
consent by any Holder of the Securities with respect to any provisions hereof or
thereof, the recovery of any judgment against the Company, any action to enforce
the same or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor other than the defense that
payment has been made or that the other relevant obligations have been paid or
performed. The Guarantor hereby waives diligence, presentment, demand of
payment, claim of fraud, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenant
that this Guarantee will not be discharged except by complete performance of the
obligations contained in the Securities and this Indenture. If any Holder or
the Trustee is required by any court or otherwise to return to the Company or
Guarantor, or any Custodian, trustee, liquidator or other similar official
acting in relation to either the Company or Guarantor, any amount paid by either
to the Trustee or such Holder, this Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. The Guarantor agrees
that, as between the Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article Five for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (y) in
the event of any declaration of acceleration of such obligations as provided in
Article Five, such obligations (whether or not due and payable) shall forthwith
become due and payable by the Guarantor for the purpose of this Guarantee. The
foregoing Guarantee shall rank pari passu with all other unsecured and
unsubordinated Indebtedness of the Guarantor.
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The Guarantor shall be subrogated to all rights of each Holder of any
Securities against the Company in respect of any amounts paid to the Holders by
the Guarantor pursuant to the provisions of this Guarantee; provided that the
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Guarantor shall not be entitled to enforce, or to receive, any payments arising
out of or based upon, such right of subrogation until the principal of, premium,
if any, and interest (including additional amounts, if any) on all the
Securities shall have been paid in full and nothing remains owed to the Trustee
pursuant to this Indenture.
Section 1302. Execution and Delivery of Guarantee.
To evidence its Guarantee set forth in Section 1301 hereof, the
Guarantor hereby agrees that a notation of such Guarantee substantially in the
form of Exhibit A shall be endorsed (manually or by facsimile) by an officer of
the Guarantor on each Security authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of the Guarantor by its
Chairman, Vice Chairman, President, Chief Executive Officer or one of its Vice
Presidents and attested to by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary.
The Guarantor hereby agrees that its Guarantee set forth in Section
1301 shall remain in full force and effect notwithstanding any failure to
endorse on each Security a notation of such Guarantee.
If an officer whose signature is on this Indenture or on the Guarantee
no longer holds that office at the time the Trustee authenticates the Security
on which a Guarantee is endorsed, the Guarantee shall be valid, binding and
enforceable nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
this Indenture on behalf of the Guarantor.
Section 1303. Guarantor May Consolidate, etc., on Certain Terms.
The Guarantor shall not consolidate with or merge into any other
corporation or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, and the Guarantor shall not permit any Person to
consolidate with or merge into the Guarantor or convey, transfer or lease its
properties and assets substantially as an entirety to the Guarantor, unless:
(1) in case the Guarantor shall consolidate with or merge into
another corporation or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the corporation formed by such
consolidation or
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96
into which the Guarantor is merged or the Person which acquires by
conveyance or transfer, or which leases, the properties and assets of the
Guarantor substantially as an entirety shall be a corporation organized and
existing under the laws of the United States of America, any State thereof
or the District of Columbia or the British Virgin Islands and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the
obligations under the Guarantee and the performance of every covenant of
this Indenture on the part of the Guarantor to be performed or observed;
(2) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Guarantor as a result
of such transaction as having been incurred by the Guarantor at the time of
such transaction, no Event of Default, and no event which, after notice or
lapse of time or both, would become an Event of Default, shall have
happened and be continuing;
(3) if, as a result of any such consolidation or merger or such
conveyance, transfer or lease, properties or assets of the Guarantor would
become subject to a mortgage, pledge, lien, security interest or other
encumbrance which would not be permitted by this Indenture, the Guarantor
or such successor corporation or Person, as the case may be, shall take
such steps as shall be necessary effectively to secure the Securities
equally and ratably with (or prior to) all indebtedness secured thereby;
and
(4) the Guarantor has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture complies with this Article and that all conditions
precedent herein provided for relating to such transaction have been
complied with.
Section 1304. [Intentionally omitted]
Section 1305. Optional Tax Redemption.
The Securities of any series may be redeemed at the option of the
Guarantor, in whole but not in part, upon not less than 30 nor more than 60
days' notice given as provided herein, at a redemption price equal to the
principal amount thereof (except for Securities issued at a price representing a
discount from the principal amount payable at maturity which may be redeemed at
the redemption price set forth in such Securities) plus accrued interest to the
date fixed for redemption if, as a result of any change in or amendment to the
laws or any regulations or ruling promulgated thereunder of any jurisdiction
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(or of any political subdivision or taxing authority thereof or therein) in
which the Guarantor is resident for tax purposes, or any change in the official
application or interpretation of such laws, regulations or rulings, or any
change in the official application or interpretation of, or any execution of or
amendment to, any treaty or treaties affecting taxation to which such
jurisdiction (or such political subdivision or taxing authority) is a party (a
"Change in Tax Law"), which becomes effective on or after the original issue
date of such Securities, the Guarantor is or would be required on the next
succeeding Interest Payment Date to pay additional amounts with respect to the
Securities as described under Section 1306, and the payment of such additional
amounts cannot be avoided by the use of any reasonable measures available to the
Guarantor.
The Securities of any series may also be redeemed at the option of the
Guarantor, in whole but not in part, upon not less than 30 days nor more than 60
days' notice given as provided herein at a redemption price equal to the
principal amount thereof (except for Securities issued at a price representing a
discount from the principal amount payable at maturity which may be redeemed at
the redemption price set forth in such Securities) plus accrued interest to the
date fixed for redemption if the Person formed by a consolidation or
amalgamation of the Guarantor or into which the Guarantor is merged or to which
the Guarantor conveys, transfers or leases its properties and assets
substantially as an entirety is required, as a consequence of such
consolidation, amalgamation, merger, conveyance, transfer or lease and as a
consequence of a Change in Tax Law occurring after the date of such
consolidation, amalgamation, merger, conveyance, transfer or lease, to pay
additional amounts (as described in Section 1306) in respect of any tax,
assessment or governmental charge imposed on any Holder.
The Guarantor will also pay, or make available for payment, to Holders on
the redemption date any additional amounts (as described in Section 1306)
resulting from the payment of such redemption price.
Section 1306. Payment of Additional Amounts.
If any deduction or withholding for any present or future taxes,
assessments or other governmental charges of any jurisdiction (or any political
subdivision or taxing authority thereof or therein) in which the Guarantor is
resident for tax purposes shall at any time be required by such jurisdiction (or
any such political subdivision or taxing authority) in respect of any amounts to
be paid by the Guarantor under the Guarantee, the Guarantor will pay to each
Holder of Outstanding Securities as additional interest, such additional amounts
as may be necessary in order that the net amounts paid to such Holder who, with
respect to any such tax, assessment or other governmental charge, is not
resident in, or a citizen of, such jurisdiction, after such deduction or
withholding, shall be not less than the amount
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to which such Holder is entitled; provided, however, the Guarantor shall not be
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required to make any payment of additional amounts for or on account of:
(i) Any tax, assessment or other governmental charge which would
not have been imposed but for (a) the existence of any present or former
connection between such Holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of such Holder, if such Holder is an
estate, trust, partnership, limited liability company or corporation) and
the taxing jurisdiction or any political subdivision or territory or
possession thereof or area subject to its jurisdiction, including, without
limitation, such Holder (or such fiduciary, settlor, beneficiary, member or
shareholder) being or having been a citizen or resident thereof or being or
having been present or engaged in trade or business therein or having had a
permanent establishment therein or (b) the presentation of an Outstanding
Security (where presentation is required) for payment on a date more than
30 days after (x) the date on which such payment became due and payable or
(y) the date on which payment thereof is duly provided for, whichever
occurs later;
(ii) Any estate, inheritance, gift, sale, transfer, personal
property or similar tax, assessment or other governmental charge;
(iii) Any tax, assessment or other governmental charge which is
payable otherwise than by withholding from payment of (or in respect of)
principal of, premium, if any, or any interest on, Outstanding Securities;
(iv) Any tax, assessment or other governmental charge that is
imposed or withheld by reason of the failure to comply by the Holder or the
beneficial owner of the Outstanding Security with a request of the
Guarantor addressed to the Holder (a) to provide information, documents or
other evidence concerning the nationality, residence or identity of the
Holder or such beneficial owner or (b) to make and deliver any declaration
or other similar claim (other than a claim for refund of a tax, assessment
or other governmental charge withheld by the Guarantor) or satisfy any
information or reporting requirements, which, in the case of (a) or (b), is
required or imposed by a statute, treaty, regulation or administrative
practice of the taxing jurisdiction as a precondition to exemption from all
or part of such tax, assessment or other governmental charge, provided
--------
that, in the case of (b), the Holder is legally entitled to deliver such
declaration or similar claim; or
(v) Any combination of items (i), (ii), (iii) and (iv) above;
<PAGE>
99
nor shall additional amounts be paid with respect to any payment of the
principal of, or any premium or interest on, any Outstanding Security to any
Holder who is a fiduciary or partnership or limited liability company or other
than the sole beneficial owner of such payment to the extent such payment would
be required by the laws of any jurisdiction in which the Guarantor is resident
for tax purposes (or any political subdivision or taxing authority thereof or
therein) to be included in the income for tax purposes of a beneficiary or
settlor with respect to such fiduciary or a member of such partnership, limited
liability company or beneficial owner who would not have been entitled to such
additional amounts had it been the Holder of such Outstanding Security.
Section 1307. "Trustee" to Include Paying Agent.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article Thirteen shall in such case (unless the context shall
otherwise require) be construed as extending to and including such Paying Agent
within its meaning as fully and for all intents and purposes as if such Paying
Agent were named in this Article Thirteen in place of the Trustee.
ARTICLE FOURTEEN
Immunity of Incorporators, Stockholders,
Officers, Directors and Employees
Section 1401. Exemption from Individual Liability.
No recourse under or upon any obligation, covenant or agreement of
this Indenture, or of any Security, or for any claim based thereon or otherwise
in respect thereof, shall be had against any incorporator, stockholder, officer,
director, or employee, as such, past, present or future, of the Company,
Guarantor or of any successor Person, either directly or through the Company or
the Guarantor, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the obligations issued hereunder are solely
corporate obligations of the Company and the Guarantor as the case may be, and
that no such personal liability whatever shall attach to, or is or shall be
incurred by, the incorporators, stockholders, officers, directors, or employees,
as such, of the Company, the Guarantor or of any successor Person, or any of
them, because of the creation of the indebtedness hereby authorized, or under or
by reason of the obligations, covenants or agreements contained in this
Indenture or in any of the Securities or implied therefrom; and that any and all
such personal liability, either at common law or in equity or by constitution or
statute, of, and any and all such rights and claims against, every such
incorporator, stockholder, officer, director, or employee, as such, because of
the creation
<PAGE>
100
of the indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Securities
or implied therefrom, are hereby expressly waived and released as a condition
of, and as a consideration for, the execution of this Indenture and the issue of
such Securities.
ARTICLE FIFTEEN
Miscellaneous
Section 1501. Consent to Jurisdiction, Etc.
(A) Each of the parties hereto consents to the jurisdiction of and
venue in federal and state courts located in the Borough of Manhattan, City and
State of New York, over any suit, action or proceeding with respect to this
Indenture.
(B) The Guarantor hereby irrevocably and unconditionally designates
and directs Tommy Hilfiger U.S.A., Inc. with offices on the date hereof at 25
West 39th Street, New York, New York, as respective agent to receive service of
any and all process and documents on its respective behalf in any legal action
or proceeding referred to in paragraph (a) of this Article in the State of New
York and agrees that service upon such agent shall constitute valid and
effective service upon the Guarantor and that failure of Tommy Hilfiger U.S.A.,
Inc. to give any notice of such service to the Guarantor shall not affect or
impair in any way the validity of such service or of any judgment rendered in
any action or proceeding based thereon and agrees to appoint a successor agent
to receive service of process on or prior to the termination for any reason of
the appointment of Tommy Hilfiger U.S.A., Inc. (or any successor agent) as agent
to receive service of process.
(C) Each of the Guarantor and the Company hereby irrevocably and
unconditionally agrees that service of process in any such action or proceeding
may also be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the Guarantor,
c/o the Company, at 25 West 39th Street, New York, New York or to the Company at
25 West 39th Street, New York, New York.
(D) The provisions of this Article shall survive the termination of
this Indenture, in whole or in part.
* * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE>
101
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
TOMMY HILFIGER U.S.A., INC.
By: /s/ Benjamin M.T. Ng
---------------------
Name: Benjamin M.T. Ng
Title: Executive Vice President
Attest: /s/ Joseph Scirocco
TOMMY HILFIGER CORPORATION
By: /s/ Benjamin M.T. Ng
---------------------
Name: Benjamin M.T. Ng
Title: Executive Vice President
-Corporate Finance
Attest: /s/ Joseph Scirocco
THE CHASE MANHATTAN BANK, as Trustee
By: /s/ Robert S. Peschler
-----------------------
Name: Robert S. Peschler
Title: Trust Officer
Attest: /s/ Gemmel Richards
Gemmel Richards
Assistant Secretary
<PAGE>
Exhibit A
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
Tommy Hilfiger Corporation, a corporation duly organized and existing under
the laws of the British Virgin Islands (herein called the "Guarantor", which
term includes any successor or additional Guarantor under the Indenture (the
"Indenture") referred to in the Security upon which this notation is endorsed)
(i) has unconditionally guaranteed, to the extent permitted by law, that (a) the
principal of, and premium, if any, and interest (including additional amounts,
if any) on the Securities will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of, premium, if any, and interest on the Securities, if any, if
lawful, and all other obligations of the Company to the Holders or the Trustee
will be promptly paid in full or performed, all in accordance with the terms
hereof and as set forth in the Indenture; and (b) in case of any extension of
time of payment or renewal of any Securities or any of such other obligations,
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration, or otherwise.
No stockholder, officer, director, employee or incorporator, past, present
or future, of the Guarantor, as such, shall have any personal liability under
this Guarantee by reason of his or its status as such stockholder, officer,
director, employee or incorporator.
This Guarantee shall be binding upon the Guarantor and its successors and
assigns and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof.
This Guarantee shall not be valid or obligatory for any purpose with
respect to a Security until the certificate of authentication on the Security
upon which this Guarantee is noted shall have been executed by or on behalf of
the Trustee under the Indenture by the manual signature of one of its authorized
signatories.
TOMMY HILFIGER CORPORATION
By: ________________________
Name:
Title:
<PAGE>
EXHIBIT 10.4
================================================================================
$450,000,000
CREDIT AGREEMENT
AMONG
TOMMY HILFIGER CORPORATION,
AS GUARANTOR,
TOMMY HILFIGER U.S.A., INC.,
AS BORROWER,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
FLEET BANK, N.A.,
AS DOCUMENTATION AGENT,
NATIONSBANK, N.A.,
AS SYNDICATION AGENT
AND
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT
DATED AS OF MAY 8, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
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<TABLE>
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<S> <C>
SECTION 1. DEFINITIONS...................................................................................... 1
1.1 Defined Terms................................................................................. 1
1.2 Other Definitional Provisions................................................................. 18
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS.................................................................. 19
2.1 Term Commitments.............................................................................. 19
2.2 Procedure for Term Loan Borrowing............................................................. 19
2.3 Repayment of Term Loans....................................................................... 19
2.4 Revolving Commitments......................................................................... 20
2.5 Procedure for Revolving Loan Borrowing........................................................ 20
2.6 Swingline Commitment.......................................................................... 20
2.7 Procedure for Swingline Borrowing; Refunding of Swingline Loans............................... 21
2.8 Commitment Fees, etc. ........................................................................ 22
2.9 Termination or Reduction of Revolving Commitments............................................. 22
2.10 Optional Prepayments.......................................................................... 23
2.11 Mandatory Prepayments and Commitment Reductions............................................... 23
2.12 Conversion and Continuation Options........................................................... 23
2.13 Limitations on Eurodollar Tranches............................................................ 24
2.14 Interest Rates and Payment Dates.............................................................. 24
2.15 Computation of Interest and Fees.............................................................. 25
2.16 Inability to Determine Interest Rate.......................................................... 25
2.17 Pro Rata Treatment and Payments............................................................... 25
2.18 Requirements of Law........................................................................... 27
2.19 Taxes......................................................................................... 28
2.20 Indemnity..................................................................................... 29
2.21 Change of Lending Office...................................................................... 29
2.22 Replacement of Lenders........................................................................ 29
SECTION 3. LETTERS OF CREDIT................................................................................ 30
3.1 L/C Commitment................................................................................ 30
3.2 Procedure for Issuance of Letter of Credit.................................................... 30
3.3 Fees and Other Charges........................................................................ 31
3.4 L/C Participations............................................................................ 31
3.5 Reimbursement Obligation of the Borrower...................................................... 32
3.6 Obligations Absolute.......................................................................... 32
3.7 Letter of Credit Payments..................................................................... 33
3.8 Applications.................................................................................. 33
SECTION 4. REPRESENTATIONS AND WARRANTIES................................................................... 33
4.1 Financial Condition........................................................................... 33
4.2 No Change..................................................................................... 34
4.3 Corporate Existence; Compliance with Law...................................................... 34
4.4 Corporate Power; Authorization; Enforceable Obligations....................................... 34
4.5 No Legal Bar.................................................................................. 34
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4.6 Litigation.................................................................................... 34
4.7 No Default.................................................................................... 35
4.8 Ownership of Property; Liens.................................................................. 35
4.9 Intellectual Property......................................................................... 35
4.10 Taxes......................................................................................... 35
4.11 Federal Regulations........................................................................... 35
4.12 Labor Matters................................................................................. 35
4.13 ERISA......................................................................................... 35
4.14 Investment Company Act; Other Regulations..................................................... 36
4.15 Subsidiaries.................................................................................. 36
4.16 Use of Proceeds............................................................................... 36
4.17 Environmental Matters......................................................................... 36
4.18 Accuracy of Information, etc.................................................................. 37
4.19 Solvency...................................................................................... 37
4.20 Year 2000 Matters............................................................................. 37
SECTION 5. CONDITIONS PRECEDENT............................................................................. 38
5.1 Conditions to Initial Extension of Credit..................................................... 38
5.2 Conditions to Each Extension of Credit........................................................ 40
SECTION 6. AFFIRMATIVE COVENANTS............................................................................ 40
6.1 Financial Statements.......................................................................... 40
6.2 Certificates; Other Information............................................................... 41
6.3 Payment of Obligations........................................................................ 42
6.4 Maintenance of Existence; Compliance. ........................................................ 42
6.5 Maintenance of Property; Insurance............................................................ 42
6.6 Inspection of Property; Books and Records; Discussions........................................ 42
6.7 Notices....................................................................................... 42
6.8 Environmental Laws............................................................................ 43
6.9 Year 2000 Matters............................................................................. 43
SECTION 7. NEGATIVE COVENANTS............................................................................... 43
7.1 Financial Condition Covenants................................................................. 43
7.2 Indebtedness.................................................................................. 44
7.3 Liens......................................................................................... 45
7.4 Fundamental Changes........................................................................... 46
7.5 Disposition of Property....................................................................... 46
7.6 Restricted Payments........................................................................... 47
7.7 Investments................................................................................... 47
7.8 Payments and Modifications of Debt Instruments, etc. ......................................... 48
7.9 Transactions with Affiliates.................................................................. 49
7.10 Sales and Leasebacks.......................................................................... 49
7.11 Changes in Fiscal Periods..................................................................... 49
7.12 Negative Pledge Clauses....................................................................... 49
7.13 Clauses Restricting Subsidiary Distributions.................................................. 49
7.14 Lines of Business............................................................................. 49
SECTION 8. EVENTS OF DEFAULT................................................................................ 49
</TABLE>
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SECTION 9. THE ADMINISTRATIVE AGENT......................................................................... 52
9.1 Appointment................................................................................... 52
9.2 Delegation of Duties.......................................................................... 52
9.3 Exculpatory Provisions........................................................................ 52
9.4 Reliance by Administrative Agent.............................................................. 53
9.5 Notice of Default............................................................................. 53
9.6 Non-Reliance on Administrative Agent and Other Lenders........................................ 53
9.7 Indemnification............................................................................... 54
9.8 Administrative Agent in Its Individual Capacity............................................... 54
9.9 Successor Administrative Agent................................................................ 54
SECTION 10. GUARANTEE....................................................................................... 55
10.1 Guarantee.................................................................................... 55
10.2 No Subrogation, Contribution, Reimbursement or Indemnity..................................... 55
10.3 Amendments, etc. with respect to the Obligations............................................. 56
10.4 Guarantee Absolute and Unconditional......................................................... 56
10.5 Reinstatement................................................................................ 57
10.6 Payments..................................................................................... 57
SECTION 11. MISCELLANEOUS................................................................................... 57
11.1 Amendments and Waivers....................................................................... 57
11.2 Notices...................................................................................... 58
11.3 No Waiver; Cumulative Remedies............................................................... 59
11.4 Survival of Representations and Warranties................................................... 59
11.5 Payment of Expenses and Taxes................................................................ 59
11.6 Successors and Assigns; Participations and Assignments....................................... 60
11.7 Adjustments; Set-off......................................................................... 62
11.8 Counterparts................................................................................. 62
11.9 Severability................................................................................. 62
11.10 Integration.................................................................................. 62
11.11 GOVERNING LAW................................................................................ 63
11.12 Submission To Jurisdiction; Waivers.......................................................... 63
11.13 Acknowledgements............................................................................. 63
11.14 WAIVERS OF JURY TRIAL........................................................................ 64
11.15 Confidentiality.............................................................................. 64
11.16 Documentation Agent and Syndication Agent.................................................... 64
</TABLE>
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<PAGE>
ANNEX:
A Pricing Grid
SCHEDULES:
1.1 Commitments
3.1 Existing Letters of Credit
4.4 Consents, Authorizations, Filings and Notices
4.15 Subsidiaries
7.2(d) Existing Indebtedness
7.3(f) Existing Liens
7.12 Existing Negative Pledge Clauses
EXHIBITS:
A Form of Compliance Certificate
B-1 Form of Borrower Closing Certificate
B-2 Form of Holdings Closing Certificate
C Form of Assignment and Acceptance
D-1 Form of Legal Opinion of Wachtell, Lipton, Rosen & Katz
D-2 Form of Legal Opinion of Harney, Westwood & Riegels
D-3 Form of Legal Opinion of Steven R. Gursky
<PAGE>
CREDIT AGREEMENT, dated as of May 8, 1998, among TOMMY HILFIGER
CORPORATION, a British Virgin Islands corporation ("Holdings"), TOMMY HILFIGER
--------
U.S.A., INC., a Delaware corporation (the "Borrower"), the several banks and
--------
other financial institutions or entities from time to time parties to this
Agreement (the "Lenders"), FLEET BANK, N.A., as documentation agent (in such
-------
capacity, the "Documentation Agent"), NATIONSBANK, N.A., as syndication agent
-------------------
(in such capacity, the "Syndication Agent") and THE CHASE MANHATTAN BANK, as
-----------------
administrative agent.
The parties hereto hereby agree as follows:
1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in
-------------
this Section 1.1 shall have the respective meanings set forth in this Section
1.1.
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
---
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on
such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof:
"Prime Rate" shall mean the rate of interest per annum publicly announced from
----------
time to time by the Reference Lender as its prime rate in effect at its
principal office in New York City (the Prime Rate not being intended to be the
lowest rate of interest charged by the Reference Lender in connection with
extensions of credit to debtors); "Base CD Rate" shall mean the sum of (a) the
------------
product of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the
numerator of which is one and the denominator of which is one minus the C/D
Reserve Percentage and (b) the C/D Assessment Rate; and "Three-Month Secondary
---------------------
CD Rate" shall mean, for any day, the secondary market rate for three-month
- -------
certificates of deposit reported as being in effect on such day (or, if such day
shall not be a Business Day, the next preceding Business Day) by the Board
through the public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be published in
Federal Reserve Statistical Release H.15(519) during the week following such
day), or, if such rate shall not be so reported on such day or such next
preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 A.M., New York City time, on such day (or, if
such day shall not be a Business Day, on the next preceding Business Day) by the
Reference Lender from three New York City negotiable certificate of deposit
dealers of recognized standing selected by it. Any change in the ABR due to a
change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate shall be effective as of the opening of business on the effective
day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate, respectively.
"ABR Loans": Loans the rate of interest applicable to which is based
---------
upon the ABR and, unless the context otherwise requires, all Swingline Loans.
"Acquired Companies": the collective reference to Pepe and TH Canada.
------------------
"Acquisition": as defined in Section 5.1.
-----------
"Acquisition Agreement": the Stock Purchase Agreement, dated as of
---------------------
January 31, 1998, by and among Holdings, the Borrower, Tommy Hilfiger (Eastern
Hemisphere) Limited and Pepe Jeans London Corporation.
"Adjustment Date": as defined in the Pricing Grid.
---------------
<PAGE>
2
"Administrative Agent": The Chase Manhattan Bank, together with its
--------------------
affiliates, as the arranger of the Commitments and as the administrative agent
for the Lenders under this Agreement and the other Loan Documents, together with
any of its successors.
"Affiliate": as to any Person, any other Person that, directly or
---------
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 20% or more of the securities
having ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
"Aggregate Exposure": with respect to any Lender at any time, an
------------------
amount equal to (a) until the Closing Date, the aggregate amount of such
Lender's Commitments at such time and (b) thereafter, the sum of (i) the
aggregate then unpaid principal amount of such Lender's Term Loans and (ii) the
amount of such Lender's Revolving Commitment then in effect or, if the Revolving
Commitments have been terminated, the amount of such Lender's Revolving
Extensions of Credit then outstanding.
"Aggregate Exposure Percentage": with respect to any Lender at any
-----------------------------
time, the ratio (expressed as a percentage) of such Lender's Aggregate Exposure
at such time to the Aggregate Exposure of all Lenders at such time.
"Agreement": this Credit Agreement, as amended, supplemented or
---------
otherwise modified from time to time.
"Applicable Margin": 0.625%; provided, that, on and after the first
----------------- --------
Adjustment Date occurring after December 31, 1998, the Applicable Margin will be
determined pursuant to the Pricing Grid.
"Application": an application, in such form as the relevant Issuing
-----------
Lender may specify from time to time, requesting such Issuing Lender to open a
Letter of Credit.
"Asset Sale": any Disposition of property or series of related
----------
Dispositions of property (excluding any such Disposition permitted by clause
(a), (b), (c), (d), (e) or (f) of Section 7.5) that yields gross proceeds to the
Borrower or any of its Subsidiaries (valued at the initial principal amount
thereof in the case of non-cash proceeds consisting of notes or other debt
securities and valued at fair market value in the case of other non-cash
proceeds) in excess of $5,000,000.
"Assignee": as defined in Section 11.6(c).
--------
"Assignor": as defined in Section 11.6(c).
--------
"Available Basket": at any time, an amount equal to the excess of (a)
----------------
33% of the sum of Consolidated Net Income for all of the fiscal years ending
prior to such date (determined on a cumulative basis), commencing with the
fiscal year ending March 31, 1998, over (b) the sum of, without duplication, (i)
the amount of all Restricted Payments made to Holdings after the Closing Date
and prior to such date pursuant to Section 7.6(c), (ii) the amount of all
Investments in Holdings and the Holdings Subsidiaries made by the Borrower and
its Subsidiaries and the amount of all Investments in Holdings made by the
Holdings Subsidiaries, in each case, after the Closing Date and prior to such
date pursuant to Section 7.7(h), (iii) the amount of all then outstanding
Guarantee Obligations of Holdings with respect to
<PAGE>
3
Indebtedness of any Unrestricted Subsidiary made pursuant to clause (i) of the
proviso to the definition of "Unrestricted Subsidiary", (iv) the amount of all
Investments by the Borrower or any other Subsidiary in any Unrestricted
Subsidiary made after the Closing Date and prior to such date pursuant to clause
(v) of the proviso to the definition of "Unrestricted Subsidiary" and (v) the
amount of all payments of principal made after the Closing Date and prior to
such date by the Borrower or any of its Subsidiaries in respect of Indebtedness
contemplated by Section 7.6(b)(i) or any other Indebtedness owing to Holdings
arising from non-cash transactions.
"Available Revolving Commitment": as to any Revolving Lender at any
------------------------------
time, an amount equal to the excess, if any, of (a) such Lender's Revolving
Commitment over (b) such Lender's Revolving Extensions of Credit; provided, that
---- --------
in calculating any Lender's Revolving Extensions of Credit for the purpose of
determining such Lender's Available Revolving Commitment pursuant to Section
2.8(a), the aggregate principal amount of Swingline Loans then outstanding shall
be deemed to be zero.
"Board": the Board of Governors of the Federal Reserve System of the
-----
United States (or any successor).
"Borrowing Date": any Business Day specified by the Borrower as a
--------------
date on which the Borrower requests the relevant Lenders to make Loans
hereunder.
"Business": as defined in Section 4.17.
--------
"Business Day": a day other than a Saturday, Sunday or other day on
------------
which commercial banks in New York City are authorized or required by law to
close, provided, that with respect to notices and determinations in connection
--------
with, and payments of principal and interest on, Eurodollar Loans, such day is
also a day for trading by and between banks in Dollar deposits in the interbank
eurodollar market.
"Canadian Loan Agreement": the C$25,000,000 credit facility to be
-----------------------
maintained by TH Canada after the Closing Date.
"Capital Expenditures": for any period, with respect to any Person,
--------------------
the aggregate of all expenditures by such Person and its Subsidiaries for the
acquisition or leasing (pursuant to a capital lease) of fixed or capital assets
or additions to equipment (including replacements, capitalized repairs and
improvements during such period) that should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries.
"Capital Lease Obligations": as to any Person, the obligations of
-------------------------
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or
-------------
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued by, or
----------------
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith
<PAGE>
4
and credit of the United States, in each case maturing within one year from the
date of acquisition; (b) certificates of deposit, time deposits, Yankee or
eurodollar time deposits, repurchase agreements, reverse repurchase agreements
or overnight bank deposits having maturities of twelve months or less from the
date of acquisition issued by any Lender or by any commercial bank organized
under the laws of the United States of America or any state thereof having
combined capital and surplus of not less than $500,000,000; (c) bankers
acceptances or commercial paper of an issuer rated at least A-1 by Standard &
Poor's Ratings Services or P-1 by Moody's Investors Service, Inc., or carrying
an equivalent rating by a nationally recognized rating agency, if both of the
two named rating agencies cease publishing ratings of commercial paper issuers
generally, and maturing within six months from the date of acquisition; (d)
corporate bonds rated BBB or Baa2 or better (or equivalent ratings), provided
--------
that not more than 20% of the aggregate principal amount of all Cash Equivalents
at any one time outstanding may be invested in such corporate bonds; (e) money
market investment funds which invest primarily in the types of securities
described in clauses (a) through (d) above and consistent with past practices;
and (f) in the case of investments by any Foreign Subsidiary, obligations of a
credit quality and maturity comparable to that of the items referred to in
clauses (a) through (e) above that are available in local markets.
"C/D Assessment Rate": for any day as applied to any ABR Loan, the
-------------------
annual assessment rate in effect on such day that is payable by a member of the
Bank Insurance Fund maintained by the Federal Deposit Insurance Corporation (the
"FDIC") classified as well-capitalized and within supervisory subgroup "B" (or a
----
comparable successor assessment risk classification) within the meaning of 12
C.F.R. (S) 327.4 (or any successor provision) to the FDIC (or any successor) for
the FDIC's (or such successor's) insuring time deposits at offices of such
institution in the United States.
"C/D Reserve Percentage": for any day as applied to any ABR Loan,
----------------------
that percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board, for determining the maximum reserve requirement for a
Depositary Institution (as defined in Regulation D of the Board as in effect
from time to time) in respect of new non-personal time deposits in Dollars
having a maturity of 30 days or more.
"Chase": The Chase Manhattan Bank, together with its affiliates,
-----
together with any of its successors.
"Closing Date": the date on which the conditions precedent set forth
------------
in Section 5.1 shall have been satisfied, which date is May 8, 1998.
"Code": the Internal Revenue Code of 1986, as amended from time to
----
time.
"Commercial L/C Commission Rate": 0.10%; provided, that, on and after
------------------------------ --------
the first Adjustment Date occurring after December 31, 1998, the Commercial L/C
Commission Rate will be determined pursuant to the Pricing Grid.
"Commitment": as to any Lender, the sum of the Term Commitment and
----------
the Revolving Commitment of such Lender.
"Commitment Fee Rate": 0.225% per annum; provided, that, on and after
------------------- --------
the first Adjustment Date occurring after December 31, 1998, the Commitment Fee
Rate will be determined pursuant to the Pricing Grid.
<PAGE>
5
"Commonly Controlled Entity": an entity, whether or not incorporated,
--------------------------
that is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group that includes the Borrower and that is
treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a
----------------------
Responsible Officer of the Borrower substantially in the form of Exhibit A.
"Confidential Information Memorandum": the Confidential Information
-----------------------------------
Memorandum dated April 1998 and furnished to the Lenders.
"Consolidated EBITDA": for any period, subject to Section 1.2(c),
-------------------
Consolidated Net Income for such period plus, without duplication and to the
----
extent reflected as a charge in the statement of such Consolidated Net Income
for such period, the sum of (a) income tax expense, (b) interest expense,
amortization or writeoff of debt discount and debt issuance costs and
commissions, discounts and other fees and charges associated with Indebtedness
(including the Loans), (c) depreciation and amortization expense, (d)
amortization of intangibles (including, but not limited to, goodwill) and
organization costs, (e) any extraordinary, unusual or non-recurring non-cash
expenses or losses (including, whether or not otherwise includable as a separate
item in the statement of such Consolidated Net Income for such period, non-cash
losses on sales of assets outside of the ordinary course of business) and (f)
any other non-cash charges, and minus, to the extent included in the statement
-----
of such Consolidated Net Income for such period, the sum of (a) any
extraordinary, unusual or non-recurring non-cash income or gains (including,
whether or not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, non-cash gains on the sales of assets
outside of the ordinary course of business) and (b) any other non-cash income,
all as determined on a consolidated basis. For the purposes of calculating
Consolidated EBITDA for any period of four consecutive fiscal quarters ending on
or prior to March 31, 1999, such item shall be calculated after giving pro forma
--- -----
effect to the Acquisition as if the Acquisition occurred on the first day of
such period.
"Consolidated EBITDAR": for any period, Consolidated EBITDA for such
--------------------
period plus, without duplication and to the extent reflected as a charge in the
----
statement of Consolidated Net Income for such period, Consolidated Lease Expense
for such period.
"Consolidated Fixed Charge Coverage Ratio": for any period of four
----------------------------------------
consecutive fiscal quarters of Holdings, the ratio of (a) Consolidated EBITDAR
for such period less the aggregate amount actually paid by Holdings and its
Subsidiaries in cash during such period on account of Capital Expenditures to
(b) Consolidated Fixed Charges for such period. For the purposes of calculating
the Consolidated Fixed Charge Coverage Ratio for any period of four consecutive
fiscal quarters ending on or prior to March 31, 1999, such ratio shall be
calculated after giving pro forma effect to the Acquisition as if the
--- -----
Acquisition occurred on the first day of such period.
"Consolidated Fixed Charges": for any period, the sum (without
--------------------------
duplication) of (a) Consolidated Interest Expense for such period, (b)
Consolidated Lease Expense for such period and (c) scheduled payments made
during such period on account of principal of Indebtedness of Holdings or any of
its Subsidiaries (including scheduled principal payments in respect of the Term
Loans).
"Consolidated Funded Debt": at any date, the aggregate outstanding
------------------------
principal amount, without duplication, of the following types of Indebtedness of
Holdings and its Subsidiaries at such date, determined on a consolidated basis
in accordance with GAAP: (a) all indebtedness for borrowed money, (b) all
obligations for the deferred purchase price of property or services (other than
current trade payables incurred in the ordinary course of business), (c) all
obligations evidenced by notes, bonds,
<PAGE>
6
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by Holdings or any of its Subsidiaries (even though the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (e) all Capital
Lease Obligations, (f) all Guarantee Obligations in respect of obligations of
the kind referred to in clauses (a) through (e) above (other than Guarantee
Obligations of Holdings in respect of obligations of any Unrestricted
Subsidiary), and (g) all obligations of the kind referred to in clauses (a)
through (f) above secured by (or for which the holder of such obligation has an
existing right, contingent or otherwise, to be secured by) any Lien on property
(including accounts and contract rights) owned by Holdings or any of its
Subsidiaries, whether or not Holdings or any of its Subsidiaries has assumed or
become liable for the payment of such obligation.
"Consolidated Interest Expense": for any period, total cash interest
-----------------------------
expense (including that attributable to Capital Lease Obligations) of Holdings
and its Subsidiaries for such period with respect to all outstanding
Indebtedness of Holdings and its Subsidiaries determined on a consolidated basis
in accordance with GAAP.
"Consolidated Lease Expense": for any period, the aggregate amount of
--------------------------
fixed and contingent rentals payable by Holdings and its Subsidiaries determined
on a consolidated basis in accordance with GAAP, for such period with respect to
leases of real and personal property; provided, that Capital Lease Obligations
--------
shall not constitute Consolidated Lease Expense.
"Consolidated Leverage Ratio": on any day, the ratio of (a)
---------------------------
Consolidated Funded Debt on such day to (b) Consolidated EBITDA for the most
recent period of four consecutive fiscal quarters of Holdings for which the
relevant financial information is available.
"Consolidated Net Income": for any period, subject to Section 1.2(c),
-----------------------
the consolidated net income (or loss) of Holdings and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP; provided that there
--------
shall be excluded (a) the income (or deficit) of any Person accrued prior to the
date it becomes a Subsidiary of Holdings or is merged into or consolidated with
Holdings or any of its Subsidiaries, (b) the income (or deficit) of any Person
(other than a Subsidiary of Holdings) in which Holdings or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by Holdings or such Subsidiary in the form of
dividends or similar distributions and (c) the undistributed earnings of any
Subsidiary of Holdings (other than the Borrower) to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of any Contractual Obligation (other
than under any Loan Document) or Requirement of Law applicable to such
Subsidiary.
"Consolidated Net Worth": at any date, all amounts that would, in
----------------------
conformity with GAAP, be included on a consolidated balance sheet of Holdings
and its Subsidiaries under stockholders' equity at such date.
"Continuing Directors": the directors of Holdings on the Closing Date
--------------------
and each other director, if, in each case, such other director's nomination for
election to the board of directors of Holdings is recommended by at least a
majority of the then Continuing Directors.
"Contractual Obligation": as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
<PAGE>
7
"Default": any of the events specified in Section 8, whether or not
-------
any requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
"Disposition": with respect to any property, any sale, lease, sale
-----------
and leaseback, assignment, conveyance, transfer or other disposition thereof;
and the terms "Dispose" and "Disposed of" shall have correlative meanings.
------- -----------
"Dollars" and "$": dollars in lawful currency of the United States of
------- -
America.
"Domestic Subsidiary": any Subsidiary organized under the laws of any
-------------------
jurisdiction within the United States of America.
"Environmental Laws": any and all foreign, Federal, state, local or
------------------
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
---------------------------------
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
(including basic, supplemental, marginal and emergency reserves under any
regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System.
"Eurodollar Base Rate": with respect to each day during each Interest
--------------------
Period pertaining to a Eurodollar Loan, the rate per annum determined on the
basis of the rate for deposits in Dollars for a period equal to such Interest
Period commencing on the first day of such Interest Period appearing on Page
3750 of the Dow Jones Markets screen as of 11:00 A.M., London time, two Business
Days prior to the beginning of such Interest Period. In the event that such
rate does not appear on Page 3750 of the Dow Jones Markets screen (or otherwise
on such screen), the "Eurodollar Base Rate" shall be determined by reference to
--------------------
such other comparable publicly available service for displaying eurodollar rates
as may be selected by the Administrative Agent or, in the absence of such
availability, by reference to the rate at which the Administrative Agent is
offered Dollar deposits at or about 11:00 A.M., New York City time, two Business
Days prior to the beginning of such Interest Period in the interbank eurodollar
market where its eurodollar and foreign currency and exchange operations are
then being conducted for delivery on the first day of such Interest Period for
the number of days comprised therein.
"Eurodollar Loans": Loans the rate of interest applicable to which is
----------------
based upon the Eurodollar Rate.
<PAGE>
8
"Eurodollar Rate": with respect to each day during each Interest
---------------
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward to the nearest 1/100th
of 1%):
Eurodollar Base Rate
-----------------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar Loans
------------------
the then current Interest Periods with respect to all of which begin on the same
date and end on the same later date (whether or not such Loans shall originally
have been made on the same day).
"Event of Default": any of the events specified in Section 8,
----------------
provided that any requirement for the giving of notice, the lapse of time, or
- --------
both, has been satisfied.
"Exchange Act": as defined in Section 8(j)(i).
------------
"Existing Account Parties": as defined in Section 3.1.
------------------------
"Facility": each of (a) the Term Commitments and the Term Loans made
--------
thereunder (the "Term Facility") and (b) the Revolving Commitments and the
-------------
extensions of credit made thereunder (the "Revolving Facility").
------------------
"Federal Funds Effective Rate": for any day, the weighted average of
----------------------------
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day of such transactions received by the Reference Lender
from three federal funds brokers of recognized standing selected by it.
"Foreign Subsidiary": any Subsidiary which is not a Domestic
------------------
Subsidiary.
"Funding Office": the office specified from time to time by the
--------------
Administrative Agent as its funding office by notice to the Borrower and the
Lenders.
"GAAP": generally accepted accounting principles in the United States
----
of America as in effect from time to time set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board and the rules and regulations of the
Securities and Exchange Commission, or in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession, that are applicable to the circumstances of Holdings and its
Subsidiaries as of the date of determination, except that for purposes of
Section 7.1, GAAP shall be determined on the basis of such principles in effect
on the date hereof and consistent with those used in the preparation of the most
recent audited financial statements delivered pursuant to Section 4.1(b). In
the event that any "Accounting Change" (as defined below) shall occur and such
change results in a change in the method of calculation of financial covenants,
standards or terms in this Agreement, then the Borrower and the Administrative
Agent agree to enter into negotiations in order to amend such provisions of this
Agreement so as to equitably reflect such Accounting Changes with the desired
result that the criteria for evaluating the Borrower's financial condition shall
be the same after such Accounting Changes as if such Accounting Changes had not
been made. Until such time as such an amendment shall
<PAGE>
9
have been executed and delivered by the Borrower, the Administrative Agent and
the Required Lenders, all financial covenants, standards and terms in this
Agreement shall continue to be calculated or construed as if such Accounting
Changes had not occurred. "Accounting Changes" refers to changes in accounting
principles required by the promulgation of any rule, regulation, pronouncement
or opinion by the Financial Accounting Standards Board of the American Institute
of Certified Public Accountants or, if applicable, the Securities and Exchange
Commission (or successors thereto or agencies with similar functions).
"Governmental Authority": any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including the National Association of Insurance Commissioners).
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
-------------------- -------------------
any obligation of (a) the guaranteeing person or (b) another Person (including
any bank under any letter of credit) to induce the creation of which the
guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
-------------------
of any other third Person (the "primary obligor") in any manner, whether
---------------
directly or indirectly, including any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall not include
-------- -------
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Holdings Subsidiaries": the Subsidiaries of Holdings other than the
---------------------
Borrower and its Subsidiaries.
"Incur": as defined in Section 7.2; and the terms "Incurred" and
----- --------
"Incurrence" shall have correlative meanings.
- -----------
"Indebtedness": of any Person at any date, without duplication, (a)
------------
all indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of property or services (other than
current trade payables incurred in the ordinary course of such Person's
business), (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all Capital Lease Obligations of
such Person, (f) all obligations of such Person, contingent
<PAGE>
10
or otherwise, as an account party under acceptance, letter of credit or similar
facilities, (g) all obligations of such Person, contingent or otherwise, to
purchase, redeem, retire or otherwise acquire for value any Capital Stock of
such Person, (h) all Guarantee Obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (g) above, (i) all
obligations of the kind referred to in clauses (a) through (h) above secured by
(or for which the holder of such obligation has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including accounts and
contract rights) owned by such Person, whether or not such Person has assumed or
become liable for the payment of such obligation, and (j) for the purposes of
Section 8(e) only, all obligations of such Person in respect of Interest Rate
Protection Agreements.
"Insolvency": with respect to any Multiemployer Plan, the condition
----------
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
---------
"Intellectual Property": the collective reference to all rights,
---------------------
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
copyrights, copyright licenses, patents, patent licenses, trademarks, trademark
licenses, technology, know-how and processes, and all rights to sue at law or in
equity for any infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.
"Interest Payment Date": (a) as to any ABR Loan, the first Business
---------------------
Day following the last day of each calendar quarter to occur while such Loan is
outstanding and the final maturity date of such Loan, (b) as to any Eurodollar
Loan having an Interest Period of three months or less, the last day of such
Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer
than three months, each day that is three months, or a whole multiple thereof,
after the first day of such Interest Period and the last day of such Interest
Period, (d) as to any Swingline Loan, the last day of any Interest Period
applicable thereto, and (e) as to any Loan (other than any Revolving Loan that
is an ABR Loan), the date of any repayment or prepayment made in respect
thereof.
"Interest Period": (a) as to any Eurodollar Loan, (x) initially, the
---------------
period commencing on the borrowing or conversion date, as the case may be, with
respect to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and (y) thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days prior to the last day of
the then current Interest Period with respect thereto; provided that, all of the
--------
foregoing provisions relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) any Interest Period that would otherwise extend beyond the
Revolving Termination Date or beyond the date final payment is due on the
Term Loans shall end on the Revolving Termination Date or such due date, as
applicable;
<PAGE>
11
(iii) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month; and
(iv) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an Interest
Period for such Loan; and
(b) as to any Swingline Loan, any Interest Period specified by the
Swingline Lender in connection therewith.
"Interest Rate Protection Agreement": any interest rate protection
----------------------------------
agreement, interest rate futures contract, interest rate option, interest rate
cap or other interest rate hedge arrangement, to or under which Holdings or any
of its Subsidiaries is a party or a beneficiary on the date hereof or becomes a
party or a beneficiary after the date hereof.
"Investments": as defined in Section 7.7.
-----------
"Issuing Lender": Chase and such other Lender or Lenders reasonably
--------------
acceptable to the Administrative Agent as may be designated by the Borrower,
each in its capacity as issuer of any Letter of Credit.
"L/C Commitment": $250,000,000.
--------------
"L/C Fee Distribution Date": five Business Days after the last day of
-------------------------
each March, June, September and December and the last day of the Revolving
Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of (a) the
---------------
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit that
have not then been reimbursed pursuant to Section 3.5.
"L/C Participants": the collective reference to all the Revolving
----------------
Lenders other than the relevant Issuing Lender.
"Letters of Credit": as defined in Section 3.1(a).
-----------------
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement and any capital lease having substantially the
same economic effect as any of the foregoing).
"Loan": any loan made by any Lender pursuant to this Agreement.
----
"Loan Documents": this Agreement and the Notes.
--------------
"Loan Parties": Holdings and the Borrower.
------------
"Majority Facility Lenders": with respect to any Facility, the
-------------------------
holders of more than 50% of the aggregate unpaid principal amount of the Term
Loans or the Total Revolving Extensions of Credit, as the case may be,
outstanding under such Facility (or, in the case of the Revolving Facility,
prior to any
<PAGE>
12
termination of the Revolving Commitments, the holders of more than 50% of the
Total Revolving Commitments).
"Majority Revolving Facility Lenders": the Majority Facility Lenders
-----------------------------------
in respect of the Revolving Facility.
"Material Adverse Effect": a material adverse effect on (a) the
-----------------------
business, operations, property, condition (financial or otherwise) or prospects
of Holdings and its Subsidiaries taken as a whole or (b) the validity or
enforceability of this Agreement or any of the other Loan Documents or the
rights or remedies of the Administrative Agent or the Lenders hereunder or
thereunder.
"Material Subsidiary": the Borrower and any other Subsidiary, the (a)
-------------------
assets, (b) revenues or (c) operating profit (excluding intercompany receivables
and revenues that would be eliminated upon consolidation in accordance with
GAAP) of which are, at the time of determination (determined, in the case of
clause (a), as at the end of the most recently concluded fiscal quarter, and, in
the case of clauses (b) and (c), in respect of the most recent period of four
consecutive fiscal quarters of Holdings for which the relevant financial
information is available), equal to or greater than five percent of the
consolidated assets, consolidated operating profit or consolidated revenues
(excluding intercompany receivables and revenue that would be eliminated upon
consolidation in accordance with GAAP), respectively, of Holdings and its
Subsidiaries at such time. Upon the acquisition of a new Subsidiary,
qualification as a "Material Subsidiary" shall be determined on a pro forma
--- -----
basis on the assumption that such Subsidiary had been acquired at the beginning
of the relevant period of four consecutive fiscal quarters.
"Materials of Environmental Concern": any gasoline or petroleum
----------------------------------
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including asbestos, polychlorinated biphenyls
and urea-formaldehyde insulation.
"Multiemployer Plan": a Plan that is a multiemployer plan as defined
------------------
in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or any
-----------------
Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents
(including any such proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase price adjustment
receivable or otherwise, but only as and when received) of such Asset Sale or
Recovery Event, net of attorneys' fees, accountants' fees, investment banking
fees, amounts required to be applied to the repayment of Indebtedness secured by
a Lien expressly permitted hereunder on any asset that is the subject of such
Asset Sale or Recovery Event and other customary fees and expenses actually
incurred in connection therewith and net of taxes paid or reasonably estimated
to be payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements) and (b) in connection
with any issuance of debt securities or instruments or the incurrence of loans,
the cash proceeds received from such issuance or incurrence, net of attorneys'
fees, investment banking fees, accountants' fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith.
"Non-Excluded Taxes": as defined in Section 2.19(a).
------------------
"Non-U.S. Lender": as defined in Section 2.19(b).
---------------
<PAGE>
13
"Notes": the collective reference to any promissory note evidencing
-----
Loans.
"Obligations": the unpaid principal of and interest on (including
-----------
interest accruing after the maturity of the Loans and Reimbursement Obligations
and interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Borrower, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) the Loans and all other obligations and
liabilities of the Borrower to the Administrative Agent or to any Lender (or, in
the case of Interest Rate Protection Agreements, any affiliate of any Lender),
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, any other Loan Document, the Letters of Credit, any
Interest Rate Protection Agreement entered into with any Lender or any affiliate
of any Lender or any other document made, delivered or given in connection
herewith or therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including all fees, charges and
disbursements of counsel to the Administrative Agent or to any Lender that are
required to be paid by the Borrower pursuant hereto) or otherwise.
"Participant": as defined in Section 11.6(b).
-----------
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
----
to Subtitle A of Title IV of ERISA (or any successor).
"Pepe": collectively, Pepe Jeans USA, Inc., a California corporation,
----
and TJ Far East Limited, a British Virgin Islands corporation, and its
Subsidiaries.
"Permitted Investors": the collective reference to the executive
-------------------
officers of AIHL Investment Group Limited on the date hereof and their
respective estates, lineal descendants and ascendants, adoptive children,
spouses, siblings, heirs, executors, personal representatives, administrators
and trusts for any of their benefit or the benefit of their respective spouses,
siblings, estates, lineal descendants and ascendants, adoptive children or heirs
and corporations and partnerships in which one or more of the foregoing own more
than 50% of the voting stock.
"Person": an individual, partnership, corporation, limited liability
------
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan that is
----
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pricing Grid": the pricing grid attached hereto as Annex A.
------------
"Pro Forma Balance Sheet": as defined in Section 4.1(a).
-----------------------
"Projections": as defined in Section 6.2(c).
-----------
"Properties": as defined in Section 4.17.
----------
<PAGE>
14
"Recovery Event": any settlement of or payment in respect of any
--------------
property or casualty insurance claim or any condemnation proceeding relating to
any asset of Holdings or any of its Subsidiaries.
"Reference Lender": The Chase Manhattan Bank.
----------------
"Refunded Swingline Loans": as defined in Section 2.7.
------------------------
"Refunding Date": as defined in Section 2.7.
--------------
"Register": as defined in Section 11.6(d).
--------
"Regulation U": Regulation U of the Board as in effect from time to
------------
time.
"Reimbursement Obligation": the obligation of the Borrower to
------------------------
reimburse the relevant Issuing Lender pursuant to Section 3.5 for amounts drawn
under Letters of Credit.
"Reinvestment Deferred Amount": with respect to any Reinvestment
----------------------------
Event, the aggregate Net Cash Proceeds received by Holdings or any of its
Subsidiaries in connection therewith that are not applied to prepay the Term
Loans or reduce the Revolving Commitments pursuant to Section 2.11(b) as a
result of the delivery of a Reinvestment Notice.
"Reinvestment Event": any Asset Sale or Recovery Event in respect of
------------------
which the Borrower has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a Responsible
-------------------
Officer stating that no Event of Default has occurred and is continuing and that
the Borrower (directly or indirectly through a Subsidiary of the Borrower)
intends and expects to use all or a specified portion of the Net Cash Proceeds
of an Asset Sale or Recovery Event to acquire assets useful in its business.
"Reinvestment Prepayment Amount": with respect to any Reinvestment
------------------------------
Event, the Reinvestment Deferred Amount relating thereto less any amount
expended prior to the relevant Reinvestment Prepayment Date to acquire assets
useful in the Borrower's business.
"Reinvestment Prepayment Date": with respect to any Reinvestment
----------------------------
Event, the earlier of (a) the date occurring twelve months after such
Reinvestment Event and (b) the date on which the Borrower shall have determined
not to, or shall have otherwise ceased to, acquire assets useful in the
Borrower's business with all or any portion of the relevant Reinvestment
Deferred Amount.
"Reorganization": with respect to any Multiemployer Plan, the
--------------
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
----------------
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg.
(S) 4043.
"Required Lenders": the holders of more than 50% of (a) until the
----------------
Closing Date, the Commitments and (b) thereafter, the sum of (i) the aggregate
unpaid principal amount of the Term Loans and (ii) the Total Revolving
Commitments or, if the Revolving Commitments have been terminated, the Total
Revolving Extensions of Credit.
<PAGE>
15
"Required Prepayment Lenders": the Majority Facility Lenders in
---------------------------
respect of each Facility.
"Requirement of Law": as to any Person, the Certificate of
------------------
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer": the principal executive officer, president,
-------------------
principal financial officer or principal accounting officer of Holdings or the
Borrower, as the case may be, but in any event, with respect to financial
matters, the principal financial or accounting officer of Holdings or the
Borrower, as the case may be.
"Restricted Payments": as defined in Section 7.6.
-------------------
"Revolving Commitment": as to any Lender, the obligation of such
--------------------
Lender, if any, to make Revolving Loans and participate in Swingline Loans and
Letters of Credit, in an aggregate principal and/or face amount not to exceed
the amount set forth under the heading "Revolving Commitment" opposite such
Lender's name on Schedule 1.1, as the same may be changed from time to time
pursuant to the terms hereof. The original amount of the Total Revolving
Commitments is $250,000,000.
"Revolving Commitment Period": the period from and including the
---------------------------
Closing Date to the Revolving Termination Date.
"Revolving Extensions of Credit": as to any Revolving Lender at any
------------------------------
time, an amount equal to the sum of (a) the aggregate principal amount of all
Revolving Loans made by such Lender then outstanding, (b) such Lender's
Revolving Percentage of the L/C Obligations then outstanding and (c) such
Lender's Revolving Percentage of the aggregate principal amount of Swingline
Loans then outstanding.
"Revolving Lender": each Lender that has a Revolving Commitment or
----------------
that holds Revolving Loans.
"Revolving Loans": as defined in Section 2.4.
---------------
"Revolving Loan Commitment": $150,000,000.
-------------------------
"Revolving Percentage": as to any Revolving Lender at any time, the
--------------------
percentage which such Lender's Revolving Commitment then constitutes of the
Total Revolving Commitments (or, at any time after the Revolving Commitments
shall have expired or terminated, the percentage which the aggregate principal
amount of such Lender's Revolving Extensions of Credit then outstanding
constitutes of the aggregate principal amount of the Revolving Extensions of
Credit then outstanding).
"Revolving Termination Date": March 31, 2003.
--------------------------
"Senior Note Indenture": the Indenture entered into by Holdings and
---------------------
the Borrower in connection with the issuance of the Senior Notes, together with
all instruments and other agreements entered into by Holdings or the Borrower in
connection therewith, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with Section 7.9.
<PAGE>
16
"Senior Notes": the notes of the Borrower issued on the Closing Date
------------
pursuant to the Senior Note Indenture.
"Single Employer Plan": any Plan that is covered by Title IV of
--------------------
ERISA, but that is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of
-------
any date of determination, (a) the amount of the "present fair saleable value"
of the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim", and
(ii) "claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"Subsidiary": as to any Person, a corporation, partnership, limited
----------
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall
refer to a Subsidiary or Subsidiaries of Holdings and shall include the
Borrower, the Acquired Companies and their respective Subsidiaries but shall not
include Unrestricted Subsidiaries (except for purposes of the definition of
"Unrestricted Subsidiary").
"Swingline Commitment": the obligation of the Swingline Lender to
--------------------
make Swingline Loans pursuant to Section 2.6 in an aggregate principal amount at
any one time outstanding not to exceed $10,000,000.
"Swingline Lender": The Chase Manhattan Bank, in its capacity as the
----------------
lender of Swingline Loans.
"Swingline Loans": as defined in Section 2.6.
---------------
"Swingline Participation Amount": as defined in Section 2.7.
------------------------------
"Term Commitment": as to any Lender, the obligation of such Lender,
---------------
if any, to make a Term Loan to the Borrower hereunder in a principal amount not
to exceed the amount set forth under the heading "Term Commitment" opposite such
Lender's name on Schedule 1.1. The original aggregate amount of the Term
Commitments is $200,000,000.
"Term Lender": each Lender that has a Term Commitment or is the
-----------
holder of a Term Loan.
<PAGE>
17
"Term Loan": as defined in Section 2.1.
---------
"Term Percentage": as to a Term Lender at any time, the percentage
---------------
which such Lender's Term Commitment then constitutes of the aggregate Term
Commitments (or, at any time after the Closing Date, the percentage which the
aggregate principal amount of such Lender's Term Loans then outstanding
constitutes of the aggregate principal amount of the Term Loans then
outstanding).
"TH Canada": collectively, Tomcan Investments, Inc., a British Virgin
---------
Islands corporation, and Tommy Hilfiger Canada Inc., a Canadian corporation.
"Total Revolving Commitments": at any time, the aggregate amount of
---------------------------
the Revolving Commitments then in effect.
"Total Revolving Extensions of Credit": at any time, the aggregate
------------------------------------
amount of the Revolving Extensions of Credit of the Revolving Lenders
outstanding at such time.
"Total Tangible Assets": at any date, an amount equal to all amounts
---------------------
that would, in conformity with GAAP, be included on a consolidated balance sheet
of Holdings and its Subsidiaries under total assets at such date minus
-----
intangible assets (including franchises, licenses, permits, patents, patent
applications, copyrights, trademarks, trade names and goodwill) of Holdings and
its Subsidiaries at such date.
"Transferee": any Assignee or Participant.
----------
"Type": as to any Loan, its nature as an ABR Loan or a Eurodollar
----
Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
---------------
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.
"Unrestricted Subsidiary": (a) any Subsidiary of Holdings created or
-----------------------
acquired by Holdings or any of its Subsidiaries and designated as such by the
Board of Directors of Holdings substantially concurrently with such creation or
acquisition and (b) any Subsidiary of such designated Subsidiary, provided, that
--------
(i) at no time shall any creditor of any Unrestricted Subsidiary have any claim
(whether pursuant to a Guarantee Obligation or otherwise) against Holdings or
any of its other Subsidiaries (other than another Unrestricted Subsidiary) in
respect of any Indebtedness or other obligation of any such Unrestricted
Subsidiary except for limited Guarantee Obligations of Holdings with respect to
Indebtedness of such Unrestricted Subsidiary in an aggregate principal amount
not to exceed for all Unrestricted Subsidiaries at any time the Available Basket
at such time; (ii) neither Holdings nor any of its Subsidiaries (other than
another Unrestricted Subsidiary) shall become a general partner or, in the case
of any limited liability company, member of any such Subsidiary; (iii) no
default with respect to any Indebtedness of any such Subsidiary (including any
right which the holders thereof may have to take enforcement action against any
such Subsidiary) shall permit (upon notice, lapse of time or both) any holder of
any Indebtedness of Holdings or its other Subsidiaries (other than another
Unrestricted Subsidiary) to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its final
scheduled maturity; (iv) no Unrestricted Subsidiary shall own any Capital Stock
of, or own or hold any Lien on any property of, Holdings or any other Subsidiary
of Holdings (other than another Unrestricted Subsidiary); (v) no Investments may
be made in any Unrestricted Subsidiary by the Borrower or any of its
Subsidiaries in excess of the Available Basket at such time; and
<PAGE>
18
(vi) at the time of such designation, no Default or Event of Default shall have
occurred and be continuing or would result therefrom (including on a pro forma
--- -----
basis pursuant to Section 7.1). Any Unrestricted Subsidiary may be designated as
a Subsidiary for all purposes of this Agreement by the Board of Directors of
Holdings or the Borrower, as applicable, provided that (i) at the time of such
--------
designation, no Default or Event of Default shall have occurred and be
continuing or would result therefrom (including on a pro forma basis pursuant to
--- -----
Section 7.1) and (ii) a certificate of a Responsible Officer demonstrating in
reasonable detail compliance with the requirements of clause (i) of this
sentence is delivered to the Administrative Agent concurrently with such
designation.
"U.S. Taxes": as defined in Section 11.6(d).
----------
"Wholly Owned Subsidiary": as to any Person, any other Person all of
-----------------------
the Capital Stock of which (other than directors' qualifying shares required by
law) is owned by such Person directly and/or through other Wholly Owned
Subsidiaries.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
-----------------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Loan Documents or any certificate or other document made
or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto, (i)
accounting terms relating to Holdings and its Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP, (ii)
the words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation", and (iii) the words "asset" and "property"
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, Capital
Stock, securities, accounts, leasehold interests and contract rights.
(c) For the purposes of calculating Consolidated EBITDA for any period
of four consecutive fiscal quarters (each, a "Reference Period") pursuant to any
determination of the Consolidated Leverage Ratio or for purposes of any
determination of Consolidated EBITDAR or Consolidated Interest Expense for any
Reference Period for the Consolidated Fixed Charge Coverage Ratio, (i) if, at
any time during such Reference Period, Holdings or any Subsidiary shall have
made any Material Disposition (as defined below), (x) the Consolidated EBITDA or
Consolidated EBITDAR, as the case may be, for such Reference Period shall be
reduced by an amount equal to the Consolidated EBITDA or Consolidated EBITDAR,
as the case may be, (if positive) attributable to the property that is the
subject of such Material Disposition for such Reference Period or increased by
an amount equal to the Consolidated EBITDA or Consolidated EBITDAR, as the case
may be, (if negative) attributable thereto for such Reference Period, and (y)
and Consolidated Interest Expense for such Reference Period shall be reduced by
an amount equal to the Consolidated Interest Expense for such Reference Period
attributable to any Indebtedness of Holdings or any Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to Holdings and its
Subsidiaries in connection with such Material Disposition (or, if the Capital
Stock of any Subsidiary is sold, the Consolidated Interest Expense for such
Reference Period directly attributable to the Indebtedness of such Subsidiary to
the extent Holdings and its continuing Subsidiaries are no longer liable for
such Indebtedness after such Material Disposition); and (ii) if, during such
Reference Period, Holdings or any Subsidiary shall have made a Material
Acquisition (as defined below), Consolidated EBITDA, Consolidated EBITDAR or
Consolidated Interest Expense, as the case may be, for such Reference Period
shall be calculated after giving pro forma effect thereto (including the
--- -----
incurrence or assumption of any such Indebtedness in connection therewith) as if
such Material Acquisition (and the incurrence or assumption of any such
Indebtedness) occurred on the first day of such
<PAGE>
19
Reference Period. If any Indebtedness bears a floating rate of interest and the
incurrence or assumption thereof is being given pro forma effect, the interest
--- -----
expense on such Indebtedness shall be calculated as if the rate in effect on the
last day of the relevant Reference Period had been the applicable rate for the
entire relevant Reference Period (taking into account any interest rate
protection agreement applicable to such Indebtedness if such interest rate
protection agreement has a remaining term greater than or equal to the lesser of
12 months and the remaining term of such Indebtedness). As used in this
paragraph, "Material Acquisition" means any acquisition of property or series of
related acquisitions of property that (a) constitutes assets comprising all or
substantially all of an operating unit of a business or constitutes all or
substantially all of the common stock of a Person and (b) involves the payment
of consideration by Holdings and its Subsidiaries in excess of $5,000,000; and
"Material Disposition" means any Disposition of property or series of related
Dispositions of property that yields gross proceeds to Holdings or any of its
Subsidiaries in excess of $5,000,000.
(d) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(e) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Commitments. Subject to the terms and conditions hereof, each
----------------
Term Lender severally agrees to make a term loan (a "Term Loan") to the Borrower
---------
on the Closing Date in an amount not to exceed the amount of the Term Commitment
of such Lender. The Term Loans may from time to time be Eurodollar Loans or ABR
Loans, as determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.2 and 2.12.
2.2 Procedure for Term Loan Borrowing. The Borrower shall give the
---------------------------------
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, one Business Day
prior to the anticipated Closing Date) requesting that the Term Lenders make the
Term Loans on the Closing Date and specifying the amount to be borrowed. Upon
receipt of such notice the Administrative Agent shall promptly notify each Term
Lender thereof. Not later than 12:00 Noon, New York City time, on the Closing
Date each Term Lender shall make available to the Administrative Agent at the
Funding Office an amount in immediately available funds equal to the Term Loan
or Term Loans to be made by such Lender. The Administrative Agent shall credit
the account of the Borrower on the books of such office of the Administrative
Agent with the aggregate of the amounts made available to the Administrative
Agent by the Term Lenders in immediately available funds.
2.3 Repayment of Term Loans. The Term Loan of each Term Lender shall
-----------------------
mature in 16 consecutive quarterly installments, commencing on June 30, 1999,
each of which shall be in an amount equal to such Lender's Term Percentage
multiplied by the amount set forth below opposite such installment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
June 30, 1999 $10,000,000
</TABLE>
<PAGE>
20
<TABLE>
<S> <C>
September 30, 1999 $10,000,000
December 31, 1999 $10,000,000
March 31, 2000 $10,000,000
June 30, 2000 $12,500,000
September 30, 2000 $12,500,000
December 31, 2000 $12,500,000
March 31, 2001 $12,500,000
June 30, 2001 $12,500,000
September 30, 2001 $12,500,000
December 31, 2001 $12,500,000
March 31, 2002 $12,500,000
June 30, 2002 $15,000,000
September 30, 2002 $15,000,000
December 31, 2002 $15,000,000
March 31, 2003 $15,000,000
</TABLE>
2.4 Revolving Commitments. (a) Subject to the terms and conditions
---------------------
hereof, each Revolving Lender severally agrees to make revolving credit loans
("Revolving Loans") to the Borrower from time to time during the Revolving
---------------
Commitment Period in an aggregate principal amount at any one time outstanding
which, when added to such Lender's Revolving Percentage of the sum of (i) the
L/C Obligations then outstanding and (ii) the aggregate principal amount of the
Swingline Loans then outstanding, does not exceed the amount of such Lender's
Revolving Commitment; provided that the Revolving Lenders shall have no
--------
obligation to make any Revolving Loan if, after giving effect to such Revolving
Loan, the aggregate outstanding principal amount of the Revolving Loans and the
Swingline Loans would exceed the Revolving Loan Commitment. During the
Revolving Commitment Period the Borrower may use the Revolving Commitments by
borrowing, prepaying the Revolving Loans in whole or in part, and reborrowing,
all in accordance with the terms and conditions hereof. The Revolving Loans may
from time to time be Eurodollar Loans or ABR Loans, as determined by the
Borrower and notified to the Administrative Agent in accordance with Sections
2.5 and 2.12, provided that no Revolving Loan shall be made as a Eurodollar Loan
--------
after the day that is one month prior to the Revolving Termination Date.
(b) The Borrower shall repay all outstanding Revolving Loans on the
Revolving Termination Date.
2.5 Procedure for Revolving Loan Borrowing. The Borrower may borrow
--------------------------------------
under the Revolving Commitments during the Revolving Commitment Period on any
Business Day, provided that the Borrower shall give the Administrative Agent
--------
irrevocable notice (which notice must be received by the Administrative Agent
prior to 11:00 A.M., New York City time, (a) three Business Days prior to the
requested Borrowing Date, in the case of Eurodollar Loans, or (b) on the
requested Borrowing Date, in the case of ABR Loans), specifying (i) the amount
and Type of Revolving Loans to be borrowed, (ii) the requested Borrowing Date
and (iii) in the case of Eurodollar Loans, the respective amounts of each such
Type of Loan and the respective lengths of the initial Interest Period therefor.
Each borrowing under the Revolving Commitments shall be in an amount equal to
(x) in the case of ABR Loans, $1,000,000 or a whole multiple thereof (or, if the
then aggregate Available Revolving Commitments are less than $1,000,000, such
lesser amount) and (y) in the case of Eurodollar Loans, $5,000,000 or a whole
multiple of $1,000,000 in excess thereof; provided, that the Swingline Lender
--------
may request, on behalf of the Borrower, borrowings under the Revolving
Commitments that are ABR Loans in other amounts pursuant to Section 2.7. Upon
receipt of any such notice from the Borrower, the Administrative Agent shall
promptly notify each Revolving Lender thereof. Each Revolving Lender will make
the amount of its pro
---
<PAGE>
21
rata share of each borrowing available to the Administrative Agent for the
- ----
account of the Borrower at the Funding Office prior to 2:00 P.M., New York City
time, on the Borrowing Date requested by the Borrower in funds immediately
available to the Administrative Agent. Such borrowing will then be made
available to the Borrower by the Administrative Agent crediting the account of
the Borrower on the books of such office with the aggregate of the amounts made
available to the Administrative Agent by the Revolving Lenders and in like funds
as received by the Administrative Agent.
2.6 Swingline Commitment. (a) Subject to the terms and conditions
--------------------
hereof, the Swingline Lender agrees to make a portion of the credit otherwise
available to the Borrower under the Revolving Commitments from time to time
during the Revolving Commitment Period by making swing line loans ("Swingline
---------
Loans") to the Borrower; provided that (i) the aggregate principal amount of
- ----- --------
Swingline Loans outstanding at any time shall not exceed the Swingline
Commitment then in effect (notwithstanding that the Swingline Loans outstanding
at any time, when aggregated with the Swingline Lender's other outstanding
Revolving Loans hereunder, may exceed the Swingline Commitment then in effect)
and (ii) the Borrower shall not request, and the Swingline Lender shall not
make, any Swingline Loan if, after giving effect to the making of such Swingline
Loan, (x) the aggregate amount of the Available Revolving Commitments would be
less than zero or (y) the aggregate outstanding principal amount of the
Revolving Loans and the Swingline Loans would exceed the Revolving Loan
Commitment. During the Revolving Commitment Period, the Borrower may use the
Swingline Commitment by borrowing, repaying and reborrowing, all in accordance
with the terms and conditions hereof.
(b) The Borrower shall repay all outstanding Swingline Loans on the
Revolving Termination Date, or, if required by the Swingline Lender, on the last
day of any Interest Period applicable thereto.
2.7 Procedure for Swingline Borrowing; Refunding of Swingline Loans. (a)
---------------------------------------------------------------
Whenever the Borrower desires that the Swingline Lender make Swingline Loans it
shall give the Swingline Lender irrevocable telephonic notice confirmed promptly
in writing (which telephonic notice must be received by the Swingline Lender not
later than 11:00 A.M., New York City time, on the proposed Borrowing Date),
specifying (i) the amount to be borrowed and (ii) the requested Borrowing Date
(which shall be a Business Day during the Revolving Commitment Period). Each
borrowing under the Swingline Commitment shall be in an amount equal to $500,000
or a whole multiple of $100,000 in excess thereof. Not later than 3:00 P.M.,
New York City time, on the Borrowing Date specified in a notice in respect of
Swingline Loans, the Swingline Lender shall make available to the Administrative
Agent at the Funding Office an amount in immediately available funds equal to
the amount of the Swingline Loan to be made by the Swingline Lender. The
Administrative Agent shall make the proceeds of such Swingline Loan available to
the Borrower on such Borrowing Date by depositing such proceeds in the account
of the Borrower with the Administrative Agent on such Borrowing Date in
immediately available funds.
(b) The Swingline Lender, at any time and from time to time in its
sole and absolute discretion may, on behalf of the Borrower (which hereby
irrevocably directs the Swingline Lender to act on its behalf), on one Business
Day's notice given by the Swingline Lender no later than 12:00 Noon, New York
City time, request each Revolving Lender to make, and each Revolving Lender
hereby agrees to make, a Revolving Loan, in an amount equal to such Revolving
Lender's Revolving Percentage of the aggregate amount of the Swingline Loans
(the "Refunded Swingline Loans") outstanding on the date of such notice, to
------------------------
repay the Swingline Lender. Each Revolving Lender shall make the amount of such
Revolving Loan available to the Administrative Agent at the Funding Office in
immediately available funds, not later than 12:00 Noon, New York City time, one
Business Day after the date of such notice. The proceeds of such Revolving
Loans shall be immediately made available by the Administrative Agent
<PAGE>
22
to the Swingline Lender for application by the Swingline Lender to the repayment
of the Refunded Swingline Loans. The Borrower irrevocably authorizes the
Swingline Lender to charge the Borrower's accounts with the Administrative Agent
(up to the amount available in each such account) in order to immediately pay
the amount of such Refunded Swingline Loans to the extent amounts received from
the Revolving Lenders are not sufficient to repay in full such Refunded
Swingline Loans.
(c) If prior to the time a Revolving Loan would have otherwise been
made pursuant to Section 2.7(b), one of the events described in Section 8(f)
shall have occurred and be continuing with respect to the Borrower or if for any
other reason, as determined by the Swingline Lender in its sole discretion,
Revolving Loans may not be made as contemplated by Section 2.7(b), each
Revolving Lender shall, on the date such Revolving Loan was to have been made
pursuant to the notice referred to in Section 2.7(b) (the "Refunding Date"),
--------------
purchase for cash an undivided participating interest in the then outstanding
Swingline Loans by paying to the Swingline Lender an amount (the "Swingline
---------
Participation Amount") equal to (i) such Revolving Lender's Revolving Percentage
- --------------------
times (ii) the sum of the aggregate principal amount of Swingline Loans then
- -----
outstanding that were to have been repaid with such Revolving Loans.
(d) Whenever, at any time after the Swingline Lender has received
from any Revolving Lender such Lender's Swingline Participation Amount, the
Swingline Lender receives any payment on account of the Swingline Loans, the
Swingline Lender will distribute to such Lender its Swingline Participation
Amount (appropriately adjusted, in the case of interest payments, to reflect the
period of time during which such Lender's participating interest was outstanding
and funded and, in the case of principal and interest payments, to reflect such
Lender's pro rata portion of such payment if such payment is not sufficient to
--- ----
pay the principal of and interest on all Swingline Loans then due); provided,
--------
however, that in the event that such payment received by the Swingline Lender is
- -------
required to be returned, such Revolving Lender will return to the Swingline
Lender any portion thereof previously distributed to it by the Swingline Lender.
(e) Each Revolving Lender's obligation to make the Loans referred to
in Section 2.7(b) and to purchase participating interests pursuant to Section
2.7(c) shall be absolute and unconditional and shall not be affected by any
circumstance, including (i) any setoff, counterclaim, recoupment, defense or
other right that such Revolving Lender or the Borrower may have against the
Swingline Lender, the Borrower or any other Person for any reason whatsoever;
(ii) the occurrence or continuance of a Default or an Event of Default or the
failure to satisfy any of the other conditions specified in Section 5; (iii) any
adverse change in the condition (financial or otherwise) of the Borrower; (iv)
any breach of this Agreement or any other Loan Document by the Borrower, any
other Loan Party or any other Revolving Lender; or (v) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
2.8 Commitment Fees, etc. (a) The Borrower agrees to pay to the
---------------------
Administrative Agent for the account of each Revolving Lender a commitment fee
for the period from and including the Closing Date to the last day of the
Revolving Commitment Period, computed at the Commitment Fee Rate on the average
daily amount of the Available Revolving Commitment of such Lender during the
period for which payment is made, payable quarterly in arrears five Business
Days after the last day of each March, June, September and December and on the
Revolving Termination Date, commencing on the first of such dates to occur after
the date hereof.
(b) The Borrower agrees to pay to the Administrative Agent the fees
in the amounts and on the dates previously agreed to in writing by the Borrower
and the Administrative Agent.
<PAGE>
<PAGE>
23
2.9 Termination or Reduction of Revolving Commitments. The Borrower
-------------------------------------------------
shall have the right, upon not less than three Business Days' notice to the
Administrative Agent, to terminate the Revolving Commitments or, from time to
time, to reduce the amount of the Revolving Commitments; provided that no such
--------
termination or reduction of Revolving Commitments shall be permitted if, after
giving effect thereto and to any prepayments of the Revolving Loans and
Swingline Loans made on the effective date thereof, the Total Revolving
Extensions of Credit would exceed the Total Revolving Commitments. Any such
reduction shall be in an amount equal to $1,000,000, or a whole multiple
thereof, and shall reduce permanently the Revolving Commitments then in effect.
2.10 Optional Prepayments. The Borrower may at any time and from time
--------------------
to time prepay the Loans, in whole or in part, without premium or penalty, upon
irrevocable notice delivered to the Administrative Agent no later than 11:00
A.M., New York City time, (a) on the date that is three Business Days prior
thereto in the case of Eurodollar Loans or (b) on the date thereof in the case
of ABR Loans, which notice shall specify the date and amount of prepayment and
whether the prepayment is of Eurodollar Loans or ABR Loans; provided, that if a
--------
Eurodollar Loan is prepaid on any day other than the last day of the Interest
Period applicable thereto, the Borrower shall also pay any amounts owing
pursuant to Section 2.20. Upon receipt of any such notice the Administrative
Agent shall promptly notify each relevant Lender thereof. If any such notice is
given, the amount specified in such notice shall be due and payable on the date
specified therein, together with (except in the case of Revolving Loans that are
ABR Loans and Swingline Loans) accrued interest to such date on the amount
prepaid. Partial prepayments of Term Loans and Revolving Loans shall be in an
aggregate principal amount of $1,000,000 or a whole multiple thereof. Partial
prepayments of Swingline Loans shall be in an aggregate principal amount of
$100,000 or a whole multiple thereof.
2.11 Mandatory Prepayments and Commitment Reductions. (a) Unless the
-----------------------------------------------
Required Prepayment Lenders shall otherwise agree, if any Indebtedness shall be
Incurred by the Borrower or any of its Subsidiaries (excluding any Indebtedness
Incurred in accordance with Section 7.2), an amount equal to 100% of the Net
Cash Proceeds thereof shall be applied on the date of such Incurrence toward the
prepayment of the Term Loans and the reduction of the Revolving Commitments as
set forth in Section 2.11(c).
(b) Unless the Required Prepayment Lenders shall otherwise agree, if
on any date the Borrower or any of its Subsidiaries shall receive Net Cash
Proceeds from any Asset Sale or Recovery Event then, unless a Reinvestment
Notice shall be delivered in respect thereof, such Net Cash Proceeds shall be
applied on such date toward the prepayment of the Term Loans and the reduction
of the Revolving Commitments as set forth in Section 2.11(c); provided, that,
--------
notwithstanding the foregoing, on each Reinvestment Prepayment Date, an amount
equal to the Reinvestment Prepayment Amount with respect to the relevant
Reinvestment Event shall be applied toward the prepayment of the Term Loans and
the reduction of the Revolving Commitments as set forth in Section 2.11(c).
(c) Amounts to be applied in connection with prepayments and
Commitment reductions made pursuant to Section 2.11 shall be applied, first, to
-----
the prepayment of the Term Loans in accordance with Section 2.17(b) and, second,
------
to reduce permanently the Revolving Commitments. Any such reduction of the
Revolving Commitments shall be accompanied by prepayment of the Revolving Loans
and/or Swingline Loans to the extent, if any, that the Total Revolving
Extensions of Credit exceed the amount of the Total Revolving Commitments as so
reduced, provided that if the aggregate principal amount of Revolving Loans and
--------
Swingline Loans then outstanding is less than the amount of such excess (because
L/C Obligations constitute a portion thereof), the Borrower shall, to the extent
of the balance of such excess, replace outstanding Letters of Credit and/or
deposit an amount in cash in a cash collateral account established with the
Administrative Agent for the benefit of the Lenders on terms and conditions
<PAGE>
24
satisfactory to the Administrative Agent. The application of any prepayment
pursuant to Section 2.11 shall be made first to ABR Loans and second to
Eurodollar Loans. Each prepayment of the Loans under Section 2.11 (except in
the case of Revolving Loans that are ABR Loans and Swingline Loans) shall be
accompanied by accrued interest to the date of such prepayment on the amount
prepaid.
2.12 Conversion and Continuation Options. (a) The Borrower may elect
-----------------------------------
from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least two Business Days' prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may only be
--------
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of such election (which notice shall specify the length of the initial Interest
Period therefor), provided that no ABR Loan under a particular Facility may be
--------
converted into a Eurodollar Loan (i) when any Event of Default has occurred and
is continuing and the Administrative Agent or the Majority Facility Lenders in
respect of such Facility have determined in its or their sole discretion not to
permit such conversions or (ii) after the date that is one month prior to the
final scheduled termination or maturity date of such Facility. Upon receipt of
any such notice the Administrative Agent shall promptly notify each relevant
Lender thereof.
(a) Any Eurodollar Loan may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
irrevocable notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in Section 1.1, of
the length of the next Interest Period to be applicable to such Loans, provided
--------
that no Eurodollar Loan under a particular Facility may be continued as such (i)
when any Event of Default has occurred and is continuing and the Administrative
Agent has or the Majority Facility Lenders in respect of such Facility have
determined in its or their sole discretion not to permit such continuations or
(ii) after the date that is one month prior to the final scheduled termination
or maturity date of such Facility, and provided, further, that if the Borrower
-------- -------
shall fail to give any required notice as described above in this paragraph or
if such continuation is not permitted pursuant to the preceding proviso such
Loans shall be automatically converted to ABR Loans on the last day of such then
expiring Interest Period. Upon receipt of any such notice the Administrative
Agent shall promptly notify each relevant Lender thereof.
2.13 Limitations on Eurodollar Tranches. Notwithstanding anything to
----------------------------------
the contrary in this Agreement, all borrowings, conversions, continuations and
optional prepayments of Eurodollar Loans hereunder and all selections of
Interest Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, (a) after giving effect thereto, the aggregate principal
amount of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal
to $5,000,000 or a whole multiple of $1,000,000 in excess thereof and (b) no
more than fifteen Eurodollar Tranches shall be outstanding at any one time.
2.14 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
--------------------------------
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(a) Each ABR Loan shall bear interest at a rate per annum equal to
the ABR or, in the case of Swingline Loans, such lower rate per annum as shall
be quoted to the Borrower by the Swingline Lender in its sole discretion in
connection with the borrowings thereof.
(b) (i) If all or a portion of the principal amount of any Loan or
Reimbursement Obligation shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue Loans and Reimbursement
Obligations shall bear interest at a rate per annum equal to (x) in the
<PAGE>
25
case of the Loans, the rate that would otherwise be applicable thereto pursuant
to the foregoing provisions of this Section 2.14 plus 2% or (y) in the case of
----
Reimbursement Obligations, the rate applicable to ABR Loans under the Revolving
Facility plus 2%, and (ii) if all or a portion of any interest payable on any
----
Loan or Reimbursement Obligation or any commitment fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a rate
per annum equal to the rate then applicable to ABR Loans under the relevant
Facility plus 2% (or, in the case of any such other amounts that do not relate
----
to a particular Facility, the rate then applicable to ABR Loans under the
Revolving Facility plus 2%), in each case, with respect to clauses (i) and (ii)
----
above, from the date of such non-payment until such amount is paid in full (as
well after as before judgment).
(c) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (c) of this Section
--------
2.14 shall be payable from time to time on demand.
2.15 Computation of Interest and Fees. (a) Interest and fees payable
--------------------------------
pursuant hereto shall be calculated on the basis of a 360-day year for the
actual days elapsed, except that, with respect to ABR Loans the rate of interest
on which is calculated on the basis of the Prime Rate, the interest thereon
shall be calculated on the basis of a 365- (or 366-, as the case may be) day
year for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Borrower and the relevant Lenders of each determination
of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the ABR or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the relevant Lenders of the effective date and the amount of each
such change in interest rate.
(a) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to Section 2.14(a).
2.16 Inability to Determine Interest Rate. If prior to the first day
------------------------------------
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(b) the Administrative Agent shall have received notice from the
Majority Facility Lenders in respect of the relevant Facility that the
Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the relevant Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans under the relevant Facility requested
to be made on the first day of such Interest Period shall be made as ABR Loans,
(y) any Loans under the relevant Facility that were to have been converted on
the first day of such Interest Period to Eurodollar Loans shall be continued as
ABR Loans and (z) any outstanding Eurodollar
<PAGE>
26
Loans under the relevant Facility shall be converted, on the first day of such
Interest Period, to ABR Loans. Until such notice has been withdrawn by the
Administrative Agent, no further Eurodollar Loans under the relevant Facility
shall be made or continued as such, nor shall the Borrower have the right to
convert Loans under the relevant Facility to Eurodollar Loans.
2.17 Pro Rata Treatment and Payments. (a) Each borrowing by the
-------------------------------
Borrower from the Lenders hereunder, each payment by the Borrower on account of
any commitment fee and any reduction of the Commitments of the Lenders shall be
made pro rata according to the respective Term Percentages or Revolving
--- ----
Percentages, as the case may be, of the relevant Lenders.
(a) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Term Loans shall be made pro rata
--- ----
according to the respective outstanding principal amounts of the Term Loans then
held by the Term Lenders. The amount of each principal prepayment of the Term
Loans made pursuant to Section 2.10 shall be applied to reduce the then
remaining installments of the Term Loans in direct order of maturity thereof.
The amount of each principal prepayment of the Term Loans made pursuant to
Section 2.11 shall be applied to reduce the then remaining installments of the
Term Loans pro rata based upon the then remaining principal amount thereof.
--- ----
Amounts prepaid on account of the Term Loans may not be reborrowed.
(b) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Revolving Loans shall be made pro
---
rata according to the respective outstanding principal amounts of the Revolving
- ----
Loans then held by the Revolving Lenders.
(c) All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for the
account of the Lenders, at the Funding Office, in Dollars and in immediately
available funds. The Administrative Agent may effect any such payment by
debiting any account maintained by the Borrower with the Administrative Agent.
The Administrative Agent shall distribute such payments to the Lenders promptly
upon receipt in like funds as received. If any payment hereunder (other than
payments on the Eurodollar Loans) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day. If any payment on a Eurodollar Loan becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day. In the case of any extension of
any payment of principal pursuant to the preceding two sentences, interest
thereon shall be payable at the then applicable rate during such extension.
(d) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the Administrative Agent. A certificate of the Administrative Agent submitted
to any Lender with respect to any amounts owing under this Section 2.17(e) shall
be conclusive in the absence of manifest error. If such Lender's share of such
borrowing is not made available to the
<PAGE>
27
Administrative Agent by such Lender within three Business Days of such Borrowing
Date, the Administrative Agent shall also be entitled to recover such amount
with interest thereon at the rate per annum applicable to ABR Loans under the
relevant Facility, on demand, from the Borrower.
(e) Unless the Administrative Agent shall have been notified in
writing by the Borrower prior to the date of any payment being made hereunder
that the Borrower will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrower is making such payment, and
the Administrative Agent may, but shall not be required to, in reliance upon
such assumption, make available to the Lenders their respective pro rata shares
--- ----
of a corresponding amount. If such payment is not made to the Administrative
Agent by the Borrower within three Business Days of such required date, the
Administrative Agent shall be entitled to recover, on demand, from each Lender
to which any amount which was made available pursuant to the preceding sentence,
such amount with interest thereon at the rate per annum equal to the daily
average Federal Funds Effective Rate. Nothing herein shall be deemed to limit
the rights of the Administrative Agent or any Lender against the Borrower.
2.18 Requirements of Law. (a) If the adoption of or any change in any
-------------------
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority made subsequent to
the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Letter of Credit, any Application or
any Eurodollar Loan made by it, or change the basis of taxation of payments
to such Lender in respect thereof (except for Non-Excluded Taxes covered by
Section 2.19 and changes in the rate of tax on the overall net income of
such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held
by, deposits or other liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other acquisition of funds by, any
office of such Lender that is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount that such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender,
upon its demand, any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable. If any Lender becomes
entitled to claim any additional amounts pursuant to this Section 2.18, it shall
promptly notify the Borrower (with a copy to the Administrative Agent) of the
event by reason of which it has become so entitled.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any
<PAGE>
28
Letter of Credit to a level below that which such Lender or such corporation
could have achieved but for such adoption, change or compliance (taking into
consideration such Lender's or such corporation's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time, after submission by such Lender to the Borrower (with a copy to
the Administrative Agent) of a written request therefor, the Borrower shall pay
to such Lender such additional amount or amounts as will compensate such Lender
for such reduction; provided that the Borrower shall not be required to
--------
compensate a Lender pursuant to this paragraph for any amounts incurred more
than six months prior to the date that such Lender notifies the Borrower of such
Lender's intention to claim compensation therefor; and provided further that, if
-------- -------
the circumstances giving rise to such claim have a retroactive effect, then such
six-month period shall be extended to include the period of such retroactive
effect.
(c) A certificate as to any additional amounts payable pursuant to
this Section 2.18 submitted by any Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
obligations of the Borrower pursuant to this Section 2.18 shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.19 Taxes. (a) All payments made by the Borrower under this
-----
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on the Administrative Agent or any Lender as a result
of a present or former connection between the Administrative Agent or such
Lender and the jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document). If any such non-
excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
------------------
payable to the Administrative Agent or any Lender hereunder, the amounts so
payable to the Administrative Agent or such Lender shall be increased to the
extent necessary to yield to the Administrative Agent or such Lender (after
payment of all Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement, provided,
--------
however, that the Borrower shall not be required to increase any such amounts
- -------
payable to any Lender that is not organized under the laws of the United States
of America or a state thereof to the extent such Lender's compliance with the
requirements of Section 2.19(b) at the time such Lender becomes a party to this
Agreement fails to establish a complete exemption from such withholding.
Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as
possible thereafter the Borrower shall send to the Administrative Agent for its
own account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent or any
Lender as a result of any such failure. The agreements in this Section 2.19
shall survive the termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder.
(a) Each Lender (or Transferee) that is not a citizen or resident of
the United States of America, a corporation, partnership or other entity created
or organized in or under the laws of the United States of America (or any
jurisdiction thereof), or any estate or trust that is subject to federal income
taxation regardless of the source of its income (a "Non-U.S. Lender") shall
---------------
deliver to the Borrower and the Administrative Agent (or, in the case of a
Participant, to the Lender from which the related
<PAGE>
29
participation shall have been purchased) two copies of either U.S. Internal
Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender
claiming exemption from U.S. federal withholding tax under Section 871(h) or
881(c) of the Code with respect to payments of "portfolio interest", a Form W-8,
or any subsequent versions thereof or successors thereto (and, if such Non-U.S.
Lender delivers a Form W-8, an annual certificate representing that such Non-
U.S. Lender is not a "bank" for purposes of Section 881(c) of the Code, is not a
10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code)
of the Borrower and is not a controlled foreign corporation related to the
Borrower (within the meaning of Section 864(d)(4) of the Code)), properly
completed and duly executed by such Non-U.S. Lender claiming complete exemption
from, or a reduced rate of, U.S. federal withholding tax on all payments by the
Borrower under this Agreement and the other Loan Documents. Such forms shall be
delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement (or, in the case of any Participant, on or before the date such
Participant purchases the related participation). In addition, each Non-U.S.
Lender shall deliver such forms promptly upon the obsolescence or invalidity of
any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender
shall promptly notify the Borrower at any time it determines that it is no
longer in a position to provide any previously delivered certificate to the
Borrower (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). Notwithstanding any other provision of this
Section 2.19(b), a Non-U.S. Lender shall not be required to deliver any form
pursuant to this Section 2.19(b) that such Non-U.S. Lender is not legally able
to deliver.
2.20 Indemnity. The Borrower agrees to indemnify each Lender and to
---------
hold each Lender harmless from any loss or expense that such Lender may sustain
or incur as a consequence of (a) default by the Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans or Swingline Loans after
the Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment after the Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (c) the making of a prepayment of Eurodollar
Loans or Swingline Loans on a day that is not the last day of an Interest Period
with respect thereto. Such indemnification may include an amount equal to the
excess, if any, of (i) the amount of interest that would have accrued on the
amount so prepaid, or not so borrowed, converted or continued, for the period
from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of such Interest Period (or, in the case of a failure
to borrow, convert or continue, the Interest Period that would have commenced on
the date of such failure) in each case at the applicable rate of interest for
such Loans provided for herein (excluding, however, the Applicable Margin
included therein, if any) over (ii) the amount of interest (as reasonably
----
determined by such Lender) that would have accrued to such Lender on such amount
by placing such amount on deposit for a comparable period with leading banks in
the interbank eurodollar market. A certificate as to any amounts payable
pursuant to this Section 2.20 submitted to the Borrower by any Lender shall be
conclusive in the absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.21 Change of Lending Office. Each Lender agrees that, upon the
------------------------
occurrence of any event giving rise to the operation of Section 2.18 or 2.19(a)
with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
--------
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage, and provided, further, that nothing in this Section 2.21 shall
-------- -------
affect or postpone any of the obligations of any Borrower or the rights of any
Lender pursuant to Section 2.18 or 2.19(a).
<PAGE>
30
2.22 Replacement of Lenders. The Borrower shall be permitted to
----------------------
replace any Lender that (a) requests reimbursement for amounts owing pursuant to
Section 2.18 or 2.19 or (b) defaults in its obligation to make Loans hereunder,
with a replacement financial institution; provided that (i) such replacement
--------
does not conflict with any Requirement of Law, (ii) no Event of Default shall
have occurred and be continuing at the time of such replacement, (iii) prior to
any such replacement, such Lender shall have taken no action under Section 2.21
so as to eliminate the continued need for payment of amounts owing pursuant to
Section 2.18 or 2.19, (iv) the replacement financial institution shall purchase,
at par, all Loans and other amounts owing to such replaced Lender on or prior to
the date of replacement, (v) the Borrower shall be liable to such replaced
Lender under Section 2.20 if any Eurodollar Loan owing to such replaced Lender
shall be purchased other than on the last day of the Interest Period relating
thereto, (vi) the replacement financial institution, if not already a Lender,
shall be reasonably satisfactory to the Administrative Agent, (vii) the replaced
Lender shall be obligated to make such replacement in accordance with the
provisions of Section 11.6 (provided that the Borrower shall be obligated to pay
the registration and processing fee referred to therein), (viii) until such time
as such replacement shall be consummated, the Borrower shall pay all additional
amounts (if any) required pursuant to Section 2.18 or 2.19, as the case may be,
and (ix) any such replacement shall not be deemed to be a waiver of any rights
that the Borrower, the Administrative Agent or any other Lender shall have
against the replaced Lender.
3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions hereof,
--------------
each Issuing Lender, in reliance on the agreements of the other Revolving
Lenders set forth in Section 3.4(a), agrees to issue letters of credit ("Letters
-------
of Credit") for the account of the Borrower on any Business Day during the
- ---------
Revolving Commitment Period in such form as may be approved from time to time by
such Issuing Lender; provided that no Issuing Lender shall have an obligation to
--------
issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C
Obligations would exceed the L/C Commitment or (ii) the aggregate amount of the
Available Revolving Commitments would be less than zero. Each letter of credit
outstanding on the Closing Date and listed on Schedule 3.1 shall constitute a
"Letter of Credit" for the purposes of this Agreement, provided, that if the
--------
account party in respect of any such letter of credit is not the Borrower (any
such account party, an "Existing Account Party"), the Borrower and the relevant
----------------------
Existing Account Party shall be jointly and severally liable for all obligations
(including reimbursement obligations) applicable thereto. Each Letter of Credit
shall (i) be denominated in Dollars and (ii) expire no later than the earlier of
(x)(A) the first anniversary of its date of issuance, in the case of standby
Letters of Credit, and (B) 180 days after the date of issuance, in the case of
commercial Letters of Credit, and (y) the date that is five Business Days prior
to the Revolving Termination Date, provided that any standby Letter of Credit
--------
with a one-year term may provide for the renewal thereof for additional one-year
periods (which shall in no event extend beyond the date referred to in clause
(y) above).
(a) Each Letter of Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the State of New
York.
(b) No Issuing Lender shall at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause such
Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letter of Credit. The Borrower may from
------------------------------------------
time to time request that an Issuing Lender issue or amend a Letter of Credit by
delivering to such Issuing Lender at its address for notices specified herein an
Application therefor, completed to the satisfaction of such Issuing Lender, and
such other certificates, documents and other papers and information as such
Issuing
<PAGE>
31
Lender may request. Upon receipt of any Application, such Issuing Lender will
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall such Issuing Lender be required to issue any
Letter of Credit earlier than three Business Days after its receipt of the
Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed to by such
Issuing Lender and the Borrower. Each Issuing Lender shall furnish a copy of, or
other evidence of the issuance of, such Letter of Credit to the Borrower and the
Administrative Agent promptly following the issuance thereof.
3.3 Fees and Other Charges. (a) The Borrower will pay a fee on all
----------------------
outstanding standby Letters of Credit at a per annum rate equal to the
Applicable Margin then in effect. Such fee shall be payable to the relevant
Issuing Lender semi-annually in advance on the issuance date and each date that
is six months (or a whole multiple thereof) after the issuance date, and shall
be shared ratably among the Revolving Lenders. In addition, the Borrower will
pay to the relevant Issuing Lender, for its own account, a fronting fee of 1/8
of 1% per annum on the face amount of each standby Letter of Credit, payable
semi-annually in advance on the issuance date and each date that is six months
(or a whole multiple thereof) after the issuance date.
(a) The Borrower will pay a fee on all drawings on outstanding
commercial Letters of Credit at the Commercial L/C Commission Rate then in
effect. Such fee shall be payable to the relevant Issuing Lender on the date of
the drawing thereof, and shall be shared ratably among the Revolving Lenders.
(b) In addition to the foregoing fees, the Borrower shall pay or
reimburse the relevant Issuing Lender for such normal and customary costs and
expenses as are incurred or charged by such Issuing Lender in issuing,
negotiating, effecting payment under, amending or otherwise administering any
Letter of Credit.
(c) Fees paid by the Borrower pursuant to this Section 3.3 for the
ratable benefit of the Revolving Lenders shall be distributed to such Lenders by
the relevant Issuing Lender (through the Administrative Agent) on each L/C Fee
Distribution Date. Fees paid by the Borrower pursuant to this Section 3.3 shall
be nonrefundable.
3.4 L/C Participations. (a) Each Issuing Lender irrevocably agrees to
------------------
grant and hereby grants to each L/C Participant, and, to induce each Issuing
Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from each Issuing
Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Percentage in each Issuing Lender's obligations and
rights under each Letter of Credit issued hereunder and the amount of each draft
paid by such Issuing Lender thereunder. Each L/C Participant unconditionally and
irrevocably agrees with each Issuing Lender that, if a draft is paid under any
Letter of Credit for which such Issuing Lender is not reimbursed in full by the
Borrower in accordance with the terms of this Agreement, such L/C Participant
shall pay to such Issuing Lender upon demand at such Issuing Lender's address
for notices specified herein an amount equal to such L/C Participant's Revolving
Percentage of the amount of such draft, or any part thereof, that is not so
reimbursed.
(a) If any amount required to be paid by any L/C Participant to the
relevant Issuing Lender pursuant to Section 3.4(a) in respect of any
unreimbursed portion of any payment made by such Issuing Lender under any Letter
of Credit is paid to such Issuing Lender within three Business Days after
<PAGE>
32
the date such payment is due, such L/C Participant shall pay to such Issuing
Lender on demand an amount equal to the product of (i) such amount, times (ii)
the daily average Federal Funds Effective Rate during the period from and
including the date such payment is required to the date on which such payment is
immediately available to such Issuing Lender, times (iii) a fraction the
numerator of which is the number of days that elapse during such period and the
denominator of which is 360. If any such amount required to be paid by any L/C
Participant pursuant to Section 3.4(a) is not made available to such Issuing
Lender by such L/C Participant within three Business Days after the date such
payment is due, such Issuing Lender shall be entitled to recover from such L/C
Participant, on demand, such amount with interest thereon calculated from such
due date at the rate per annum applicable to ABR Loans under the Revolving
Facility. A certificate of the relevant Issuing Lender submitted to any L/C
Participant with respect to any amounts owing under this Section shall be
conclusive in the absence of manifest error.
(b) Whenever, at any time after the relevant Issuing Lender has made
payment under any Letter of Credit and has received from any L/C Participant its
pro rata share of such payment in accordance with Section 3.4(a), such Issuing
- --- ----
Lender receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of collateral applied thereto
by such Issuing Lender), or any payment of interest on account thereof, such
Issuing Lender will distribute to such L/C Participant its pro rata share
--- ----
thereof; provided, however, that in the event that any such payment received by
-------- -------
such Issuing Lender shall be required to be returned by such Issuing Lender,
such L/C Participant shall return to such Issuing Lender the portion thereof
previously distributed by such Issuing Lender to it.
3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to
----------------------------------------
reimburse the relevant Issuing Lender on each date on which such Issuing Lender
notifies the Borrower of the date and amount of a draft presented under any
Letter of Credit and paid by such Issuing Lender for the amount of (a) such
draft so paid and (b) any taxes, fees, charges or other costs or expenses
incurred by such Issuing Lender in connection with such payment; provided that
--------
if such Issuing Lender notifies the Borrower of the presentment of a draft after
10:00 A.M. New York City time on any day, such reimbursement shall be made on
the next Business Day. Each such payment shall be made to such Issuing Lender
at its address for notices specified herein in lawful money of the United States
of America and in immediately available funds. Interest shall be payable on any
and all amounts remaining unpaid by the Borrower under this Section from the
date such amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate set forth in (i) until the second
Business Day following the date of the applicable drawing, Section 2.14(b) and
(ii) thereafter, Section 2.14(c).
3.6 Obligations Absolute. The Borrower's obligations under this
--------------------
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment that the
Borrower may have or have had against the relevant Issuing Lender, any
beneficiary of a Letter of Credit or any other Person. The Borrower also agrees
with each Issuing Lender that no Issuing Lender shall be responsible for, and
the Borrower's Reimbursement Obligations under Section 3.5 shall not be affected
by, among other things, the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Borrower and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of the Borrower against
any beneficiary of such Letter of Credit or any such transferee. No Issuing
Lender shall be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
such Issuing Lender. The Borrower agrees that any action taken or omitted by the
relevant Issuing Lender under or in connection with any Letter of Credit or the
related
<PAGE>
33
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified in the Uniform
Commercial Code of the State of New York, shall be binding on the Borrower and
shall not result in any liability of such Issuing Lender to the Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented for
-------------------------
payment under any Letter of Credit, the relevant Issuing Lender shall promptly
notify the Borrower of the date and amount thereof. The responsibility of the
relevant Issuing Lender to the Borrower in connection with any draft presented
for payment under any Letter of Credit shall, in addition to any payment
obligation expressly provided for in such Letter of Credit, be limited to
determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are substantially in
conformity with such Letter of Credit. On the last day of each month (or more
frequently if requested by the Administrative Agent), each Issuing Lender which
had any Letters of Credit outstanding during such month shall notify the
Administrative Agent of the dates and amounts of all drafts presented for
payment under such Letters of Credit during the such month and such other
information as is necessary for the Administrative Agent to calculate the
commitment fee.
3.8 Applications. To the extent that any provision of any Application
-------------------------
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, Holdings and the Borrower hereby jointly and severally represent and
warrant to the Administrative Agent and each Lender that:
4.1 Financial Condition. (a) The unaudited pro forma consolidated
------------------- --- -----
balance sheet of Holdings and its consolidated Subsidiaries as at March 31, 1998
(including the notes thereto) (the "Pro Forma Balance Sheet"), copies of which
-----------------------
have heretofore been furnished to each Lender, has been prepared giving effect
(as if such events had occurred on such date) to (i) the consummation of the
Acquisition, (ii) the Loans to be made and the Senior Notes to be issued on the
Closing Date and the use of proceeds thereof and (iii) the payment of fees and
expenses in connection with the foregoing. The Pro Forma Balance Sheet has been
prepared based on the best information available to Holdings as of the date of
delivery thereof, and presents fairly on a pro forma basis the estimated
--- -----
financial position of Holdings and its consolidated Subsidiaries as at March 31,
1998, assuming that the events specified in the preceding sentence had actually
occurred at such date.
(a) The audited consolidated balance sheets of Holdings and its
consolidated Subsidiaries as at March 31, 1996 and March 31, 1997, and the
related consolidated statements of income and of cash flows for the fiscal years
ended on such dates, reported on by and accompanied by an unqualified report
from Price Waterhouse LLP, present fairly the consolidated financial condition
of Holdings and its consolidated Subsidiaries as at such date, and the
consolidated results of its operations and its consolidated cash flows for the
respective fiscal years then ended. The unaudited preliminary consolidated
balance sheet of Holdings and its consolidated Subsidiaries as at March 31,
1998, and the related unaudited preliminary consolidated statements of income
for the fiscal year ended on such date, copies of which have been delivered to
the Lenders, present fairly in all material respects the consolidated financial
condition of Holdings and its consolidated Subsidiaries as at such date, and the
consolidated results of its operations for the twelve-month period then ended
(subject to normal year-end adjustments and potential audit adjustments). All
such financial statements, including the related schedules and notes
<PAGE>
34
thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by the aforementioned firm
of accountants and disclosed therein). Holdings and its consolidated
Subsidiaries do not have any material Guarantee Obligations, contingent
liabilities and liabilities for taxes, or any long-term leases or unusual
forward or long-term commitments, including any interest rate or foreign
currency swap or exchange transaction or other obligation in respect of
derivatives, that are required to be but are not reflected in the most recent
financial statements referred to in this paragraph and the Pro Forma Balance
Sheet. During the period from March 31, 1997 to and including the date hereof
there has been no Disposition by Holdings or any of its consolidated
Subsidiaries of any material part of its business or property.
4.2 No Change. Since March 31, 1997 there has been no development or
---------
event that has had or could reasonably be expected to have a Material Adverse
Effect.
4.3 Corporate Existence; Compliance with Law. Each of Holdings and
----------------------------------------
its Subsidiaries (a) is duly organized, validly existing and in good standing
(or any similar concept in any foreign jurisdiction) under the laws of the
jurisdiction of its organization, (b) has the corporate power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification and (d) is in compliance
with all Requirements of Law except to the extent that the failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
4.3 Corporate Power; Authorization; Enforceable Obligations. Each Loan
-------------------------------------------------------
Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party and, in the case of the Borrower, to
authorize the borrowings on the terms and conditions of this Agreement. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the Acquisition and the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or any of the Loan Documents, except consents, authorizations, filings and
notices described in Schedule 4.4, which consents, authorizations, filings and
notices have been obtained or made and are in full force and effect. Each Loan
Document has been duly executed and delivered on behalf of each Loan Party party
thereto. This Agreement constitutes, and each other Loan Document upon execution
will constitute, a legal, valid and binding obligation of each Loan Party party
thereto, enforceable against each such Loan Party in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
4.4 No Legal Bar. The execution, delivery and performance of this
------------
Agreement and the other Loan Documents, the issuance of Letters of Credit, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or any Contractual Obligation of Holdings or any of its
Subsidiaries and will not result in, or require, the creation or imposition of
any Lien on any of their respective properties or revenues pursuant to any
Requirement of Law or any such Contractual Obligation. No Requirement of Law or
Contractual Obligation applicable to Holdings or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.
<PAGE>
35
4.6 Litigation. No litigation, investigation or proceeding of or
----------
before any arbitrator or Governmental Authority is pending or, to the knowledge
of Holdings or the Borrower, threatened by or against Holdings or any of its
Subsidiaries or against any of their respective properties or revenues (a) with
respect to any of the Loan Documents or any of the transactions contemplated
hereby or thereby, or (b) that could reasonably be expected to have a Material
Adverse Effect.
4.7 No Default. Neither Holdings nor any of its Subsidiaries is in
----------
default under or with respect to any of its Contractual Obligations in any
respect that could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of Holdings and its
----------------------------
Subsidiaries has title in fee simple to, or a valid leasehold interest in, all
its material real property, and good title to, or a valid leasehold interest in,
all its other material property, and none of such property is subject to any
Lien except as permitted by Section 7.3.
4.9 Intellectual Property. Holdings and each of its Subsidiaries
---------------------
owns, or is licensed to use, all Intellectual Property necessary for the conduct
of its business as currently conducted. No material claim has been asserted and
is pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does Holdings or the Borrower know of any valid basis for any such
claim. The use of such Intellectual Property by Holdings and its Subsidiaries
does not infringe on the rights of any Person in any material respect.
4.10 Taxes. Each of Holdings and each of its Subsidiaries has filed
-----
or caused to be filed all Federal, state and other material tax returns that are
required to be filed and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any the amount or validity of that are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of Holdings or its Subsidiaries, as the case may be); no tax Lien has been
filed, and, to the knowledge of Holdings and the Borrower, no claim is being
asserted, with respect to any such tax, fee or other charge.
4.11 Federal Regulations. No part of the proceeds of any Loans will
-------------------
be used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U as now and from time to
time hereafter in effect or for any purpose that violates the provisions of the
Regulations of the Board. If requested by any Lender or the Administrative
Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
G-3 or FR Form U-1 referred to in Regulation U.
4.12 Labor Matters. Except as, in the aggregate, could not reasonably
-------------
be expected to have a Material Adverse Effect: (a) there are no strikes or other
labor disputes against Holdings or any of its Subsidiaries pending or, to the
knowledge of Holdings or the Borrower, threatened; (b) hours worked by and
payment made to employees of Holdings and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other applicable Requirement of
Law dealing with such matters; and (c) all payments due from Holdings or any of
its Subsidiaries on account of employee health and welfare insurance have been
paid or accrued as a liability on the books of Holdings or the relevant
Subsidiary.
<PAGE>
36
4.13 ERISA. Neither a Reportable Event nor an "accumulated funding
-----
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no
Lien in favor of the PBGC or a Plan has arisen, during such five-year period.
The present value of all accrued benefits under each Single Employer Plan (based
on those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits by a material amount. Neither the Borrower nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan that
has resulted or could reasonably be expected to result in a material liability
under ERISA, and neither the Borrower nor any Commonly Controlled Entity would
become subject to any material liability under ERISA if the Borrower or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer Plan is in
Reorganization or Insolvent.
4.14 Investment Company Act; Other Regulations. No Loan Party is an
-----------------------------------------
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Requirement of Law that limits its
ability to incur Indebtedness.
4.15 Subsidiaries. The Subsidiaries listed on Schedule 4.15
------------
constitute all the Subsidiaries of Holdings at the date hereof after giving
effect to the Acquisition.
4.16 Use of Proceeds. The proceeds of the Term Loans shall be used
---------------
to finance a portion of the Acquisition and to pay related fees and expenses.
The proceeds of the Revolving Loans and the Swingline Loans, and the Letters of
Credit, shall be used for general corporate purposes (including to finance a
portion of the Acquisition).
4.17 Environmental Matters. Except as, in the aggregate, could not
---------------------
reasonably be expected to have a Material Adverse Effect:
(a) the facilities and properties owned, leased or operated by
Holdings or any of its Subsidiaries (the "Properties") do not contain,
----------
and have not previously contained, any Materials of Environmental Concern
in amounts or concentrations or under circumstances that constitute or
constituted a violation of, or could give rise to liability under, any
Environmental Law;
(b) neither Holdings nor any of its Subsidiaries has received or is
aware of any notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the Properties or
the business operated by Holdings or any of its Subsidiaries (the
"Business"), nor does Holdings or the Borrower have knowledge or reason to
--------
believe that any such notice will be received or is being threatened;
(c) Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a
location that could give rise to liability under, any Environmental Law,
nor have any Materials of Environmental Concern been generated, treated,
stored or disposed of at, on or under any of the Properties in violation
of, or in a manner that could give rise to liability under, any applicable
Environmental Law;
<PAGE>
37
(d) no judicial proceeding or governmental or administrative action is
pending or, to the knowledge of Holdings and the Borrower, threatened,
under any Environmental Law to which Holdings or any Subsidiary is or will
be named as a party with respect to the Properties or the Business, nor are
there any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to the Properties or
the Business;
(e) there has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related
to the operations of Holdings or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in violation of or
in amounts or in a manner that could give rise to liability under
Environmental Laws;
(f) the Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, with all
applicable Environmental Laws, and there is no contamination at, under or
about the Properties or violation of any Environmental Law with respect to
the Properties or the Business; and
(g) neither Holdings nor any of its Subsidiaries has assumed any
liability of any other Person under Environmental Laws.
4.18 Accuracy of Information, etc. No statement or information
----------------------------
contained in this Agreement, any other Loan Document, the Confidential
Information Memorandum or any other document, certificate or statement furnished
to the Administrative Agent or the Lenders or any of them, by or on behalf of
any Loan Party for use in connection with the transactions contemplated by this
Agreement or the other Loan Documents, contained as of the date such statement,
information, document or certificate was so furnished (or, in the case of the
Confidential Information Memorandum, as of the Closing Date), any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements contained herein or therein not misleading. The projections
and pro forma financial information contained in the materials referenced above
--- -----
are based upon good faith estimates and assumptions believed by management of
Holdings and the Borrower to be reasonable at the time made, it being recognized
by the Lenders that such financial information as it relates to future events is
not to be viewed as fact and that actual results during the period or periods
covered by such financial information may differ from the projected results set
forth therein by a material amount. As of the date hereof, the representations
and warranties contained in the Acquisition Agreement are true and correct in
all material respects. There is no fact known to any Loan Party that could
reasonably be expected to have a Material Adverse Effect that has not been
expressly disclosed herein, in the other Loan Documents, in the Confidential
Information Memorandum or in any other documents, certificates and statements
furnished to the Administrative Agent and the Lenders for use in connection with
the transactions contemplated hereby and by the other Loan Documents.
4.19 Solvency. Each Loan Party is, and after giving effect to the
--------
Acquisition and the incurrence of all Indebtedness and obligations being
incurred in connection herewith and therewith will be and will continue to be,
Solvent.
4.20 Year 2000 Matters. Any reprogramming required to permit the
-----------------
proper functioning (but only to the extent that such proper functioning would
otherwise be impaired by the occurrence of the year 2000) in and following the
year 2000 of computer systems and other equipment containing embedded
microchips, in either case owned or operated by Holdings or any of its
Subsidiaries or used or relied upon in the conduct of their business (including
any such systems and other equipment supplied by
<PAGE>
38
others or with which the computer systems of Holdings or any of its Subsidiaries
interface), and the testing of all such systems and other equipment as so
reprogrammed, will be completed reasonably in advance of the year 2000. The
costs to Holdings and its Subsidiaries that have not been incurred as of the
date hereof for such reprogramming and testing and for the other reasonably
foreseeable consequences to them of any improper functioning of other computer
systems and equipment containing embedded microchips due to the occurrence of
the year 2000 could not reasonably be expected to result in a Default or Event
of Default or to have a Material Adverse Effect. Except for any reprogramming
referred to above, the computer systems of Holdings and its Subsidiaries are
and, with ordinary course upgrading and maintenance, will continue for the term
of this Agreement to be, reasonably sufficient for the conduct of their business
as currently conducted.
5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement of
-----------------------------------------
each Lender to make the initial extension of credit requested to be made by it
is subject to the satisfaction, prior to or concurrently with the making of such
extension of credit on the Closing Date, of the following conditions precedent:
(a) Credit Agreement. The Administrative Agent shall have received
----------------
this Agreement, executed and delivered by a duly authorized officer of
Holdings and the Borrower.
(b) Acquisition, etc. The following transactions shall have been
----------------
consummated (or shall be consummated substantially concurrently with the
initial extension of credit on the Closing Date), in each case on terms and
conditions reasonably satisfactory to the Lenders:
(i) the Borrower and Tommy Hilfiger (Eastern Hemisphere)
Limited shall have acquired directly or indirectly all of the capital
stock of Pepe and TH Canada (the "Acquisition"), for an aggregate
-----------
purchase price not exceeding $755,760,000 in cash (exclusive of
$10,000,000 expended to purchase an outstanding note), with the
remainder of the purchase price being paid in the form of common stock
of Holdings, pursuant to the Acquisition Agreement, and no provision
thereof relating to any material matter shall have been waived,
amended, supplemented or otherwise modified without the prior written
consent of the Required Lenders; and
(ii) the Borrower shall have received at least
$400,000,000 in gross cash proceeds from the issuance of the Senior
Notes on terms reasonably satisfactory to the Lenders.
(c) Fees. The Lenders and the Administrative Agent shall have
----
received all fees required to be paid, and all expenses for which invoices
have been presented (including the reasonable fees and expenses of legal
counsel), on or before the Closing Date.
(d) Credit Ratings. The Borrower's senior unsecured debt shall have
--------------
been rated at least BBB- by Standard & Poor's Ratings Services or at least
Baa3 by Moody's Investors Service, Inc.
(e) Pro Forma Balance Sheet; Financial Statements. The Lenders shall
---------------------------------------------
have received (i) the Pro Forma Balance Sheet, (ii) audited consolidated
financial statements of Holdings and its consolidated Subsidiaries for the
fiscal years ended March 31, 1996 and March 31, 1997, (iii) unaudited
preliminary consolidated financial statements of Holdings and its
consolidated Subsidiaries for the fiscal year ended March 31, 1998, and
such financial statements shall not, in
<PAGE>
39
the reasonable judgment of the Lenders, reflect any material adverse change
in the consolidated financial condition of Holdings and its consolidated
Subsidiaries, as reflected in the financial statements or projections
contained in the Confidential Information Memorandum.
(f) Financial Statements of Acquired Companies. The Lenders shall
------------------------------------------
have received (i) audited consolidated or combined financial statements of
each of the Acquired Companies for the two most recent fiscal years ended
prior to the Closing Date as to which such financial statements are
available and (ii) unaudited interim consolidated or combined financial
statements of each of the Acquired Companies for the nine-month period
ended December 31, 1997, and such financial statements shall not, in the
reasonable judgment of the Lenders, reflect any material adverse change in
the consolidated or combined financial condition of the Acquired Companies,
as reflected in the financial statements or projections contained in the
Confidential Information Memorandum.
(g) Projections. The Lenders shall have received satisfactory
-----------
projections through the 2003 fiscal year of Holdings.
(h) Approvals. All governmental and material third party approvals
---------
(including landlords' and other consents) necessary in connection with the
Acquisition, the continuing operations of Holdings and its Subsidiaries and
the transactions contemplated hereby shall have been obtained and be in
full force and effect, and all applicable waiting periods shall have
expired without any action being taken or threatened by any competent
authority that would restrain, prevent or otherwise impose adverse
conditions on the Acquisition or the financing contemplated hereby.
(i) Lien Searches. The Administrative Agent shall have received the
-------------
results of a recent lien search in each of the jurisdictions where assets
of the Loan Parties are located, and such search shall reveal no Liens on
any of the assets of Holdings or its Subsidiaries except for Liens
permitted by Section 7.3 or which are to be released by the lenders under
the existing credit facilities on or about the Closing Date pursuant to
clause (m) below.
(j) Expenses. The Administrative Agent shall have received
--------
satisfactory evidence that the fees and expenses to be incurred in
connection with the Acquisition and the financing thereof shall not exceed
$30,000,000.
(k) Closing Certificate. The Administrative Agent shall have
-------------------
received, with a counterpart for each Lender, a certificate of each of the
Borrower and Holdings, dated the Closing Date, substantially in the form of
Exhibits B-1 and B-2, respectively, with appropriate insertions and
attachments.
(l) Legal Opinions. The Administrative Agent shall have received the
--------------
following executed legal opinions:
(i) the legal opinion of Wachtell, Lipton, Rosen & Katz,
counsel to the Borrower and United States counsel to Holdings,
substantially in the form of Exhibit D-1;
(ii) the legal opinion of Harney, Westwood & Riegels,
British Virgin Islands counsel to Holdings, substantially in the form
of Exhibit D-2; and
(iii) the legal opinion of Steven R. Gursky, substantially
in the form of Exhibit D-3; and
<PAGE>
40
(iv) to the extent consented to by the relevant counsel,
each legal opinion, if any, delivered in connection with the
Acquisition Agreement, accompanied by a reliance letter in favor of
the Lenders.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.
(m) Existing Credit Facilities. The Administrative Agent shall have
--------------------------
received evidence reasonably satisfactory to it that the existing credit
facilities of the Borrower, the Acquired Companies and their respective
Subsidiaries (other than the Canadian Loan Agreement, the C$12,000,000
letter of credit facility to be maintained by TH Canada and the 15,000,000
Hong Kong Dollar letter of credit facility to be maintained by TJ Clothing
(H.K.) Limited), together with any security interests granted in connection
therewith, shall have been, or in the case of any such security interest,
will promptly thereafter be, terminated.
5.2 Conditions to Each Extension of Credit. The agreement of each
--------------------------------------
Lender to make any extension of credit requested to be made by it on any date
(including its initial extension of credit) is subject to the satisfaction of
the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by any Loan Party in or pursuant to the Loan Documents
shall be true and correct on and as of such date as if made on and as of
such date.
(b) No Default. No Default or Event of Default shall have occurred
----------
and be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
Each borrowing by and issuance or amendment of a Letter of Credit on behalf of
the Borrower hereunder shall constitute a representation and warranty by the
Borrower as of the date of such extension of credit that the conditions
contained in this Section 5.2 have been satisfied.
6. AFFIRMATIVE COVENANTS
Holdings and the Borrower hereby jointly and severally agree that, so
long as the Commitments remain in effect, any Letter of Credit remains
outstanding or any Loan or other amount is owing to any Lender or the
Administrative Agent hereunder, each of Holdings and the Borrower shall and
shall cause each of its Subsidiaries to:
6.1 Financial Statements. Furnish to the Administrative Agent and
--------------------
each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of Holdings, a copy of the audited consolidated
balance sheet of Holdings and its consolidated Subsidiaries as at the end
of such year and the related audited consolidated statements of income and
of cash flows for such year (including summary financial information as to
the Borrower and its Subsidiaries in the form described in Rule 1-02(bb) of
Regulation S-X under the Exchange Act), setting forth in each case in
comparative form the figures for the previous year, reported on without a
"going concern" or like qualification or exception, or qualification
arising out of the scope of the audit, by Price Waterhouse LLP or other
independent certified public accountants of nationally recognized standing;
and
<PAGE>
41
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of Holdings, the unaudited consolidated balance sheet of Holdings and
its consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated statement of income for such quarter and the portion
of the fiscal year through the end of such quarter and the related
unaudited consolidated statement of cash flows for the portion of the
fiscal year through the end of such quarter (including summary financial
information as to the Borrower and its Subsidiaries in the form described
in Rule 1-02(bb) of Regulation S-X under the Exchange Act), setting forth
in each case in comparative form the figures for the previous year,
certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments).
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
6.2 Certificates; Other Information. Furnish to the Administrative
-------------------------------
Agent and each Lender (or, in the case of clause (g), to the relevant Lender):
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer of
Holdings or the Borrower, as applicable, stating that, to the best of each
such Responsible Officer's knowledge, each Loan Party during such period
has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Agreement and the other Loan
Documents to which it is a party to be observed, performed or satisfied by
it, and that such Responsible Officer has obtained no knowledge of any
Default or Event of Default except as specified in such certificate and
(ii) in the case of quarterly or annual financial statements of Holdings, a
Compliance Certificate containing all information necessary for determining
compliance by Holdings and its Subsidiaries with the provisions of this
Agreement referred to therein as of the last day of the fiscal quarter or
fiscal year of Holdings, as the case may be;
(c) as soon as available, and in any event no later than 45 days after
the end of each fiscal year of Holdings, a consolidated budget for the
following fiscal year (including a projected consolidated balance sheet of
Holdings and its Subsidiaries as of the end of the following fiscal year,
and the related consolidated statements of projected cash flow and
projected income), and, as soon as available, and in any event no later
than 45 days after the end of the second quarter of each fiscal year of
Holdings, a revised consolidated budget covering the remainder of such
fiscal year (collectively, the "Projections"), which Projections shall in
-----------
each case be accompanied by a certificate of a Responsible Officer stating
that such Projections are based on reasonable estimates, information and
assumptions and that such Responsible Officer has no reason to believe that
such Projections are incorrect or misleading in any material respect;
(d) within 45 days after the end of each fiscal quarter of Holdings, a
narrative discussion and analysis of the financial condition and results of
operations of Holdings and its Subsidiaries
<PAGE>
42
for such fiscal quarter and for the period from the beginning of the then
current fiscal year to the end of such fiscal quarter;
(e) no later than 10 Business Days prior to the effectiveness thereof,
copies of substantially final drafts of any proposed amendment, supplement,
waiver or other modification with respect to the Senior Note Indenture;
(f) within five days after the same are sent, copies of all financial
statements and reports that Holdings or the Borrower sends to the holders
of any class of its debt securities or public equity securities and, within
five days after the same are filed, copies of all financial statements and
reports that Holdings or the Borrower may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
Governmental Authority; and
(g) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
----------------------
or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of Holdings or the relevant Subsidiary, as the case may be.
6.4 Maintenance of Existence; Compliance. (a) (i) Preserve, renew
------------------------------------
and keep in full force and effect its corporate existence and (ii) take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business, except, in each case, as
otherwise permitted by Section 7.4 and except, in the case of clause (ii) above,
to the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect; and (b) comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all material
----------------------------------
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted and (b) maintain with financially
sound and reputable insurance companies insurance on all its property in at
least such amounts and against at least such risks (but including in any event
public liability, product liability and business interruption) as are usually
insured against in the same general area by companies engaged in the same or a
similar business.
6.6 Inspection of Property; Books and Records; Discussions. (a)
------------------------------------------------------
Keep proper books of records and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities and (b)
permit representatives of any Lender to visit and inspect any of its properties
and examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of Holdings
and its Subsidiaries with officers and employees of Holdings and its
Subsidiaries.
6.7 Notices. Promptly give notice to the Administrative Agent and
-------
each Lender of:
(a) the occurrence of any Default or Event of Default;
<PAGE>
43
(b) any (i) default or event of default under any Contractual
Obligation of Holdings or any of its Subsidiaries or (ii) litigation,
investigation or proceeding that may exist at any time between Holdings or
any of its Subsidiaries and any Governmental Authority, that in either
case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting Holdings or any of its
Subsidiaries in which the amount involved is $10,000,000 or more and not
covered by insurance or a binding indemnification obligation or in which
injunctive or similar relief is sought;
(d) the following events, as soon as possible and in any event within
30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence of any Reportable Event with respect to any Plan, a failure to
make any required contribution to a Plan, the creation of any Lien in favor
of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other action by the PBGC or
the Borrower or any Commonly Controlled Entity or any Multiemployer Plan
with respect to the withdrawal from, or the termination, Reorganization or
Insolvency of, any Plan; and
(e) any development or event that has had or could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section 6.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action Holdings or the relevant Subsidiary proposes to
take with respect thereto.
6.8 Environmental Laws. Except as could not reasonably be expected
------------------
to have a Material Adverse Effect, (a) comply with, and ensure compliance by all
tenants and subtenants, if any, with, all applicable Environmental Laws, and
obtain and comply with and maintain, and ensure that all tenants and subtenants
obtain and comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws and (b) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and directives of
all Governmental Authorities regarding Environmental Laws.
6.9 Year 2000 Matters. Do or cause to be done all things necessary
-----------------
to ensure that any reprogramming required to permit the proper functioning, in
and following the year 2000, of the computer systems of Holdings and its
Subsidiaries and equipment containing embedded microchips (including systems and
equipment supplied by others or with which the systems of Holdings or any of its
Subsidiaries interface) and the testing of all such systems and equipment, as so
reprogrammed, will be completed reasonably prior to the year 2000.
7. NEGATIVE COVENANTS
Holdings and the Borrower hereby jointly and severally agree that, so
long as the Commitments remain in effect, any Letter of Credit remains
outstanding or any Loan or other amount is owing to any Lender or the
Administrative Agent hereunder, (i) the Borrower shall not, and shall not permit
any of its
<PAGE>
44
Subsidiaries to, directly or indirectly, (ii) Holdings shall not permit any of
its Subsidiaries to, directly or indirectly, and, (iii) in the case of Sections
7.1, 7.3, 7.10, 7.11 and 7.12, Holdings shall not, directly or indirectly:
7.1 Financial Condition Covenants.
-----------------------------
(a) Consolidated Leverage Ratio. Permit the Consolidated Leverage
---------------------------
Ratio at any time on or after September 30, 1998 to exceed 3.0 to 1.0.
(b) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated
----------------------------------------
Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters
of Holdings to be less than 1.5 to 1.0.
(c) Consolidated Net Worth. Permit Consolidated Net Worth at any time
----------------------
to be less than $700,000,000.
7.2 Indebtedness. Create, incur, assume or suffer to exist (in each
------------
case, to "Incur") any Indebtedness, except:
-----
(a) Indebtedness of the Borrower pursuant to any Loan Document;
(b) Indebtedness of the Borrower or any other Subsidiary to Holdings
or any of its Subsidiaries, provided that any such Indebtedness of the
--------
Borrower and its Subsidiaries to Holdings and the Holdings Subsidiaries
incurred on or after the Closing Date shall be subordinated to the
Obligations and the obligations of the Borrower under the Senior Note
Indenture;
(c) Indebtedness secured by Liens permitted by Section 7.3(g) and
Capital Lease Obligations, in an aggregate principal amount not to exceed
$25,000,000 at any one time outstanding;
(d) Indebtedness outstanding or available to be drawn on the date
hereof and listed on Schedule 7.2(d) and any refinancings, refundings,
renewals or extensions thereof (without increasing, or shortening the
maturity of, the principal amount thereof);
(e) (i) Guarantee Obligations Incurred in the ordinary course of
business by the Borrower or any of its Subsidiaries in respect of
obligations of any Subsidiary of the Borrower and (ii) Guarantee
Obligations Incurred in the ordinary course of business by the Holdings
Subsidiaries in respect of obligations of any other Subsidiary other than
the Borrower;
(f) Indebtedness of the Borrower in respect of the initial issuance of
the Senior Notes on the Closing Date in an aggregate principal amount not
to exceed $450,000,000 and any refinancings, refundings, renewals or
extensions thereof;
(g) additional Indebtedness of the Borrower or any other Subsidiary in
an aggregate principal amount (for the Borrower and all other Subsidiaries)
not to exceed the aggregate amount of the shelf offering registered by the
Borrower on or before the Closing Date minus the aggregate principal amount
-----
of the Senior Notes issued on the Closing Date;
(h) Indebtedness of the Borrower or any other Subsidiary which is
subordinated to the Obligations on terms reasonably satisfactory to the
Required Lenders;
<PAGE>
45
(i) so long as no Default or Event of Default would occur after giving
effect to the assumption of such Indebtedness, Indebtedness of any Person
(other than an Unrestricted Subsidiary) that is merged into or consolidated
or amalgamated with the Borrower or any other Subsidiary, whose assets are
purchased by the Borrower or any other Subsidiary or that becomes a
Subsidiary after the date hereof in accordance with the terms of Section
7.4 or 7.7 that is existing at the time such Person so merges,
consolidates, amalgamates, such assets are purchased or such Person becomes
a Subsidiary, provided that such Indebtedness was not incurred in
--------
contemplation of such Person merging, consolidating, amalgamating, such
assets being purchased or such Person becoming such a Subsidiary; and
(j) Indebtedness Incurred by the Borrower or any other Subsidiary
which is used to refinance the Term Loans.
Notwithstanding anything else herein to the contrary, the aggregate principal
amount of Indebtedness Incurred by Subsidiaries other than the Borrower pursuant
to clauses (g), (h) and (j) above shall not exceed $25,000,000 at any one time
outstanding.
7.3 Liens. Create, incur, assume or suffer to exist any Lien upon
-----
any of its property or revenues, whether now owned or hereafter acquired, except
for:
(a) Liens for taxes not yet due or that are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
--------
respect thereto are maintained on the books of Holdings or the relevant
Subsidiary, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business that are not
overdue for a period of more than 30 days or that are being contested in
good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business that, in the
aggregate, are not substantial in amount and that do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of Holdings
or any of its Subsidiaries;
(f) Liens in existence on the date hereof (or granted in connection
with any refinancings, refundings, renewals or extensions permitted by
Section 7.2(d)) listed on Schedule 7.3(f), securing Indebtedness permitted
by Section 7.2(d), provided that no such Lien is spread to cover any
--------
additional types of property after the Closing Date and that the amount of
Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of Holdings or any of its Subsidiaries
incurred to finance the acquisition of fixed or capital assets, provided
--------
that (i) such Liens shall be created substantially simultaneously with the
acquisition of such fixed or capital assets, (ii) such Liens do not at any
time encumber any property other than the property financed by such
Indebtedness,
<PAGE>
46
(iii) the aggregate principal amount of such Indebtedness shall not exceed
$25,000,000 at any one time outstanding and (iv) the amount of Indebtedness
secured thereby is not increased;
(h) any interest or title of a lessor under any lease entered into by
the Borrower or any other Subsidiary in the ordinary course of its business
and covering only the assets so leased;
(i) so long as no Default or Event of Default would occur after giving
effect to the assumption of such Lien, Liens on property of a Person (other
than an Unrestricted Subsidiary) existing at the time such Person is merged
into or consolidated or amalgamated with Holdings of any of its
Subsidiaries, Holdings or any of its Subsidiaries purchases assets of such
Person or such Person becomes a Subsidiary of Holdings after the date
hereof in accordance with the terms of Section 7.4 or 7.7; provided that
such Liens were not created in contemplation of such merger, consolidation,
amalgamation, asset purchase or becoming a Subsidiary and do not extend to
any assets other than those of the Person merged into or consolidated or
amalgamated with Holdings or any of its Subsidiaries, the assets being so
purchased or the Person becoming such a Subsidiary;
(j) Liens arising either (i) by the terms of commercial letters of
credit entered into in the ordinary course of business to secure
reimbursement obligations thereunder, or (ii) under accounts receivable
collection arrangements entered into in the ordinary course of business to
secure fees and other charges owing to the other party to such
arrangements;
(k) Liens on the Borrower's office facility located at 25 West 39th
Street, New York, New York; and
(l) additional Liens (not otherwise permitted hereunder) which secure
obligations at any time outstanding not exceeding (as to Holdings and all
of its Subsidiaries) an amount equal to 10% of Total Tangible Assets.
7.4 Fundamental Changes. Enter into any merger, consolidation or
-------------------
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or Dispose of, all or substantially all of its
property or business, except:
(a) (i) any Subsidiary of the Borrower may be merged, consolidated or
amalgamated with or into the Borrower (provided that the Borrower shall be
--------
the continuing or surviving corporation) or with or into any Subsidiary of
the Borrower and (ii) any Holdings Subsidiary may be merged, consolidated
or amalgamated with or into the Borrower (provided that the Borrower shall
--------
be the continuing or surviving corporation) or with or into any other
Subsidiary;
(b) (i) any Subsidiary of the Borrower may Dispose of any or all of
its assets (upon voluntary liquidation or otherwise) to the Borrower or any
Subsidiary of the Borrower and (ii) any Holdings Subsidiary may Dispose of
any or all of its assets (upon voluntary liquidation or otherwise) to the
Borrower or any other Subsidiary;
(c) in connection with Dispositions permitted by Section 7.5; and
(d) in connection with Investments permitted by Section 7.7.
<PAGE>
47
7.5 Disposition of Property. Dispose of any of its property,
-----------------------
whether now owned or hereafter acquired, or, in the case of any Subsidiary of
Holdings, issue or sell any shares of such Subsidiary's Capital Stock to any
Person, except:
(a) the Disposition of obsolete or worn out property in the ordinary
course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by Section 7.4(b);
(d) Dispositions of Unrestricted Subsidiaries;
(e) (i) the sale or issuance of any Subsidiary's Capital Stock to the
Borrower or any Subsidiary of the Borrower and (ii) the sale or issuance of
any Holdings Subsidiary's Capital Stock to Holdings, the Borrower or any
other Subsidiary;
(f) the Disposition of the Borrower's office facility located at 25
West 39th Street in New York, New York; and
(g) the Disposition of other property having an aggregate fair market
value not to exceed 10% of Total Tangible Assets (excluding the portion of
Total Tangible Assets attributable solely to Holdings and calculated as at
the time of any such Disposition) during the term of this Agreement.
7.6 Restricted Payments. Declare or pay any dividend (other than
-------------------
dividends payable solely in common stock of the Person making such dividend) on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any Capital Stock of the Borrower or any other Subsidiary,
whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of the Borrower or any Subsidiary, or make any principal payment on
any obligation of the type described in clause (v) of the definition of
"Available Basket" owing by any Subsidiary to Holdings (collectively,
"Restricted Payments"), except that:
-------------------
(a) (i) any Subsidiary of the Borrower may make Restricted Payments to
the Borrower or any Subsidiary of the Borrower and (ii) any Holdings
Subsidiary may make Restricted Payments to the Borrower or any other
Subsidiary;
(b) so long as no Default or Event of Default shall have occurred and
be continuing or would result therefrom, (i) the Borrower or any of its
Subsidiaries may purchase (to be paid in the form of a subordinated
intercompany note) ordinary shares of Holdings for the purpose of funding
the Acquisition or the Borrower's or such Subsidiary's employee stock
incentive program and (ii) any Holdings Subsidiary may purchase an
aggregate amount of up to 60,000 ordinary shares of Holdings (appropriately
adjusted for stock splits, reverse stock splits and stock dividends) in any
fiscal year for the purpose of funding such Holdings Subsidiary's employee
stock incentive program; and
(c) so long as no Default or Event of Default shall have occurred and
be continuing or would result therefrom, any Subsidiary may make Restricted
Payments to Holdings in an aggregate amount not to exceed the Available
Basket at such time.
<PAGE>
48
7.7 Investments. Make any advance, loan, extension of credit (by
-----------
way of guaranty or otherwise) or capital contribution to, or purchase any
Capital Stock, bonds, notes, debentures or other securities of, or any assets
constituting all or a material part of a business unit of, or make any other
investment in, any Person (all of the foregoing, "Investments"), except:
-----------
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 7.2;
(d) loans and advances to employees of Holdings or any of its
Subsidiaries in the ordinary course of business (including for travel,
entertainment and relocation expenses) in an aggregate amount for the
Borrower and the other Subsidiaries not to exceed $5,000,000 at any one
time outstanding;
(e) the Acquisition;
(f) Investments made by the Borrower or any of its Subsidiaries with
the proceeds of any Reinvestment Deferred Amount;
(g) (i) Investments by Holdings or any of its Subsidiaries in the
Borrower or any Person that, prior to such investment is, or simultaneously
in connection with such Investment becomes, a Wholly Owned Subsidiary of
the Borrower and (ii) Investments by any Holdings Subsidiary in any Person
that, prior to such investment is, or simultaneously in connection with
such Investment becomes, a Wholly Owned Subsidiary of such Holdings
Subsidiary;
(h) (i) Investments by the Borrower of any of its Subsidiaries in
Holdings or any of the Holdings Subsidiaries in an aggregate amount not to
exceed the Available Basket at such time and (ii) Investments by any
Holdings Subsidiary in Holdings in an aggregate amount not to exceed the
Available Basket at such time;
(i) Investments by any Holdings Subsidiary in the Borrower or any
other Subsidiary;
(j) purchases of ordinary shares of Holdings described in Section
7.6(b); and
(k) in addition to Investments otherwise expressly permitted by this
Section 7.7, Investments by the Borrower or any other Subsidiary in an
aggregate amount (valued at cost) not to exceed $25,000,000 during the term
of this Agreement.
7.8 Payments and Modifications of Debt Instruments, etc. (a) Make
----------------------------------------------------
or offer to make any payment, prepayment, repurchase or redemption of or
otherwise defease or segregate funds with respect to the Senior Notes (other
than scheduled interest payments required to be made in cash), provided that (i)
--------
the Borrower may refinance the Senior Notes and (ii) the Borrower may prepay,
repurchase or redeem all or a portion of the Senior Notes so long as the
Borrower simultaneously prepays a percentage of the Term Loans equal to the
percentage of the Senior Notes being prepaid, repurchased or redeemed at such
time, or (b) amend, modify, waive or otherwise change, or consent or agree to
any amendment, modification, waiver or other change to, any of the terms of the
Senior Notes (other than any such amendment, modification, waiver or other
change that (i) would extend the maturity or reduce the
<PAGE>
49
amount of any payment of principal thereof or reduce the rate or extend the date
for payment of interest thereon or (ii) is not materially adverse to the
Lenders).
7.9 Transactions with Affiliates. Enter into any transaction,
----------------------------
including any purchase, sale, lease or exchange of property, with any Affiliate
(other than Holdings or any of its Subsidiaries) unless such transaction is (a)
otherwise not prohibited under this Agreement and (b) upon fair and reasonable
terms no less favorable to the Borrower or the relevant Subsidiary than it would
obtain in a comparable arm's length transaction with a Person that is not an
Affiliate. It is understood and agreed that the transactions contemplated by the
Acquisition Agreement shall satisfy the provisions of this Section 7.9.
7.10 Sales and Leasebacks. Enter into any arrangement with any Person
--------------------
providing for the leasing by Holdings or any Subsidiary of real or personal
property that has been or is to be sold or transferred by Holdings or such
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of Holdings or such Subsidiary other than with respect to the
Borrower's office facility located at 25 West 39th Street in New York, New York.
7.11 Changes in Fiscal Periods. Permit the fiscal year of Holdings
-------------------------
or the Borrower to end on a day other than March 31 or change Holdings' or the
Borrower's method of determining fiscal quarters.
7.12 Negative Pledge Clauses. Enter into or suffer to exist or become
-----------------------
effective any agreement that prohibits or limits the ability of Holdings or any
of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon
any of its property or revenues, whether now owned or hereafter acquired, other
than (a) this Agreement and the other Loan Documents, (b) the Senior Note
Indenture, (c) any agreements governing any Liens otherwise permitted hereby (in
which case, any prohibition or limitation shall only be effective against the
assets financed thereby) and (d) in any currently existing agreements set forth
on Schedule 7.12 or any successor agreements thereto (in which case, any
prohibition or limitation shall only be effective against the types of assets
covered by the original agreement).
7.13 Clauses Restricting Subsidiary Distributions. Enter into or
--------------------------------------------
suffer to exist or become effective any consensual encumbrance or restriction on
the ability of any Subsidiary of the Borrower to (a) pay dividends or make any
other distributions in respect of any Capital Stock of such Subsidiary held by,
or pay any Indebtedness owed to, the Borrower or any other Subsidiary of the
Borrower, (b) make loans or advances to the Borrower or any other Subsidiary of
the Borrower or (c) transfer any of its assets to the Borrower or any other
Subsidiary of the Borrower, except for such encumbrances or restrictions
existing under or by reason of (i) any restrictions existing under the Loan
Documents or the Canadian Loan Agreement and any refinancings, refundings,
renewals or extensions thereof and (ii) any restrictions with respect to a
Subsidiary imposed pursuant to an agreement that has been entered into in
connection with the Disposition of all or substantially all of the Capital Stock
or assets of such Subsidiary.
7.14 Lines of Business. Enter into any business, either directly or
-----------------
through any Subsidiary, except for those businesses in which the Borrower or any
other Subsidiary is engaged on the date of this Agreement or the fashion,
apparel or consumer products business or any business reasonably related to any
thereof.
<PAGE>
50
8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the terms hereof; or
the Borrower shall fail to pay any interest on any Loan or Reimbursement
Obligation, or any other amount payable hereunder or under any other Loan
Document, within five days after any such interest or other amount becomes
due in accordance with the terms hereof; or
(b) any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or that is contained in any
certificate, document or financial or other statement furnished by it at
any time under or in connection with this Agreement or any such other Loan
Document shall prove to have been inaccurate in any material respect on or
as of the date made or deemed made; or
(c) any Loan Party shall default in the observance or performance of
any agreement contained in clause (i) or (ii) of Section 6.4(a) (with
respect to Holdings and the Borrower only), Section 6.7(a) or Section 7 of
this Agreement; or
(d) any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of this Section), and
such default shall continue unremedied for a period of 30 days after notice
to the Borrower from the Administrative Agent or the Required Lenders; or
(e) Holdings or any of its Subsidiaries shall (i) default in making
any payment of any principal of any Indebtedness (including any Guarantee
Obligation, but excluding the Loans) on the scheduled or original due date
with respect thereto; or (ii) default in making any payment of any interest
on any such Indebtedness beyond the period of grace, if any, provided in
the instrument or agreement under which such Indebtedness was created; or
(iii) default in the observance or performance of any other agreement or
condition relating to any such Indebtedness or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or beneficiary of such
Indebtedness (or a trustee or agent on behalf of such holder or
beneficiary) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or (in the case of
any such Indebtedness constituting a Guarantee Obligation) to become
payable; provided, that a default, event or condition described in clause
--------
(i), (ii) or (iii) of this paragraph (e) shall not at any time constitute
an Event of Default unless, at such time, one or more defaults, events or
conditions of the type described in clauses (i), (ii) and (iii) of this
paragraph (e) shall have occurred and be continuing with respect to
Indebtedness the outstanding principal amount of which exceeds in the
aggregate $20,000,000; or
(f) (i) Holdings or any of its Material Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian, conservator or other similar official for it or for all
or any substantial part of its assets,
<PAGE>
51
or Holdings or any of its Material Subsidiaries shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against Holdings or any of its Material Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above that
(A) results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a
period of 60 days; or (iii) there shall be commenced against Holdings or
any of its Material Subsidiaries any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets that
results in the entry of an order for any such relief that shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) Holdings or any of its Material
Subsidiaries shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or (v) Holdings or any of its Material
Subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
(g) (i) any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with respect
to a Plan; and in each case in clauses (i) through (vi) above, such event
or condition, together with all other such events or conditions, if any,
could, in the sole judgment of the Required Lenders, reasonably be expected
to have a Material Adverse Effect; or
(h) one or more judgments or decrees shall be entered against Holdings
or any of its Material Subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance as to which the relevant insurance
company has acknowledged coverage) of $20,000,000 or more, and all such
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 30 days from the entry thereof; or
(i) the guarantee contained in Section 10 hereof shall cease, for any
reason, to be in full force and effect or any Loan Party or any Affiliate
of any Loan Party shall so assert; or
(j) (i) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (other than the Permitted Investors) shall become, or
------------
obtain rights (whether by means or warrants, options or otherwise) to
become, the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act), directly or indirectly, of more than 35% of the
outstanding ordinary shares of Holdings; (ii) the board of directors of
Holdings shall cease to consist of a majority of Continuing Directors; or
(iii) Holdings shall cease to own and control, of record and beneficially,
directly, 100% of each class of outstanding Capital Stock of the Borrower
free and clear of all Liens;
<PAGE>
52
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) shall immediately
become due and payable, and (B) if such event is any other Event of Default,
either or both of the following actions may be taken: (i) with the consent of
the Majority Revolving Facility Lenders, the Administrative Agent may, or upon
the request of the Majority Revolving Facility Lenders, the Administrative Agent
shall, by notice to the Borrower declare the Revolving Commitments to be
terminated forthwith, whereupon the Revolving Commitments shall immediately
terminate; and (ii) with the consent of the Required Lenders, the Administrative
Agent may, or upon the request of the Required Lenders, the Administrative Agent
shall, by notice to the Borrower, declare the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement and the other
Loan Documents (including all amounts of L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) to be due and payable forthwith, whereupon the
same shall immediately become due and payable. With respect to all Letters of
Credit with respect to which presentment for honor shall not have occurred at
the time of an acceleration pursuant to this paragraph, the Borrower shall at
such time deposit in a cash collateral account opened by the Administrative
Agent an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit. Amounts held in such cash collateral account shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay other obligations of the Borrower hereunder and under the other Loan
Documents. After all such Letters of Credit shall have expired or been fully
drawn upon, all Reimbursement Obligations shall have been satisfied and all
other obligations of the Borrower hereunder and under the other Loan Documents
shall have been paid in full, the balance, if any, in such cash collateral
account shall be returned to the Borrower (or such other Person as may be
lawfully entitled thereto). Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived by the Borrower.
9. THE ADMINISTRATIVE AGENT
9.1 Appointment. Each Lender hereby irrevocably designates and
-----------
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
9.2 Delegation of Duties. The Administrative Agent may execute any
--------------------
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
<PAGE>
53
9.3 Exculpatory Provisions. Neither the Administrative Agent nor
---------------------
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from its or such Person's own gross negligence or willful misconduct)
or (ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Loan Party or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of any Loan Party a party thereto to perform its
obligations hereunder or thereunder. The Administrative Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Loan Party.
9.4 Reliance by Administrative Agent. The Administrative Agent shall
--------------------------------
be entitled to rely, and shall be fully protected in relying, upon any
instrument, writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including counsel to Holdings or the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders (or, if so specified
by this Agreement, all Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense that may be incurred by it by reason of taking or continuing to take any
such action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders (or, if so
specified by this Agreement, all Lenders), and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Loans.
9.5 Notice of Default. The Administrative Agent shall not be deemed
-----------------
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender,
Holdings or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give notice thereof to the Lenders. The Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders (or, if so specified by this
Agreement, all Lenders); provided that unless and until the Administrative Agent
--------
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
9.6 Non-Reliance on Administrative Agent and Other Lenders. Each
------------------------------------------------------
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates have
made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of a
Loan Party or any
<PAGE>
54
affiliate of a Loan Party, shall be deemed to constitute any representation or
warranty by the Administrative Agent to any Lender. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Loan Parties and their affiliates and made
its own decision to make its Loans hereunder and enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their
affiliates. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
any Loan Party or any affiliate of a Loan Party that may come into the
possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
9.7 Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent in its capacity as such (to the extent not reimbursed by
Holdings or the Borrower and without limiting the obligation of Holdings or the
Borrower to do so), ratably according to their respective Aggregate Exposure
Percentages in effect on the date on which indemnification is sought under this
Section 9.7 (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Loans shall have been paid in full,
ratably in accordance with such Aggregate Exposure Percentages immediately prior
to such date), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever that may at any time (whether before or after the payment
of the Loans) be imposed on, incurred by or asserted against the Administrative
Agent in any way relating to or arising out of, the Commitments, this Agreement,
any of the other Loan Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by the Administrative Agent under or in connection with
any of the foregoing; provided that no Lender shall be liable for the payment of
--------
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements that are found by a
final and nonappealable decision of a court of competent jurisdiction to have
resulted from the Administrative Agent's gross negligence or willful misconduct.
The agreements in this Section 9.7 shall survive the payment of the Loans and
all other amounts payable hereunder.
9.8 Administrative Agent in Its Individual Capacity. The
-----------------------------------------------
Administrative Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with any Loan Party as though the
Administrative Agent was not the Administrative Agent. With respect to its Loans
made or renewed by it and with respect to any Letter of Credit issued or
participated in by it, the Administrative Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any Lender and may
exercise the same as though it were not the Administrative Agent, and the terms
"Lender" and "Lenders" shall include the Administrative Agent in its individual
capacity.
9.9 Successor Administrative Agent. The Administrative Agent may
------------------------------
resign as Administrative Agent upon 10 days' notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent under
this Agreement and the other Loan Documents, then the Required Lenders shall
appoint from among the Lenders a successor agent for the Lenders, which
<PAGE>
55
successor agent shall (unless an Event of Default under Section 8(a) or Section
8(f) with respect to the Borrower shall have occurred and be continuing) be
subject to approval by the Borrower (which approval shall not be unreasonably
withheld or delayed), whereupon such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. If no successor agent
has accepted appointment as Administrative Agent by the date that is 10 days
following a retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become effective
and the Lenders shall assume and perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Required Lenders appoint a
successor agent as provided for above. After any retiring Administrative Agent's
resignation as Administrative Agent, the provisions of this Section 9 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement and the other Loan Documents.
10. GUARANTEE
10.1 Guarantee. In order to induce the Administrative Agent and the
---------
Lenders to execute and deliver this Agreement and to make or maintain the Loans
hereunder, and in consideration thereof, Holdings hereby unconditionally and
irrevocably guarantees to the Administrative Agent, for the ratable benefit of
the Lenders, the prompt and complete payment and performance by the Borrower
when due (whether at stated maturity, by acceleration or otherwise) of the
Obligations, and Holdings further agrees to pay any and all expenses (including
all reasonable fees, charges and disbursements of counsel) that may be paid or
incurred by the Administrative Agent or by the Lenders in enforcing, or
obtaining advice of counsel in respect of, any of their rights under the
guarantee contained in this Section 10. The guarantee contained in this Section
10, subject to Section 10.5, shall remain in full force and effect until the
Obligations are paid in full, the Commitments are terminated and no Letters of
Credit are outstanding, notwithstanding that from time to time prior thereto the
Borrower may be free from any Obligations.
Holdings agrees that whenever, at any time, or from time to time, it
shall make any payment to the Administrative Agent or any Lender on account of
its liability under this Section 10, it will notify the Administrative Agent and
such Lender in writing that such payment is made under the guarantee contained
in this Section 10 for such purpose. No payment or payments made by the Borrower
or any other Person or received or collected by the Administrative Agent or any
Lender from the Borrower or any other Person by virtue of any action or
proceeding or any setoff or appropriation or application, at any time or from
time to time, in reduction of or in payment of the Obligations shall be deemed
to modify, reduce, release or otherwise affect the liability of Holdings under
this Section 10 which, notwithstanding any such payment or payments, shall
remain liable for the Obligations until, subject to Section 10.5, the
Obligations are paid in full, the Commitments are terminated and no Letters of
Credit are outstanding.
10.2 No Subrogation, Contribution, Reimbursement or Indemnity.
--------------------------------------------------------
Notwithstanding anything to the contrary in this Section 10, Holdings hereby
irrevocably waives all rights that may have arisen in connection with the
guarantee contained in this Section 10 to be subrogated to any of the rights
(whether contractual, under the United States Bankruptcy Code (or similar action
under any successor law or under any comparable law), including Section 509
thereof, under common law or otherwise) of the Administrative Agent or any
Lender against the Borrower or against the Administrative Agent or any Lender
for the payment of the Obligations, until the Obligations shall have been paid
in full, no Letters of
<PAGE>
56
Credit shall be outstanding and the Commitments shall have been terminated.
Holdings hereby further irrevocably waives all contractual, common law,
statutory and other rights of reimbursement, contribution, exoneration or
indemnity (or any similar right) from or against the Borrower or any other
Person that may have arisen in connection with the guarantee contained in this
Section 10, until the Obligations shall have been paid in full, no Letters of
Credit shall be outstanding and the Commitments shall have been terminated. So
long as the Obligations remain outstanding, if any amount shall be paid by or on
behalf of the Borrower to Holdings on account of any of the rights waived in
this Section 10.2, such amount shall be held by Holdings in trust, segregated
from other funds of Holdings, and shall, forthwith upon receipt by Holdings, be
turned over to the Administrative Agent in the exact form received by Holdings
(duly indorsed by Holdings to the Administrative Agent, if required), to be
applied against the Obligations, whether matured or unmatured, in such order as
the Administrative Agent may determine. The provisions of this Section 10.2
shall survive the term of the guarantee contained in this Section 10 and the
payment in full of the Obligations and the termination of the Commitments.
10.3 Amendments, etc. with respect to the Obligations. Holdings shall
------------------------------------------------
remain obligated under this Section 10 notwithstanding that, without any
reservation of rights against Holdings, and without notice to or further assent
by Holdings, any demand for payment of or reduction in the principal amount of
any of the Obligations made by the Administrative Agent or any Lender may be
rescinded by the Administrative Agent or such Lender, and any of the Obligations
continued, and the Obligations, or the liability of any other party upon or for
any part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent or any Lender, and this
Agreement, any other Loan Document, and any other documents executed and
delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Lenders (or the Required Lenders, as the
case may be) may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by the Administrative Agent or any
Lender for the payment of the Obligations may be sold, exchanged, waived,
surrendered or released. Neither the Administrative Agent nor any Lender shall
have any obligation to protect, secure, perfect or insure any Lien at any time
held by it as security for the Obligations or for the guarantee contained in
this Section 10 or any property subject thereto.
10.4 Guarantee Absolute and Unconditional. Holdings waives any and all
------------------------------------
notice of the creation, renewal, extension or accrual of any of the Obligations
and notice of or proof of reliance by the Administrative Agent or any Lender
upon the guarantee contained in this Section 10 or acceptance of the guarantee
contained in this Section 10; the Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred, or renewed,
extended, amended or waived, in reliance upon the guarantee contained in this
Section 10; and all dealings between the Borrower or Holdings, on the one hand,
and the Administrative Agent and the Lenders, on the other, shall likewise be
conclusively presumed to have been had or consummated in reliance upon the
guarantee contained in this Section 10. Holdings waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Borrower or Holdings with respect to the Obligations. The guarantee contained in
this Section 10 shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity or enforceability of
this Agreement or any other Loan Document, any of the Obligations or any
collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Administrative Agent or any
Lender, (b) any defense, setoff or counterclaim (other than a defense of payment
or performance) that may at any time be available to or be asserted by the
Borrower against the Administrative Agent or any Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge of the Borrower
or Holdings) that constitutes, or might be construed to constitute, an equitable
or legal discharge of the Borrower for the Obligations, or of Holdings under the
guarantee contained in this Section 10, in bankruptcy or in any
<PAGE>
57
other instance. When the Administrative Agent or any Lender is pursuing its
rights and remedies under this Section 10 against Holdings, the Administrative
Agent or any Lender may, but shall be under no obligation to, pursue such rights
and remedies as it may have against the Borrower or any other Person or against
any collateral security or guarantee for the Obligations or any right of offset
with respect thereto, and any failure by the Administrative Agent or any Lender
to pursue such other rights or remedies or to collect any payments from the
Borrower or any such other Person or to realize upon any such collateral
security or guarantee or to exercise any such right of offset, or any release of
the Borrower or any such other Person or of any such collateral security,
guarantee or right of offset, shall not relieve Holdings of any liability under
this Section 10, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the Administrative Agent
and the Lenders against Holdings.
10.5 Reinstatement. The guarantee contained in this Section 10 shall
-------------
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is rescinded or must
otherwise be restored or returned by the Administrative Agent or any Lender upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower or any
substantial part of its property, or otherwise, all as though such payments had
not been made.
10.6 Payments. Holdings hereby agrees that any payments in respect of
--------
the Obligations pursuant to this Section 10 will be paid to the Administrative
Agent without setoff or counterclaim in Dollars at the Funding Office.
11. MISCELLANEOUS
11.1 Amendments and Waivers. Neither this Agreement, any other Loan
----------------------
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 11.1. The
Required Lenders and each Loan Party party to the relevant Loan Document may,
or, with the written consent of the Required Lenders, the Administrative Agent
and each Loan Party party to the relevant Loan Document may, from time to time,
(a) enter into written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the Administrative Agent, as the
case may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
-------- -------
supplement or modification shall (i) forgive the principal amount or extend the
final scheduled date of maturity of any Loan, extend the scheduled date of any
amortization payment in respect of any Term Loan, reduce the stated rate of any
interest or fee payable hereunder or extend the scheduled date of any payment
thereof, or increase the amount or extend the expiration date of any Lender's
Revolving Commitment, in each case without the consent of each Lender directly
affected thereby; (ii) amend, modify or waive any provision of this Section 11.1
or reduce any percentage specified in the definition of Required Lenders or
Required Prepayment Lenders, consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this Agreement and the other
Loan Documents or release Holdings from its obligations under Section 10, in
each case without the written consent of all Lenders; (iii) amend, modify or
waive any condition precedent to any extension of credit under the Revolving
Facility set forth in Section 5.2 (including in connection with any waiver of an
existing Default or Event of Default) without the written consent of the
Majority Revolving Facility Lenders; (iv) reduce the percentage specified in the
definition of Majority Facility Lenders with respect to any Facility without
<PAGE>
58
the written consent of all Lenders under such Facility; (v) amend, modify or
waive any provision of Section 9 without the written consent of the
Administrative Agent; (vi) amend, modify or waive any provision of Section 2.6
or 2.7 without the written consent of the Swingline Lender; or (vii) amend,
modify or waive any provision of Section 3 without the written consent of each
Issuing Lender. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Loan Parties, the Lenders, the Administrative Agent and all future
holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders
and the Administrative Agent shall be restored to their former position and
rights hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
11.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of Holdings, the Borrower and the
Administrative Agent, and as set forth in an administrative questionnaire
delivered to the Administrative Agent in the case of the Lenders, or to such
other address as may be hereafter notified by the respective parties hereto:
Holdings or the Borrower: c/o Tommy Hilfiger U.S.A., Inc.
25 West 39th Street
New York, New York 10018
Attention: Joel J. Horowitz - Chief
Executive Officer
Telecopy: 212-548-1818
Telephone: 212-840-8888
and
c/o Tommy Hilfiger U.S.A., Inc.
485 Fifth Avenue
New York, New York 10017
Attention: Gary I. Sheff
Telecopy: 212-681-9337
Telephone: 212-681-1888 x4827
with a copy to:
Wachtell, Lipton,Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Eric S. Robinson
Telecopy: 212-403-2000
Telephone: 212-403-1000
<PAGE>
59
The Administrative Agent: The Chase Manhattan Bank
c/o The Loan and Agency Services Group
One Chase Manhattan Plaza
New York, New York 10081
Attention: Jesus Sang
Telecopy: 212-552-5650
with a copy to: Chase Securities Inc.
270 Park Avenue
New York, New York 10017
Attention: Robert Anastasio
Telecopy: 212-270-1063
provided that any notice, request or demand to or upon the Administrative Agent
- --------
or the Lenders shall not be effective until received.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
11.4 Survival of Representations and Warranties. All representations and
------------------------------------------
warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans and other extensions of credit hereunder.
11.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or
-----------------------------
reimburse the Administrative Agent for all its reasonable out-of-pocket costs
and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the other Loan Documents and any other documents prepared in connection
herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including the reasonable fees and
disbursements of counsel to the Administrative Agent and filing and recording
fees and expenses, with statements with respect to the foregoing to be submitted
to the Borrower prior to the Closing Date (in the case of amounts to be paid on
the Closing Date) and from time to time thereafter on a quarterly basis or such
other periodic basis as the Administrative Agent shall deem appropriate, (b) to
pay or reimburse each Lender and the Administrative Agent for all its reasonable
costs and expenses incurred in connection with the enforcement or preservation
of any rights under this Agreement, the other Loan Documents and any such other
documents, including the reasonable fees and disbursements of counsel (including
the allocated fees and expenses of in-house counsel) to each Lender and of
counsel to the Administrative Agent, (c) to pay, indemnify, and hold each Lender
and the Administrative Agent harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, that may be payable or determined
to be payable in connection with the execution and delivery of, or consummation
or administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Loan Documents and any such other documents, and (d)
to pay, indemnify, and hold each Lender and the Administrative Agent and their
respective officers, directors, employees, affiliates, agents and controlling
<PAGE>
60
persons (each, an "Indemnitee") harmless from and against any and all other
----------
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents and any such other documents, including any
of the foregoing relating to the use of proceeds of the Loans or the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the operations of Holdings or any of its Subsidiaries or any of the Properties
(all the foregoing in this clause (d), collectively, the "Indemnified
-----------
Liabilities"), provided, that the Borrower shall have no obligation hereunder to
- ----------- --------
any Indemnitee with respect to Indemnified Liabilities to the extent such
Indemnified Liabilities are found by a final and nonappealable decision of a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of such Indemnitee. Without limiting the foregoing, and to
the extent permitted by applicable law, each of Holdings and the Borrower agrees
not to assert and to cause their respective Subsidiaries not to assert, and
hereby waives and agrees to cause their respective Subsidiaries to so waive, all
rights for contribution or any other rights of recovery with respect to all
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature, under or related to Environmental Laws,
that any of them might have by statute or otherwise against any Indemnitee. All
amounts due under this Section 11.5 shall be payable promptly after written
demand therefor. Statements payable by the Borrower pursuant to this Section
11.5 shall be submitted to Joel J. Horowitz - Chief Executive Officer (Telephone
No. 212-840-8888) (Telecopy No. 212-548-1818), at the address of the Borrower
set forth in Section 11.2. The agreements in this Section 11.5 shall survive
repayment of the Loans and all other amounts payable hereunder.
11.6 Successors and Assigns; Participations and Assignments. (a) This
------------------------------------------------------
Agreement shall be binding upon and inure to the benefit of Holdings, the
Borrower, the Lenders, the Administrative Agent, all future holders of the Loans
and their respective successors and assigns, except that the Borrower may not
assign or transfer any of its rights or obligations under this Agreement without
the prior written consent of each Lender.
(a) Any Lender may, without the consent of the Borrower, in accordance
with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a "Participant") participating interests
-----------
in any Loan owing to such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan Documents. In the
event of any such sale by a Lender of a participating interest to a Participant,
such Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder of any such
Loan for all purposes under this Agreement and the other Loan Documents, and the
Borrower and the Administrative Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Agreement and the other Loan Documents. In no event shall any Participant
under any such participation have any right to approve any amendment or waiver
of any provision of any Loan Document, or any consent to any departure by any
Loan Party therefrom, except to the extent that such amendment, waiver or
consent would reduce the principal of, or interest on, the Loans or any fees
payable hereunder, or postpone the date of the final maturity of the Loans, in
each case to the extent subject to such participation. The Borrower agrees that
if amounts outstanding under this Agreement and the Loans are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in respect of
its participating interest in amounts owing under this Agreement to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under this Agreement, provided that, in purchasing such
--------
participating interest, such Participant shall be deemed to have agreed to share
with the Lenders the proceeds thereof as provided in Section 11.7(a) as fully as
if it were a Lender hereunder. The Borrower also agrees that each Participant
shall be
<PAGE>
61
entitled to the benefits of Sections 2.18, 2.19 and 2.20 with respect to its
participation in the Commitments and the Loans outstanding from time to time as
if it was a Lender; provided that, in the case of Section 2.19, such
--------
Participant shall have complied with the requirements of said Section and
provided, further, that no Participant shall be entitled to receive any greater
- -------- -------
amount pursuant to any such Section than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred by
such transferor Lender to such Participant had no such transfer occurred.
(b) Any Lender (an "Assignor") may, in accordance with applicable law,
--------
at any time and from time to time assign to any Lender or any affiliate thereof
or, with the consent of the Borrower and the Administrative Agent (which, in
each case, shall not be unreasonably withheld or delayed), to an additional
bank, financial institution or other entity (an "Assignee") all or any part of
--------
its rights and obligations under this Agreement pursuant to an Assignment and
Acceptance, substantially in the form of Exhibit C, executed by such Assignee,
such Assignor and any other Person whose consent is required pursuant to this
Section 11.6(c), and delivered to the Administrative Agent for its acceptance
and recording in the Register; provided that no such assignment to an Assignee
--------
(other than any Lender or any affiliate thereof) shall be in an aggregate
principal amount of less than $5,000,000 (other than in the case of an
assignment of all of a Lender's interests under this Agreement), unless
otherwise agreed by the Borrower and the Administrative Agent. Any such
assignment need not be ratable as among the Facilities. Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder with a Commitment and/or
Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all of an Assignor's rights and obligations under this Agreement, such Assignor
shall cease to be a party hereto). Notwithstanding any provision of this
Section 11.6, the consent of the Borrower shall not be required for any
assignment that occurs when an Event of Default shall have occurred and be
continuing.
(c) The Administrative Agent shall maintain at its address referred to
in Section 11.2 a copy of each Assignment and Acceptance delivered to it and a
register (the "Register") for the recordation of the names and addresses of the
--------
Lenders and the Commitment of, and the principal amount of the Loans owing to,
each Lender from time to time. The entries in the Register shall be conclusive,
in the absence of manifest error, and the Borrower, each other Loan Party, the
Administrative Agent and the Lenders shall treat each Person whose name is
recorded in the Register as the owner of the Loans and any Notes evidencing the
Loans recorded therein for all purposes of this Agreement. Any assignment of
any Loan, whether or not evidenced by a Note, shall be effective only upon
appropriate entries with respect thereto being made in the Register (and each
Note shall expressly so provide). Any assignment or transfer of all or part of
a Loan evidenced by a Note shall be registered on the Register only upon
surrender for registration of assignment or transfer of the Note evidencing such
Loan, accompanied by a duly executed Assignment and Acceptance, and thereupon
one or more new Notes shall be issued to the designated Assignee.
(d) Upon its receipt of an Assignment and Acceptance executed by an
Assignor, an Assignee and any other Person whose consent is required by Section
11.6(c), together with payment to the Administrative Agent of a registration and
processing fee of $4,000, the Administrative Agent shall (i) promptly accept
such Assignment and Acceptance and (ii) record the information contained therein
in the Register on the effective date determined pursuant thereto.
(e) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this Section 11.6 concerning assignments of Loans and
Notes relate only to absolute
<PAGE>
62
assignments and that such provisions do not prohibit assignments creating
security interests, including any pledge or assignment by a Lender of any Loan
or Note to any Federal Reserve Bank in accordance with applicable law.
(f) The Borrower agrees to issue Notes to any Lender requiring Notes
to facilitate transactions of the type described in paragraph (f) above.
11.7 Adjustments; Set-off. (a) Except to the extent that this Agreement
--------------------
provides for payments to be allocated to the Lenders under a particular
Facility, if any Lender (a "Benefitted Lender") shall at any time receive any
-----------------
payment of all or part of the Obligations owing to it, or receive any collateral
in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant
to events or proceedings of the nature referred to in Section 8(f), or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of the Obligations owing to
such other Lender, such Benefitted Lender shall purchase for cash from the other
Lenders a participating interest in such portion of the Obligations owing to
each such other Lender, or shall provide such other Lenders with the benefits of
any such collateral, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral ratably with each of the
Lenders; provided, however, that if all or any portion of such excess payment or
-------- -------
benefits is thereafter recovered from such Benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest.
(a) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to Holdings or the
Borrower, any such notice being expressly waived by Holdings and the Borrower to
the extent permitted by applicable law, upon any amount becoming due and payable
by Holdings or the Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise), to set off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of Holdings or the Borrower,
as the case may be. Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such setoff and application made by such Lender,
provided that the failure to give such notice shall not affect the validity of
- --------
such setoff and application.
11.8 Counterparts. This Agreement may be executed by one or more of the
------------
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed signature page of this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.
11.9 Severability. Any provision of this Agreement that is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11.10 Integration. This Agreement and the other Loan Documents
-----------
represent the agreement of Holdings, the Borrower, the Administrative Agent and
the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the
<PAGE>
63
Administrative Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.
11.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
-------------
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.12 Submission To Jurisdiction; Waivers. Each of Holdings and the
-----------------------------------
Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to Holdings or the
Borrower, as the case may be at its address set forth in Section 11.2 or at such
other address of which the Administrative Agent shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this Section 11.12 any special, exemplary, punitive or consequential damages.
11.13 Acknowledgements. Each of Holdings and the Borrower hereby
----------------
acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to Holdings or the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and Holdings
and the Borrower, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among Holdings, the Borrower and the Lenders.
<PAGE>
64
11.14 WAIVERS OF JURY TRIAL. HOLDINGS, THE BORROWER, THE ADMINISTRATIVE
---------------------
AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
11.15 Confidentiality. Each of the Administrative Agent and each Lender
---------------
agrees to keep confidential all non-public information provided to it by any
Loan Party pursuant to this Agreement that is designated by such Loan Party as
confidential; provided that nothing herein shall prevent the Administrative
--------
Agent or any Lender from disclosing any such information (a) to the
Administrative Agent, any other Lender or any affiliate of any Lender (so long
as such affiliate is informed that such information is confidential non-public
information), (b) to any Transferee or prospective Transferee that agrees to
comply with the provisions of this Section 11.15, (c) to its employees,
directors, agents, attorneys, accountants and other professional advisors or
those of any of its affiliates (so long as such Persons are informed that such
information is confidential non-public information), (d) upon the request or
demand of any Governmental Authority, (e) in response to any order of any court
or other Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (f) if requested or required to do so in connection with any
litigation or similar proceeding, (g) that has been publicly disclosed, (h) to
the National Association of Insurance Commissioners or any similar organization
or any nationally recognized rating agency that requires access to information
about a Lender's investment portfolio in connection with ratings issued with
respect to such Lender, or (i) in connection with the exercise of any remedy
hereunder or under any other Loan Document.
11.16 Documentation Agent and Syndication Agent. Neither the
-----------------------------------------
Documentation Agent nor the Syndication Agent shall have any duties or
responsibilities hereunder in its capacity as such.
<PAGE>
65
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
TOMMY HILFIGER CORPORATION
By: /s/ Joel J. Horowitz
---------------------------------
Name: Joel J. Horowitz
Title: Chief Executive Officer
TOMMY HILFIGER U.S.A., INC.
By: /s/ Benjamin M.T. Ng
---------------------------------
Name: Benjamin M.T. Ng
Title: Executive Vice President
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By: /s/ Paul V. Phelan
---------------------------------
Name: Paul V. Phelan
Title: Vice President
Agreed to solely for the purposes of Section 3.1:
TOMMY HILFIGER RETAIL, INC.
BY: /s/ Joel J. Horowitz
------------------------------------
Name: Joel J. Horowitz
Title: President
PEPE JEANS USA, INC.
By: /s/ Lawrence S. Stroll
-------------------------------------
Name: Lawrence S. Stroll
Title: Chairman
<PAGE>
EXHIBIT 10.5
TOMMY HILFIGER U.S.A.
1992 STOCK INCENTIVE PLAN
(Restated to Incorporate All Amendments
through May 8, 1998 and the Effects of the
December 27, 1994 Two-for-One Stock Split)
<PAGE>
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the Plan is to give the Company and its Affiliates a
significant advantage in attracting, retaining and motivating officers,
employees and directors and to provide the Company and its subsidiaries with the
ability to provide incentives more directly linked to the profitability of the
Company's businesses and increases in stockholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
a. "Affiliate" means a corporation or other entity controlled by or
---------
in control of the Company and designated by the Committee as such.
b. "Award" means a Stock Appreciation Right, Stock Option or
-----
Restricted Stock.
c. "Board" means the Board of Directors of the Company.
-----
d. "Cause" has the meaning set forth in Section 5(i).
-----
e. "Code" means the Internal Revenue Code of 1986, as amended from
----
time to time, and any successor thereto.
f. "Committee" means the Committee referred to in Section 2.
---------
g. "Company" means Tommy Hilfiger U.S.A., Inc., a Delaware
-------
corporation.
h. "Disability" means permanent and total disability as determined
----------
under procedures established by the Committee for purposes of the Plan.
i. "Fair Market Value" means, as of any given date, the mean between
-----------------
the highest and lowest reported sales prices of the Stock on the New York Stock
Exchange Composite Tape or, if not listed on such exchange, on any other
national securities exchange on which the Stock is listed or on NASDAQ. If
there is no regular public trading market for such Stock, the Fair Market Value
of the Stock shall be determined by the Committee in good faith.
1
<PAGE>
j. "Incentive Stock Option" means any Stock Option intended to be
----------------------
and designated as an "incentive stock option" within the meaning of Section 422
of the Code.
k. "Non-Qualified Stock Option" means any Stock Option that is not
--------------------------
an Incentive Stock Option.
l. "Plan" means the Tommy Hilfiger U.S.A. 1992 Stock Incentive Plan,
----
As Amended, as set forth herein and as hereinafter amended from time to time.
m. "Restricted Stock" means an award granted under Section 7.
----------------
n. "Retirement" means retirement from active employment under a
----------
pension plan of the Company, any subsidiary or Affiliate, or under an employment
contract with any of them, or termination of employment at or after age 55 under
circumstances which the Committee, in its sole discretion, deems equivalent to
retirement.
o. "Stock" means the Ordinary Shares, par value $0.01 per share, of
-----
Tommy Hilfiger Corporation, a British Virgin Islands corporation.
p. "Stock Appreciation Right" means a right granted under Section 6.
------------------------
q. "Stock Option" means an option granted under Section 5.
------------
r. "Termination of Employment" means the termination of the
-------------------------
participant's employment with the Company and any subsidiary or Affiliate. A
participant employed by a subsidiary or an Affiliate shall also be deemed to
incur a Termination of Employment if the subsidiary or Affiliate ceases to be
such a subsidiary or Affiliate, as the case may be, and the participant does not
immediately thereafter become an employee of the Company or another subsidiary
or Affiliate.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
2
<PAGE>
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Compensation Committee of the
Board. If at any time no Committee shall be in office, the functions of the
Committee specified in the Plan shall be exercised by the Board.
The Committee shall have plenary authority to grant Awards pursuant to
the terms of the Plan to officers, employees and directors of the Company and
its subsidiaries and Affiliates.
Among other things, the Committee shall have the authority, subject to
the terms of the Plan:
(a) subject to Section 4, to select the officers, employees and
directors to whom Awards may from time to time be granted;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights and Restricted Stock or
any combination thereof are to be granted hereunder;
(c) to determine the number of shares of Stock to be covered by each
Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the option price (subject to Section
5(a)), any vesting restriction or limitation and any vesting acceleration or
forfeiture waiver regarding any Award and the shares of Stock relating thereto,
based on such factors as the Committee shall determine);
(e) to modify, amend or adjust the terms and conditions of any Award,
at any time or from time to time, including, but not limited to, with respect to
performance goals and measurements applicable to performance-based Awards
pursuant to the terms of the Plan;
(f) to determine to what extent and under what circumstances Stock
and other amounts payable with respect to an Award shall be deferred; and
(g) to determine under what circumstances a Stock Option may be
settled in cash or Stock under Section 5(j).
3
<PAGE>
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
Any determination made by the Committee or pursuant to delegated
authority pursuant to the provisions of the Plan with respect to any Award shall
be made in the sole discretion of the Committee or such delegate at the time of
the grant of the Award or, unless in contravention of any express term of the
Plan, at any time thereafter. All decisions made by the Committee or any
appropriately delegated officer pursuant to the provisions of the Plan shall be
final and binding on all persons, including the Company and Plan participants.
SECTION 3. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided herein, the total number of shares
of Stock available for grant under the Plan shall be 7,720,000 shares of Stock,
less the number of shares of Stock which have been made the subject of an Award
under the Tommy Hilfiger (Eastern Hemisphere) Limited 1992 Stock Incentive Plan,
As Amended. Shares of Stock subject to an Award under the Plan may be
authorized and unissued shares or may be treasury shares.
If any shares of Restricted Stock are forfeited for which the
participant did not receive any benefits of ownership (as such phrase is
construed by the Commission or its Staff), or if any Stock Option (and related
Stock Appreciation Right, if any) terminates without being exercised, or if any
Stock Appreciation Right is exercised for cash, shares subject to such Awards
shall again be available for distribution in connection with Awards under the
Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, extraordinary distribution with
respect to the Stock or other change in corporate structure affecting the Stock,
the Committee or Board may make such substitution or adjustments in the
aggregate number and kind of shares reserved for issuance under the Plan, in the
number, kind and option price of shares subject to outstanding Stock Options and
Stock Appreciation Rights, in the number and
4
<PAGE>
kind of shares subject to other outstanding Awards granted under the Plan and/or
such other substitution or adjustments in the consideration receivable upon
exercise as it may determine to be appropriate in its sole discretion; provided,
however, that the number of shares subject to any Award shall always be a whole
number. Such adjusted option price shall also be used to determine the amount
payable by the Company upon the exercise of any Stock Appreciation Right
associated with any Stock Option.
SECTION 4. ELIGIBILITY.
Officers, employees and directors of the Company, its subsidiaries and
Affiliates who are responsible for or contribute to the management, growth and
profitability of the business of the Company, its subsidiaries and Affiliates
are eligible to be granted Awards under the Plan. No grant shall be made to
Thomas J. Hilfiger, Joel J. Horowitz, Silas K.F. Chou, Ronald K.Y. Chao or
Lawrence S. Stroll pursuant to this Plan.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone or in addition to other Awards
granted under the Plan and may be of two types: Incentive Stock Options and
Non-Qualified Stock Options. Any Stock Option granted under the Plan shall be
in such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights). Incentive Stock Options
may be granted only to employees of the Company and its subsidiaries (within the
meaning of Section 424(f) of the Code). To the extent that any Stock Option is
not designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock
Option.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it is intended to be an agreement for an Incentive Stock Option or a
Non-Qualified Stock Option. The grant of a Stock Option shall occur on the date
the Committee by resolution selects an individual to be a participant in any
grant of a Stock Option, determines the number of shares of Stock to be
5
<PAGE>
subject to such Stock Option to be granted to such individual and specifies the
terms and provisions of the Stock Option. The Company shall notify a participant
of any grant of a Stock Option, and a written option agreement or agreements
shall be duly executed and delivered by the Company to the participant.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered nor shall any discretion or authority granted under the Plan be
exercised so as to disqualify the Plan under Section 422 of the Code or, without
the consent of the optionee affected, to disqualify any Incentive Stock Option
under such Section 422.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Committee shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable
------------
under a Stock Option shall be determined by the Committee and set forth in the
option agreement, and shall not be less than the Fair Market Value of the Stock
subject to the Stock Option on the date of grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
-----------
Committee, but no Stock Option shall be exercisable more than 15 years after the
date the Stock Option is granted.
(c) Exercisability. Except as otherwise provided herein, Stock
--------------
Options shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. If the Committee provides
that any Stock Option is exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or in part, based
on such factors as the Committee may determine. In addition, the Committee may
at any time, in whole or in part, accelerate the exercisability of any Stock
Option.
(d) Method of Exercise. Subject to the provisions of this Section 5,
------------------
Stock Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise to the Company specifying the
number of shares of Stock subject to the Stock Option to be purchased.
6
<PAGE>
The option price of Stock to be purchased upon exercise of any Option
shall be paid in full in cash (by certified or bank check or such other
instrument as the Company may accept) or, if and to the extent set forth in the
option agreement, may also be paid by one or more of the following: (i) in the
form of unrestricted Stock already owned by the optionee (and, in the case of
the exercise of a Non-Qualified Stock Option, Restricted Stock subject to an
Award hereunder) based in any such instance on the Fair Market Value of the
Stock on the date the Stock Option is exercised; provided, however, that, in the
case of an Incentive Stock Option, the right to make a payment in the form of
already owned shares of Stock may be authorized only at the time the Stock
Option is granted; (ii) by requesting the Company to withhold from the number of
shares of Stock otherwise issuable upon exercise of the Stock Option that number
of shares having an aggregate fair market value on the date of exercise equal to
the exercise price for all of the shares of Stock subject to such exercise; or
(iii) by a combination thereof, in each case in the manner provided in the
option agreement.
In the discretion of the Committee, payment for any shares subject to
a Stock Option may also be made by delivering a properly executed exercise
notice to the Company, together with a copy of irrevocable instructions to a
broker to deliver promptly to the Company the amount of sale or loan proceeds to
pay the purchase price. To facilitate the foregoing, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
If payment of the option exercise price of a Non-Qualified Stock
Option is made in whole or in part in the form of Restricted Stock, the number
of shares of Stock to be received upon such exercise equal to the number of
shares of Restricted Stock used for payment of the option exercise price shall
be subject to the same forfeiture restrictions to which such Restricted Stock
was subject, unless otherwise determined by the Committee.
No shares of Stock shall be issued until full payment therefor has
been made. Subject to any forfeiture restrictions that may apply if a Stock
Option is exercised using Restricted Stock, an optionee shall have all of the
rights of a stockholder of the Company holding the Stock that is subject to such
Stock Option (including, if applicable, the right to vote the shares and the
right to receive dividends), when the optionee has given written notice of
exercise, has paid in full for such shares and, if
7
<PAGE>
requested, has given the representation described in Section 10(a).
(e) Non-transferability of Stock Options. No Stock Option shall be
------------------------------------
transferable by the optionee other than (i) by will or by the laws of descent
and distribution or (ii) in the case of a Non-Qualified Stock Option, pursuant
to a qualified domestic relations order (as defined in the Code or Title I of
the Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder). All Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee or by the guardian or legal representative of the
optionee or, in the case of a Non-Qualified Stock Option, its alternate payee
pursuant to such qualified domestic relations order, it being understood that
the terms "holder" and "optionee" include the guardian and legal representative
of the optionee named in the option agreement and any person to whom an option
is transferred by will or the laws of descent and distribution or, in the case
of a Non-Qualified Stock Option, pursuant to a qualified domestic relations
order.
(f) Termination by Death. If an optionee's employment terminates by
--------------------
reason of death, any Stock Option held by such optionee may thereafter be
exercised, to the extent then exercisable, or on such accelerated basis as the
Committee may determine, for a period of one year (or such other period as the
Committee may specify in the option agreement) from the date of such death or
until the expiration of the stated term of such Stock Option, whichever period
is the shorter. In the event of termination of employment due to death, if an
Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Stock Option will
thereafter be treated as a Non-Qualified Stock Option.
(g) Termination by Reason of Disability. If an optionee's employment
-----------------------------------
terminates by reason of Disability, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable at the
time of termination, or on such accelerated basis as the Committee may
determine, for a period of one year (or such shorter period as the Committee may
specify in the option agreement) from the date of such termination of employment
or until the expiration of the stated term of such Stock Option, whichever
period is the shorter; provided, however, that if the optionee dies within such
one-year period (or such shorter period), any unexercised Stock Option held by
such optionee shall, notwithstanding
8
<PAGE>
the expiration of such three-year (or such shorter) period, continue to be
exercisable to the extent to which it was exercisable at the time of death for a
period of 12 months from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter. In the event
of termination of employment by reason of Disability, if an Incentive Stock
Option is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. If an optionee's employment
-----------------------------------
terminates by reason of Retirement, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable at the
time of such Retirement or on such accelerated basis as the Committee may
determine, for a period of three years (or such shorter period as the Committee
may specify in the option agreement) from the date of such termination of
employment or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided, however, that if the optionee dies
within such three-year (or such shorter) period, any unexercised Stock Option
held by such optionee shall, notwithstanding the expiration of such three-year
(or such shorter) period, continue to be exercisable to the extent to which it
was exercisable at the time of death for a period of 12 months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment by
reason of Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422 of the
Code, such Stock Option will thereafter be treated as a Non-Qualified Stock
Option.
(i) Other Termination. Unless otherwise determined by the Committee,
-----------------
if an optionee incurs a Termination of Employment for any reason other than
death, Disability or Retirement, any Stock Option held by such Optionee shall
thereupon terminate, except that such Stock Option, to the extent then
exercisable, or on such accelerated basis as the Committee may determine, may be
exercised for the lesser of three months from the date of such Termination of
Employment or the balance of such Stock Option's term if such Termination of
Employment of the optionee is without Cause; provided, however, that if the
optionee dies within such three-month period, any unexercised Stock Option held
by such optionee shall
9
<PAGE>
notwithstanding the expiration of such three-month period, continue to be
exercisable to the extent to which it was exercisable at the time of death for a
period of 12 months from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter. In the event
of Termination of Employment for any reason other than death, Disability or
Retirement, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a Non-Qualified Stock Option. Unless
otherwise determined by the Committee, for the purposes of the Plan "Cause"
shall mean (i) the conviction of the optionee for committing a felony under
Federal law or the law of the state in which such action occurred, (ii)
dishonesty in the course of fulfilling the optionee's employment duties or (iii)
willful and deliberate failure on the part of the optionee to perform his
employment duties in any material respect.
(j) Cashing Out of Stock Option. On receipt of written notice of
---------------------------
exercise, the Committee may elect to cash out all or part of the portion of the
shares of Stock for which a Stock Option is being exercised by paying the
optionee an amount, in cash or Stock, equal to the excess of the Fair Market
Value of the Stock over the option price times the number of shares of Stock for
which to the Option is being exercised on the effective date of such cash out.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
------------------
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of such Stock
Option. A Stock Appreciation Right shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in
accordance with Section 6(b) by surrendering the applicable portion of the
related Stock Option in accordance with procedures established by the Committee.
Upon such exercise and surrender, the optionee shall be entitled to receive an
amount determined in the manner prescribed in Section 6(b). Stock Options which
have been so surrendered
10
<PAGE>
shall no longer be exercisable to the extent the related Stock Appreciation
Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject
--------------------
to such terms and conditions as shall be determined by the Committee, including
the following:
(i) Stock Appreciation Rights shall be exercisable only at such time
or times and to the extent that the Stock Options to which they relate are
exercisable in accordance with the provisions of Section 5 and this Section
6.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash, shares of Stock or both
equal in value to the excess of the Fair Market Value of one share of Stock
over the option price per share specified in the related Stock Option
multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only to
permitted transferees of the underlying Stock Option in accordance with
Section 5(e).
SECTION 7. RESTRICTED STOCK.
(a) Administration. Shares of Restricted Stock may be awarded either
--------------
alone or in addition to other Awards granted under the Plan. The Committee
shall determine the officers and employees to whom and the time or times at
which grants of Restricted Stock will be awarded, the number of shares to be
awarded to any participant, the time or times within which such Awards may be
subject to forfeiture and any other terms and conditions of the Awards, in
addition to those contained in Section 7(c).
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals of the participant or of the Company
or subsidiary, division or department of the Company for or within which the
participant is primarily employed or upon such other factors or criteria as the
Committee shall determine. The provisions of Restricted Stock Awards need not
be the same with respect to each recipient.
11
<PAGE>
(b) Awards and Certificates. Shares of Restricted Stock shall be
-----------------------
evidenced in such manner as the Committee may deem appropriate, including book-
entry registration or issuance of one or more stock certificates. Any
certificate issued in respect of shares of Restricted Stock shall be registered
in the name of such participant and shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such Award,
substantially in the following form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Tommy Hilfiger
U.S.A. 1992 Stock Incentive Plan, As Amended, and a
Restricted Stock Agreement. Copies of such Plan and
Agreement are on file at the offices of Tommy Hilfiger
U.S.A., Inc.,18 Thatcher Road, Dayton, New Jersey 08810."
The Committee may require that the certificates evidencing such shares be held
in custody by the Company until the restrictions thereon shall have lapsed and
that, as a condition of any Award of Restricted Stock, the participant shall
have delivered a stock power, endorsed in blank, relating to the Stock covered
by such Award.
(c) Terms and Conditions. Shares of Restricted Stock shall be subject
--------------------
to the following terms and conditions:
(i) Subject to the provisions of the Plan and the Restricted Stock
Agreement referred to in Section 7(c)(vi), during a period set by the
Committee, commencing with the date of such Award (the "Restriction
Period"), the participant shall not be permitted to sell, assign, transfer,
pledge or otherwise encumber shares of Restricted Stock. The Committee may
provide for the lapse of such restrictions in installments or otherwise and
may accelerate or waive such restrictions, in whole or in part, in each case
based on period of service, performance of the participant or of the Company
or the subsidiary, division or department for which the participant is
employed or such other factors or criteria as the Committee may determine.
(ii)Except as provided in this paragraph (ii) and Section 7(c)(i)
and the Restricted Stock Agreement,
12
<PAGE>
the participant shall have, with respect to the shares of Restricted Stock,
all of the rights of a stockholder of the Company holding the class or
series of Stock that is the subject of the Restricted Stock, including, if
applicable, the right to vote the shares and the right to receive any cash
dividends. If so determined by the Committee in the applicable Restricted
Stock Agreement and subject to Section 10(f) of the Plan, (1) cash dividends
on the shares of Stock that are the subject of the Restricted Stock Award
shall be automatically deferred and reinvested in additional Restricted
Stock, and (2) dividends payable in Stock shall be paid in the form of
Restricted Stock.
(iii) Except to the extent otherwise provided in the applicable
Restricted Stock Agreement and Sections 7(c)(i) and 7(c)(iv), upon a
participant's Termination of Employment for any reason during the
Restriction Period, all shares still subject to restriction shall be
forfeited by the participant.
(iv) In the event of Termination of Employment of a participant for
any reason (other than for Cause), the Committee shall have the discretion
to waive in whole or in part any or all remaining restrictions with respect
to any or all of such participant's shares of Restricted Stock.
(v) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period,
unlegended certificates for such shares shall be delivered to the
participant.
(vi) Each Award shall be confirmed by, and be subject to the terms
of, a Restricted Stock Agreement.
SECTION 8. TERM, AMENDMENT AND TERMINATION.
The Plan will terminate on December 31, 2002. Under the Plan, Awards
outstanding as of December 31, 2002 shall not be affected or impaired by the
termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of an
optionee under a Stock Option or a recipient of a Stock Appreciation Right or
13
<PAGE>
Restricted Stock Award theretofore granted without the optionee's or recipient's
consent.
The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights of any holder without the holder's consent.
SECTION 9. UNFUNDED STATUS OF PLAN.
It is presently intended that the Plan constitute an "unfunded" plan
for incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or make payments; provided, however, that, unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
SECTION 10. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing or receiving
shares pursuant to an Award to represent to and agree with the Company in
writing that such person is acquiring the shares without a view to the
distribution thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock or other securities delivered
under the Plan shall be subject to such stock transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the Commission, any stock exchange upon which the
Stock is then listed and any applicable Federal or state securities law, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) Nothing contained in the Plan shall prevent the Company or any
subsidiary or Affiliate from adopting other or additional compensation
arrangements for its employees.
(c) The adoption of the Plan shall not confer upon any employee any
right to continued employment nor shall it interfere in any way with the right
of the Company
14
<PAGE>
or any subsidiary or Affiliate to terminate the employment of any
employee at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any Award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Company regarding the
payment of, any Federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. Unless otherwise determined by
the Committee, withholding obligations may be settled with Stock, including
Stock that is part of the Award that gives rise to the withholding requirement.
The obligations of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company, its Subsidiaries and its Affiliates
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment otherwise due to the participant. The Committee may establish
such procedures as it deems appropriate, including the making of irrevocable
elections, for the settlement of withholding obligations with Stock.
(e) At the time of grant, the Committee may provide in connection
with any grant made under the Plan that the shares of Stock received as a result
of such grant shall be subject to a right of first refusal pursuant to which the
participant shall be required to offer to the Company any shares that the
participant wishes to sell at the then Fair Market Value of the Stock, subject
to such other terms and conditions as the Committee may specify at the time of
grant.
(f) The reinvestment of dividends in additional Restricted Stock at
the time of any dividend payment shall only be permissible if sufficient shares
of Stock are available under Section 3 for such reinvestment (taking into
account then outstanding Stock Options and other Awards).
(g) The Committee shall establish such procedures as it deems
appropriate for a participant to designate a beneficiary to whom any amounts
payable in the event of the participant's death are to be paid.
(h) The Plan and all Awards made and actions taken thereunder shall
be governed by and construed in accordance with the laws of Delaware.
15
<PAGE>
SECTION 11. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on the date it is approved by the
shareholders of the Company.
16
<PAGE>
TOMMY HILFIGER (EASTERN HEMISPHERE) LIMITED
1992 STOCK INCENTIVE PLAN
(Restated to Incorporate All Amendments
through May 8, 1998 and the Effects of the
December 27, 1994 Two-for-One Stock Split)
<PAGE>
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the Plan is to give the Company and its Affiliates a
significant advantage in attracting, retaining and motivating officers,
employees and directors and to provide the Company and its subsidiaries with the
ability to provide incentives more directly linked to the profitability of the
Company's businesses and increases in stockholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
a. "Affiliate" means a corporation or other entity controlled by or
---------
in control of the Company and designated by the Committee as such.
b. "Award" means a Stock Appreciation Right, Stock Option or
-----
Restricted Stock.
c. "Board" means the Board of Directors of the Company.
-----
d. "Cause" has the meaning set forth in Section 5(i).
-----
e. "Code" means the Internal Revenue Code of 1986, as amended from
----
time to time, and any successor thereto.
f. "Committee" means the Committee referred to in Section 2.
---------
g. "Company" means Tommy Hilfiger (Eastern Hemisphere) Limited, a
-------
British Virgin Islands corporation.
h. "Disability" means permanent and total disability as determined
----------
under procedures established by the Committee for purposes of the Plan.
i. "Fair Market Value" means, as of any given date, the mean between
-----------------
the highest and lowest reported sales prices of the Stock on the New York Stock
Exchange Composite Tape or, if not listed on such exchange, on any other
national securities exchange on which the Stock is listed or on NASDAQ. If
there is no regular public trading market for such Stock, the Fair Market Value
of the Stock shall be determined by the Committee in good faith.
1
<PAGE>
j. "Incentive Stock Option" means any Stock Option intended to be
----------------------
and designated as an "incentive stock option" within the meaning of Section 422
of the Code.
k. "Non-Qualified Stock Option" means any Stock Option that is not
--------------------------
an Incentive Stock Option.
l. "Plan" means the Tommy Hilfiger (Eastern Hemisphere) Limited 1992
----
Stock Incentive Plan, as set forth herein and as hereinafter amended from time
to time.
m. "Restricted Stock" means an award granted under Section 7.
----------------
n. "Retirement" means retirement from active employment under a
----------
pension plan of the Company, any subsidiary or Affiliate, or under an employment
contract with any of them, or termination of employment at or after age 55 under
circumstances which the Committee, in its sole discretion, deems equivalent to
retirement.
o. "Stock" means the ordinary shares, par value $0.01 per share, of
-----
Tommy Hilfiger Corporation, a British Virgin Islands corporation.
p. "Stock Appreciation Right" means a right granted under Section 6.
------------------------
q. "Stock Option" means an option granted under Section 5.
------------
r. "Termination of Employment" means the termination of the
-------------------------
participant's employment with the Company and any subsidiary or Affiliate. A
participant employed by a subsidiary or an Affiliate shall also be deemed to
incur a Termination of Employment if the subsidiary or Affiliate ceases to be
such a subsidiary or Affiliate, as the case may be, and the participant does not
immediately thereafter become an employee of the Company or another subsidiary
or Affiliate.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
2
<PAGE>
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Compensation Committee of the
Board. If at any time no Committee shall be in office, the functions of the
Committee specified in the Plan shall be exercised by the Board.
The Committee shall have plenary authority to grant Awards pursuant to
the terms of the Plan to officers, employees and directors of the Company and
its subsidiaries and Affiliates.
Among other things, the Committee shall have the authority, subject to
the terms of the Plan:
(a) subject to Section 4, to select the officers, employees and
directors to whom Awards may from time to time be granted;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights and Restricted Stock or
any combination thereof are to be granted hereunder;
(c) to determine the number of shares of Stock to be covered by each
Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the option price (subject to Section
5(a)), any vesting restriction or limitation and any vesting acceleration or
forfeiture waiver regarding any Award and the shares of Stock relating thereto,
based on such factors as the Committee shall determine);
(e) to modify, amend or adjust the terms and conditions of any Award,
at any time or from time to time, including, but not limited to, with respect to
performance goals and measurements applicable to performance-based Awards
pursuant to the terms of the Plan;
(f) to determine to what extent and under what circumstances Stock and
other amounts payable with respect to an Award shall be deferred; and
(g) to determine under what circumstances a Stock Option may be
settled in cash or Stock under Section 5(j).
3
<PAGE>
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
Any determination made by the Committee or pursuant to delegated
authority pursuant to the provisions of the Plan with respect to any Award shall
be made in the sole discretion of the Committee or such delegate at the time of
the grant of the Award or, unless in contravention of any express term of the
Plan, at any time thereafter. All decisions made by the Committee or any
appropriately delegated officer pursuant to the provisions of the Plan shall be
final and binding on all persons, including the Company and Plan participants.
SECTION 3. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided herein, the total number of shares
of Stock available for grant under the Plan shall be 7,720,000 shares of Stock,
less the number of shares of Stock which have been made subject to an Award
under the Tommy Hilfiger U.S.A. 1992 Stock Incentive Plan. Shares of Stock
subject to an Award under the Plan may be authorized and unissued shares or may
be treasury shares.
If any shares of Restricted Stock are forfeited for which the
participant did not receive any benefits of ownership (as such phrase is
construed by the Commission or its Staff), or if any Stock Option (and related
Stock Appreciation Right, if any) terminates without being exercised, or if any
Stock Appreciation Right is exercised for cash, shares subject to such Awards
shall again be available for distribution in connection with Awards under the
Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, extraordinary distribution with
respect to the Stock or other change in corporate structure affecting the Stock,
the Committee or Board may make such substitution or adjustments in the
aggregate number and kind of shares reserved for issuance under the Plan, in the
number, kind and option price of shares subject to outstanding Stock Options and
Stock Appreciation Rights, in the number and kind of shares subject to other
outstanding Awards granted
4
<PAGE>
under the Plan and/or such other substitution or adjustments in the
consideration receivable upon exercise as it may determine to be appropriate in
its sole discretion; provided, however, that the number of shares subject to any
Award shall always be a whole number. Such adjusted option price shall also be
used to determine the amount payable by the Company upon the exercise of any
Stock Appreciation Right associated with any Stock Option.
SECTION 4. ELIGIBILITY.
Officers, employees and directors of the Company, its subsidiaries and
Affiliates who are responsible for or contribute to the management, growth and
profitability of the business of the Company, its subsidiaries and Affiliates
are eligible to be granted Awards under the Plan. No grant shall be made to
Thomas J. Hilfiger, Joel J. Horowitz, Silas K.F. Chou, Ronald K.Y. Chao or
Lawrence S. Stroll pursuant to this Plan.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone or in addition to other Awards
granted under the Plan and may be of two types: Incentive Stock Options and
Non-Qualified Stock Options. Any Stock Option granted under the Plan shall be
in such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights). Incentive Stock Options
may be granted only to employees of the Company and its subsidiaries (within the
meaning of Section 424(f) of the Code). To the extent that any Stock Option is
not designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock
Option.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it is intended to be an agreement for an Incentive Stock Option or a
Non-Qualified Stock Option. The grant of a Stock Option shall occur on the date
the Committee by resolution selects an individual to be a participant in any
grant of a Stock Option, determines the number of shares of Stock to be subject
to such Stock Option to be granted to such
5
<PAGE>
individual and specifies the terms and provisions of the Stock Option. The
Company shall notify a participant of any grant of a Stock Option, and a written
option agreement or agreements shall be duly executed and delivered by the
Company to the participant.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered nor shall any discretion or authority granted under the Plan be
exercised so as to disqualify the Plan under Section 422 of the Code or, without
the consent of the optionee affected, to disqualify any Incentive Stock Option
under such Section 422.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Committee shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable
------------
under a Stock Option shall be determined by the Committee and set forth in the
option agreement, and shall not be less than the Fair Market Value of the Stock
subject to the Stock Option on the date of grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
-----------
Committee, but no Stock Option shall be exercisable more than 15 years after the
date the Stock Option is granted.
(c) Exercisability. Except as otherwise provided herein, Stock
--------------
Options shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. If the Committee provides
that any Stock Option is exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or in part, based
on such factors as the Committee may determine. In addition, the Committee may
at any time, in whole or in part, accelerate the exercisability of any Stock
Option.
(d) Method of Exercise. Subject to the provisions of this Section 5,
------------------
Stock Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise to the Company specifying the
number of shares of Stock subject to the Stock Option to be purchased.
The option price of Stock to be purchased upon exercise of any Option
shall be paid in full in cash (by
6
<PAGE>
certified or bank check or such other instrument as the Company may accept) or,
if and to the extent set forth in the option agreement, may also be paid by one
or more of the following: (i) in the form of unrestricted Stock already owned
by the optionee (and, in the case of the exercise of a Non-Qualified Stock
Option, Restricted Stock subject to an Award hereunder) based in any such
instance on the Fair Market Value of the Stock on the date the Stock Option is
exercised; provided, however, that, in the case of an Incentive Stock Option,
the right to make a payment in the form of already owned shares of Stock may be
authorized only at the time the Stock Option is granted; (ii) by requesting the
Company to withhold from the number of shares of Stock otherwise issuable upon
exercise of the Stock Option that number of shares having an aggregate fair
market value on the date of exercise equal to the exercise price for all of the
shares of Stock subject to such exercise; or (iii) by a combination thereof, in
each case in the manner provided in the option agreement.
In the discretion of the Committee, payment for any shares subject to
a Stock Option may also be made by delivering a properly executed exercise
notice to the Company, together with a copy of irrevocable instructions to a
broker to deliver promptly to the Company the amount of sale or loan proceeds to
pay the purchase price. To facilitate the foregoing, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
If payment of the option exercise price of a Non-Qualified Stock
Option is made in whole or in part in the form of Restricted Stock, the number
of shares of Stock to be received upon such exercise equal to the number of
shares of Restricted Stock used for payment of the option exercise price shall
be subject to the same forfeiture restrictions to which such Restricted Stock
was subject, unless otherwise determined by the Committee.
No shares of Stock shall be issued until full payment therefor has
been made. Subject to any forfeiture restrictions that may apply if a Stock
Option is exercised using Restricted Stock, an optionee shall have all of the
rights of a stockholder of the Company holding the Stock that is subject to such
Stock Option (including, if applicable, the right to vote the shares and the
right to receive dividends), when the optionee has given written notice of
exercise, has paid in full for such shares and, if requested, has given the
representation described in Section 10(a).
7
<PAGE>
(e) Non-transferability of Stock Options. No Stock Option shall be
------------------------------------
transferable by the optionee other than (i) by will or by the laws of descent
and distribution or (ii) in the case of a Non-Qualified Stock Option, pursuant
to a qualified domestic relations order (as defined in the Code or Title I of
the Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder). All Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee or by the guardian or legal representative of the
optionee or, in the case of a Non-Qualified Stock Option, its alternate payee
pursuant to such qualified domestic relations order, it being understood that
the terms "holder" and "optionee" include the guardian and legal representative
of the optionee named in the option agreement and any person to whom an option
is transferred by will or the laws of descent and distribution or, in the case
of a Non-Qualified Stock Option, pursuant to a qualified domestic relations
order.
(f) Termination by Death. If an optionee's employment terminates by
--------------------
reason of death, any Stock Option held by such optionee may thereafter be
exercised, to the extent then exercisable, or on such accelerated basis as the
Committee may determine, for a period of one year (or such other period as the
Committee may specify in the option agreement) from the date of such death or
until the expiration of the stated term of such Stock Option, whichever period
is the shorter. In the event of termination of employment due to death, if an
Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Stock Option will
thereafter be treated as a Non-Qualified Stock Option.
(g) Termination by Reason of Disability. If an optionee's employment
-----------------------------------
terminates by reason of Disability, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable at the
time of termination, or on such accelerated basis as the Committee may
determine, for a period of one year (or such shorter period as the Committee may
specify in the option agreement) from the date of such termination of employment
or until the expiration of the stated term of such Stock Option, whichever
period is the shorter; provided, however, that if the optionee dies within such
one-year period (or such shorter period), any unexercised Stock Option held by
such optionee shall, notwithstanding the expiration of such three-year (or such
shorter) period, continue to be exercisable to the extent to which it was
8
<PAGE>
exercisable at the time of death for a period of 12 months from the date of such
death or until the expiration of the stated term of such Stock Option, whichever
period is the shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. If an optionee's employment
-----------------------------------
terminates by reason of Retirement, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable at the
time of such Retirement or on such accelerated basis as the Committee may
determine, for a period of three years (or such shorter period as the Committee
may specify in the option agreement) from the date of such termination of
employment or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided, however, that if the optionee dies
within such three-year (or such shorter) period, any unexercised Stock Option
held by such optionee shall, notwithstanding the expiration of such three-year
(or such shorter) period, continue to be exercisable to the extent to which it
was exercisable at the time of death for a period of 12 months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment by
reason of Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422 of the
Code, such Stock Option will thereafter be treated as a Non-Qualified Stock
Option.
(i) Other Termination. Unless otherwise determined by the Committee,
-----------------
if an optionee incurs a Termination of Employment for any reason other than
death, Disability or Retirement, any Stock Option held by such Optionee shall
thereupon terminate, except that such Stock Option, to the extent then
exercisable, or on such accelerated basis as the Committee may determine, may be
exercised for the lesser of three months from the date of such Termination of
Employment or the balance of such Stock Option's term if such Termination of
Employment of the optionee is without Cause; provided, however, that if the
optionee dies within such three-month period, any unexercised Stock Option held
by such optionee shall notwithstanding the expiration of such three-month
period, continue to be exercisable to the extent to which it was exercisable at
the time of death for a
9
<PAGE>
period of 12 months from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter. In the event
of Termination of Employment for any reason other than death, Disability or
Retirement, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a Non-Qualified Stock Option. Unless
otherwise determined by the Committee, for the purposes of the Plan "Cause"
shall mean (i) the conviction of the optionee for committing a felony under
Federal law or the law of the state in which such action occurred, (ii)
dishonesty in the course of fulfilling the optionee's employment duties or (iii)
willful and deliberate failure on the part of the optionee to perform his
employment duties in any material respect.
(j) Cashing Out of Stock Option. On receipt of written notice of
---------------------------
exercise, the Committee may elect to cash out all or part of the portion of the
shares of Stock for which a Stock Option is being exercised by paying the
optionee an amount, in cash or Stock, equal to the excess of the Fair Market
Value of the Stock over the option price times the number of shares of Stock for
which to the Option is being exercised on the effective date of such cash out.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
------------------
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of such Stock
Option. A Stock Appreciation Right shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in
accordance with Section 6(b) by surrendering the applicable portion of the
related Stock Option in accordance with procedures established by the Committee.
Upon such exercise and surrender, the optionee shall be entitled to receive an
amount determined in the manner prescribed in Section 6(b). Stock Options which
have been so surrendered shall no longer be exercisable to the extent the
related Stock Appreciation Rights have been exercised.
10
<PAGE>
(b) Terms and Conditions. Stock Appreciation Rights shall be subject
--------------------
to such terms and conditions as shall be determined by the Committee, including
the following:
(i) Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Stock Options to which they relate
are exercisable in accordance with the provisions of Section 5 and this
Section 6.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash, shares of Stock or both
equal in value to the excess of the Fair Market Value of one share of Stock
over the option price per share specified in the related Stock Option
multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only to
permitted transferees of the underlying Stock Option in accordance with
Section 5(e).
SECTION 7. RESTRICTED STOCK.
(a) Administration. Shares of Restricted Stock may be awarded either
--------------
alone or in addition to other Awards granted under the Plan. The Committee
shall determine the officers and employees to whom and the time or times at
which grants of Restricted Stock will be awarded, the number of shares to be
awarded to any participant, the time or times within which such Awards may be
subject to forfeiture and any other terms and conditions of the Awards, in
addition to those contained in Section 7(c).
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals of the participant or of the Company
or subsidiary, division or department of the Company for or within which the
participant is primarily employed or upon such other factors or criteria as the
Committee shall determine. The provisions of Restricted Stock Awards need not
be the same with respect to each recipient.
(b) Awards and Certificates. Shares of Restricted Stock shall be
-----------------------
evidenced in such manner as the Committee may deem appropriate, including book-
entry
11
<PAGE>
registration or issuance of one or more stock certificates. Any certificate
issued in respect of shares of Restricted Stock shall be registered in the name
of such participant and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award, substantially in the
following form:
"The transferability of this certificate and the shares
of stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Tommy Hilfiger
(Eastern Hemisphere) Limited 1992 Stock Incentive Plan
and a Restricted Stock Agreement. Copies of such Plan
and Agreement are on file at the offices of Tommy
Hilfiger (Eastern Hemisphere) Limited, 6/F, Precious
Industrial Centre, 18 Cheung Yue Street, Cheung Sha Wan,
Kowloon, Hong Kong."
The Committee may require that the certificates evidencing such shares be held
in custody by the Company until the restrictions thereon shall have lapsed and
that, as a condition of any Award of Restricted Stock, the participant shall
have delivered a stock power, endorsed in blank, relating to the Stock covered
by such Award.
(c) Terms and Conditions. Shares of Restricted Stock shall be subject
--------------------
to the following terms and conditions:
(i) Subject to the provisions of the Plan and the Restricted Stock
Agreement referred to in Section 7(c)(vi), during a period set by the
Committee, commencing with the date of such Award (the "Restriction
Period"), the participant shall not be permitted to sell, assign, transfer,
pledge or otherwise encumber shares of Restricted Stock. The Committee may
provide for the lapse of such restrictions in installments or otherwise and
may accelerate or waive such restrictions, in whole or in part, in each case
based on period of service, performance of the participant or of the Company
or the subsidiary, division or department for which the participant is
employed or such other factors or criteria as the Committee may determine.
(ii) Except as provided in this paragraph (ii) and Section 7(c)(i)
and the Restricted Stock Agreement, the participant shall have, with respect
to the shares of Restricted Stock, all of the rights of a
12
<PAGE>
stockholder of the Company holding the class or series of Stock that is the
subject of the Restricted Stock, including, if applicable, the right to vote
the shares and the right to receive any cash dividends. If so determined by
the Committee in the applicable Restricted Stock Agreement and subject to
Section 10(f) of the Plan, (1) cash dividends on the shares of Stock that
are the subject of the Restricted Stock Award shall be automatically
deferred and reinvested in additional Restricted Stock, and (2) dividends
payable in Stock shall be paid in the form of Restricted Stock.
(iii) Except to the extent otherwise provided in the applicable
Restricted Stock Agreement and Sections 7(c)(i) and 7(c)(iv), upon a
participant's Termination of Employment for any reason during the
Restriction Period, all shares still subject to restriction shall be
forfeited by the participant.
(iv) In the event of Termination of Employment of a participant for
any reason (other than for Cause), the Committee shall have the discretion
to waive in whole or in part any or all remaining restrictions with respect
to any or all of such participant's shares of Restricted Stock.
(v) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period,
unlegended certificates for such shares shall be delivered to the
participant.
(vi) Each Award shall be confirmed by, and be subject to the terms
of, a Restricted Stock Agreement.
SECTION 8. TERM, AMENDMENT AND TERMINATION.
The Plan will terminate on December 31, 2002. Under the Plan, Awards
outstanding as of December 31, 2002 shall not be affected or impaired by the
termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of an
optionee under a Stock Option or a recipient of a Stock Appreciation Right or
Restricted Stock Award theretofore granted without the optionee's or recipient's
consent.
13
<PAGE>
The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights of any holder without the holder's consent.
SECTION 9. UNFUNDED STATUS OF PLAN.
It is presently intended that the Plan constitute an "unfunded" plan
for incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or make payments; provided, however, that, unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
SECTION 10. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing or receiving
shares pursuant to an Award to represent to and agree with the Company in
writing that such person is acquiring the shares without a view to the
distribution thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock or other securities delivered
under the Plan shall be subject to such stock transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the Commission, any stock exchange upon which the
Stock is then listed and any applicable Federal or state securities law, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) Nothing contained in the Plan shall prevent the Company or any
subsidiary or Affiliate from adopting other or additional compensation
arrangements for its employees.
(c) The adoption of the Plan shall not confer upon any employee any
right to continued employment nor shall it interfere in any way with the right
of the Company or any subsidiary or Affiliate to terminate the employment of any
employee at any time.
14
<PAGE>
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any Award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Company regarding the
payment of, any Federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. Unless otherwise determined by
the Committee, withholding obligations may be settled with Stock, including
Stock that is part of the Award that gives rise to the withholding requirement.
The obligations of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company, its Subsidiaries and its Affiliates
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment otherwise due to the participant. The Committee may establish
such procedures as it deems appropriate, including the making of irrevocable
elections, for the settlement of withholding obligations with Stock.
(e) At the time of grant, the Committee may provide in connection
with any grant made under the Plan that the shares of Stock received as a result
of such grant shall be subject to a right of first refusal pursuant to which the
participant shall be required to offer to the Company any shares that the
participant wishes to sell at the then Fair Market Value of the Stock, subject
to such other terms and conditions as the Committee may specify at the time of
grant.
(f) The reinvestment of dividends in additional Restricted Stock at
the time of any dividend payment shall only be permissible if sufficient shares
of Stock are available under Section 3 for such reinvestment (taking into
account then outstanding Stock Options and other Awards).
(g) The Committee shall establish such procedures as it deems
appropriate for a participant to designate a beneficiary to whom any amounts
payable in the event of the participant's death are to be paid.
(h) The Plan and all Awards made and actions taken thereunder shall
be governed by and construed in accordance with the laws of the British Virgin
Islands.
SECTION 11. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on the date it is approved by the
shareholders of the Company.
15
<PAGE>
EXHIBIT 10.8
TOMMY HILFIGER U.S.A., INC.
VOLUNTARY DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
<PAGE>
FOREWORD
Effective as of January 1, 1998, Tommy Hilfiger U.S.A., Inc. (the "Company") has
adopted the Tommy Hilfiger U.S.A., Inc. Voluntary Deferred Compensation Plan
(the "Plan").
The purpose of the Plan is to provide a select group of management or highly
compensated employees with an opportunity to defer an amount of base salary or
bonus pursuant to the terms of the Plan. It is intended that this Plan will
constitute an unfunded arrangement for purposes of both the Internal Revenue
Code of 1986 and the Employee Retirement Income Security Act of 1974.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - DEFINITIONS...................................................... 1
1.1 Base Pay............................................................ 1
1.2 Beneficiary......................................................... 1
1.3 Bonus............................................................... 1
1.4 Bookkeeping Account................................................. 1
1.5 Code................................................................ 1
1.6 Company............................................................. 1
1.7 Deferral Agreement.................................................. 1
1.8 Deferral Compensation............................................... 1
1.9 Disability.......................................................... 1
1.10 Election Date....................................................... 1
1.11 ERISA............................................................... 2
1.12 Participant......................................................... 2
1.13 Plan................................................................ 2
1.14 Plan Administrator.................................................. 2
1.15 Retirement Age...................................................... 2
1.16 Year Certain........................................................ 2
ARTICLE II - PARTICIPATION................................................... 3
2.1 Eligibility......................................................... 3
2.2 Deferral Agreement Required......................................... 3
2.3 No Retention Rights................................................. 3
ARTICLE III - DEFERRAL OF COMPENSATION....................................... 4
3.1 Deferral Amounts.................................................... 4
3.2 Payment Options..................................................... 4
ARTICLE IV - DEFERRAL ACCOUNT AND CREDITING OF INTEREST...................... 5
4.1 Account to Reflect Interest......................................... 5
4.2 Rate of Interest.................................................... 5
4.3 Time of Crediting Interest.......................................... 5
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(Cont'd)
<TABLE>
<S> <C>
ARTICLE V - BENEFIT PAYMENTS................................................. 6
5.1 Benefit Commencement................................................. 6
5.2 Vesting.............................................................. 6
5.3 Form of Payment...................................................... 6
5.4 Accelerated Distribution............................................. 6
5.5 Death of Participant................................................. 6
5.6 Change in Control.................................................... 6
ARTICLE VI - ADMINISTRATION.................................................. 7
6.1 Named Fiduciary and Plan Administration.............................. 7
6.2 General Administration............................................... 7
6.3 Participation by Employee of Acquired Employer....................... 7
ARTICLE VII - CLAIMS PROCEDURE............................................... 8
7.1 Request for Benefits................................................. 8
7.2 Denial of Claim...................................................... 8
7.3 Review of Denial..................................................... 8
7.4 Decision on Review................................................... 8
ARTICLE VIII - MISCELLANEOUS................................................. 9
8.1 Amendment of the Plain............................................... 9
8.2 Termination of the Plan.............................................. 9
8.3 No Impairment of Benefits............................................ 9
8.4 Nonalienation........................................................ 9
8.5 Tax Withholding...................................................... 9
8.6 Not an Employment Contract........................................... 9
8.7 Source of Benefits................................................... 9
8.8 Governing Law........................................................ 10
</TABLE>
ii
<PAGE>
ARTICLE I
DEFINITIONS
-----------
1.1 "BASE PAY" shall mean the Participant's annual rate of base pay, without
regard to bonuses or any other amount reported as compensation income.
1.2 "BENEFICIARY" shall mean the person designated by the Participant to
receive the benefit under the Plan.
1.3 "BONUS" shall mean the Participant's annual bonus under the Tommy Hilfiger
Incentive Plan for the calendar year beginning after the year of deferral.
1.4 "BOOKKEEPING ACCOUNT" shall mean the bookkkeping record for each
Participant who elects to defer compensation under this plan.
1.5 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.6 "COMPANY" shall mean Tommy Hilfiger U.S.A., Inc., a Delaware Corporation,
and its successors and assigns.
1.7 "DEFERRAL AGREEMENT" shall mean the written form which is submitted to the
Plan Administrator before the relevant Election Date which indicates
whether the Participant wishes to defer a portion of his compensation and
indicates the portion of Base Pay and Bonus (or both) to be deferred. In no
event may a Plan Participant elect to defer Base Pay or Bonus already
earned. Any written document which provides substantially the same
information also is a "Deferral Agreement". However, no Deferral Agreement
shall be effective until it is acknowledged by the Plan Administrator, or
if it is submitted after the Election Date.
1.8 "DEFERRED COMPENSATION" shall mean the portion of a Participant's Base Pay
or Bonus compensation for any fiscal year, or part thereof, that has been
deferred pursuant to the Plan.
1.9 "DISABILITY" shall mean the inability of the Participant to perform
services or to remain gainfully employed.
-1-
<PAGE>
1.10 "ELECTION DATE" shall mean the annual date established by this Plan as the
date before which an Executive must submit a valid Deferral Agreement to
the Plan Administrator. The applicable Election Dates are as follows: (a)
30 days after adoption of the Plan for employees who are eligible to
participate at the time the Plan is adopted, (b) 30 days after a newly
eligible employee is notified of his right to participate in the Plan, or
(c) December 15 of any calendar year, if (a) or (b) above do not apply.
1.11 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
1.12 "PARTICIPANT" shall mean an individual who is eligible to participate
pursuant to Article II and who timely completes and returns a Deferral
Agreement.
1.13 "PLAN" shall mean the Tommy Hilfiger U.S.A., Inc. Voluntary Deferred
Compensation Plan.
1.14 "PLAN ADMINISTRATOR" shall mean a committee of the Chief Executive
Officer, Chief Financial Officer and Senior Vice President of Human
Resources.
1.15 "RETIREMENT AGE" shall mean age 65.
1.16 "YEAR CERTAIN" shall mean a benefit commencing at the end of five complete
calendar years, or ten complete calendar years, at the election of the
Participant.
-2-
<PAGE>
ARTICLE II
PARTICIPATION
-------------
2.1 Eligibility
-----------
Participation in the Plan shall be limited to any persons specifically
designated by the Chief Executive Officer to be Participants in this Plan,
provided that participation shall be limited to a select group of
management or highly compensated employees.
2.2 Deferral Agreement Required
---------------------------
An employee, after having been selected for participation by the Committee,
shall, as a condition to participation, complete and return to the
Committee a duly executed Deferral Agreement no later than the Election
Date.
2.3 No Retention Rights
-------------------
Nothing contained in the Plan shall be deemed to give any Participant or
employee the right to be retained in the service of the Company or to
interfere with the right of the Company to discharge any Participant or
employee at any time, regardless of the effect which such discharge shall
have upon him as a participant in the Plan.
-3-
<PAGE>
ARTICLE III
DEFERRAL OF COMPENSATION
------------------------
3.1. Deferral Amounts
----------------
Each Participant in the Plan may have a percentage of his Base Pay and/or
Bonus deferred in accordance with the terms and conditions of this Plan. A
Participant who is a Senior Vice President or a higher position may defer
up to 20% of his Base Pay and up to 50% of his Bonus, provided that (i)
any deferral of Base Pay shall be in increments of 1% of Base Pay and be
in an amount not less than 5% of Base Pay, and (ii) any deferral of Bonus
shall be in increments of 1% of Bonus and in an amount not less than 10%
of Bonus. A Participant who is a Vice President may defer up to 10% of his
Base Pay and up to 25% of his Bonus, provided that (i) any deferral of
Base Pay shall be in increments of 1% of Base Pay and be in an amount not
less than 3% of Base Pay, and (ii) any deferral of Bonus shall be in
increments of 1% of Bonus and in an amount not less than 5% of Bonus.
3.2. Payment Events
--------------
At the time of deferral, the Participant shall elect the time at which the
payment shall commence. A Participant may defer the commencement of
payment until any of the following events, as determined in the Deferral
Agreement:
a) his Retirement Age,
b) his termination of employment,
c) his death,
d) his Disability,
e) a Year Certain,
f) the occurrence of a Change in Control of the Company wherein ownership
of the Company is sold or otherwise acquired ("Change in Control"), or
g) the occurrence of an accelerated distribution, as described in Section
5.4.
The Deferral Agreement shall specify the terms and conditions of the
Participant's election.
-4-
<PAGE>
ARTICLE IV
DEFERRAL ACCOUNT AND CREDITING OF INTEREST
------------------------------------------
4.1. Account to Reflect Interest
---------------------------
Amounts deferred by a Participant under a written Deferral Agreement shall
be credited in a dollar amount to a separate Bookkeeping Account for each
Participant. Amounts deferred under subsequent written Deferral Agreements
by a Participant also shall be credited to his Bookkeeping Account.
4.2. Rate of Interest
----------------
The amount in the Participant's Bookkeeping Account shall be credited with
interest at a rate determined by the Plan Administrator. Deferred
Compensation shall be deemed to be so invested on the date the amounts
deferred are credited to the Bookkeeping Account. The interest rate for
each deferral year shall reflect the actual after-tax cost of borrowing by
the Company.
4.3. Time of Crediting Interest
--------------------------
Interest shall be credited to the Bookkeeping Account as of the last day
of each calendar year.
-5-
<PAGE>
ARTICLE V
BENEFIT PAYMENTS
----------------
5.1. Benefit Commencement
--------------------
Distribution of the value of a Participant's Bookkeeping Account balance
shall be made according to the terms of this Plan and as specified in the
Participant's Deferral Agreement, which is incorporated as part of this
Plan by reference.
5.2. Vesting
-------
The Participant shall have a nonforfeitable right to receive the value of
his Bookkeeping Account according to the terms of this Plan.
5.3. Form of Payment
---------------
All distributions of a Participant's Bookkeeping Account shall be made in
cash and in a lump sum.
5.4. Accelerated Distribution
------------------------
A Participant may elect to receive payment earlier than the otherwise
applicable payout date if the Participant is charged with a penalty to his
Bookkeeping Account balance of 10%.
5.5. Death of Participant
--------------------
If the Participant dies before receiving his benefit under the Plan, his
Beneficiary shall receive the face value of his Bookkeeping Account
balance in a lump sum.
5.6. Change in Control
-----------------
If there is a Change in Control of the Company, Participant's Bookkeeping
Account balance shall become payable as soon as practicable after the
Change in Control.
-6-
<PAGE>
ARTICLE VI
ADMINISTRATION
--------------
6.1 Named Fiduciary and Plan Administrator
--------------------------------------
The Company shall be the "named fiduciary" and the Plan Administrator shall
be "administrator" of the Plan within the meaning of ERISA.
6.2 General Administration
----------------------
The Plan Administrator shall be vested with the general administration of
the Plan, and shall have the exclusive and discretionary right to
interpret, and make determinations under, the Plan. The interpretations,
determinations, actions and records of the Plan Administrator shall be
conclusive and binding upon the Company and all persons having or claiming
to have any right or interest in or under the Plan, unless found by a court
of competent jurisdiction to be arbitrary and capricious.
The Plan Administrator's authority, duties, and responsibilities shall be
those that are considered necessary or appropriate for the proper and
efficient operation of the Plan and, including, without limitation, (i)
interpretation of the Plan, and (ii) approval, payment and review of
claims. The Plan Administrator may adopt such procedures as it may
determine for the administration of the plan, the conduct of meetings, the
delegation of authority and the establishment of rules and regulations for
the fulfillment of its duties.
6.3 Participation by Employees of Acquired Employer
-----------------------------------------------
If, as a result of an acquisition or other corporate transaction, an
individual becomes an employee of the Company, or subsidiary or affiliated
Company, the Company may authorize such employee to participate in this
Plan under such terms and conditions as the Company may determine.
-7-
<PAGE>
ARTICLE VII
CLAIMS PROCEDURE
----------------
7.1 Request for Benefits
--------------------
Benefits shall be paid in accordance with the provisions of this Plan. The
Participant, or a designated recipient or any other person claiming through
the Participant, shall make a written request for benefits under this Plan.
This written claim shall be mailed or delivered to the Plan Administrator.
Such claim shall be reviewed by the Plan Administrator.
7.2 Denial of Claim
---------------
If the claim is denied, in full or in part, the Plan Administrator shall
provide a written notice within ninety (90) days setting forth the specific
reasons for denial, and any additional material or information necessary to
perfect the claim, and an explanation of why such material or information
is necessary, and appropriate information and explanation of the steps to
be taken if a review of the denial is desired.
7.3 Review of Denial
----------------
If the claim is denied and a review is desired, the Participant (or
beneficiary) shall notify the Plan Administrator in writing within sixty
(60) days after receipt of the written notice of denial. A claim shall be
deemed denied if the Plan Administrator does not take any action within the
aforesaid ninety (90) day period. In requesting a review, the Participant
or his Beneficiary may request a review of the Plan document or other
pertinent documents with regard to the employee benefit plan created under
this agreement, may submit any written issues and comments, and may request
an extension of time for such written submission of issues and comments.
7.4 Decision on Review
------------------
The decision on the review of the denial of the claim shall be rendered by
the Plan Administrator within sixty (60) days after the receipt of the
request for review. The decision shall be written and shall state the
specific reasons for the decision, including reference to specific
provisions of this Plan on which the decision is based.
-8-
<PAGE>
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Amendment of the Plan
---------------------
Subject to the provisions of Section 8.3, the Plan may be wholly or
partially amended or otherwise modified at any time by the Company.
8.2 Termination of the Plan
-----------------------
Subject to the provisions of Section 8.3, the Plan may be terminated at any
time by the Company.
8.3 No Impairment of Benefits
-------------------------
Notwithstanding the provisions of Sections 8.1 and 8.2, no amendment to, or
termination of, the Plan shall impair any rights to vested benefits
hereunder.
8.4 Nonalienation
-------------
Except insofar as this provision may be contrary to applicable law, no
sale, transfer, alienation, assignment, pledge, collateralization or
attachment of any benefits under this Plan shall be valid or recognized by
the Plan Administrator.
8.5 Tax Withholding
---------------
Any benefits deferred or payable under this Plan shall be subject to any
applicable payroll or other taxes required to be withheld by law.
8.6 Not an Employment Contract
--------------------------
This Plan does not contribute a contract of employment between the
Participant and the Company, and participation in the Plan does not affect
the nature of the employment relationship.
8.7 Source of Benefits
------------------
Participants have the status of general unsecured creditors of the Company
and the Plan constitutes a mere promise by the Company to make benefit
payments in the future from its general assets. Nothing contained in this
Plan, and no actions taken pursuant to its provisions, shall create, or be
construed to create, a trust of any kind between the
-9-
<PAGE>
Company and any Participant or Beneficiary or an obligation to set aside or
earmark any monies or other assets specifically for payments under this
Plan.
-10-
<PAGE>
8.8 Governing Law
-------------
This Plan shall be governed by and construed in accordance with the laws of
the State of New York, except to the extent preempted by ERISA, without
reference to principles of conflict of laws, and subject to the sole
jurisdiction of the courts thereof.
/s/ Joel J. Horowitz
------------------------------
Chief Executive Officer
Date: 4/24/98 Witness: /s/ Howard Shapiro
--------------- ------------------------
-11-
<PAGE>
EXHIBIT 10.9
TOMMY HILFIGER U.S.A., INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EFFECTIVE JANUARY 1, 1998
RESTATED MAY 1, 1998
<PAGE>
FOREWORD
Effective as of January 1, 1998, Tommy Hilfiger U.S.A., Inc. (the "Company")
adopted the Tommy Hilfiger U.S.A., Inc. Supplemental Executive Retirement Plan
(the "Plan"). The Plan was amended and restated, effective May 1, 1998.
The purpose of the Plan is to provide a select group of management or highly
compensated employees with a supplemental pension pursuant to the terms of the
Plan. It is intended that this Plan will constitute an unfunded arrangement for
purposes of both the Internal Revenue Code of 1986 and the Employee Retirement
Income Security Act of 1974.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - DEFINITIONS.......................................................... 1
1.1 Accrued Benefits........................................................ 1
1.2 Base Salary............................................................. 1
1.3 Cause................................................................... 1
1.4 Code.................................................................... 1
1.5 Company................................................................. 1
1.6 ERISA................................................................... 2
1.7 Final Average Base Salary............................................... 2
1.8 Participant............................................................. 2
1.9 Plan.................................................................... 2
1.10 Plan Administrator...................................................... 2
1.11 Retirement.............................................................. 2
1.12 Years of Service........................................................ 2
ARTICLE II - PARTICIPATION....................................................... 3
2.1 Eligibility............................................................. 3
2.2 No Retention Rights..................................................... 3
ARTICLE III - BENEFITS PAYMENT................................................... 4
3.1 Benefits................................................................ 4
3.2 Contributions........................................................... 4
3.3 Vesting................................................................. 4
3.4 Benefit Commencement.................................................... 4
3.5 General Provisions...................................................... 5
ARTICLE IV - ADMINISTRATION...................................................... 6
4.1 Named Fiduciary and Plan Administrator.................................. 6
4.2 General Administration.................................................. 6
4.3 Participation by Employees of Acquired Employer......................... 6
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
-----------
<TABLE>
<S> <C>
ARTICLE V - CLAIMS PROCEDURES.................................................... 7
5.1 Request for Benefits.................................................... 7
5.2 Denial of Claim......................................................... 7
5.3 Review of Denial........................................................ 7
5.4 Decision on Review...................................................... 7
ARTICLE VI - MISCELLANEOUS....................................................... 8
6.1 Amendment of the Plan................................................... 8
6.2 Termination of the Plan................................................. 8
6.3 No Impairment of Benefits............................................... 8
6.4 Nonalienation........................................................... 8
6.5 Tax Withholding......................................................... 8
6.6 Not an Employment Contract.............................................. 8
6.7 Source of Benefits...................................................... 8
6.8 Governing Law........................................................... 9
</TABLE>
ii
<PAGE>
ARTICLE I
DEFINITIONS
-----------
1.1 "ACCRUED BENEFIT" shall mean an amount payable to a Participant pursuant to
Section 3.1.
1.2 "BASE SALARY" shall mean the Participant's annual rate of base pay, without
regard to bonuses or any other amount reported as compensation income.
1.3 "CAUSE" means the occurrence of one of the following:
(a) Commission by the Participant of a fraud against the Company,
(b) Conviction of the Participant for aiding or abetting a crime,
(c) Commission by the Participant of a felony, or of a fraud or a crime
involving moral turpitude or of a business crime,
(d) Possession or use by the Participant of illegal drugs or prohibited
substances,
(e) Excessive drinking, by the Participant, of alcoholic beverages which
impairs the Participant's ability to perform his duties, or the
Participant's appearance during hours of employment of being under the
influence of drugs, substances or alcohol, or
(f) Gross negligence by the Participant, which has a material adverse
effect on the Company, or its reputation.
1.4 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.5 "COMPANY" shall mean Tommy Hilfiger U.S.A., Inc., a Delaware Corporation,
and its successors and assigns.
-1-
<PAGE>
1.6 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
1.7 "FINAL AVERAGE BASE SALARY" shall mean the average of a Participant's Base
Salary for the Participant's last three full calendar years of employment
with the Company. In the case of a Participant who has completed less than
three full calendar years of employment with the Company, the Base Salary
shall be averaged over the period of the Participant's employment with the
Company.
1.8 "PARTICIPANT" shall mean an individual who is eligible to participate
pursuant to Article II.
1.9 "PLAN" shall mean the Tommy Hilfiger U.S.A., Inc. Supplemental Executive
Retirement Plan.
1.10 "PLAN ADMINISTRATOR" shall mean a committee of the Chief Executive
Officer, Chief Financial Officer and Senior Vice President of Human
Resources.
1.11 "RETIREMENT AGE" shall mean age 65.
1.12 "YEARS OF SERVICE" shall mean a Participant's service with the Company
after March 27, 1989. For purposes of determining Years of Service, a
Participant who begins working on or before June 30 in the year of
employment shall receive a full Year of Service for the calendar year in
which he was hired. A Participant beginning employment on or after July 1
in a calendar year shall commence accruing Years of Service on the
following January 1, if the Participant is still employed on that date.
-2-
<PAGE>
ARTICLE II
PARTICIPATION
-------------
2.1 Eligibility
-----------
Participation in the Plan shall be limited to any persons specifically
designated by the Chief Executive Officer to be Participants in this Plan,
provided that participation shall be limited to a select group of
management or highly compensated employees. Notwithstanding the foregoing,
a Participant whose employment is terminated for Cause shall be removed
from the Plan and immediately shall forfeit all rights and entitlements
under the Plan.
2.2 No Retention Rights
-------------------
Nothing contained in the Plan shall be deemed to give any Participant or
employee the right to be retained in the service of the Company or to
interfere with the right of the Company to discharge any Participant or
employee at any time, regardless of the effect which such discharge shall
have upon him or her as a participant in the Plan.
-3-
<PAGE>
ARTICLE III
BENEFITS PAYMENT
----------------
3.1 Benefits
--------
A Participant's vested Accrued Benefit shall be an amount equal to 2% of
the Participant's Final Average Base Salary multiplied by the Participant's
Years of Service. For purposes of this Section 3.1, Years of Service shall
be limited to a maximum of 25 years. The form of payment shall be an
annuity for the Participant's life.
3.2 Contributions
-------------
Contributions sufficient to pay the benefits shall be made by the Company.
3.3 Vesting
-------
A Participant shall become vested in his Accrued Benefit upon the first to
occur of the following events:
(a) The Participant's completion of 10 Years of Service
(b) The Participant's attainment of age 40 and completion of five Years of
Service, or
(c) The Participant's attainment of age 65.
Notwithstanding the foregoing, a Participant who is terminated for reasons
of Cause, as determined by the Plan Administrator, shall forfeit all rights
to benefits (whether or not vested).
3.4 Benefit Commencement
--------------------
Benefits shall commence on:
(a) The first day of the first month beginning after the Participant's
attainment of Retirement Age,
-4-
<PAGE>
(b) The election of benefit commencement by a Participant with vested
Accrued Benefits who has attained the age of 55.
Such benefits shall commence on the first day of the month following the
Participant's election and shall be reduced by 5% per year for each year it
is paid before the Participant's attainment of age 65.
3.5 General Provisions
------------------
(a) The Company shall make no provision for the funding of any benefits
payable hereunder that (i) would cause the Plan to be a funded plan
for purposes of section 404(a)(5) of the Code, or Title I of ERISA, or
(ii) would cause the Plan to be other than an "unfunded and unsecured
promise to pay money or other property in the future" under Treasury
Regulations Section 1.83-3(e); and shall have no obligation to make
any arrangement for the accumulation of funds to pay any amounts under
this Plan.
(b) In the event that the Company shall decide to establish an advance
accrual reserve on its books against the future expense of benefit
payments, such reserve shall not under any circumstances be deemed to
be an asset of this Plan but, at all times, shall remain a part of the
general assets of the Company, subject to claims of the Company's
creditors.
(c) A person entitled to any amount under this Plan shall be a general
unsecured creditor of the Company with respect to such amount.
-5-
<PAGE>
ARTICLE IV
ADMINISTRATION
--------------
4.1 Named Fiduciary and Plan Administrator
--------------------------------------
The Company shall be the "named fiduciary" and the Plan Administrator shall
be "administrator" of the Plan within the meaning of ERISA.
4.2 General Administration
----------------------
The Plan Administrator shall be vested with the general administration of
the Plan, and shall have the exclusive and discretionary right to
interpret, and make determinations under, the Plan. The interpretations,
determinations, actions and records of the Plan Administrator shall be
conclusive and binding upon the Company and all persons having or claiming
to have any right or interest in or under the Plan, unless found by a court
of competent jurisdiction to be arbitrary and capricious.
The Plan Administrator's authority, duties, and responsibilities shall be
those that are considered necessary or appropriate for the proper and
efficient operation of the Plan and, including, without limitation, (i)
interpretation of the Plan, and (ii) approval, payment and review of
claims. The Plan Administrator may adopt such procedures as it may
determine for the administration of the plan, the conduct of meetings, the
delegation of authority and the establishment of rules and regulations for
the fulfillment of its duties.
4.3 Participation by Employees of Acquired Employer
-----------------------------------------------
If, as a result of an acquisition or other corporate transaction, an
individual becomes an employee of the Company, or subsidiary or affiliated
company, the Company may authorize such employee to participate in this
Plan under such terms and conditions as the Company may determine.
-6-
<PAGE>
ARTICLE V
CLAIMS PROCEDURE
----------------
5.1 Request for Benefits
--------------------
Benefits shall be paid in accordance with the provisions of this Plan. The
Participant, or a designated recipient or any other person claiming through
the Participant, shall make a written request for benefits under this Plan.
This written claim shall be mailed or delivered to the Plan Administrator.
Such claim shall be reviewed by the Plan Administrator.
5.2 Denial of Claim
---------------
If the claim is denied, in full or in part, the Plan Administrator shall
provide a written notice within ninety (90) days setting forth the specific
reasons for denial, and any additional material or information necessary to
perfect the claim, and an explanation of why such material or information
is necessary, and appropriate information and explanation of the steps to
be taken if a review of the denial is desired.
5.3 Review of Denial
----------------
If the claim is denied and a review is desired, the Participant (or
beneficiary) shall notify the Plan Administrator in writing within sixty
(60) days after receipt of the written notice of denial. A claim shall be
deemed denied if the Plan Administrator does not take any action within the
aforesaid ninety (90) day period. In requesting a review, the Participant
or his Beneficiary may request a review of the Plan document or other
pertinent documents with regard to the employee benefit plan created under
this agreement, may submit any written issues and comments, and may request
an extension of time for such written submission of issues and comments.
5.4 Decision on Review
------------------
The decision on the review of the denial of the claim shall be rendered by
the Plan Administrator within sixty (60) days after the receipt of the
request for review. The decision shall be written and shall state the
specific reasons for the decision, including reference to specific
provisions of this Plan on which the decision is based.
-7-
<PAGE>
ARTICLE VI
MISCELLANEOUS
-------------
6.1 Amendment of the Plan
---------------------
Subject to the provisions of Section 6.3, the Plan may be wholly or
partially amended or otherwise modified at any time by the Company.
6.2 Termination of the Plan
-----------------------
Subject to the provisions of Section 6.3, the Plan may be terminated at any
time by the Company.
6.3 No Impairment of Benefits
-------------------------
Notwithstanding the provisions of Sections 6.1 and 6.2, no amendment to, or
termination of, the Plan shall impair any rights to vested Accrued
Benefits.
6.4 Nonalienation
-------------
Except insofar as this provision may be contrary to applicable law, no
sale, transfer, alienation, assignment, pledge, collateralization or
attachment of any benefits under this Plan shall be valid or recognized by
the Plan Administrator.
6.5 Tax Withholding
---------------
Any benefits deferred or payable under this Plan shall be subject to any
applicable payroll or other taxes required to be withheld by law.
6.6 Not an Employment Contract
--------------------------
This Plan does not contribute a contract of employment between the
Participant and the Company, and participation in the Plan does not affect
the nature of the employment relationship.
6.7 Source of Benefits
------------------
Participants have the status of general unsecured creditors of the Company
and the Plan constitutes a mere promise by the Company to make benefit
payments in the future from its general assets. Nothing contained in this
Plan, and no actions taken pursuant to its provisions, shall create, or be
construed to create, a trust of any kind between the
-8-
<PAGE>
Company and any Participant or an obligation to set aside or earmark any
monies or other assets specifically for payments under this Plan.
6.8 Governing Law
-------------
This Plan shall be governed by and construed in accordance with the laws of
the State of New York, except to the extent preempted by ERISA, without
reference to principles of conflict of laws, and subject to the sole
jurisdiction of the courts thereof.
/s/ Joel J. Horowitz
----------------------------
Chief Executive Officer
Date: 4/23/98 Witness: /s/ Howard Shapiro
----------------- ----------------------------
-9-
<PAGE>
EXHIBIT 10.16
CENTURY BUSINESS CREDIT CORPORATION ("CBCC")
119 WEST 40TH STREET
NEW YORK, NEW YORK 10018
As of April 1, 1998
Re: Tommy Hilfiger U.S.A., Inc.
25 West 39th Street
New York, New York 10018
Gentlemen:
This letter will amend and restate in its entirety the Factoring Agreement
between us dated January 2, 1990, as amended on September 4, 1991, March 10,
1993, April 5, 1994, July 13, 1994, September 16, 1994, April 3, 1995, April 9,
1996 and April 8, 1997. [For purposes of this Agreement, "we," "us," and "our"
refers to Tommy Hilfiger USA, Inc. and "you" and "your" refers to CBCC.] We
hereby confirm that you will act as our sole collection Factor upon the
following terms and conditions commencing April 1, 1998, namely:
1. We hereby appoint you as our agent to collect all of our Receivables
(as hereinafter defined). Additionally, we hereby agree to sell you and you
hereby agree to purchase from us, all credit approved Receivables in accordance
with Paragraph 6 hereunder; provided, however, that title and ownership of
Receivables shall not vest in you and shall remain in us until the date the
purchase price is paid to us by you, in cash or its equivalent (less any reserve
as provided in this Agreement); and further provided, however, that at all times
you shall have a continuing security interest in all of our present and future
Receivables as collateral for repayment of any and all Obligations (as defined
in paragraph 9 hereof) to you, whether now existing or hereafter arising. Upon
payment of the purchase price, title shall vest in you to those Receivables
which you have purchased pursuant to Paragraph 6. For all purposes hereof, the
term "Receivables" shall mean and include all accounts and all forms of
obligations owing to us arising from or out of the sale of merchandise and/or
the rendition of services, all proceeds thereof, all of our rights to
merchandise represented thereby, all of our rights under insurance policies
covering such merchandise or services, all of our rights against carriers of
said merchandise, and all of our right, title, security interests and guarantees
with respect to each Receivable, including all rights of replevin and
reclamation and stoppage in transit and all other rights of an unpaid seller of
merchandise or services.
2. Each sale of merchandise and/or rendition of services by us on credit
approved Receivables shall be made only with your written approval as to terms
of sale (which shall not be changed without your written approval) and the
credit standing of our customer, and you shall have the right to withdraw such
approval at any time before delivery of merchandise or rendition of services.
You shall not be liable to any person or in any manner for refusing to approve
the credit of any customer. We shall execute and deliver to you written
schedules of all Receivables sold or assigned to you hereunder in form
satisfactory to you, together with copies of customers' invoices or the
equivalent and upon your request conclusive evidence of delivery for all goods
sold and all other information or documents you may require relating to
Receivables. All customers' invoices shall be marked payable to you in a manner
satisfactory to you, and such
<PAGE>
marking of invoices as payable to you, regardless of by whom done, and/or the
delivery thereof to you shall constitute an assignment thereof to you whether or
not we execute any specific instrument of assignment. You shall have the right
to retain all remittances, checks and other proceeds of sale relating to
Receivables and we agree to confirm your rights thereto by execution from time
to time of whatever documents you may reasonably deem necessary to effect
collection thereof. We authorize you to endorse our name on any and all checks
or other forms of remittances received in payment of Receivables, whether you
have purchased the same or not, whenever you deem such endorsement to be
necessary to effect collection thereof. If any remittances are made directly to
us relating to Receivables, we shall hold the same in trust for your benefit and
your property and will immediately deliver to you the identical checks,
documents, instruments or moneys received in the same form as received by us. We
have been advised that you may employ and we consent to your use of a lockbox
account for the deposit of remittances received in payment of Receivables.
3. We represent and warrant that each and every Receivable now or
hereafter assigned to you will cover a bona fide sale and delivery of
merchandise usually dealt in by us or the rendition by us of services to
customers in the ordinary course of our business; covers merchandise or services
which have been received and accepted by our customers without dispute or claim
of any kind or nature; will be for an amount certain payable in United States
funds in accordance with the terms of our invoice covering said sale, which
shall not be changed without your written approval; except for your security
interest therein on credit approved Receivables, and the subordinate security
interests of our lenders, there are no security interests, liens, or
encumbrances thereon and each Receivable will at all times be kept free and
clear of same in your favor; we have good title thereto and the legal rights to
sell, assign, transfer and set over the same to you; all documents to be
delivered to you in connection therewith will be genuine and be enforceable
against our customers free and clear of any offset, deduction, counterclaim,
lien, encumbrance or any other claim or dispute, including, without limitation,
claims or disputes as to price, terms, delivery, quantity or quality and claims
of release from liability or because of any act of God, or a public enemy, or
war, or because of the requirements of law or of rules, orders or regulations
having the force of law. We agree to indemnify you against any liability, loss
or expense caused by or arising out of the rejection of merchandise or services
or claims or deductions of every kind and nature by our customers, other than
those resulting from financial inability of our customer, whose credit standing
you have approved, to make payment. In the event of our breach of any of the
foregoing representations and/or warranties, you shall have, in addition to all
your other rights under this Agreement, the right to chargeback to us
immediately the full amount of the Receivables affected thereby together with
interest, but such chargeback shall not be deemed a reassignment thereof, and
you shall retain a security interest in such Receivable and in the merchandise
represented thereby until such Receivable is fully paid, settled or discharged
or all our Obligations (as hereinafter defined in Paragraph 9) to you are fully
satisfied. You shall not, however, have the right to chargeback to us any
Receivable approved by you which is unpaid solely because of such customer's
financial inability to pay. We agree that you may limit your purchase of
Receivables arising from our sales to any one customer or the terms of sale, you
nevertheless agree to collect such non-credit approved Receivables on our
behalf. We agree that although all invoices in the amount of $100.00 or less
shall be with full recourse to us in the event of nonpayment thereof for any
reason whatsoever regardless of whether or not you have approved the sale
relating thereto. As
2
<PAGE>
to Receivables purchased by you with recourse to us, you shall have the right to
charge the same back to us at any time, together with interest, if any. Upon the
occurrence of any breach of any representation or warranty for or by us to you
or any chargeback by you, we shall promptly pay you the full amount of the
Receivable affected thereby.
4. We shall notify you upon your request in each instance of the return,
rejection, loss of or damage to merchandise represented by any Receivable, of
any request for extension of time to pay or request for credit or adjustment, or
of any merchandise dispute or other dispute or claim relating to any Receivable
or to the merchandise or services covered thereby or tending in any way to
diminish the sum certain payable thereon. As to credit approved Receivables, if
any such dispute, controversy or claim is not promptly settled by us, you may,
if you so elect, settle, compromise, adjust or otherwise enforce or dispose of
by litigation or otherwise, any such dispute, controversy or claim, at our
expense, and upon such terms and conditions as you in your sole discretion shall
deem proper, but you shall have no obligation to do so. You agree that, after
assignment of credit approved Receivables to you and so long as no event of
default has occurred, we may grant allowances, credits or adjustments to
customers, or accept any return of merchandise, in each case solely in the
ordinary course of business, and should we do so we shall supply you with
immediate written notice in each instance. All such credit memoranda to be
issued to any customer shall be furnished by us only to you for transmission by
you to our customer who shall solely be entitled to the benefit thereof. As to
credit approved Receivables, if any merchandise relating thereto shall be
returned by or recovered from our customer or held subject to bill and hold
invoices, we shall forthwith pay you the full amount of such Receivable, either
in cash or by the assignment of new Receivables hereunder, and until such
payment or assignment, such merchandise shall be held by us in trust for your
benefit, shall be segregated and identified by us as property held in trust for
your benefit, and upon your reasonable request we shall, at our expense, deliver
the same to you or for your account or upon your order to such place or places
as you may designate. Upon notice to us, you may sell or cause the sale of any
such merchandise, at such prices and upon such terms as you may deem proper, and
in the event of any public sale thereof, you may be the purchaser. The proceeds
of any such sale or sales shall first be charged with the costs and expenses of
any incident to such sale, and the balance, if any, shall be credited to our
account.
5. You will send us a monthly account current at the end of each month
which will be in the same form as heretofore rendered to us, and as such shall
not reflect the retention or transfer of title to Receivables as herein provided
and shall not supersede or override the provisions of paragraph 1 hereof
regarding the retention or transfer of title to Receivables. Unless you receive
our written objection to any account current rendered by you within thirty (30)
days after the mailing of such account current, it shall be deemed accepted by
us and shall become conclusive and binding upon us. All debit balances shall be
payable to you on demand and shall bear interest at the rate of interest then in
effect as hereinafter provided (herein called the "Contract Rate"); such
interest is payable to you daily but shall be charged to our account monthly as
a cash advance made by you to us. The Contract Rate of interest hereunder shall
be equal to the Prime Rate (as hereinafter defined). Such Contract Rate is
based upon the highest announced prime, base or reference rate charged by New
York City money center banks to substantial and responsible corporate commercial
borrowers ("Prime Rate") which is now eight and one-half percent (8 1/2 %) per
annum, and is neither tied to any external rate of interest or
3
<PAGE>
index, nor does it necessarily reflect the lowest rate of interest actually
charged to any particular class or category of customers by such banks. Such
Contract Rate shall be increased or decreased as the case may be, as such Prime
Rate is increased or decreased and to the extent thereof; each such change to be
effective as at the first of the month after the related change in such Prime
Rate; but in no event shall the Contract Rate of interest hereunder be less than
the Prime Rate per annum nor in excess of the maximum rate you are permitted to
charge by law.
6. Collections of our Receivables, less any sums remitted or otherwise
paid to us or for our account, or debited to our account hereunder, shall be
payable by you to us each Friday for collections credited to us Monday, Tuesday
and Wednesday of each week, and each Tuesday for collections credited to us for
Thursday and Friday of the previous week. However, if any Receivable as to
which you have approved the credit standing of the customer shall not be paid by
reason of the customer's bankruptcy or insolvency or within 120 days of
maturity, you will pay us one-half ( 1/2) of the purchase price thereof on the
earlier of (a) the first Tuesday of the month following such customer's
bankruptcy or insolvency, or (b) the first Tuesday following the Receivable
becoming 120 days past due without dispute. Upon such payment to or for us, our
assignment of the Receivable shall be effective to transfer title to such
Receivable to you. Upon your collection in whole or in part of any Receivable
with respect to which you have made payment to us in accordance with the
provisions of the second sentence of paragraph 6, you shall pay to us one half
of the amount of such collection (net of your actual and reasonable attorneys
fees for collection provided that the collection attorney shall be satisfactory
to us in each instance, our consent not to be unreasonably withheld). The
purchase price of Receivables sold and assigned to you each month shall be the
net amount thereof, as herein defined, less the amount of your commission on the
purchase of such Receivables as provided in paragraph 7 hereof. As used herein,
the term "net amount" of Receivables shall mean the gross amount of Receivables,
less returns, allowances and discounts to customers upon shortest or longest
selling terms, as you may elect.
7. For your services hereunder with respect to our sales, you shall
receive a commission, which shall be chargeable to our account with you on the
last day of each month, equal to the product of (a) the net face amount of each
credit approved Receivable less selling discounts and (b) the commission rate
set forth below opposite the applicable period in which such sale is made:
<TABLE>
<CAPTION>
Period Commission Rate
------ ---------------
<S> <C>
April 1, 1998 through .3175%
March 31, 1999
April 1, 1999 through .3000%
March 31, 2000
</TABLE>
8. If any tax by any governmental authority (other than for your income
and franchise taxes) is or may be imposed on or as a result of any transaction
between us under or relating to this Agreement, or in respect to sales or the
merchandise affected by such sales, which you are or may be required to withhold
or pay, we agree to indemnify and hold you harmless in
4
<PAGE>
respect of such taxes, and we will repay you the amount of any such taxes, which
shall be charged to our account, and until we shall furnish you with indemnity
therefor (or supply you with evidence satisfactory to you that due provision for
the payment thereof has been made), you may hold without interest any balance
standing to our credit and you shall retain your security interest in any and
all collateral held by you.
9. As security for all "Obligations" (as herein defined), we hereby grant
to you a security interest in, a general lien upon and/or a right of setoff of,
all Receivables, all our credit balances with you and all our claims against you
(whether now or hereafter existing and whether arising under this Agreement or
otherwise), and all our property of every kind and description, tangible or
intangible, at any time in your possession or subject to your control, whether
now or hereafter existing or now owned or hereafter acquired and wherever
located. As used herein, the term "Obligations" means and includes all
indebtedness, liabilities, obligations, debit balances, covenants and duties
owing by us now or hereafter existing, all interest, fees, charges, expenses and
attorneys' fees for which we are obligated hereunder. We agree to execute such
further instruments and financing statements as may be required by any law in
connection with the transactions contemplated hereby and to cooperate with you
in the filing or recording and renewal thereof, and we hereby further authorize
you (and appoint any person whom you designate as our attorney-in-fact with
power) to sign our name on any such instrument and on financing statements under
the Uniform Commercial Code. Recourse to security shall not be required and we
shall at all times remain liable for the repayment on demand of all Obligations.
10. The undersigned will pay you on demand all costs and expenses
incurred, including a reasonable allowance for attorneys' fees, in connection
with the execution and delivery of any amendment, supplement or modification
hereof or the filing or perfecting any security interest in the Receivables or
any other collateral granted by us or by any of our affiliates, shareholders or
guarantors or to obtain or enforce payment of any Obligation of the undersigned
to you, or in the prosecution or defense of any action or proceeding concerning
any matter growing out of or connected with this Agreement and/or the
Receivables assigned and/or any Obligations of the undersigned to you, or any
collateral therefor, including, without limitation, effecting collection of
Receivables whether by adjustments, litigation or otherwise, and realization
upon recovered or returned merchandise.
11. We shall not be entitled to pledge your credit for any purpose
whatsoever.
12. We waive presentment and protest of any instruments and all notices
thereof, notices to which we might otherwise be entitled. We shall maintain, at
out expense, proper books of account. You shall have the right to inspect and
make extracts from such books and all of our files, records and correspondence
at all reasonable times. All sales of Receivables to you by us shall be deemed
to include all of our right, title and interest to all of our books, records and
files and all other data and documents relating to each Receivable. We shall
furnish you with as many duplicate customers' invoices as you may from time to
time require. We certify to you that our address as set forth in this Agreement
is our mailing address, our chief place of business, and the office at which our
records relating to Receivables are kept. We shall not effect any change in our
mailing address, or in our chief place of business, or in the office in which
our records relating to Receivables are kept, without first giving you written
notice thereof.
5
<PAGE>
13. The term of this Agreement began as of January 2, 1990 and shall
continue until March 31, 2000. You shall have the right to terminate this
Agreement at any time by giving the undersigned sixty (60) days prior written
notice. Notwithstanding the foregoing, you may terminate this Agreement without
notice in the event that: we commit any breach of or default in the performance
of any of our representations, warranties or covenants whether contained herein
or in any instrument or document delivered pursuant hereto or in any other
agreement, instrument, or document under which we are obligated to you; or we
make any false or untrue representation to you in connection with this Agreement
or any transaction relating thereto, become unable to pay our debts as they
mature, make a general assignment for the benefit of creditors, suspend the
transaction of our usual business, convene or cause to be convened a meeting of
our creditors or principal creditors or take advantage of the insolvency laws of
any State, or a case is commenced or a petition in bankruptcy or for an
arrangement or reorganization under the Federal Bankruptcy Code is filed by or
against us (if involuntary, only if such case is not dismissed or consented to
within 60 days of filing) or a custodian or receiver (or other court designee
performing the functions of a receiver) is appointed for or takes possession of
our assets or affairs or an order for relief in a case commenced under the
Federal Bankruptcy Code is entered; or we shall be dissolved or be a party to
any merger or consolidation without your written consent; or if there shall be
issued or filed against us any tax lien, or there shall be issued or filed
against us any attachment, injunction, execution, or judgment which is not
removed within thirty (30) days after same was issued or filed. Notwithstanding
any termination of this Agreement we shall continue to assign Receivables to you
and turn over all collections to you as herein provided until all Obligations
shall have been fully paid and satisfied, and until then this Agreement shall
remain in full force and effect as to and be binding upon us, and you shall be
entitled to retain your security interest in all existing and future Receivables
and other security.
14. Upon the occurrence of any of the events of default specified in
Paragraph 13 hereof, you shall have all the rights and remedies of a secured
party under the Uniform Commercial Code and other applicable laws with respect
to all collateral in which you have a security interest, such rights and
remedies being in addition to all of your other rights and remedies provided for
herein. You may sell or cause to be sold any or all of such collateral, in one
or more sales or parcels, at such prices and upon such terms as you may deem
best, and for cash or on credit or for future delivery, without your assumption
of any credit risk, and at a public or private sale as you may deem appropriate.
Unless the collateral is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market, you will give us
reasonable notice of the time and place of any public sale thereof or of the
time after which any private sale or any other intended disposition thereof is
to be made. The requirements of reasonable notice shall be met if any such
notice is mailed, postage prepaid to our address shown herein, at least five (5)
days before the time of the sale or disposition thereof. You may invoice any
such sale in your name or in our name, as you may elect, as the seller, and in
such latter event such invoice shall be marked payable to you as provided in
Paragraph 2 hereof. You may be the purchaser at any such public sale and
thereafter hold the property so sold at public sale, absolutely, free from any
claim or right of any kind, including any equity of redemption. The proceeds of
sale shall be applied first to all costs and expenses of and incident to such
sale, including attorneys' fees, and then to the payment (in such order as you
may elect) of all Obligations. You will return any excess to us and we shall
remain liable for any
6
<PAGE>
deficiency.
15. We warrant that we are solvent, know of no present or pending
situation which could render us insolvent, and we will remain solvent during the
term of this Agreement. This Agreement is made and is to be performed under the
law of the State of New York and shall be governed by and construed in
accordance with said law. Each of the parties to this Agreement expressly
submits and consents to the jurisdiction of the Supreme Court of the State of
New York in the County of New York, with respect to any controversy arising out
of or relating to this Agreement or any amendment or supplement thereto or to
any transactions in connection therewith and each of the parties to this
Agreement hereby waives personal service of any summons or complaint or other
process or papers to be issued in any action or proceeding involving any such
controversy and hereby agrees that service of such summons or complaint or
process may be made by registered or certified mail to the other party at the
address appearing herein; failure on the part of either party to appear or
answer within thirty (30) days after such mailing of such summons, complaint or
process shall constitute a default entitling the other party to enter a judgment
or order as demanded or prayed for therein to the extent that said Court or duly
authorized Officer thereof may authorize or permit. You and we do hereby waive
any and all right to a trial by jury in any such action or proceeding. In the
event you commence any action or proceeding against us, we will not assert any
offset or counterclaims, of whatever nature or description, in any such action
or proceeding. No failure or delay by you in exercising any of your powers or
rights hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such power or right preclude other or further exercise
thereof or the exercise of any other right or power. Your rights, remedies and
benefits hereunder are cumulative and not exclusive of any other rights,
remedies or benefits which you may have. This Agreement may only be modified in
writing and no waiver by you will be effective unless in writing and then only
to the extent specifically stated. All notices and other communications by
either party hereto shall be in writing and shall be sent to the other party at
the address specified herein. You shall have the right to assign this Agreement
and all of your rights hereunder shall inure to the benefit of your successors
and assigns; and this Agreement shall inure to the benefit of and shall bind our
respective successors and assigns.
Very truly yours,
TOMMY HILFIGER U.S.A., INC.
By: /s/ Joel H. Newman
-------------------
Title: Exec. VP
----------
Accepted at New York, New York
As of April 1, 1998
CENTURY BUSINESS CREDIT CORPORATION
By: /s/ Andrew H. Tananbaum
------------------------
Title: President
----------
7
<PAGE>
EXHIBIT 10.17
CENTURY BUSINESS CREDIT CORPORATION ("CBCC")
119 WEST 40TH STREET
NEW YORK, NEW YORK 10018
As of April 1, 1998
Re: Amended and Restated Factoring Agreement
Pepe Jeans USA, Inc.
485 Fifth Avenue
New York, New York 10017
Gentlemen:
This letter ("Agreement") will amend and restate in its entirety the
Factoring Agreement between us dated April 21, 1994, as amended on December 20,
1995 and February 27, 1997. [For purposes of this Agreement, "we," "us," and
"our" refers to Pepe Jeans USA, Inc. and "you" and "your" refers to CBCC.] We
hereby confirm that you will act as our sole collection Factor upon the
following terms and conditions, namely:
1. We hereby appoint you as our agent to collect all of our Receivables
(as hereinafter defined). Additionally, we hereby agree to sell you and you
hereby agree to purchase from us, all credit approved Receivables in accordance
with Paragraph 6 hereunder; provided, however, that title and ownership of
Receivables shall not vest in you and shall remain in us until the date the
purchase price is paid to us by you, in cash or its equivalent (less any reserve
as provided in this Agreement); and further provided, however, that at all times
you shall have a continuing security interest in all of our present and future
Receivables as collateral for repayment of any and all Obligations (as defined
in paragraph 9 hereof) to you, whether now existing or hereafter arising. Upon
payment of the purchase price, title shall vest in you as to those Receivables
which you have purchased pursuant to Paragraph 6. For all purposes hereof, the
term "Receivables" shall mean and include all accounts and all forms of
obligations owing to us arising from or out of the sale of merchandise and/or
the rendition of services, all proceeds thereof, all of our rights to
merchandise represented thereby, all of our rights under insurance policies
covering such merchandise or services, all of our rights against carriers of
said merchandise, and all of our right, title, security interests and guarantees
with respect to each Receivable, including all rights of replevin and
reclamation and stoppage in transit and all other rights of an unpaid seller of
merchandise or services.
2. Each sale of merchandise and/or rendition of services by us on credit
approved Receivables shall be made only with your written approval as to terms
of sale (which shall not be changed without your written approval) and the
credit standing of our customer, and you shall have the right to withdraw such
approval at any time before delivery of merchandise or rendition of services.
You shall not be liable to any person or in any manner for refusing to approve
the credit of any customer. We shall execute and deliver to you written
schedules of all Receivables sold or assigned to you hereunder in form
satisfactory to you, together with copies of customers' invoices or the
equivalent and upon your request conclusive evidence of delivery for all goods
sold and all other information or documents you may require relating to
Receivables. All
<PAGE>
customers' invoices shall be marked payable to you in a manner satisfactory to
you, and such marking of invoices as payable to you, regardless of by whom done,
and/or the delivery thereof to you shall constitute an assignment thereof to you
whether or not we execute any specific instrument of assignment. You shall have
the right to retain all remittances, checks and other proceeds of sale relating
to Receivables and we agree to confirm your rights thereto by execution from
time to time of whatever documents you may reasonably deem necessary to effect
collection thereof. We authorize you to endorse our name on any and all checks
or other forms of remittances received in payment of Receivables, whether you
have purchased the same or not, whenever you deem such endorsement to be
necessary to effect collection thereof. If any remittances are made directly to
us relating to Receivables, we shall hold the same in trust for your benefit and
your property and will immediately deliver to you the identical checks,
documents, instruments or moneys received in the same form as received by us. We
have been advised that you may employ and we consent to your use of a lockbox
account for the deposit of remittances received in payment of Receivables.
3. We represent and warrant that each and every Receivable now or
hereafter assigned to you will cover a bona fide sale and delivery of
merchandise usually dealt in by us or the rendition by us of services to
customers in the ordinary course of our business; covers merchandise or services
which have been received and accepted by our customers without dispute or claim
of any kind or nature; will be for an amount certain payable in United States
funds in accordance with the terms of our invoice covering said sale, which
shall not be changed without your written approval; except for your security
interest therein on credit approved Receivables, and the subordinate security
interests of our lenders, there are no security interests, liens, or
encumbrances thereon and each Receivable will at all times be kept free and
clear of same in your favor; we have good title thereto and the legal rights to
sell, assign, transfer and set over the same to you; and all documents to be
delivered by us to you in connection therewith will be genuine and, to our best
knowledge, will be enforceable against our customers free and clear of any
offset, deduction, counterclaim, lien, encumbrance or any other claim or
dispute, including, without limitation, claims or disputes as to price, terms,
delivery, quantity or quality and claims of release from liability or because of
any act of God, or a public enemy, or war, or because of the requirements of law
or of rules, orders or regulations having the force of law. We agree to
indemnify you against any liability, loss or expense caused by or arising out of
the rejection of merchandise or services or claims or deductions of every kind
and nature by our customers, other than those resulting from financial inability
of our customer, whose credit standing you have approved, to make payment. In
the event of our breach of any of the foregoing representations and/or
warranties, you shall have, in addition to all your other rights under this
Agreement, the right to chargeback to us immediately the full amount of the
Receivables affected thereby together with interest, but such chargeback shall
not be deemed a reassignment thereof, and you shall retain a security interest
in such Receivable and in the merchandise represented thereby until such
Receivable is fully paid, settled or discharged or all our Obligations (as
hereinafter defined in paragraph 9) to you are fully satisfied. Notwithstanding
anything to the contrary in this Agreement, you shall not, however, have the
right to chargeback to us any Receivable approved by you which is unpaid solely
because of such customer's financial inability to pay. We agree that although
you may limit your purchase of Receivables arising from our sales to any one
customer or the terms of sale, you nevertheless agree to collect such non-credit
approved Receivables on our behalf. We agree that all invoices
2
<PAGE>
in the amount of $100.00 or less shall be with full recourse to us in the event
of nonpayment thereof for any reason whatsoever regardless of whether or not you
have approved the sale relating thereto. As to Receivables purchased by you with
recourse to us, you shall have the right to charge the same back to us at any
time, together with interest, if any. Upon the occurrence of any breach of any
representation or warranty for or by us to you or any chargeback by you, we
shall promptly pay you the full amount of the Receivable affected thereby.
4. We shall notify you upon your request in each instance of the return,
rejection, loss of or damage to merchandise represented by any Receivable, of
any request for extension of time to pay or request for credit or adjustment, or
of any merchandise dispute or other dispute or claim relating to any Receivable
or to the merchandise or services covered thereby or tending in any way to
diminish the sum certain payable thereon. As to credit approved Receivables, if
any such dispute, controversy or claim is not promptly settled by us, you may,
if you so elect, settle, compromise, adjust or otherwise enforce or dispose of
by litigation or otherwise, any such dispute, controversy or claim, at our
expense, and upon such terms and conditions as you in your sole discretion shall
deem proper, but you shall have no obligation to do so. You agree that, after
assignment of credit approved Receivables to you and so long as no event of
default has occurred, we may grant allowances, credits or adjustments to
customers, or accept any return of merchandise, in each case solely in the
ordinary course of business, and should we do so we shall supply you with
immediate written notice in each instance. All such credit memoranda to be
issued to any customer shall be furnished by us only to you for transmission by
you to our customer who shall solely be entitled to the benefit thereof. As to
credit approved Receivables, if any merchandise relating thereto shall be
returned by or recovered from our customer or held subject to bill and hold
invoices, we shall forthwith pay you the full amount of such Receivable, either
in cash or by the assignment of new Receivables hereunder, and until such
payment or assignment, such merchandise shall be held by us in trust for your
benefit, shall be segregated and identified by us as property held in trust for
your benefit, and upon your reasonable request we shall, at our expense, deliver
the same to you or for your account or upon your order to such place or places
as you may designate. Upon notice to us, you may sell or cause the sale of any
such merchandise, at such prices and upon such terms as you may deem proper, and
in the event of any public sale thereof, you may be the purchaser. The proceeds
of any such sale or sales shall first be charged with the costs and expenses of
any incident to such sale, and the balance, if any, shall be credited to our
account.
5. You will send us a monthly account current at the end of each month
which will be in the same form as heretofore rendered to us, and as such shall
not reflect the retention or transfer of title to Receivables as herein provided
and shall not supersede or override the provisions of paragraph 1 hereof
regarding the retention or transfer of title to Receivables. Unless you receive
our written objection to any account current rendered by you within thirty (30)
days after the mailing of such account current, it shall be deemed accepted by
us and shall become conclusive and binding upon us. All debit balances shall be
payable to you on demand and shall bear interest at the rate of interest then in
effect as hereinafter provided (herein called the "Contract Rate"); such
interest is payable to you daily but shall be charged to our account monthly as
a cash advance made by you to us. The Contract Rate of interest hereunder shall
be equal to the Prime Rate (as hereinafter defined). Such Contract Rate is
based upon the highest announced prime, base or reference rate charged by New
York City money center banks to
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substantial and responsible corporate commercial borrowers ("Prime Rate") which
is now eight and one-half percent (8 1/2 %) per annum, and is neither tied to
any external rate of interest or index, nor does it necessarily reflect the
lowest rate of interest actually charged to any particular class or category of
customers by such banks. Such Contract Rate shall be increased or decreased as
the case may be, as such Prime Rate is increased or decreased and to the extent
thereof; each such change to be effective as at the first of the month after the
related change in such Prime Rate; but in no event shall the Contract Rate of
interest hereunder be less than the Prime Rate per annum nor in excess of the
maximum rate you are permitted to charge by law.
6. Collections of our Receivables, less any sums remitted or otherwise
paid to us or for our account, or debited to our account hereunder, shall be
payable by you to us each Friday for collections credited to us Monday, Tuesday
and Wednesday of each week, and each Tuesday for collections credited to us for
Thursday and Friday of the previous week. However, if any Receivable as to
which you have approved the credit standing of the customer shall not be paid by
reason of the customer's bankruptcy or insolvency or within 120 days of
maturity, you will pay us one-half (1/2) of the purchase price thereof on the
earlier of (a) the first Tuesday of the month following such customer's
bankruptcy or insolvency, or (b) the first Tuesday following the Receivable
becoming 120 days past due without dispute. Upon such payment to or for us, our
assignment of the Receivable shall be effective to transfer title to such
Receivable to you. Upon your collection in whole or in part of any Receivable
with respect to which you have made payment to us in accordance with the
provisions of the second sentence of Paragraph 6, you shall pay to us one half
of the amount of such collection (net of your actual and reasonable attorneys
fees for collection provided that the collection attorney shall be satisfactory
to us in each instance, our consent not to be unreasonably withheld). The
purchase price of Receivables sold and assigned to you each month shall be the
net amount thereof, as herein defined, less the amount of your commission on the
purchase of such Receivables as provided in Paragraph 7 hereof. As used herein,
the term "net amount" of Receivables shall mean the gross amount of Receivables,
less returns, allowances and discounts to customers upon shortest or longest
selling terms, as you may elect.
7. For your services hereunder with respect to our sales, you shall
receive a commission, which shall be chargeable to our account with you on the
last day of each month, equal to the product of (a) the net face amount of each
credit approved Receivable less selling discounts and (b) the commission rate
set forth below opposite the applicable period in which such sale is made:
<TABLE>
<CAPTION>
Period Commission Rate
------ ---------------
<S> <C>
April 1, 1998 through .3175%
March 31, 1999
April 1, 1999 through .3000%
March 31, 2000
</TABLE>
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8. If any tax by any governmental authority (other than for your income
and franchise taxes) is or may be imposed on or as a result of any transaction
between us under or relating to this Agreement, or in respect to sales or the
merchandise affected by such sales, which you are or may be required to withhold
or pay, we agree to indemnify and hold you harmless in respect of such taxes,
and we will repay you the amount of any such taxes, which shall be charged to
our account, and until we shall furnish you with indemnity therefor (or supply
you with evidence satisfactory to you that due provision for the payment thereof
has been made), you may hold without interest any balance standing to our credit
and you shall retain your security interest in any and all collateral held by
you.
9. As security for all "Obligations" (as herein defined), we hereby grant
to you a security interest in, a general lien upon and/or a right of setoff of,
all Receivables, all our credit balances with you and all our claims against you
(whether now or hereafter existing and whether arising under this Agreement or
otherwise), and all our property of every kind and description, tangible or
intangible, at any time in your possession or subject to your control, whether
now or hereafter existing or now owned or hereafter acquired and wherever
located. As used herein, the term "Obligations" means and includes all
indebtedness, liabilities, obligations, debit balances, covenants and duties
owing by us now or hereafter existing, all interest, fees, charges, expenses and
attorneys' fees for which we are obligated hereunder. We agree to execute such
further instruments and financing statements as may be required by any law in
connection with the transactions contemplated hereby and to cooperate with you
in the filing or recording and renewal thereof, and we hereby further authorize
you (and appoint any person whom you designate as our attorney-in-fact with
power) to sign our name on any such instrument and on financing statements under
the Uniform Commercial Code. Recourse to security shall not be required and we
shall at all times remain liable for the repayment on demand of all Obligations.
10. The undersigned will pay you on demand all costs and expenses
incurred, including a reasonable allowance for attorneys' fees, in connection
with the execution and delivery of any amendment, supplement or modification
hereof or the filing or perfecting any security interest in the Receivables or
any other collateral granted by us or by any of our affiliates, shareholders or
guarantors or to obtain or enforce payment of any Obligation of the undersigned
to you, or in the prosecution or defense of any action or proceeding concerning
any matter growing out of or connected with this Agreement and/or the
Receivables assigned and/or any Obligations of the undersigned to you, or any
collateral therefor, including, without limitation, effecting collection of
Receivables whether by adjustments, litigation or otherwise, and realization
upon recovered or returned merchandise.
11. We shall not be entitled to pledge your credit for any purpose
whatsoever.
12. We waive presentment and protest of any instruments and all notices
thereof, notices to which we might otherwise be entitled. We shall maintain, at
out expense, proper books of account. You shall have the right to inspect and
make extracts from such books and all of our files, records and correspondence
at all reasonable times. All sales of Receivables to you by us shall be deemed
to include all of our right, title and interest to all of our books, records and
files and all other data and documents relating to each Receivable. We shall
furnish you with as many duplicate customers' invoices as you may from time to
time require. We certify to you that
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our address as set forth in this Agreement is our mailing address, our chief
place of business, and the office at which our records relating to Receivables
are kept. We request however that notices under this Agreement be sent to us at
35 Henry Street, Secaucus, New Jersey 07094. We shall not effect any change in
our mailing address, or in our chief place of business, or in the office in
which our records relating to Receivables are kept, without first giving you
written notice thereof.
13. The term of this Agreement began as of April 21, 1994 and shall
continue until March 31, 2000. You shall have the right to terminate this
Agreement at any time by giving the undersigned sixty (60) days prior written
notice. Notwithstanding the foregoing, you may terminate this Agreement without
notice in the event that: we commit any breach of or default in the performance
of any of our representations, warranties or covenants whether contained herein
or in any instrument or document delivered pursuant hereto or in any other
agreement, instrument, or document under which we are obligated to you; or we
make any false or untrue representation to you in connection with this Agreement
or any transaction relating thereto, become unable to pay our debts as they
mature, make a general assignment for the benefit of creditors, suspend the
transaction of our usual business, convene or cause to be convened a meeting of
our creditors or principal creditors or take advantage of the insolvency laws of
any State, or a case is commenced or a petition in bankruptcy or for an
arrangement or reorganization under the Federal Bankruptcy Code is filed by or
against us (if involuntary, only if such case is not dismissed or consented to
within 60 days of filing) or a custodian or receiver (or other court designee
performing the functions of a receiver) is appointed for or takes possession of
our assets or affairs or an order for relief in a case commenced under the
Federal Bankruptcy Code is entered; or we shall be dissolved or be a party to
any merger or consolidation without your written consent; or if there shall be
issued or filed against us any tax lien, or there shall be issued or filed
against us any attachment, injunction, execution, or judgment which is not
removed within thirty (30) days after same was issued or filed. Notwithstanding
any termination of this Agreement we shall continue to assign Receivables to you
and turn over all collections to you as herein provided until all Obligations
shall have been fully paid and satisfied, and until then this Agreement shall
remain in full force and effect as to and be binding upon us, and you shall be
entitled to retain your security interest in all existing and future Receivables
and other security.
14. Upon the occurrence of any of the events of default specified in
Paragraph 13 hereof, you shall have all the rights and remedies of a secured
party under the Uniform Commercial Code and other applicable laws with respect
to all collateral in which you have a security interest, such rights and
remedies being in addition to all of your other rights and remedies provided for
herein. You may sell or cause to be sold any or all of such collateral, in one
or more sales or parcels, at such prices and upon such terms as you may deem
best, and for cash or on credit or for future delivery, without your assumption
of any credit risk, and at a public or private sale as you may deem appropriate.
Unless the collateral is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market, you will give us
reasonable notice of the time and place of any public sale thereof or of the
time after which any private sale or any other intended disposition thereof is
to be made. The requirements of reasonable notice shall be met if any such
notice is mailed, postage prepaid to our address shown herein, at least five (5)
days before the time of the sale or disposition thereof. You may invoice any
such sale in your name or in our name, as you may elect, as the seller, and
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in such latter event such invoice shall be marked payable to you as provided in
Paragraph 2 hereof. You may be the purchaser at any such public sale and
thereafter hold the property so sold at public sale, absolutely, free from any
claim or right of any kind, including any equity of redemption. The proceeds of
sale shall be applied first to all costs and expenses of and incident to such
sale, including attorneys' fees, and then to the payment (in such order as you
may elect) of all Obligations. You will return any excess to us and we shall
remain liable for any deficiency.
15. We warrant that we are solvent, know of no present or pending
situation which could render us insolvent, and we will remain solvent during the
term of this Agreement. This Agreement is made and is to be performed under the
law of the State of New York and shall be governed by and construed in
accordance with said law. Each of the parties to this Agreement expressly
submits and consents to the jurisdiction of the Supreme Court of the State of
New York in the County of New York, with respect to any controversy arising out
of or relating to this Agreement or any amendment or supplement thereto or to
any transactions in connection therewith and each of the parties to this
Agreement hereby waives personal service of any summons or complaint or other
process or papers to be issued in any action or proceeding involving any such
controversy and hereby agrees that service of such summons or complaint or
process may be made by registered or certified mail to the other party at the
address appearing herein; failure on the part of either party to appear or
answer within thirty (30) days after such mailing of such summons, complaint or
process shall constitute a default entitling the other party to enter a judgment
or order as demanded or prayed for therein to the extent that said Court or duly
authorized Officer thereof may authorize or permit. You and we do hereby waive
any and all right to a trial by jury in any such action or proceeding. In the
event you commence any action or proceeding against us, we will not assert any
offset or counterclaims, of whatever nature or description, in any such action
or proceeding. No failure or delay by you in exercising any of your powers or
rights hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such power or right preclude other or further exercise
thereof or the exercise of any other right or power. Your rights, remedies and
benefits hereunder are cumulative and not exclusive of any other rights,
remedies or benefits which you may have. This Agreement may only be modified in
writing and no waiver by you will be effective unless in writing and then only
to the extent specifically stated. All notices and other communications by
either party hereto shall be in writing and shall be sent to the other party at
the address specified
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herein. You shall have the right to assign this Agreement and all of your rights
hereunder shall inure to the benefit of your successors and assigns; and this
Agreement shall inure to the benefit of and shall bind our respective successors
and assigns.
Very truly yours,
PEPE JEANS USA, INC.
By: /s/ Arthur Bargonetti
----------------------
Title: Executive Vice President
-------------------------
Accepted at New York, New York
On April 20, 1998
------ --
CENTURY BUSINESS CREDIT CORPORATION
By: /s/ David J. Finkelstein
-------------------------
Title: SR EVP
-------
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EXHIBIT 10.19
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLES PAGE
- -------- ----
<S> <C>
1 - DEFINITIONS..................................................... 3
2 - DEMISE AND TERM................................................. 6
3 - RENT............................................................ 6
4 - USE OF DEMISED PREMISES......................................... 7
5 - PREPARATION OF DEMISED PREMISES................................. 8
6 - TAX AND OPERATING EXPENSE PAYMENTS.............................. 8
7 - OMITTED......................................................... 9
8 - SECURITY........................................................ 9
9 - SUBORDINATION................................................... 10
10 - QUIET ENJOYMENT................................................. 11
11 - ASSIGNMENT, SUBLETTING AND MORTGAGING........................... 11
12 - COMPLIANCE WITH LAWS............................................ 14
13 - INSURANCE AND INDEMNITY......................................... 15
14 - RULES AND REGULATIONS........................................... 17
15 - ALTERATIONS AND SIGNS........................................... 17
16 - LANDLORD'S AND TENANT'S PROPERTY................................ 18
17 - REPAIRS AND MAINTENANCE......................................... 19
18 - UTILITY CHARGES................................................. 20
19 - ACCESS, CHANGES AND NAME........................................ 20
20 - MECHANICS' LIENS AND OTHER LIENS................................ 21
21 - NON-LIABILITY AND INDEMNIFICATION............................... 21
</TABLE>
<PAGE>
<TABLE>
<S> <C>
22 - DAMAGE OR DESTRUCTION........................................... 22
23 - EMINENT DOMAIN.................................................. 23
24 - SURRENDER....................................................... 24
25 - CONDITIONS OF LIMITATION........................................ 25
26 - RE-ENTRY BY LANDLORD............................................ 26
27 - DAMAGES......................................................... 27
28 - AFFIRMATIVE WAIVERS............................................. 29
29 - NO WAIVERS...................................................... 29
30 - CURING TENANT'S DEFAULTS........................................ 30
31 - BROKER.......................................................... 30
32 - NOTICES......................................................... 30
33 - ESTOPPEL CERTIFICATES........................................... 31
34 - ARBITRATION..................................................... 31
35 - MEMORANDUM OF LEASE............................................. 31
36 - MISCELLANEOUS................................................... 31
</TABLE>
EXHIBITS
Exhibit A - Omitted
Exhibit B - Site Plan
Exhibit C - Work and Installation to be Performed and Furnished in
Demised Premises
Exhibit D - Rules and Regulations
Exhibit E - Letter of Credit
<PAGE>
052997
LEASE, dated June 10, 1997, between HARTZ MOUNTAIN INDUSTRIES, INC. a New
York corporation, having an office at 400 Plaza Drive, Secaucus, New Jersey
07094-3688 ("Landlord"), and PEPE JEANS USA, INC., a California corporation,
having an office at 10 Mulholland Drive, Hasbrouck Heights, NJ 07604 ("Tenant").
ARTICLE 1 - DEFINITIONS
1.01. As used in this Lease (including in all Exhibits and any Riders
attached hereto, all of which shall be deemed to be part of this Lease) the
following words and phrases shall have the meanings indicated:
A. Advance Rent: $111,915.17
B. Additional Charges: All amounts that become payable by Tenant to
Landlord hereunder other than the Fixed Rent and Percentage Rent.
C. Architect: Kenneth Carl Bonte, or as Landlord may designate.
D. Broker: Chaus Realty
E. Building: The building or buildings located on the Land and known as
35 Henry Street, Secaucus, NJ.
F. Business Days: All days except Saturdays, Sundays, days observed by the
federal or state government as legal holidays.
G. Business Hours: Generally customary daytime business hours, but not
before 9:00 A.M. or after 6:00 P.M.
H. Calendar Year: Any twelve-month period commencing on a January 1.
I. Commencement Date: September 1, 1997, subject to Unavoidable Delays.
J. Demised Premises: The Building and the Land known as 35 Henry Street,
Secaucus, New Jersey depicted on the site plan(s) attached hereto as Exhibit B,
outlined in red. The Building on the Demised Premises contains approximately
323,610 square feet of Floor Space.
K. Expiration Date: The date that is the day before the fifth (5th)
anniversary of the Commencement Date if the Commencement Date is the first day
of a month, or the fifth (5th) anniversary
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of the last day of the month in which the Commencement Date occurs if the
Commencement Date is not the first day of a month. However, if the Term is
extended by Tenant's effective exercise of Tenant's right, if any, to extend the
Term, the "Expiration Date" shall be changed to the last day of the latest
extended period as to which Tenant shall have effectively exercised its right to
extend the Term. For the purposes of this definition, the earlier termination of
this Lease shall not affect the "Expiration Date."
L. Fixed Rent: An amount at the annual rate of Four and 15/100 ($4.15)
Dollars multiplied by the Floor Space of the Demised Premises.
M. Floor Space: As to the Demised Premises, the sum of the floor area
stated in square feet bounded by the exterior faces of the exterior walls. Any
reference to Floor Space of a building shall mean the floor area of all levels
or stories of such building, excluding any roof, except such portion thereof
(other than cooling towers, elevator penthouses, mechanical rooms, chimneys and
staircases, entrances and exits) as is permanently enclosed, and including any
interior basement level or mezzanine area not occupied or used by a tenant on a
continuing or repetitive basis, and any mechanical room, enclosed or interior
truck dock, and areas used for housing meters and/or other equipment or for
other purposes. Any reference to the Floor Space is intended to refer to the
Floor Space of the entire area in question irrespective of the Person(s) who may
be the owner(s) of all or any part thereof.
N. Guarantor: None
O. Insurance Requirements: Rules, regulations, orders and other
requirements of the applicable board of underwriters disclosed to Tenant and/or
the applicable fire insurance rating organization and/or any other similar body
performing the same or similar functions and having jurisdiction or cognizance
over the Land and Building, whether now or hereafter in force.
P. Land: The land upon which the Demised Premises are located.
Q. Landlord's Work: The materials and work to be furnished, installed and
performed by Landlord at its expense in accordance with the provisions of
Exhibit C.
R. Legal Requirements: Laws and ordinances of all federal, state, county,
and municipal governments, and rules, regulations, orders and directives of all
departments, subdivisions, bureaus, agencies or offices thereof, and of any
other governmental, public or quasi-public authorities having jurisdiction over
the Land and Building, whether now or hereafter in force, including, but not
limited to, those pertaining to environmental matters.
S. Mortgage: A mortgage and/or a deed of trust.
T. Mortgagee: A holder of a mortgage or a beneficiary of a deed of trust.
U. Permitted Uses: Warehousing and distribution of non-hazardous
materials and ancillary offices and warehouse outlet store incidental to the
operation of the warehouse portion of the Demised Premises
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in an area not to exceed the lesser of (i) 2,500 square feet or (ii) the size
permitted by applicable zoning requirements.
V. Person: A natural person or persons, a partnership, a corporation, or
any other form of business or legal association or entity.
W. Ready for Occupancy: The condition of the Demised Premises when for
the first time the Landlord's Work shall have been substantially completed and a
temporary or permanent Certificate of Occupancy shall have been issued
permitting use of the Demised Premises for the warehousing and distribution of
non-hazardous materials and ancillary offices. The Landlord's Work shall be
deemed substantially completed notwithstanding the fact that minor or
insubstantial details of construction, mechanical adjustment or decoration
remain to be performed, the noncompletion of which does not in Tenant's
reasonable judgement materially interfere with Tenant's use of the Demised
Premises.
X. Real Estate Taxes: The real estate taxes, assessments, special
assessments, sewer rents, water charges, and all other similar charges and
impositions imposed upon the Building and Land by any federal, state, municipal
or other governments or governmental bodies or authorities, and any expenses
incurred by Landlord in contesting such taxes or assessments and/or the assessed
value of the Building and Land, which expenses shall be allocated to the period
of time to which such expenses relate. If at any time during the Term the
methods of taxation prevailing on the date hereof shall be altered so that in
lieu of, or as an addition to or as a substitute for, the whole or any part of
such real estate taxes, assessments and special assessments now imposed on real
estate there shall be levied, assessed or imposed (a) a tax, assessment, levy,
imposition, license fee or charge wholly or partially as a capital levy or
otherwise on the rents received therefrom, or (b) any other such additional or
substitute tax, assessment, levy, imposition or charge, then all such taxes,
assessments, levies, impositions, fees or charges or the part thereof so
measured or based shall be deemed to be included within the term "Real Estate
Taxes" for the purposes hereof.
Y. Rent: The Fixed Rent, the Percentage Rent and the Additional Charges.
Z. Rules and Regulations: The reasonable rules and regulations that may
be promulgated by Landlord from time to time, which may be reasonably changed by
Landlord from time to time. The Rules and Regulations now in effect are
attached hereto as Exhibit D.
AA. Security Deposit: Such amount as Tenant has deposited or hereinafter
deposits with Landlord as security under this Lease. Tenant is required to
deposit the sum of $111,915.17 with Landlord as security hereunder as of the
date hereof.
BB. Successor Landlord: As defined in Section 9.03.
CC. Superior Lease: Any lease to which this Lease is, at the time
referred to, subject and subordinate and which has been disclosed in writing to
Tenant.
DD. Superior Lessor: The lessor of a Superior Lease or its successor in
interest, at the time
5
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referred to.
EE. Superior Mortgage: Any Mortgage to which this Lease is, at the time
referred to, subject and subordinate.
FF. Superior Mortgagee: The Mortgagee of a Superior Mortgage at the time
referred to.
GG. Tenant's Property: As defined in Section 16.02.
HH. Tenant's Work: The facilities, materials and work which may be
undertaken by or for the account of Tenant (other than the Landlord's Work) to
equip, decorate and furnish the Demised Premises for Tenant's occupancy in
accordance with the provisions of Exhibit C.
II. Term: The period commencing on the Commencement Date and ending at
11:59 p.m. of the Expiration Date, but in any event the Term shall end on the
date when this Lease is earlier terminated.
JJ. Unavoidable Delays: A delay arising from or as a result of a strike,
lockout, or labor difficulty, explosion, sabotage, accident, riot or civil
commotion, act of war, fire or other catastrophe, Legal Requirement or an act of
the other party and any cause beyond the reasonable control of that party,
provided that the party asserting such Unavoidable Delay has exercised its best
efforts to minimize such delay.
ARTICLE 2 - DEMISE AND TERM
2.01. Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the Demised Premises, for the Term. This Lease is subject to (a) any
and all existing encumbrances, conditions, rights, covenants, easements,
restrictions and rights of way, of record, and other matters of record,
applicable zoning and building laws, regulations and codes, and such matters as
may be disclosed by an inspection or survey, and (b) easements now or hereafter
created by Landlord in, under, over, across and upon the Land for access, sewer,
water, electric, gas and other utility lines and services now or hereafter
installed; provided, however, Landlord represents covenants and warrants to
Tenant that the Demises Premises may be used and occupied for the purposes set
forth herein; and that the foregoing shall in no manner interfere with Tenant's
use and quiet enjoyment of the Demised Premises. Promptly following the
Commencement Date, the parties hereto shall enter into an agreement in form and
substance satisfactory to Landlord setting forth the Commencement Date.
ARTICLE 3 - RENT
3.01. Tenant shall pay the Fixed Rent in equal monthly installments in
advance on the first day of each and every calendar month during the Term
(except that Tenant shall pay, upon the execution and delivery of this Lease by
Tenant, the Advance Rent, to be applied against the first installment or
installments of Fixed Rent becoming due under this Lease). If the Commencement
Date occurs on a day other than the first day of a calendar month, the Fixed
Rent for the partial calendar month at the
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<PAGE>
commencement of the Term shall be prorated.
3.02. The Rent shall be paid in lawful money of the United States to
Landlord at its office, or such other place, or Landlord's agent, as Landlord
shall designate by notice to Tenant. Tenant shall pay the Rent promptly when due
without notice or demand therefor and without any abatement, deduction or setoff
for any reason whatsoever, except as may be expressly provided in this Lease. If
Tenant makes any payment to Landlord by check, same shall be by check of Tenant
and Landlord shall not be required to accept the check of any other Person, and
any check received by Landlord shall be deemed received subject to collection.
If any check is mailed by Tenant, Tenant shall post such check in sufficient
time prior to the date when payment is due so that such check will be received
by Landlord on or before the date when payment is due. Tenant shall assume the
risk of lateness or failure of delivery of the mails, and no lateness or failure
of the mails will excuse Tenant from its obligation to have made the payment in
question when required under this Lease.
3.03. No payment by Tenant or receipt or acceptance by Landlord of a
lesser amount than the correct Rent shall be deemed to be other than a payment
on account, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to Landlord's right
to recover the balance or pursue any other remedy in this Lease or at law
provided.
3.04. If Tenant is in arrears in payment of Rent, Tenant waives Tenant's
right, if any, to designate the items to which any payments made by Tenant are
to be credited, and Landlord may apply any payments made by Tenant to such items
as Landlord sees fit, irrespective of and notwithstanding any designation or
request by Tenant as to the items to which any such payments shall be credited.
3.05. In the event that any installment of Rent due hereunder shall be
overdue, a "Late Charge" equal to four percent (4%) or the maximum rate
permitted by law, whichever is less ("Late Payment Rate") for Rent so overdue
may be charged by Landlord for each month or part thereof that the same remains
overdue. In the event that any check tendered by Tenant to Landlord is returned
for insufficient funds, Tenant shall pay to Landlord, in addition to the charge
imposed by the preceding sentence, a fee of $25.00. Any such Late Charges if not
previously paid shall, at the option of the Landlord, be added to and become
part of the next succeeding Rent payment to be made hereunder.
3.06 It is intended that the Fixed Rent shall be an absolutely net return
to Landlord throughout the Term, free of any expense, charge or other deduction
whatsoever, with respect to the Demised Premises, the Building, the Land and/or
the ownership, leasing, operation, management, maintenance, repair, rebuilding,
use or occupation thereof, or any portion thereof, with respect to any interest
of Landlord therein.
ARTICLE 4 - USE OF DEMISED PREMISES
4.01. Tenant shall use and occupy the Demised Premises for the Permitted
Uses, and Tenant shall not use or permit or suffer the use of the Demised
Premises or any part thereof for any other purpose.
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4.02. If any governmental license or permit, including a certificate of
occupancy or certificate of continued occupancy (a "Certificate of Occupancy")
for the Demised Premises, shall be required for the proper and lawful conduct of
Tenant's business in the Demised Premises or any part thereof, Tenant shall duly
procure and thereafter maintain such license or permit and submit the same to
Landlord for inspection. Tenant shall at all times comply with the terms and
conditions of each such license or permit. Tenant shall not at any time use or
occupy, or suffer or permit anyone to use or occupy the Demised Premises, or do
or permit anything to be done in the Demised Premises, in any manner which (a)
violates the Certificate of Occupancy for the Demised Premises or for the
Building; (b) causes or is liable to cause injury to the Building or any
equipment, facilities or systems therein; (c) constitutes a violation of the
Legal Requirements or Insurance Requirements; (d) impairs or tends to impair the
character, reputation or appearance of the Building; (e) impairs or tends to
impair the proper and economic maintenance, operation and repair of the Building
and/or its equipment, facilities or systems. Notwithstanding the foregoing,
Landlord shall be responsible for obtaining the initial temporary or permanent
certificate of occupancy or continued occupancy upon the completion of the
Landlord's Work.
ARTICLE 5 - PREPARATION OF DEMISED PREMISES
5.01. The Demised Premises shall be completed and prepared for Tenant's
occupancy in the manner described in, and subject to the provisions of, Exhibit
C. Tenant shall occupy the Demised Premises promptly after the same are Ready
for Occupancy and possession thereof is delivered to Tenant by Landlord giving
to Tenant a notice of such effect. Except as expressly provided to the contrary
in this Lease, the taking of possession by Tenant of the Demised Premises shall
be conclusive evidence as against Tenant that the Demised Premises and the
Building were in good and satisfactory condition at the time such possession was
taken. Except as expressly provided to the contrary in this Lease, Tenant is
leasing the Demised Premises "as is" on the date hereof, subject to reasonable
wear and tear and the rights of the present occupant(s) of the Demised Premises
to remove its or their trade fixtures and other property from the Demised
Premises.
5.02. If the substantial completion of the Landlord's Work shall be
delayed due to (a) any act or omission of Tenant or any of its employees, agents
or contractors (including, without limitation, [i] any delays due to changes in
or additions to the Landlord's Work, or [ii] any delays by Tenant in the
submission of plans, drawings, specifications or other information or in
approving any working drawings or estimates or in giving any authorizations or
approvals), or (b) any additional time needed for the completion of the
Landlord's Work by the inclusion in the Landlord's Work of any items specified
by Tenant that require long lead time for delivery or installation, then the
Demised Premises shall be deemed Ready for Occupancy on the date when they would
have been ready but for such delay(s). The Demised Premises shall be
conclusively presumed to be in satisfactory condition on the Commencement Date
except for the minor or insubstantial details of which Tenant gives Landlord
notice within thirty (30) days after the Commencement Date specifying such
details with reasonable particularity.
5.03. If Landlord is unable to give possession of the Demised Premises on
the Commencement Date because of the holding-over or retention of possession by
any tenant, undertenant or occupant, Landlord shall not be subject to any
liability for failure to give possession, the validity of this Lease shall
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not be impaired under such circumstances, and the Term shall not be extended,
but the Rent shall be abated if Tenant is not responsible for the inability to
obtain possession.
5.04. Landlord reserves the right, at any time and from time to time, to
increase, reduce or change the number, type, size, location, elevation, nature
and use of the Building and any other buildings and other improvements on the
Land, including, without limitation, the right to move and/or remove same,
provided same shall not unreasonably block or interfere with Tenant's means of
ingress or egress to and from the Demised Premises or its right to uninterrupted
use and enjoyment of the entire Floor Space under this Lease.
ARTICLE 6 - TAX AND OPERATING EXPENSE PAYMENTS
6.01. Promptly following the Commencement Date, Landlord shall provide
written notice to the Town of Secaucus advising that tax invoices should be
remitted directly to the Tenant. Tenant shall pay all Real Estate Taxes not
later than thirty (30) days prior to the date when such Real Estate Taxes shall
first become due. Not later than fifteen days prior to such due date, Tenant
shall deliver to Landlord evidence of such payment. Any Real Estate Taxes for a
real estate fiscal tax year, a part of which is included within the Term and a
part of which is not so included, shall be apportioned on the basis of the
number of days in the real estate fiscal tax year included in the Term, and the
real estate fiscal tax year for any improvement assessment will be deemed to be
the one-year period commencing on the date when such assessment is due, except
that if any improvement assessment is payable in installments, the real estate
fiscal tax year for each installment will be deemed to be the one-year period
commencing on the date when such installment is due. In addition to the
foregoing, Tenant shall be responsible for any increase in Real Estate Taxes
attributable to assessments for improvements installed by or for the account of
Tenant at the Demised Premises. If the Demised Premises are not separately
assessed, the amount of any such increase shall be determined by reference to
the records of the tax assessor.
6.02. Subject to the provisions of Article 17, Tenant shall be solely
responsible for the full and prompt payment of all expenses of or relating to
the Demised Premises and all utilities servicing same provided, however, that in
no event shall Tenant be responsible for the payment of any of Landlord's ground
rent, mortgage debt service, or Landlord's income taxes, or capital gains, or
mortgage or transfer taxes imposed upon Landlord.
ARTICLE 7 - OMITTED
ARTICLE 8 - SECURITY
8.01. (a) In the event Tenant deposits with Landlord any Security
Deposit, the same shall be held as security for the full and faithful payment
and performance by Tenant of Tenant's obligations under this Lease. If Tenant
defaults in the full and prompt payment and performance of any of its
obligations under this Lease, including, without limitation, the payment of
Rent, Landlord may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any Rent or any other sums
as to which Tenant is in default or for any sum which Landlord may expend or may
be required to
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expend by reason of Tenant's default in respect of any of Tenant's obligations
under this Lease, including, without limitation, any damages or deficiency in
the reletting of the Demised Premises, whether such damages or deficiency accrue
before or after summary proceedings or other re-entry by Landlord. If Landlord
shall so use, apply or retain the whole or any part of the security, Tenant
shall upon demand immediately deposit with Landlord a sum equal to the amount so
used, applied and retained, as security as aforesaid. If Tenant shall fully and
faithfully pay and perform all of Tenant's obligations under this Lease, the
security or any balance thereof to which Tenant is entitled shall be returned or
paid over to Tenant no later than thirty (30) days after the date on which this
Lease shall expire or sooner end or terminate, and after delivery to Landlord of
entire possession of the Demised Premises. In the event of any sale or leasing
of the Land, Landlord shall have the right to transfer the security to which
Tenant is entitled to the vendee or lessee and Landlord shall thereupon be
released by Tenant from all liability for the return or payment thereof; and
Tenant shall look solely to the new landlord for the return or payment of the
same; and the provisions hereof shall apply to every transfer or assignment made
of the same to a new landlord. Tenant shall not assign or encumber or attempt to
assign or encumber the monies deposited herein as security, and neither Landlord
nor its successors or assigns shall be bound by any such assignment,
encumbrance, attempted assignment or attempted encumbrance.
8.01. (b) In lieu of the cash security required by this Lease, Tenant
shall provide to Landlord an irrevocable transferrable Letter of Credit in the
amount of the Security Deposit in form and substance attached hereto as Exhibit
E and issued by a financial institution approved by Landlord. Landlord shall
have the right, upon written notice to Tenant (except that for Tenant's non-
payment of Rent or for Tenant's failure to comply with Article 8.03, no such
notice shall be required) and regardless of the exercise of any other remedy the
Landlord may have by reason of a default, to draw upon said Letter of Credit to
cure any default of Tenant or for any purpose authorized by section 8.01(a) of
this Lease and if Landlord does so, Tenant shall, upon demand, additionally fund
the Letter of Credit with the amount so drawn so that Landlord shall have the
full deposit on hand at all times during the Term of the Lease and for a period
of thirty (30) days' thereafter. In the event of a sale of the Building or a
lease of the Building subject to this Lease, Landlord shall have the right to
transfer the security to the vendee or lessee.
8.02. The Letter of Credit shall expire not earlier than thirty (30) days
after the Expiration Date of this Lease. Upon Landlord's prior consent, the
Letter of Credit may be of the type which is automatically renewed on an annual
basis (Annual Renewal Date), provided however, in such event Tenant shall
maintain the Letter of Credit and its renewals in full force and effect during
the entire Term of this Lease (including any renewals or extensions) and for a
period of thirty (30) days thereafter. The Letter of Credit will contain a
provision requiring the issuer thereof to give the beneficiary (Landlord) sixty
(60) days' advance written notice of its intention not to renew the Letter of
Credit on the next Annual Renewal Date.
8.03. In the event Tenant shall fail to deliver to Landlord a substitute
irrevocable Letter of Credit, in the amount stated above, on or before thirty
(30) days prior to the next Annual Renewal Date, said failure shall be deemed a
default under this Lease. Landlord may, in its discretion treat this the same as
a default in the payment of Rent or any other default and pursue the appropriate
remedy. In addition, and not in limitation, Landlord shall be permitted to draw
upon the Letter of Credit as in the case of any other
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default by Tenant under the Lease.
ARTICLE 9 - SUBORDINATION
9.01. To the extent they have been disclosed in writing to Tenant, this
Lease, and all rights of Tenant hereunder, are and shall be subject and
subordinate to all ground leases and underlying leases of the Land and/or the
Building now or hereafter existing and to all Mortgages which may now or
hereafter affect the Land and/or building and/or any of such leases, whether or
not such Mortgages or leases shall also cover other lands and/or buildings, to
each and every advance made or hereafter to be made under such Mortgages, and to
all renewals, modifications, replacements and extensions of such leases and such
Mortgages and spreaders and consolidations of such Mortgages. The provisions of
this Section 9.01 shall be self-operative and no further instrument of
subordination shall be required. In confirmation of such subordination, Tenant
shall promptly execute, acknowledge and deliver any instrument that Landlord,
the lessor under any such lease or the Mortgagee of any such Mortgage or any of
their respective successors in interest may reasonably request to evidence such
subordination; and if Tenant fails to execute, acknowledge or deliver any such
instruments within 10 days after request therefor, Tenant hereby irrevocably
constitutes and appoints Landlord as Tenant's attorney-in-fact, coupled with an
interest, to execute and deliver any such instruments for and on behalf of
Tenant.
9.02. If any act or omission of Landlord would give Tenant the right,
immediately or after lapse of a period of time, to cancel or terminate this
Lease, or to claim a partial or total eviction, Tenant shall not exercise such
right (a) until it has given written notice of such act or omission to Landlord
and each Superior Mortgagee and each Superior Lessor whose name and address
shall previously have been furnished to Tenant, and (b) until a reasonable
period for remedying such act or omission shall have elapsed following the
giving of such notice and following the time when such Superior Mortgagee or
Superior Lessor shall have become entitled under such Superior Mortgage or
Superior Lease, as the case may be, to remedy the same (which reasonable period
shall in no event be less than the period to which Landlord would be entitled
under this Lease or otherwise, after similar notice, to effect such remedy),
provided such Superior Mortgagee or Superior Lessor shall with due diligence
give Tenant notice of intention to, and commence and continue to, remedy such
act or omission.
9.03. If any Superior Lessor or Superior Mortgagee shall succeed to the
rights of Landlord under this Lease, whether through possession or foreclosure
action or delivery of a new lease or deed, then at the request of such party so
succeeding to Landlord's rights ("Successor Landlord") and upon such Successor
Landlord's written agreement to accept Tenant's attornment, Tenant shall attorn
to and recognize such Successor Landlord as Tenant's landlord under this Lease
and shall promptly execute and deliver any instrument that such Successor
Landlord may reasonably request to evidence such attornment. Upon such
attornment this Lease shall continue in full force and effect as a direct lease
between the Successor Landlord and Tenant upon all of the terms, conditions and
covenants as are set forth in this Lease except that the Successor Landlord
shall not (a) be liable for any previous act or omission of Landlord under this
Lease; (b) be subject to any offset, not expressly provided for in this Lease,
which theretofore shall have accrued to Tenant against Landlord; (c) be liable
for the return of any Security Deposit, in whole or in part, to the extent that
same is not paid over to the Successor Landlord; or (d) be bound by any previous
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modification of this Lease or by any previous prepayment of more than one
month's Fixed Rent or Additional Charges, unless such modification or prepayment
shall have been expressly approved in writing by the Superior Lessor of the
Superior Lease or the Mortgagee of the Superior Mortgage through or by reason of
which the Successor Landlord shall have succeeded to the rights of Landlord
under this Lease.
9.04. If any then present or prospective Superior Mortgagee shall require
any modification(s) of this Lease, Tenant shall promptly execute and deliver to
Landlord such instruments effecting such modification(s) as Landlord shall
request, provided that such modification(s) do not adversely affect in any
material respect any of Tenant's rights under this Lease and do not affect
Tenant's financial obligations hereunder in any respect.
ARTICLE 10 - QUIET ENJOYMENT
10.01. So long as Tenant pays all of the Rent and performs all of Tenant's
other obligations hereunder, Tenant shall peaceably and quietly have, hold and
enjoy the Demised Premises without hindrance, ejection or molestation by
Landlord or any person lawfully claiming through or under Landlord, subject,
nevertheless, to the provisions of this Lease and to Superior Leases and
Superior Mortgages.
ARTICLE 11 - ASSIGNMENT, SUBLETTING AND MORTGAGING
11.01. Tenant shall not, whether voluntarily, involuntarily, or by
operation of law or otherwise, (a) assign or otherwise transfer this Lease, or
offer or advertise to do so, (b) sublet the Demised Premises or any part
thereof, or offer or advertise to do so, or allow the same to be used, occupied
or utilized by anyone other than Tenant, or (c) mortgage, pledge, encumber or
otherwise hypothecate this Lease in any manner whatsoever, without in each
instance obtaining the prior written consent of Landlord. Notwithstanding the
foregoing, Landlord acknowledges it is the intention of the parties that Tenant
will sublet approximately 100,000 square feet of the warehouse space for the
period not to exceed the first two years of the Lease Term and Landlord's
consent to same shall not be unreasonably withheld.
11.02. If at any time (a) the original Tenant named herein, (b) the then
Tenant, (c) any Guarantor, or (d) any Person owning a majority of the voting
stock of, or directly or indirectly controlling, the then Tenant shall be a
corporation or partnership, any transfer of voting stock or partnership interest
resulting in the person(s) who shall have owned a majority of such corporation's
shares of voting stock or the general partners' interest in such partnership, as
the case may be, immediately before such transfer, ceasing to own a majority of
such shares of voting stock or general partner's interest, as the case may be,
except as the result of transfers by inheritance, shall be deemed to be an
assignment of this Lease as to which Landlord's consent shall have been
required, and in any such event Tenant shall notify Landlord. The provisions of
this Section 11.02 shall not be applicable to any corporation all the
outstanding voting stock of which is listed on a national securities exchange
(as defined in the Securities Exchange Act of 1934, as amended) or is traded in
the over-the-counter market with quotations reported by the National Association
of Securities Dealers through its automated system for reporting quotations and
shall not apply to transactions with a corporation into or with which the then
Tenant is merged or consolidated or to which substantially all of the then
Tenant's assets are transferred or to any corporation which controls or is
controlled by the
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then Tenant or is under common control with the then Tenant, provided that in
any of such events (i) the successor to Tenant has a net worth computed in
accordance with generally accepted accounting principles at least equal to the
greater of (1) the net worth of Tenant immediately prior to such merger,
consolidation or transfer, or (2) the net worth of the original Tenant on the
date of this Lease, and (ii) proof satisfactory to Landlord of such net worth
shall have been delivered to Landlord at least 10 days prior to the effective
date of any such transaction. For the purposes of this Section, the words
"voting stock" shall refer to shares of stock regularly entitled to vote for the
election of directors of the corporation. Landlord shall have the right at any
time and from time to time during the Term to inspect the stock record books of
the corporation to which the provisions of this Section 10.02 apply, and Tenant
will produce the same on request of Landlord.
11.03. If this Lease is assigned, whether or not in violation of this
Lease, Landlord may collect rent from the assignee. If the Demised Premises or
any part thereof are sublet or used or occupied by anybody other then Tenant,
whether or not in violation of this Lease, Landlord may, after default by
Tenant, and expiration of Tenant's time to cure such default, collect rent from
the subtenant or occupant. In either event, Landlord may apply the net amount
collected to the Rent, but no such assignment, subletting, occupancy or
collection shall be deemed a waiver of any of any of the provisions of Section
11.01 or Section 11.02, or the acceptance of the assignee, subtenant or occupant
as tenant, or a release of Tenant from the performance by Tenant of Tenant's
obligations under this Lease. The consent by Landlord to any assignment,
mortgaging, subletting or use or occupancy by others shall not in any way be
considered to relieve Tenant from obtaining the express written consent of
Landlord to any other or further assignment, mortgaging or subletting or use or
occupancy by others not expressly permitted by this Article 10. References in
this Lease to use or occupancy by others (that is, anyone other than Tenant)
shall not be construed as limited to subtenants and those claiming under or
through subtenants but shall be construed as including also licensees and others
claiming under or through Tenant, immediately or remotely.
11.04. Any permitted assignment or transfer, whether made with Landlord's
consent pursuant to Section 10.01 or without Landlord's consent if permitted by
Section 11.02, shall be made only if, and shall not be effective until, the
assignee shall execute, acknowledge and deliver to Landlord an agreement in form
and substance satisfactory to Landlord whereby the assignee shall assume
Tenant's obligations under this Lease and whereby the assignee shall agree that
all of the provisions in this Article 10 shall, notwithstanding such assignment
or transfer, continue to be binding upon it in respect to all future assignments
and transfers. Notwithstanding any assignment or transfer, whether or not in
violation of the provisions of this Lease, and notwithstanding the acceptance of
Rent by Landlord from an assignee, transferee, or any other party during the
Term, the original Tenant and any other person(s) who at any time was or were
Tenant shall remain fully liable for the payment of the Rent and for Tenant's
other obligations under this Lease.
11.05. The liability of the original named Tenant and any other Person(s)
(including but not limited to any Guarantor) who at any time are or become
responsible for Tenant's obligations under this Lease shall not be discharged,
released or impaired by any agreement extending the time of, or modifying any of
the terms or obligations under this Lease, or by any waiver or failure of
Landlord to enforce, any of this Lease.
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11.06. The listing of any name other than that of Tenant, whether on the
doors of the Demised Premises or the Building directory, or otherwise, shall not
operate to vest any right or interest in this Lease or in the Demised Premises,
nor shall it be deemed to be the consent of Landlord to any assignment or
transfer of this Lease or to any sublease of the Demised Premises or to the use
or occupancy thereof by others. Notwithstanding anything contained in this
Lease to the contrary, Landlord shall have the absolute right to withhold its
consent to an assignment or subletting to a Person who is otherwise a tenant or
occupant of the Building, or of a building owned or managed by Landlord or its
affiliated entities.
11.07. Without limiting any of the provisions of Article 24, if pursuant
to the Federal Bankruptcy Code (or any similar law hereafter enacted having the
same general purpose), Tenant is permitted to assign this Lease notwithstanding
the restrictions contained in this Lease, adequate assurance of future
performance by an assignee expressly permitted under such Code shall be deemed
to mean the deposit of cash security in an amount equal to the sum of one (1)
year's Fixed Rent plus an amount equal to the Percentage Rent and the Additional
Charges for the Calendar Year preceding the year in which such assignment is
intended to become effective, which deposit shall be held by Landlord for the
balance of the Term, without interest, as security for the full performance of
Tenant's obligations under this Lease, to be held and applied in the manner
specified for security in Article 8.
11.08. If Tenant shall propose to assign or in any manner transfer this
Lease or any interest therein, or sublet the Demised Premises or any part or
parts thereof, or grant any concession or license or otherwise permit occupancy
of all or any part of the Demised Premises by any person, Tenant shall give
notice thereof to Landlord, together with a copy of the proposed instrument that
is to accomplish same and such financial and other information pertaining to the
proposed assignee, transferee, subtenant, concessionaire or licensee as Landlord
shall require, and Landlord may, in addition to Landlord's right to give or
withhold consent, terminate this Lease by notice given to Tenant within thirty
(30) days after receipt of said proposed instrument and financial and other
information, and upon the date specified in such notice, which date shall be not
less than thirty (30) days and not more than sixty (60) days after the giving of
said notice, this Lease shall terminate. If Landlord does not so terminate this
Lease, and (if Landlord consents to the subject transaction or if Landlord's
consent is not required to same) if Tenant does not consummate the subject
transaction within sixty (60) days after the last day on which Landlord might
have so terminated this Lease as a result of such transaction, Tenant shall
again be required to comply with the provisions of this Section 11.07. in
connection with any such transaction as if the notice by Tenant referred to
above in this Section 11.07. had not been given. Notwithstanding anything
contained in this Lease to the contrary and except as provided in Section 11.01,
Landlord shall not be obligated to entertain or consider any request by Tenant
to consent to any proposed assignment of this Lease or sublet of all or any part
of the Demised Premises unless each request by Tenant is accompanied by a non-
refundable fee payable to Landlord in the amount of One Thousand Dollars
($1,000.00) to cover Landlord's administrative, legal, and other costs and
expenses incurred in processing each of Tenant's requests. Neither Tenant's
payment nor Landlord's acceptance of the foregoing fee shall be construed to
impose any obligation whatsoever upon Landlord to consent to Tenant's request.
ARTICLE 12 - COMPLIANCE WITH LAWS
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12.01. Subject to the provisions of Article 36.13(iv), Tenant shall comply
with all Legal Requirements which shall, in respect of the Demised Premises or
the use and occupation thereof, or the abatement of any nuisance in, on or about
the Demised Premises, impose any violation, order or duty on Landlord or Tenant;
and Tenant shall pay all the cost, expenses, fines, penalties and damages which
may be imposed upon Landlord or any Superior Lessor by reason of or arising out
of Tenant's failure to fully and promptly comply with and observe the provisions
of this Section. However, Tenant need not comply with any such law or
requirement of any public authority so long as Tenant shall be contesting the
validity or the applicability thereof to the Demised Premises, in accordance
with Section 12.02.
12.02. Tenant may contest, by appropriate proceedings prosecuted
diligently and in good faith, the validity, or applicability to the Demised
Premises, of any Legal Requirement, provided that (a) Landlord shall not be
subject to criminal penalty or to prosecution for a crime, and neither the
Demised Premises nor any part thereof shall be subject to being condemned or
vacated, by reason of non-compliance or otherwise by reason of such contest; (b)
before the commencement of such contest, Tenant shall furnish to Landlord either
(i) the bond of a surety company satisfactory to Landlord, which bond shall be,
as to its provisions and form, satisfactory to Landlord, and shall be in an
amount at least equal to 125% of the cost of such compliance (as estimated by a
reputable contractor designated by Landlord) and shall indemnify Landlord
against the cost thereof and against all liability for damages, interest,
penalties and expenses (including reasonable attorneys' fees and expenses),
resulting from or incurred in connection with such contest or non-compliance, or
(ii) other security in place of such bond satisfactory to Landlord; (c) such
non-compliance or contest shall not constitute or result in any violation of any
Superior Lease or Superior Mortgage, or if any such Superior Lease and/or
Superior Mortgage shall permit such non-compliance or contest on condition of
the taking of action or furnishing of security by Landlord, such action shall be
taken and such security shall be furnished at the expense of Tenant; and (d)
Tenant shall keep Landlord advised as to the status of such proceedings. Without
limiting the application of the above, Landlord shall be deemed subject to
prosecution for a crime if Landlord, or its managing agent, or any officer,
director, partner, shareholder or employee of Landlord or its managing agent, as
an individual, is charged with a crime of any kind or degree whatsoever, whether
by service of a summons or otherwise, unless such charge is withdrawn before
Landlord or its managing agent, or such officer, director, partner, shareholder
or employee of Landlord or its managing agent (as the case may be) is required
to plead or answer thereto. Notwithstanding anything contained in this Lease to
the contrary, Tenant shall not file any Real Estate Tax appeal without the prior
written consent of Landlord, which consent may be given or withheld in
Landlord's absolute discretion. Notwithstanding anything contained in this Lease
to the contrary, Tenant shall not file any Real Estate Tax Appeal with respect
to the Land, Building or the Demised Premises.
ARTICLE 13 - INSURANCE AND INDEMNITY
13.01. During the Term Tenant shall maintain at its own cost and expense
the following insurance: (a) comprehensive general public liability insurance in
respect of the Demised Premises and the conduct and operation of business
therein, having limits of not less than $5,000,000.00 combined single limit per
occurrence for bodily injury or death to any one person and for bodily injury or
death to any number of persons in any one occurrence, and for property damage,
including water damage and sprinkler leakage
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legal liability (coverage to include but not be limited to (i) premises
operation, completed operations, broad form contractual liability and product
liability, (ii) comprehensive automobile, truck and vehicle liability insurance
covering all owned, hired and non-owned vehicles used by the contractor(s) in
connection with their work and any loading of such vehicles, with limits as
stated above and (iii) workmen's compensation, employers liability and
occupational disease insurance as required by statutes, but in any event not
less than $500,000.00 for Coverage B covering all damages and injuries arising
from each accident or occupational disease), (b) All-Risk insurance (including
flood and earthquake) covering the Demised Premises against loss or damage in an
amount equal to the full replacement value thereof as same might increase from
time to time or such higher amount as either may be required by the holder of
any fee mortgage covering the Demises Premises or is necessary to prevent
Landlord and/or Tenant from becoming a co-insurer, including boiler and
machinery insurance, if applicable (c) rent insurance with broad form extended
coverage endorsement in an amount equal to the Rent, and all other charges
payable by Tenant pursuant to this Lease for a period of one (1) year and (d)
any other insurance required for compliance with the Insurance Requirements.
Landlord may at any time and from time to time require that the limits for the
comprehensive general public liability insurance to be maintained by Tenant be
increased to the limits that new Tenants in similar buildings are required by
Landlord to maintain. The insurance carried pursuant to Section 13.01 (b) shall
be carried in favor of Landlord and the holder of any fee mortgage on the
Premises and the standard mortgagee clause shall be attached to the appropriate
policies. Insurance carried pursuant to Section 13.01 (b) shall provide that the
loss, if any, shall be adjusted with and payable to the party who will perform
the work of restoration pursuant to Article 22 and such mortgagee as their
interests may appear. Tenant shall deliver to Landlord and any additional named
insured(s) certificates for such fully paid-for policies upon execution hereof.
Upon request of Landlord, Tenant shall furnish Landlord with copies of all such
insurance policies. Tenant shall procure and pay for renewals of such insurance
from time to time before the expiration thereof, and Tenant shall deliver to
Landlord and any additional insured(s) certificates therefor at least thirty
(30) days before the expiration of any existing policy. All such policies shall
be issued by companies of recognized responsibility, having a Bests Key Rating
Guide of not less than A, Class VII, licensed to do business in New Jersey, and
all such policies shall contain a provision whereby the same cannot be canceled
unless Landlord and any additional insured(s) are given at least thirty (30)
days' prior written notice of such cancellation. The certificates of insurance
to be delivered to Landlord by Tenant shall name Landlord as an additional
insured and, at Landlord's request, shall also name any Superior Lessors or
Superior Mortgagees as additional insureds, and the following phrase must be
typed on the certificate of insurance: "Hartz Mountain Industries, Inc., and its
respective subsidiaries, affiliates, associates, joint ventures, and
partnerships, are hereby named as additional insureds as their interests may
appear (and if Landlord has so requested, Tenant shall include any Superior
Lessors and Superior Mortgagees as additional insured(s)). It is intended for
this insurance to be primary and non-contributing." Tenant shall give Landlord
at least thirty (30) days' prior written notice that any such policy is being
canceled or replaced.
13.02. Tenant shall not do, permit or suffer to be done any act, matter,
thing or failure to act in respect of the Demised Premises or use or occupy the
Demised Premises or conduct or operate Tenant's business in any manner
objectionable to any insurance company or companies whereby the fire insurance
or any other insurance then in effect in respect to the Land and Building or any
part thereof shall become void or suspended or whereby any premiums in respect
of insurance maintained by Landlord shall be
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higher than those which would normally have been in effect for the occupancy
contemplated under the Permitted Uses. In case of a breach of the provisions of
this Section 13.02, in addition to all other rights and remedies of Landlord
hereunder, Tenant shall (a) indemnify Landlord and the Superior Lessors and hold
Landlord and the Superior Lessors harmless from and against any loss which would
have been covered by insurance which shall have become void or suspended because
of such breach by Tenant and (b) pay to Landlord any and all increases of
premiums on any insurance, including, without limitation, rent insurance,
resulting from any such breach.
13.03. Tenant shall indemnify and hold harmless Landlord and all Superior
Lessors and its and their respective partners, joint venturers, directors,
officers, agents, servants and employees from and against any and all claims
arising from or in connection with (a) the conduct or management of the Demised
Premises or of any business therein, or any work or thing whatsoever done, or
any condition created (other than by Landlord) in the Demised Premises during
the Term or during the period of time, if any, prior to the Commencement Date
that Tenant may have been given access to the Demised Premises; (b) any act,
omission or negligence of Tenant or any of its subtenants or licensees or its or
their partners, joint venturers, directors, officers, agents, employees or
contractors; (c) any accident, injury or damage whatever (unless caused solely
by Landlord's negligence) occurring in the Demised Premises; and (d) any breach
or default by Tenant in the full and prompt payment and performance of Tenant's
obligations under this Lease; together with all costs, expenses and liabilities
incurred in or in connection with each such claim or action or proceeding
brought thereon, including, without limitation, all attorneys' fees and
expenses. In case any action or proceeding is brought against Landlord and/or
any Superior Lessor and/or its or their partners, joint venturers, directors,
officers, agents and/or employees in connection with conduct or management of
the Demised Premises or by reason of any claim referred to above, Tenant, upon
notice from Landlord or such Superior Lessor, shall, at Tenant's cost and
expense, resist and defend such action or proceeding by counsel reasonably
satisfactory to Landlord.
13.04. Neither Landlord nor any Superior Lessor shall be liable or
responsible for, and Tenant hereby releases Landlord and each Superior Lessor
from, all liability and responsibility to Tenant and any person claiming by,
through or under Tenant, by way of subrogation or otherwise, for any injury,
loss or damage to any person or property in or around the Demised Premises or to
Tenant's business irrespective of the cause of such injury, loss or damage, and
Tenant shall require its insurers to include in all of Tenant's insurance
policies which could give rise to a right of subrogation against Landlord or any
Superior Lessor a clause or endorsement whereby the insurer waives any rights of
subrogation against Landlord and such Superior Lessors or permits the insured,
prior to any loss, to agree with a third party to waive any claim it may have
against said third party without invalidating the coverage under the insurance
policy.
13.05. Tenant shall not be liable or responsible for, and Landlord hereby
releases Tenant from, all liability and responsibility to Landlord and any
person claiming by, through or under Landlord, by way of subrogation for any
injury, loss or damage to any property in or around the Common Areas, the
Building (exclusive of the Demised Premises) or to Landlord's business
irrespective of the cause of such injury, loss or damage, and Landlord shall
require its insurers to include in all of Landlord's insurance policies which
could give rise to a right of subrogation against Tenant a clause or endorsement
whereby the insurer waives
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any rights of subrogation against Tenant or permits the insured, prior to any
loss, to agree with a third party to waive any claim it may have against said
third party without invalidating the coverage under the insurance policy.
ARTICLE 14 - RULES AND REGULATIONS
14.01. Tenant and its employees and agents shall faithfully observe and
comply with the Rules and Regulations and such reasonable changes therein
(whether by modification, elimination or addition) as Landlord at any time or
times hereafter may make and communicate to Tenant, which in Landlord's
judgment, shall be necessary for the reputation, safety, care or appearance of
the Land and Building, or the preservation of good order therein, or the
operation or maintenance of the Building or its equipment and fixtures, and
which do not unreasonably affect the conduct of Tenant's business in the Demised
Premises; provided, however, that in case of any conflict or inconsistency
between the provisions of this Lease and any of the Rules and Regulations, the
provisions of this Lease shall control.
ARTICLE 15 - ALTERATIONS AND SIGNS
15.01. Tenant shall not make any alterations or additions to the Demised
Premises, or make any holes or cuts in the walls, ceilings, roofs, or floors
thereof, or change the exterior color or architectural treatment of the Demised
Premises, without on each occasion first obtaining the consent of Landlord.
Tenant shall submit to Landlord plans and specifications for such work at the
time Landlord's consent is sought. Tenant shall pay to Landlord upon demand the
reasonable cost and expense of Landlord in (a) reviewing said plans and
specifications and (b) inspecting the alterations to determine whether the same
are being performed in accordance with the approved plans and specifications and
all Legal Requirements and Insurance Requirements, including, without
limitation, the fees of any architect or engineer employed by Landlord for such
purpose. Before proceeding with any permitted alteration which will cost more
than $50,000 (exclusive of the costs of decorating work and items constituting
Tenant's Property), as estimated by a reputable contractor designated by
Landlord, Tenant shall obtain and deliver to Landlord either (i) a performance
bond and a labor and materials payment bond (issued by a corporate surety
licensed to do business in New Jersey), each in an amount equal to 125% of such
estimated cost and in form satisfactory to Landlord, or (ii) such other security
as shall be satisfactory to Landlord. Tenant shall fully and promptly comply
with and observe the Rules and Regulations then in force in respect of the
making of alterations. Any review or approval by Landlord of any plans and/or
specifications with respect to any alterations is solely for Landlord's benefit,
and without any representation or warranty whatsoever to Tenant in respect to
the adequacy, correctness or efficiency thereof or otherwise.
15.02. Tenant shall obtain all necessary governmental permits and
certificates for the commencement and prosecution of permitted alterations and
for final approval thereof upon completion, and shall cause alterations to be
performed in compliance with all applicable Legal Requirements and Insurance
Requirements. Alterations shall be diligently performed in a good and
workmanlike manner, using new materials and equipment at least equal in quality
and class to the better of (a) the original installations of the Building, or
(b) the then standards for the Building established by Landlord.
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Alterations shall be performed by contractors first approved by Landlord;
provided, however, that any alterations in or to the mechanical, electrical,
sanitary, heating, ventilating, air conditioning or other systems of the
Building shall be performed only by the contractor(s) designated by Landlord.
Alterations shall be made in such manner as not to unreasonably interfere with
or delay and as not to impose any additional expense upon Landlord in the
construction, maintenance, repair or operation of the Building; and if any such
additional expense shall be incurred by Landlord as a result of Tenant's making
of any alterations, Tenant shall pay any such additional expense upon demand.
Throughout the making of alterations (not including the Landlord's Work), Tenant
shall carry, or cause to be carried, workmen's compensation insurance in
statutory limits and general liability insurance, with completed operation
endorsement, for any occurrence in or about the Building, under which Landlord
and its managing agent and any Superior Lessor whose name and address shall
previously have been furnished to Tenant shall be named as parties insured, in
such limits as Landlord may reasonably require, with insurers reasonably
satisfactory to Landlord. Tenant shall furnish Landlord with reasonably
satisfactory evidence that such insurance is in effect at or before the
commencement of alterations and, on request, at reasonable intervals thereafter
during the making of alterations.
15.03. Tenant shall not place any signs on the roof, exterior walls or
grounds of the Demised Premises without first obtaining Landlord's written
consent thereto. In placing any signs on or about the Demised Premises, Tenant
shall, at its expense, comply with all applicable legal requirements and obtain
all required permits and/or licenses.
ARTICLE 16 - LANDLORD'S AND TENANT'S PROPERTY
16.01. All fixtures, equipment, improvements and appurtenances attached to
or built into the Demised Premises at the commencement of or during the Term,
whether or not by or at the expense of Tenant, shall be and remain a part of the
Demised Premises, shall be deemed to be the property of Landlord and shall not
be removed by Tenant, except as provided in Section 16.02. Further, any
carpeting or other personal property in the Demised Premises on the Commencement
Date, unless installed and paid for by Tenant, shall be and shall remain
Landlord's property and shall not be removed by Tenant.
16.02. All movable partitions, business and trade fixtures, machinery and
equipment, communications equipment and office equipment, whether or not
attached to or built into the Demised Premises, which are installed in the
Demised Premises by or for the account of Tenant without expense to Landlord and
can be removed without structural damage to the Building and all furniture,
furnishings, and other movable personal property owned by Tenant and located in
the Demised Premises (collectively, "Tenant's Property") shall be and shall
remain the property of Tenant and may be removed by Tenant at any time during
the Term; provided that if any of the Tenant's Property is removed, Tenant shall
repair or pay the cost of repairing any damage to the Demised Premises,
resulting from the installation and/or removal thereof. Any equipment or other
property for which Landlord shall have granted any allowance or credit to Tenant
shall not be deemed to have been installed by or for the account of Tenant
without expense to Landlord, shall not be considered as the Tenant's Property
and shall be deemed the property of Landlord.
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16.03. At or before the Expiration Date or the date of any earlier
termination of this Lease, or within fifteen (15) days after such an earlier
termination date, Tenant shall remove from the Demised Premises all of the
Tenant's Property (except such items thereof as Landlord shall have expressly
permitted to remain, which property shall become the property of Landlord if not
removed), and Tenant shall repair any damage to the Demised Premises resulting
from any installation and/or removal of the Tenant's Property. Any items of the
Tenant's Property which shall remain in the Demised Premises after the
Expiration Date or after a period of fifteen (15) days following an earlier
termination date, may, at the option of Landlord, be deemed to have been
abandoned, and in such case such items may be retained by Landlord as its
property or disposed of by Landlord, without accountability, in such manner as
Landlord shall determine at Tenant's expense.
ARTICLE 17 - REPAIRS AND MAINTENANCE
17.01. Tenant shall, throughout the Term, take good care of the Demised
Premises, the fixtures and appurtenances therein, and shall not do, suffer, or
permit any waste with respect thereto. Tenant shall keep and maintain all
interior and exterior portions of the Demised Premises including, without
limitation, all Building equipment, windows, doors, loading bay doors and
shelters, plumbing and electrical systems, heating, ventilating and air
conditioning ("HVAC") systems in a clean and orderly condition and in good order
and repair. Tenant shall keep and maintain all floors, sidewalks, landscaping
(including lawn areas), curbing, exterior fencing, paving whether in driveways,
parking areas or access easements. The phrase "keep and maintain" as used
herein includes repairs, replacement and/or restoration as appropriate; however,
nothing in this Lease requires Tenant to repair or restore the Building and/or
Land to any condition better than the condition they were delivered to Tenant on
the Commencement Date. Tenant shall maintain the exterior areas of the Demised
Premises free of accumulation of snow, ice, dirt and rubbish. Tenant shall not
permit or suffer any over-loading of the floors of the Building. Tenant shall be
responsible for all other repairs, interior and exterior, structural and
nonstructural, ordinary and extraordinary, in and to the Demised Premises,
including the Building and Land and the facilities and systems thereof, the need
for which arises out of (a) the performance or existence of the Tenant's Work or
alterations, (b) the installation, use or operation of the Tenant's Property in
the Demised Premises, (c) the moving of the Tenant's Property in or out of the
Building, or (d) the act, omission, misuse or neglect of Tenant or any of its
subtenants or its or their employees, agents, contractors or invitees. Upon
request by Landlord, Tenant shall furnish Landlord with true and complete copies
of maintenance contracts and with copies of all invoices for work performed,
confirming Tenant's compliance with its obligations under this Article. In the
event Tenant fails to furnish such copies, Landlord shall have the right, at
Tenant's cost and expense, to conduct such inspections or surveys as may be
required to determine whether or not Tenant is in compliance with this Article
and to have any work required of Tenant performed at Tenant's cost and expense.
Tenant shall promptly replace all scratched, damaged or broken doors and glass
in and about the Demised Premises and shall be responsible for all repairs,
maintenance and replacement of wall and floor coverings in the Demised Premises
and for the repair and maintenance of all sanitary and electrical fixtures and
equipment therein. Tenant shall promptly make all repairs in or to the Demised
Premises and any repairs required to be made by Tenant to the mechanical,
electrical, sanitary, heating, ventilating, air-conditioning or other systems of
the Building shall be performed only by contractor(s) designated by Landlord.
Any other repairs in or to the Building and the facilities and systems thereof
for which Tenant
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is responsible may, at Landlord's option, be performed by Landlord at Tenant's
expense; but Landlord may, at its option, before commencing any such work or at
any time thereafter, require Tenant to furnish to Landlord such security, in
form (including, without limitation, a bond issued by a corporate surety
licensed to do business in New Jersey) and amount, as Landlord shall deem
necessary to assure the payment for such work by Tenant.
17.02. Except as provided in Article 17.01:(i) Landlord shall be
responsible for structural repairs to the foundation, steel supports, and
structural support to the roof of the Building and shall, at its cost and
expense, make all repairs and replacements thereto; however, Tenant shall be
responsible for maintenance, repairs or replacement of the roof and roof deck)
and (ii) Landlord shall be responsible for the repair of future depressions in
the floors, provided further that Tenant does not permit the overloading of the
floors.
17.03. Except as otherwise expressly provided in this Lease, Landlord
shall have no liability to Tenant, nor shall Tenant's covenants and obligations
under this Lease be reduced or abated in any manner whatsoever, by reason of any
inconvenience, annoyance, interruption or injury to business arising from
Landlord's doing any repairs, maintenance, or changes which Landlord is required
or permitted by this Lease, or required by Law, to make in or to any portion of
the Building.
17.04. Tenant shall not permit or suffer the overloading of the floors of
the Demised Premises beyond 250 pounds per square foot, or lesser amount as may
be applicable to any mezzanine areas.
ARTICLE 18 - UTILITY CHARGES
18.01. Tenant shall pay all charges for gas, water, sewer, electricity,
heat or other utility or service supplied to the Demised Premises as measured by
meters relating to Tenant's use, and the cost of repair, maintenance,
replacement, and reading of any meters measuring Tenant's consumption thereof.
Tenant expressly agrees that Landlord shall not be responsible for the failure
of supply to Tenant of any of the aforesaid, or any other utility service.
Landlord shall not be responsible for any public or private telephone service to
be installed in the space, particularly conduit if required.
18.02. Tenant's use of electric energy in the Demised Premises shall not
at any time exceed the capacity of any of the electrical conductors and
equipment in or otherwise serving the Demised Premises. In order to insure that
such capacity is not exceeded and to avert possible adverse effect upon the
Building's electric service, Tenant shall not, without Landlord's prior consent
in each instance (which shall not be unreasonably withheld), connect any
fixtures, appliances or equipment to the Building's electric distribution system
or make any alteration or addition to the electric system of the Demised
Premises existing on the Commencement Date. Should Landlord grant such consent,
all additional risers or other equipment required therefor shall be provided by
Landlord and the cost thereof shall be paid by Tenant to Landlord on demand.
ARTICLE 19 - ACCESS, CHANGES AND NAME
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19.01. Omitted
19.02. Landlord and its agents shall have the right to enter and/or pass
through the Demised Premises at any time or times (a) to examine the Demised
Premises and to show then to actual and prospective Superior Lessors, Superior
Mortgagees, or prospective purchasers of the Building, and (b) to make such
repairs, alterations, additions and improvements in or to the Demised Premises
and/or in or to the Building or its facilities and equipment as Landlord is
required or desires to make. Landlord shall be allowed to take all materials
into and upon the Demised Premises that may be required in connection therewith,
without any liability to Tenant and without any reduction of Tenant's
obligations hereunder. During the period of eighteen (18) months prior to the
Expiration Date, Landlord and its agents may exhibit the Demised Premises to
prospective tenants. Notwithstanding the foregoing, Landlord covenants that it
will minimize any interference with Tenant's right to use and enjoyment of the
Demised Premises.
19.03. If at any time any windows of the Demised Premises are temporarily
darkened or obstructed by reason of any repairs, improvements, maintenance
and/or cleaning in or about the Building, or if any part of the Building is
temporarily or permanently closed or inoperable, the same shall not be deemed a
constructive eviction and shall not result in any reduction or diminution of
Tenant's obligations under this Lease.
19.04. If, during the last month of the Term, Tenant has removed all or
substantially all of the Tenant's Property from the Demised Premises, Landlord
may, with Tenant's prior consent, immediately enter the Demised Premises and
later, renovate and decorate the same, without liability to Tenant and without
reducing or otherwise affecting Tenant's obligations hereunder.
19.05. Landlord reserves the right, at any time and from time to time, to
make such changes, alterations, additions and improvements in or to the Building
and the fixtures and equipment thereof as Landlord shall deem necessary or
desirable provided they do not reduce or otherwise affect Tenant's rights under
this Lease. Landlord may adopt any name for the Building. Landlord reserves
the right to change the name and/or address of the Building at any time.
ARTICLE 20 - MECHANICS' LIENS AND OTHER LIENS
20.01. Nothing contained in this Lease shall be construed to imply any
consent of Landlord to subject Landlord's interest or estate to any liability
under any mechanic's, construction or other lien law. If any lien or any Notice
of Intention (to file a lien), Lis Pendens, or Notice of Unpaid Balance and
Right to File Lien is filed against the Land, the Building, or any part thereof,
or the Demised Premises, or any part thereof, for any work, labor, services or
materials claimed to have been performed or furnished for or on behalf of
Tenant, or anyone holding any part of the Demised Premises through or under
Tenant, Tenant shall cause the same to be canceled and discharged of record by
payment, bond or order of a court of competent jurisdiction within thirty (30)
days after notice by Landlord to Tenant.
ARTICLE 21 - NON-LIABILITY AND INDEMNIFICATION
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21.01. Neither Landlord nor any partner, joint venturer, director,
officer, agent, servant or employee of Landlord shall be liable to Tenant for
any loss, injury or damage to Tenant or to any other Person, or to its or their
property, irrespective of the cause of such injury, damage or loss, unless
caused by or resulting from the negligence of Landlord, its agents, servants or
employees in the operation or maintenance of the Land or Building without
contributory negligence on the part of Tenant or any of its subtenants or
licensees or its or their employees, agents or contractors. Further, neither
Landlord nor any partner, joint venturer, director, officer, agent, servant or
employee of Landlord shall be liable (a) for any such damage caused by other
tenants or Persons in, upon or about the Land or Building, or caused by
operations in construction of any private, public or quasi-public work; or (b)
even if negligent, for consequential damages arising out of any loss of use of
the Demised Premises or any equipment or facilities therein by Tenant or any
Person claiming through or under Tenant.
21.02. Notwithstanding any provision to the contrary, Tenant shall look
solely to the estate and property of Landlord in and to the Land and Building
(or the proceeds received by Landlord on a sale of such estate and property but
not the proceeds of any financing or refinancing thereof) in the event of any
claim against Landlord arising out of or in connection with this Lease, the
relationship of Landlord and Tenant or Tenant's use of the Demised Premises, and
Tenant agrees that the liability of Landlord arising out of or in connection
with this Lease, the relationship of Landlord and Tenant or Tenant's use of the
Demised Premises shall be limited to such estate and property of Landlord (or
sale proceeds). No other properties or assets of Landlord or any partner, joint
venturer, director, officer, agent, servant or employee of Landlord shall be
subject to levy, execution or other enforcement procedures for the satisfaction
of any judgement (or other judicial process) or for the satisfaction of any
other remedy of Tenant arising out of, or in connection with, this Lease, the
relationship of Landlord and Tenant or Tenant's use of the Demised Premises and
if Tenant shall acquire a lien on or interest in any other properties or assets
by judgment or otherwise, Tenant shall promptly release such lien on or interest
in such other properties and assets by executing, acknowledging and delivering
to Landlord an instrument to that effect prepared by Landlord's attorneys.
Tenant hereby waives the right of specific performance and any other remedy
allowed in equity if specific performance or such other remedy could result in
any liability of Landlord for the payment of money to Tenant, or to any court or
governmental authority (by way of fines or otherwise) for Landlord's failure or
refusal to observe a judicial decree or determination, or to any third party.
ARTICLE 22 - DAMAGE OR DESTRUCTION
22.01. If the Building or the Demised Premises shall be partially or
totally damaged or destroyed by fire or other casualty (and if this Lease shall
not be terminated as in this Article 22 hereinafter provided), Landlord shall
repair the damage and restore and rebuild the Building and/or the Demised
Premises (except for the Tenant's Property) with reasonable dispatch after
notice to it of the damage or destruction and the collection of the insurance
proceeds attributable to such damage.
22.02. Deleted
22.03. If (a) the Building or the Demised Premises shall be totally
damaged or destroyed by fire or other casualty, or (b) the Building shall be so
damaged or destroyed by fire or other casualty that its
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repair or restoration requires the expenditure, as estimated by a reputable
contractor or architect designated by Landlord, of more than twenty percent
(20%) (or ten percent [10%] if such casualty occurs during the last two [2]
years of the Term) of the full insurable value of the Building immediately prior
to the casualty, or (c) the Building shall be damaged or destroyed by fire or
other casualty and either the loss shall not be covered by Landlord's insurance
or the net insurance proceeds (after deducting all expenses in connection with
obtaining such proceeds) shall, in the estimation of a reputable contractor or
architect designated by Landlord be insufficient to pay for the repair or
restoration work, then in either such case Landlord may terminate this Lease by
giving Tenant notice to such effect within seventy five (75) days after the date
of the fire or other casualty. If the Demised Premises shall be so damaged or
destroyed by fire or other casualty that its repair would take more than twelve
(12) months to accomplish, as reasonably estimated by the Architect (the
"Architect's Determination"), either party shall have the right to terminate
this Lease upon written notice to the other given within sixty (60) notice of
the Architect's Determination. Landlord shall give Tenant written notice of the
Architect's Determination within sixty (60) days of such damage or destruction.
22.04. Tenant shall not be entitled to terminate this Lease and no
damages, compensation or claim shall be payable by Landlord for inconvenience,
loss of business or annoyance arising from any repair or restoration of any
portion of the Building pursuant to this Article 22. Landlord shall use its
best efforts to make such repair or restoration promptly and in such manner as
to not unreasonably interfere with Tenant's use and occupancy of the Demised
Premises, but Landlord shall not be required to do such repair or restoration
work except during Business Hours on Business Days.
22.05. Notwithstanding any of the foregoing provisions of this Article 22,
if by reason of some act or omission on the part of Tenant or any of its
subtenants or its or their partners, directors, officers, servants, employees,
agents or contractors, either (a) Landlord or any Superior Lessor or any
Superior Mortgagee shall be unable to collect all of the insurance proceeds
(including, without limitation, rent insurance proceeds) applicable to damage or
destruction of the Building by fire or other casualty, or (b) the Building shall
be damaged or destroyed or rendered completely or partially untenantable on
account of fire or other casualty, then, without prejudice to any other remedies
which may be available against Tenant, there shall be no abatement or reduction
of the Rent. Further, nothing contained in this Article 21 shall relieve Tenant
from any liability that may otherwise exist as a result of any damage or
destruction by fire or other casualty.
22.06. Landlord will not carry insurance of any kind on the Tenant's
Property, and, except as provided by law or by reason of Landlord's breach of
any of its obligations hereunder, shall not be obligated to repair any damage to
or replace the Tenant's Property.
22.07. The provisions of this Article 22 shall be deemed an express
agreement governing any case of damage or destruction of the Building by fire or
other casualty, and any law providing for such a contingency in the absence of
an express agreement, now or hereafter in force, shall have no application in
such case.
ARTICLE 23 - EMINENT DOMAIN
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23.01. If the whole of the Demised Premises shall be taken by any public or
quasi-public authority under the power of condemnation, eminent domain or
expropriation, or in the event of conveyance of the whole of the Demised
Premises in lieu thereof, this Lease shall terminate as of the day possession
shall be taken by such authority. If 25% or less of the Floor Space of the
Building shall be so taken or conveyed, this Lease shall terminate only in
respect of the part so taken or conveyed as of the day possession shall be taken
by such authority. If more than 25% of the Floor Space of the Building shall be
so taken or conveyed, this Lease shall terminate only in respect of the part so
taken or conveyed as of the day possession shall be taken by such authority, but
either party shall have the right to terminate this Lease upon notice given to
the other party within 30 days after such taking possession. If so much of the
parking facilities shall be so taken or conveyed that the number of parking
spaces necessary, in Tenant's reasonable judgment, for the continued operation
of the Tenant's business shall not be available, Tenant may by notice to
Landlord, terminate this Lease as of the day possession shall be taken provided
that Landlord shall first be given (upon thirty (30) days notice) the
opportunity to replace such parking spaces within reasonable walking distance of
the Demised Premises. If this Lease shall continue in effect as to any portion
of the Demised Premises not so taken or conveyed, the Rent shall be computed as
of the day possession shall be taken on the basis of the remaining Floor Space
of the Building. Except as specifically provided herein, in the event of any
such taking or conveyance there shall be no reduction in Rent. If this Lease
shall continue in effect, Landlord shall, at its expense, but shall be obligated
only to the extent of the net award or other compensation (after deducting all
expenses in connection with obtaining same) available to Landlord for the
improvements taken or conveyed (excluding any award or other compensation for
land or for the unexpired portion of the term of any Superior Lease), make all
necessary alterations so as to constitute the remaining Building a complete
architectural and tenantable unit, except for the Tenants' property, and Tenant
shall make all alterations or replacements to the Tenant's Property and
decorations in the Demised Premises. All awards and compensation for any taking
or conveyance, whether for the whole or a part of the Land or Building, shall be
property of Landlord, and Tenant hereby assigns to Landlord all of Tenant's
right, title and interest in and to any and all such awards and compensation,
including, without limitation, any award or compensation for the value of the
unexpired portion of the Term. Tenant shall be entitled to claim, prove and
receive in the condemnation proceeding such award or compensation as may be
allowed for the Tenant's property and for loss of business, good will, and
depreciation or injury to and cost of removal of the Tenant's property, but only
if such award or compensation shall be made by the condemning authority in
addition to, and shall not result in a reduction of, the award or compensation
made by it to Landlord.
23.02. If the temporary use or occupancy of all or any part of the Demised
Premises shall be taken during the Term, Tenant shall be entitled, except as
hereinafter set forth, to receive that portion of the award or payment for such
taking which represents compensation for the use and occupancy of the Demised
Premises, for the taking of the Tenant's Property and for moving expenses, and
Landlord shall be entitled to receive that portion which represents
reimbursement for the cost of restoration of the Demised Premises for purposes
of this Article 23, "temporary" means no more than six (6) months. This Lease
shall be and remain unaffected by such taking and Tenant shall continue to be
responsible for all of its obligations hereunder insofar as such obligations are
not affected by such taking and shall continue to pay the Rent in full when due.
If the period of temporary use or occupancy shall extend beyond the Expiration
Date, that part of the award or payment which represents compensation for the
use and
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occupancy of the Demised Premises (or a part thereof) shall be divided between
Landlord and Tenant so that Tenant shall receive (except as otherwise provided
below) so much thereof as represents compensation for the period up to and
including the Expiration Date and Landlord shall receive so much thereof as
represents compensation for the period after the Expiration Date. All monies to
be paid to Tenant as, or as part of, an award or payment for temporary use and
occupancy for a period beyond the date to which the Rent has been paid shall be
received, held and applied by the first Superior Mortgagee (or if there is no
Superior Mortgagee, by Landlord as a trust fund) for payment of the Rent
becoming due hereunder.
ARTICLE 24 - SURRENDER
24.01. On the Expiration Date, or upon any earlier termination of this
Lease, or upon any re-entry by Landlord upon the Demised Premises, Tenant shall
quit and surrender the Demised Premises to Landlord "broom-clean" and in good
order, condition and repair, except for ordinary wear and tear and such damage
or destruction as Landlord is required to repair or restore under this Lease,
and Tenant shall remove all of Tenant's property therefrom except as otherwise
expressly provided in this Lease.
24.02. If Tenant remains in possession of the Demised Premises after the
expiration of the Term, Tenant shall be deemed to be occupying the Demised
Premises at the sufferance of Landlord subject to all of the provisions of this
Lease, except that the monthly Fixed Rent shall be twice the Fixed Rent in
effect during the last month of the Term, plus 1/12th of the average annual
Percentage Rent for the immediately preceding three full Calendar Years.
24.03. No act or thing done by Landlord or its agents shall be deemed an
acceptance of a surrender of the Demised Premises, and no agreement to accept
such surrender shall be valid unless in writing and signed by Landlord.
ARTICLE 25 - CONDITIONS OF LIMITATION
25.01. This Lease is subject to the limitation that whenever Tenant or any
Guarantor (a) shall make an assignment for the benefit of creditors, or (b)
shall commence a voluntary case or have entered against it an order for relief
under any chapter of the Federal Bankruptcy Code (Title 11 of the United States
Code) or any similar order or decree under any federal or state law, now in
existence, or hereafter enacted having the same general purpose, and such order
or decree shall have not been stayed or vacated within 30 days after entry, or
(c) shall cause, suffer, permit or consent to the appointment of a receiver,
trustee, administrator, conservator, sequestrator, liquidator or similar
official in any federal, state or foreign judicial or nonjudicial proceeding, to
hold, administer and/or liquidate all or substantially all of its assets, and
such appointment shall not have been revoked, terminated, stayed or vacated and
such official discharged of his duties within 30 days of his appointment then
Landlord, at any time after the occurrence of any such event, may give Tenant a
notice of intention to end the Term at the expiration of five (5) days from the
date of service of such notice of intention, and upon the expiration of said
five (5) day period, whether or not the
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Term shall theretofore have commenced, this Lease shall terminate with the same
effect as if that day were the expiration date of this Lease, but Tenant shall
remain liable for damages as provided in Article 27.
25.02. This Lease is subject to the further limitations that: (a) if
Tenant shall default in the payment of any Rent, or (b) if Tenant shall, whether
by action or inaction, be in default of any of its obligations under this Lease
(other than a default in the payment of Rent) and such default shall continue
and not be remedied within twenty five (25) days after Landlord shall have given
to Tenant a notice specifying the same, or, in the case of a default which
cannot with due diligence be cured within a period of twenty five (25) days and
the continuance of which for the period required for cure will not subject
Landlord or any Superior Lessor or prosecution for a crime (as more particularly
described in the last sentence of Section 12.02) or termination of any Superior
Lease or foreclosure of any Superior Mortgage, if Tenant shall not, (i) within
said twenty five (25) day period advise Landlord of Tenant's intention to take
all steps necessary to remedy such default, (ii) duly commence within said
twenty five (25) day period, and thereafter diligently prosecute to completion
all steps necessary to remedy the default, and (iii) complete such remedy within
a reasonable time after the date of said notice by Landlord, or (c) if any event
shall occur or any contingency shall arise whereby this Lease would, by
operation of law or otherwise, devolve upon or pass to any person, firm or
corporation other than Tenant, except as expressly permitted by Article 11, or
(d) if Tenant shall vacate or abandon the Demised Premises, or (e) if there
shall be any default by Tenant (or any person which, directly or indirectly,
controls, is controlled by, or is under common control with Tenant) under any
other lease with Landlord (or any person which, directly or indirectly, controls
is controlled by, or is under common control with Landlord) which shall not be
remedied within the applicable twenty five (25) day notice period, if any,
provided therefor under such other lease, then in any of said cases Landlord may
give to Tenant a notice of intention to end the Term at the expiration of five
(5) days from the date of the service of such notice of intention, and upon the
expiration of said five (5) days, whether or not the Term shall theretofore have
commenced, this Lease shall terminate with the same effect as if that day were
the expiration date of this Lease, but Tenant shall remain liable for damages as
provided in Article 27.
ARTICLE 26 - RE-ENTRY BY LANDLORD
26.01. If Tenant shall default in the payment of any Rent, or if this
Lease shall terminate as provided in Article 25, Landlord or Landlord's agents
and employees may immediately or at any time thereafter re-enter the Demised
Premises, or any part thereof, either by summary dispossess proceedings or by
any suitable action or proceeding at law without being liable to indictment,
prosecution or damages therefor, and may repossess the same, and may remove any
Person therefrom, to the end that Landlord may have, hold and enjoy the Demised
Premises. The word "re-enter," as used herein, is not restricted to its
technical legal meaning. If this Lease is terminated under the provisions of
Article 25, or if Landlord shall re-enter the Demised Premises under the
provisions of this Article 26, or in the event of the termination of this Lease,
or of re-entry, by or under any summary dispossess or other proceedings or
action or any provision of law by reason of default hereunder on the part of
Tenant, Tenant shall thereupon pay to Landlord the Rent payable up to the time
of such termination of this Lease, or of such recovery of possession of the
Demised Premises by Landlord, as the case may be, and shall also pay to Landlord
damages as provided in Article 27.
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26.02. In the event of a breach or threatened breach by Tenant of any of
its obligations under this Lease, Landlord shall also have the right of
injunction. The special remedies to which Landlord may resort hereunder are
cumulative and are not intended to be exclusive of any other remedies to which
Landlord may lawfully be entitled at any time and Landlord may invoke any remedy
allowed at law or in equity as if specific remedies were not provided for
herein.
26.03. If this Lease shall terminate under the provisions of Article 25,
or if Landlord shall re-enter the Demised Premises under the provisions of this
Article 26, or in the event of the termination of this Lease, or of re-entry, by
or under any summary dispossess or other proceeding or action or any provision
of law by reason of default hereunder on the part of Tenant, Landlord shall be
entitled to retain all monies, if any, paid by Tenant to Landlord, whether as
Advance Rent, security or otherwise, but such monies shall be credited by
Landlord against any Rent due from Tenant at the time of such termination or re-
entry or, at Landlord's option, against any damages payable by Tenant under
Article 27 or pursuant to law.
ARTICLE 27 - DAMAGES
27.01. If this Lease is terminated under the provisions of Article 25, or
if Landlord shall re-enter the Demised Premises under the provisions of Article
26, or in the event of the termination of this Lease, or of re-entry, by or
under any summary dispossess or other proceeding or action or any provision of
law by reason of default hereunder on the part of Tenant, Tenant shall pay as
Additional Charges to Landlord, at the election of Landlord, either or any
combination of:
(a) a sum which at the time of such termination of this Lease or
at the time of any such re-entry by Landlord, as the case may be,
represents the then value of the excess, if any, of (i) the aggregate
amount of the Rent which would have been payable by Tenant (conclusively
presuming the average monthly Percentage Rent and Additional Charges to be
the same as were the average monthly Percentage Rent and Additional Charges
payable for the year, or if less than 365 days have then elapsed since the
Commencement Date, the partial year, immediately preceding such termination
or re-entry) for the period commencing with such earlier termination of
this Lease or the date of any such re-entry, as the case may be, and ending
with the Expiration Date, over (ii) the aggregate rental value of the
Demised Premises for the same period; or
(b) sums equal to the Fixed Rent, Percentage Rent (in the same
monthly amount as the average monthly Percentage Rent payable for the year,
or if less than three hundred sixty five (365) days have then elapsed since
the Commencement Date, the partial year, immediately preceding such
termination or re-entry) and the Additional Charges which would have been
payable by Tenant had this Lease not so terminated, or had Landlord not so
re-entered the Demised Premises, payable upon the due dates therefor
specified herein following such termination or such re-entry and until the
Expiration Date, provided, however, that if Landlord shall relet the
Demised Premises during said period, Landlord shall credit Tenant with the
net rents received by Landlord from such reletting, such net rents to be
determined by first deducting from the gross rents as and when received by
Landlord from such reletting the expenses incurred or paid by Landlord in
terminating
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this Lease or in re-entering the Demised Premises and in securing
possession thereof, as well as the expenses of reletting, including,
without limitation, altering and preparing the Demised Premises for new
tenants, brokers' commissions, legal fees, and all other expenses properly
chargeable against the Demised Premises and the rental therefrom, it being
understood that any such reletting may be for a period shorter or longer
than the period ending on the Expiration Date; but in no event shall Tenant
be entitled to receive any excess of such net rents over the sums payable
by Tenant to Landlord hereunder, nor shall Tenant be entitled in any suit
for the collection of damages pursuant to this subdivision (b) to a credit
in respect of any rents from a reletting, except to the extent that such
net rents are actually received by Landlord. If the Demised Premises or any
part thereof should be relet in combination with other space, then proper
apportionment on a square foot basis shall be made of the rent received
from such reletting and of the expenses of reletting; or
(c) a sum which at the time of such termination of this Lease or at
the time of any such re-entry by Landlord, as the case may be, represents
the aggregate amount of the Rent which would have been payable by Tenant
(conclusively presuming the average monthly Additional Charges to be the
same as were the average monthly Additional Charges payable for the year,
or if less than 365 days have then elapsed since the Commencement Date, the
partial year, immediately preceding such termination or re-entry) for the
period commencing with such earlier termination of this Lease or the date
of any such re-entry, as the case may be, and ending with the Expiration
Date; provided, however, that if Landlord shall relet the Demised Premises
during said period, Landlord shall credit Tenant with the net rents
received by Landlord from such reletting, such net rents to be determined
by first deducting from the gross rents as and when received by Landlord
from such reletting the expenses incurred or paid by Landlord in
terminating this Lease or in re-entering the Demised Premises and in
securing possession thereof, as well as the expenses of reletting,
including, without limitation, altering and preparing the Demised Premises
for new tenants, brokers' commissions, legal fees, and all other expenses
properly chargeable against the Demised Premises and the rental therefrom,
it being understood that any such reletting may be for a period shorter or
longer than the period ending on the Expiration Date; but in no event shall
Landlord have to account to Tenant for any rents in excess of the total
damages recovered by Landlord hereunder, nor shall Tenant be entitled in
any suit for the collection of damages pursuant to this subsection (c) to a
credit in respect of any rents from a reletting, except to the extent that
such net rents are actually received by Landlord. If the Demised Premises
or any part thereof should be relet in combination with other space, then
proper apportionment on a square foot basis shall be made of the rent
received from such reletting and of the expenses of reletting.
If the Demised Premises or any part thereof be relet by Landlord before
presentation of proof of such damages to any court, commission or tribunal, the
amount of rent reserved upon such reletting shall, prima facie, be the fair and
reasonable rental value for the Demised Premises, or part thereof, so relet
during the term of the reletting. Landlord shall not be liable in any way
whatsoever for its failure to relet the Demised Premises or any part thereof, or
if the Demised Premises or any part thereof are relet, for its inability to
collect the rent under such reletting, and no such failure to relet or failure
to collect rent shall release or affect Tenant's liability for damages or
otherwise under this Lease.
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27.02. Suit or suits for the recovery of such damages or, any installments
thereof, may be brought by Landlord at any time and from time to time at its
election, and nothing contained herein shall be deemed to require Landlord to
postpone suit until the date when the Term would have expired if it had not been
so terminated under the provisions of Article 24, or under any provision of law,
or had Landlord not re-entered the Demised Premises. Nothing herein contained
shall be construed to limit or preclude recovery by Landlord against Tenant of
any sums or damages to which, in addition to the damages particularly provided
above, Landlord may lawfully be entitled by reason of any default hereunder on
the part of Tenant. Nothing herein contained shall be construed to limit or
prejudice the right of Landlord to prove for and obtain as damages by reason of
the termination of this Lease or re-entry of the Demised Premises for the
default of Tenant under this Lease, an amount equal to the maximum allowed by
any statute or rule of law in effect at the time, whether or not such amount be
greater than, equal to, or less than any of the sums referred to in Section
27.01.
27.03. In addition, if this Lease is terminated under the provisions of
Article 25, or if Landlord shall re-enter the Demised Premises under the
provisions of Article 26, Tenant covenants that: (a) the Demised Premises then
shall be in the same condition as that in which Tenant has agreed to surrender
the same to Landlord at the Expiration Date; (b) Tenant shall have performed
prior to any such termination any obligation of Tenant contained in this Lease
for the making of any alteration or for restoring or rebuilding the Demised
Premises or the Building, or any part thereof; and (c) for the breach of any
covenant of Tenant set forth above in this Section 27.03, Landlord shall be
entitled immediately, without notice or other action by Landlord, to recover,
and Tenant shall pay, as and for liquidated damages therefor, the cost of
performing such covenant (as estimated by an independent contractor selected by
Landlord).
27.04. In addition to any other remedies Landlord may have under this
Lease, and without reducing or adversely affecting any of Landlord's rights and
remedies under this Article 27, if any Rent or damages payable hereunder by
Tenant to Landlord are not paid upon demand therefor, the same shall bear
interest at the Late Payment Rate or the maximum rate permitted by law,
whichever is less, from the due date thereof until paid, and the amounts of such
interest shall be Additional Charges hereunder.
27.05. In the event of Tenant's default under this Lease and Landlord's
re-entry and recovery or possession of the Demised Premises, Landlord shall use
commercially reasonable efforts to mitigate Landlord's damages by reletting of
the Demised Premises. The net proceeds of any such reletting received by
Landlord shall be credited against Tenant's then-outstanding obligations under
this Lease. As used herein, "net proceeds" shall mean the full amount of rent
and other similar charges paid to Landlord by all succeeding tenants of all or
any portion of the Demised Premises less Landlord's actual expenses of reletting
the Demised Premises (including, but not limited to expenses or work done to the
Demised Premises in connection with such reletting, broker's fees and attorneys'
fees). Nothing contained herein shall require Landlord to relet the Demised
Premises prior to or with any preference over the leasing of any other similar
premises of Landlord or any affiliate of Landlord, nor shall any rental of such
other premises reduce the damages which Landlord would be entitled to recover
from Tenant.
ARTICLE 28 - AFFIRMATIVE WAIVERS
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28.01. Tenant, on behalf of itself and any and all persons claiming
through or under Tenant, does hereby waive and surrender all right and privilege
which it, they or any of them might have under or by reason of any present or
future law, to redeem the Demised Premises or to have a continuance of this
Lease after being dispossessed or ejected from the Demised Premises by process
of law or under the terms of this Lease or after the termination of this Lease
as provided in this Lease.
28.02. Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other on any matter
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, and Tenant's use or occupancy of the
Demised Premises including, without limitation, any claim of injury or damage,
and any emergency and other statutory remedy with respect thereto. Except for
mandatory counterclaims, Tenant shall not interpose any counterclaim of any kind
in any action or proceeding commenced by Landlord to recover possession of the
Demised Premises.
ARTICLE 29 - NO WAIVERS
29.01. The failure of either party to insist in any one or more instances
upon the strict performance of any one or more of the obligations of this Lease,
or to exercise any election herein contained, shall not be construed as a waiver
or relinquishment for the future of the performance of such one or more
obligations of this Lease or of the right to exercise such election, but the
same shall continue and remain in full force and effect with respect to any
subsequent breach, act or omission. The receipt by Landlord of Fixed Rent,
Percentage Rent or Additional Charges with knowledge of breach by Tenant of any
obligation of this Lease shall not be deemed a waiver of such breach.
ARTICLE 30 - CURING TENANT'S DEFAULTS
30.01. If Tenant shall default in the performance of any of Tenant's
obligations under this Lease, Landlord, without thereby waiving such default,
may (but shall not be obligated to) perform the same for the account and at the
expense of Tenant, without notice in a case of emergency, and in any other case
only if such default continues after the expiration of twenty five (25) days
from the date Landlord gives Tenant notice of the default. Bills for any
expenses incurred by Landlord in connection with any such performance by it for
the account of Tenant, and bills for all costs, expenses and disbursements of
every kind and nature whatsoever, including reasonable attorneys' fees and
expenses, involved in collecting or endeavoring to collect the Rent or any part
thereof or enforcing or endeavoring to enforce any rights against Tenant or
Tenant's obligations hereunder, under or in connection with this Lease or
pursuant to law, including any such cost, expense and disbursement involved in
instituting and prosecuting summary proceedings or in recovering possession of
the Demised Premises after default by Tenant or upon the expiration of the Term
or sooner termination of this Lease, and interest on all sums advanced by
Landlord under this Article at the rate of 4% percent per month or the maximum
rate permitted by law, whichever is less, may be sent by Landlord to Tenant
monthly, or immediately, at Landlord's option, and such amounts shall be due and
payable in accordance with the terms of such bills.
ARTICLE 31 - BROKER
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31.01. Tenant represents that no broker except the Broker was instrumental
in bringing about or consummating this Lease and that Tenant had no
conversations or negotiations with any broker except the Broker concerning the
leasing of the Demised Premises. Tenant agrees to indemnify and hold harmless
Landlord against and from any claims for any brokerage commissions and all
costs, expenses and liabilities in connection therewith, including, without
limitation, attorneys' fees and expenses, arising out of any conversations or
negotiations had by Tenant with any broker other than the Broker. Landlord
shall pay any brokerage commissions due the Broker pursuant to a separate
agreement between Landlord and the Broker.
ARTICLE 32 - NOTICES
32.01. Any notice, statement, demand, consent, approval or other
communication required or permitted to be given, rendered or made by either
party to the other, pursuant to this Lease or pursuant to any applicable Legal
Requirement, shall be in writing and shall be deemed to have been properly
given, rendered or made only if hand delivered or sent by United States
registered or certified mail, return receipt requested, addressed to the other
party at the address hereinabove set forth (except that after the Commencement
Date, Tenant's address, unless Tenant shall give notice to the contrary, shall
be the Building) as to Landlord, to the attention of General Counsel with a
concurrent Notice to the attention of Controller, and shall be deemed to have
been given, rendered or made on the second day after the day so mailed, unless
mailed outside the State of New Jersey, in which case it shall be deemed to have
been given, rendered or made on the third business day after the day so mailed.
Either party may, by notice as aforesaid, designate a different address or
addresses for notices, statements, demands, consents, approvals or other
communications intended for it. In addition, upon and to the extent requested
by Landlord, copies of notices shall be sent to the Superior Mortgagee.
ARTICLE 33 - ESTOPPEL CERTIFICATES
33.01. Each party shall, at any time and from time to time, as requested
by the other party, upon not less than ten (10) days' prior notice, execute and
deliver to the requesting party a statement certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating the
modifications), certifying the dates to which the Fixed Rent and Additional
Charges have been paid, stating whether or not, to the best knowledge of the
party giving the statement, the requesting party is in default in performance of
any of its obligations under this Lease, and, if so, specifying each such
default of which the party giving the statement shall have knowledge, and
stating whether or not, to the best knowledge of the party giving the statement,
any event has occurred which with the giving of notice or passage of time, or
both, would constitute such a default of the requesting party, and, if so,
specifying each such event; any such statement delivered pursuant hereto shall
be deemed a representation and warranty to be relied upon by the party
requesting the certificate and by others with whom such party may be dealing,
regardless of independent investigation. Tenant also shall include in any such
statement such other information concerning this Lease as Landlord may
reasonably request.
ARTICLE 34 - ARBITRATION
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34.01. Landlord may at any time request arbitration, and Tenant may at any
time when not in default in the payment of any Rent request arbitration, of any
matter in dispute but only where arbitration is expressly provided for in this
Lease. The party requesting arbitration shall do so by giving notice to that
effect to the other party, specifying in said notice the nature of the dispute,
and said dispute shall be determined in Newark, New Jersey, by a single
arbitrator, in accordance with the rules then obtaining of the American
Arbitration Association (or any organization which is the successor thereto).
The award in such arbitration may be enforced on the application of either party
by the order or judgment of a court of competent jurisdiction. The fees and
expenses of any arbitration shall be borne by the parties equally, but each
party shall bear the expense of its own attorneys and experts and the additional
expenses of presenting its own proof. If Tenant gives notice requesting
arbitration as provided in this Article, Tenant shall simultaneously serve a
duplicate of the notice on each Superior Mortgagee and Superior Lessor whose
name and address shall previously have been furnished to Tenant, and such
Superior Mortgagees and Superior Lessor shall have the right to participate in
such arbitration.
ARTICLE 35 - MEMORANDUM OF LEASE
35.01. Tenant shall not record this Lease. However, at the request of
Landlord, Tenant shall promptly execute, acknowledge and deliver to Landlord a
memorandum of lease in respect of this Lease sufficient for recording. Such
memorandum shall not be deemed to change or otherwise affect any of the
obligations or provisions of this Lease. Whichever party records such
memorandum of Lease shall pay all recording costs and expenses, including any
taxes that are due upon such recording.
ARTICLE 36 - MISCELLANEOUS
36.01. Tenant expressly acknowledges and agrees that Landlord has not made
and is not making, and Tenant, in executing and delivering this Lease, is not
relying upon, any warranties, representations, promises or statements, except to
the extent that the same are expressly set forth in this Lease or in any other
written agreement(s) which may be made between the parties concurrently with the
execution and delivery of this Lease. All understandings and agreements
heretofore had between the parties are merged in this Lease and any other
written agreement(s) made concurrently herewith, which alone fully and
completely express the agreement of the parties and which are entered into after
full investigation. Neither party has relied upon any statement or
representation not embodied in this Lease or in any other written agreement(s)
made concurrently herewith. The submission of this Lease to Tenant does not
constitute by Landlord a reservation of, or an option to Tenant for, the Demised
Premises, or an offer to lease on the terms set forth herein and this Lease
shall become effective as a lease agreement only upon execution and delivery
thereof by Landlord and Tenant.
36.02. No agreement shall be effective to change, modify, waive, release,
discharge, terminate or effect an abandonment of this Lease, in whole or in
part, unless such agreement is in writing, refers expressly to this Lease and is
signed by the party against whom enforcement of the change, modification,
waiver, release, discharge, termination or effectuation of abandonment is
sought.
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36.03. If Tenant shall at any time request Landlord to sublet or let the
Demised Premises for Tenant's account, Landlord or its agent is authorized to
receive keys for such purposes without releasing Tenant from any of its
obligations under this Lease, and Tenant hereby releases Landlord of any
liability for loss or damage to any of the Tenant's Property in connection with
such subletting or letting.
36.04. Except as otherwise expressly provided in this Lease, the
obligations under this Lease shall bind and benefit the successors and assigns
of the parties hereto with the same effect as if mentioned in each instance
where a party is named or referred to; provided, however, that (a) no violation
of the provisions of Article 11 shall operate to vest any rights in any
successor or assignee of Tenant and (b) the provisions of this Section 36.04
shall not be construed as modifying the conditions of limitation contained in
Article 25.
36.05. Except for Tenant's obligations to pay Rent, the time for Landlord
or Tenant, as the case may be, to perform any of its respective obligations
hereunder shall be extended if and to the extent that the performance thereof
shall be prevented due to any strikes, lockouts, civil commotions, warlike
operations, invasions, rebellions, hostilities, military or usurped power,
governmental regulations or controls, inability to obtain labor or materials
despite due diligence, acts of God, or other causes beyond the control of the
party whose performance is required. Except as expressly provided to the
contrary, the obligations of Tenant hereunder shall not be affected, impaired or
excused, nor shall Landlord have any liability whatsoever to Tenant, (a) because
Landlord is unable to fulfill, or is delayed in fulfilling, any of its
obligations under this Lease due to any of the matters set forth in the first
sentence of this Section 36.05, or (b) because of any failure or defect in the
supply, quality or character of electricity, water or any other utility or
service furnished to the Demised Premises for any reason beyond Landlord's
reasonable control.
36.06. Any liability for payments hereunder (including, without
limitation, Additional Charges) shall survive the expiration of the Term or
earlier termination of this Lease.
36.07. If Tenant shall request Landlord's consent and Landlord shall fail
to refuse to give such consent, Tenant shall not be entitled to any damages for
any withholding by Landlord of its consent; Tenant's sole remedy shall be an
action for specific performance or injunction, and such remedy shall be
available only in those cases where Landlord has expressly agreed in writing not
to unreasonably withhold or delay its consent or where as a matter of law
Landlord may not unreasonably withhold its consent.
36.08. If an excavation shall be made upon land adjacent to or under the
Building, or shall be authorized to be made, Tenant shall afford to the Person
causing or authorized to cause such excavation, license to enter the Demised
Premises for the purpose of performing such work as said Person shall reasonably
deem necessary or desirable to preserve and protect the Building from injury or
damage and to support the same by proper foundations, without any claim for
damages or liability against Landlord or Tenant and without reducing or
otherwise affecting either party's obligations under this Lease.
36.09. Tenant shall not exercise its rights under Article 14 or any other
provision of this Lease in a manner which would violate Landlord's union
contracts or create any work stoppage, picketing labor disruption or dispute or
any interference with the business of Landlord. Landlord shall not exercise its
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rights under Article 14 or any other provision of this Lease in a manner which
would violate Tenant's union contracts or create any work stoppage, picketing or
labor disruption.
36.10. The parties shall give prompt notice to the other party of (a) any
occurrence in or about the Demised Premises for which the other party might be
liable, (b) any fire or other casualty in the Demised Premises, (c) any damage
to or defect in the Demised Premises, including the fixtures and equipment
thereof, for the repair of which the other party might be responsible, and (d)
any damage to or defect in any part of the Building's sanitary, electrical,
heating, ventilating, air-conditioning, elevator or other systems located in
passing through the Demised Premises or any part thereof.
36.11. This Lease shall be governed by and construed in accordance with
the laws of the State of New Jersey. Tenant hereby irrevocably agrees that any
legal action or proceeding arising out of or relating to this Lease may be
brought in the Courts of the State of New Jersey, or the Federal District Court
for the District of New Jersey, as the initiating party may elect. By execution
and delivery of this Lease, the parties hereby irrevocably accepts and submits
generally and unconditionally for themselves and with respect to their
properties, to the jurisdiction of any such court in any such action or
proceeding, and hereby waives in the case of any such action or proceeding
brought in the courts of the State of New Jersey, or Federal District Court for
the District of New Jersey, any defenses based on jurisdiction, venue or forum
non coveniens. If any provision of this Lease shall, be invalid or
unenforceable, the remainder of this Lease shall not be affected and shall be
enforced to the extent permitted by law. The table of contents, captions,
headings and titles in this Lease are solely for convenience of reference and
shall not affect its interpretation. This Lease shall be construed without
regard to any presumption or other rule requiring construction against the party
causing this Lease to be drafted. If any words or phrases in this Lease shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Lease shall be construed as if the words or
phrases so stricken out or otherwise eliminated were never included in this
Lease and no implication or inference shall be drawn from the fact that said
words or phrases were so stricken out or otherwise eliminated. Each covenant,
agreement, obligation or other provision of this Lease on Tenant's part to be
performed, shall be deemed and construed as a separate and independent covenant
of Tenant, not dependent on any other provision of this Lease. All terms and
words used in this Lease, regardless of the number or gender in which they are
used, shall be deemed to include any other number and any other gender as the
context may require. Tenant specifically agrees to pay all of Landlord's costs,
charges and expenses, including attorneys' fees, incurred in connection with any
document review requested by Tenant and upon submission of bills therefor. In
the event Landlord permits Tenant to examine Landlord's books and records with
respect to any Additional Charge imposed under this Lease, such examination
shall be conducted at Tenant's sole cost and expense and shall be conditioned
upon Tenant retaining an independent accounting firm for such purposes which
shall not be compensated on any type of contingent fee basis with respect to
such examination. Wherever in this Lease or by law a party is authorized to
charge or recover costs and expenses for legal services or attorneys' fees, same
shall include, without limitation, the costs and expenses for in-house or staff
legal counsel or outside counsel at rates not to exceed the reasonable and
customary charges for any such services as would be imposed in an arms length
third party agreement for such services.
36.12. Within thirty (30) days of each anniversary date of this Lease,
Tenant shall annually furnish to Landlord a copy of its then current audited
financial statement which shall be employed by Landlord for purposes of
financing the Demised Premises and not distributed otherwise without prior
authorization of Tenant. Any material adverse change of Tenant's financial
condition shall be furnished to Landlord in writing forthwith and without
request by Landlord for same.
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<PAGE>
36.13. (i) At least ninety (90) days prior to Tenant's termination of its
lease, and any extensions thereof, Tenant agrees to seek a determination from
the New Jersey Department of Environmental Protection and Energy ("NJDEPE") in
the form of a Letter of Non-applicability ("LNA"), that the New Jersey
Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq. ("ISRA"), is inapplicable
to the Tenant's cessation of operations and termination of its lease. Tenant
represents, warrants, and covenants that any information contained in any
application for an LNA submitted pursuant to this subsection will be true and
complete. Tenant represents that the Standard Industrial Classification (SIC)
number applicable to Tenant's operations would not subject this transaction to
the requirements of ISRA.
(ii) In the event that an LNA is denied by NJDEPE, notice of such denial
will be given to Landlord within two (2) business days of Tenant's receipt of
NJDEPE's denial of the LNA. Tenant shall satisfy its obligations under ISRA
prior to its lease termination date: (1) by securing an approval of the Tenant's
Negative Declaration; or (2) by securing an approval of the Tenant's Remedial
Action Workplan, and completing the implementation of such Plan, and obtaining
from NJDEPE a "No Further Action" letter. Tenant shall bear sole responsibility
for any investigation and cleanup costs, fees, penalties, or damages associated
with ISRA compliance. In the event that Tenant is unable to complete the its
ISRA compliance obligations by the date of its lease termination, Landlord shall
continue to provide Tenant with reasonable access to the Demised Premises,
provided that any work undertaken by Tenant shall be performed in such a manner
as to minimize interference with Landlord's or any other tenant's use of the
Demised Premises. However, Landlord reserves its rights to deem Tenant a
holdover tenant in the event that Tenant's ISRA compliance unreasonably
restricts the Landlord's use of the Demised Premises.
(iii) Tenant shall provide Landlord with copies of all correspondence,
documents and reports, including sampling results submitted to or received from
any governmental agency or third party in connection with Tenant's compliance
with ISRA.
(iv) Landlord represents to Tenant that, to the best of its knowledge, the
Demised Premises are in compliance with all applicable present Environmental
Laws, as hereinafter defined, affecting the Demised Premises. Landlord further
agrees that it shall defend, indemnify and save Tenant harmless from and against
all claims, loss, damage, liability and expense (including reasonable attorney's
fees and expenses) which the Tenant may sustain as a result of or on account of
non-compliance of the Demised Premises with the Environmental Laws as the result
of conditions existing on the Demised Premises prior to the Commencement Date.
Environmental Laws are defined as any state or federal laws, statutes,
ordinances or regulations relating to the discharge of "Hazardous Substances",
as defined under New Jersey law [N.J.A.C. 7:1E-1.7], into the air, water, lands
or groundwaters of the State of New Jersey, or the United States of America.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as of
the day and year first above written.
HARTZ MOUNTAIN INDUSTRIES, INC.
By: /s/ Irwin A. Horowitz
-------------------------------
Irwin A. Horowitz
Executive Vice President
36
<PAGE>
PEPE JEANS USA, INC.
By: /s/ Arthur A. Bargonetti
--------------------------
Name: Arthur A. Bargonetti
Title: Executive Vice President
37
<PAGE>
RIDER TO LEASE DATED JUNE 10, 1997, BETWEEN HARTZ MOUNTAIN INDUSTRIES, INC., AS
LANDLORD AND PEPE JEANS USA, INC., AS TENANT.
________________________________________________________________________________
R1. If any of the provisions of this Rider shall conflict with any of the
provisions, printed or typewritten, of this Lease, such conflict shall resolve
in every instance in favor of the provisions of this Rider.
R2. Provided Tenant is in compliance with all of the terms and conditions
contained herein, and provided Tenant has not assigned this Lease or sublet all
or any portion of the Demised Premises and is itself in occupation and
conducting business in the whole of the Demised Premises in accordance with the
terms of this Lease, Tenant expressly acknowledging and agreeing that the option
rights contained herein are personal to the original named Tenant, Tenant shall
have one option to extend the Term of its lease of the Demised Premises, from
the date upon which this Lease would otherwise expire for one extended period of
five years (herein referred to as the "Extended Period"), upon the following
terms and conditions:
a. If Tenant elects to exercise said option, it shall do so by giving
notice of such election to Landlord on or before the date which is twelve (12)
months before the beginning of the Extended Period for which the Term is to be
extended by the exercise of such option. Tenant agrees that it shall have
forever waived its right to exercise any such option if it shall fail for any
reason whatsoever to give such notice to Landlord by the time provided herein
for the giving of such notice, whether such failure is inadvertent or
intentional, time being of the essence as to the exercise of each such option.
b. If Tenant elects to exercise said option, the Term shall be
automatically extended for the Extended Period covered by the option so
exercised without execution of an extension or renewal lease. Within ten (10)
days after request of either party following the effective exercise of any such
option, however, Landlord and Tenant shall execute, acknowledge and deliver to
each other duplicate originals of an instrument in recordable form confirming
that such option was effectively exercised.
c. The Extended Period shall be upon the same terms and conditions as are
in effect immediately preceding the commencement of such Extended Period;
provided, however, that Tenant shall have no right or option to extend the Term
for any period of time beyond the expiration of the Extended Period and,
provided further, that in the Extended Period the Fixed Rent shall be at Fair
Market Value. ("FMV"). FMV shall be determined by mutual agreement of the
parties. If the parties are unable to agree on the FMV within thirty (30) days
of Tenant's exercise of its option, the parties shall choose a licensed Real
Estate Appraiser who shall determine the FMV. The cost of said Real Estate
Appraiser shall be borne equally by the parties. If the parties are unable to
agree on a licensed Real Estate Appraiser within forty-five (45) days of
Tenant's exercise of its option, each party shall select one Appraiser to
appraise the FMV. All appraisals shall be rendered within thirty (30) days of
appointment of the respective Appraiser appointed under this paragraph. If the
difference between the two appraisals is 20% or less of the lower appraisal,
then the FMV shall be the average of the two appraisals. If the difference
between the two appraisals is greater than 20% of the lower appraisal, the two
Appraisers shall select a third licensed Real Estate Appraiser to appraise the
FMV. The FMV shall in such case be the average of the three appraisals. The
cost of the third appraisal shall be borne equally by the parties.
Anything to the contrary contained herein notwithstanding, the Fixed Rent for
such Extended Period shall not be less than the Fixed Rent for the period
immediately preceding the Extended Period for which the Fixed Rent is being
calculated.
38
<PAGE>
d. Any termination, expiration, cancellation or surrender of this Lease
shall terminate any right or option for the Extended Period(s) not yet
exercised.
e. Landlord shall have the right, for thirty (30) days after receipt of
notice of Tenant's election to exercise any option to extend the Term, to reject
Tenant's election if Tenant gave such notice while Tenant was in default in the
performance of any of its obligations under the Lease, and such rejection shall
automatically render Tenant's election to exercise such option null and void and
of no effect.
f. The options provided herein to extend the Term of the Lease may not be
severed from the Lease or separately sold, assigned or otherwise transferred.
R3. Tenant shall have the right, subject to compliance by Tenant with all
Legal Requirements, to operate a warehouse outlet store in a portion of the
Demised Premises containing not more than 2,500 square feet of Floor Space. In
the event Tenant operates such outlet store, Tenant shall pay to Landlord, in
addition to the Fixed Rent, a "Percentage Rent" (as hereinafter provided):
a. Percentage Rent: The amount for any period computed in accordance with the
provisions of Paragraph e hereof.
b. Percentage Rent Rate: 4%
c. Gross Sales: The dollar aggregate of: (a) the actual sales price of all
goods and merchandise sold, leased or licensed and the charges for all
services performed by Tenant or otherwise in connection with all business
conducted at or from the Demised Premises, whether made for cash, by check,
credit or otherwise, without reserve or deduction for inability or failure
to collect the same, including, without limitation, sales and services (i)
where the orders therefor originate at or are accepted at or from the
Demised Premises, whether delivery or performance thereof is made at or
from the Demised Premises or any other place, it being understood that all
sales made and orders received at or from the Demised Premises shall be
deemed to have been made and completed therein even though the orders are
fulfilled elsewhere or the payments of account are transferred to some
other office for collection, (ii) where the orders therefor result from
solicitation off the Demised Premises but which are conducted by personnel
operating from or reporting to or under the control or supervision of any
person at the Demised Premises, (iii) pursuant to mail, telegraph,
telephone or other similar orders received or billed at or from the Demised
Premises, and (iv) by means of mechanical or other vending devices, and (b)
all monies or other things of value received by Tenant from its operations
at the Demised Premises (which are not excluded from Gross Sales by the
next succeeding sentence) including all finance charges, cost of gift or
merchandise certificates and all deposits not refunded to customers. Gross
Sales shall not include (x) the exchange of merchandise between stores of
Tenant where such exchange is made solely for the convenient operation of
Tenant's business and neither for the purpose of depriving Landlord of the
benefits of a sale which would otherwise be made at or from the Demised
Premises nor for the purpose of consummating a sale which has been
theretofore made at or from the Demised Premises, (y) sales of trade
fixtures which are not part of Tenant's stock in trade and not sold in the
regular course of Tenant's business, or (z) the amount of any city, county,
state or federal sales tax, luxury tax or excise tax on sales if the tax is
added to the selling price and separately stated and actually paid to the
taxing authority by Tenant; provided, however, no franchise or capital
stock tax and no income or similar tax based upon income, profits or Gross
Sales shall be deducted from Gross Sales in any event whatsoever. Cash or
credit refunds made upon transactions included
39
<PAGE>
within the Gross Sales, but not exceeding the selling price of merchandise
returned by the purchaser and accepted by Tenant, shall be deducted from
the Gross Sales for the period when such refunds are made. Each charge or
sale upon installment or credit or layaway, so called, shall be treated as
a sale for the full price in the month during which such charge or sale
shall be made, irrespective of the time when Tenant shall receive payment
from its customer. Each lease or rental or license of merchandise to
customers shall be treated as a sale in the month in which the lease,
rental or license is made for a price equal to the total rent of license
fee payable. For purposes of this paragraph the word "Tenant" shall include
any of Tenant's subtenants, concessionaires and licensees.
d. Breakpoint: An amount at an annual rate of $300.00 per square foot of
retail Floor Space; and, in the event the Tenant exercises its right to
extend the Term, the Breakpoint shall be increased in the same proportion
as Fixed Rent applicable to such Extended Period is increased. If the
Fixed Rent is not changed for such Extended Period, the Breakpoint shall
remain the same as the Breakpoint in effect immediately preceding such
Extended Period. If for any reason the Fixed Rent is reduced or abated,
the Breakpoint shall be reduced in the same proportion as the Fixed Rent is
reduced or abated.
e. Within thirty (30) days after the end of each calendar month during the
Term, Tenant shall submit to Landlord a statement certified by Tenant (by
an authorized officer if Tenant is a corporation or by a partner if Tenant
is a partnership) stating the Gross Sales (including an itemization of all
claimed deductions therefrom) for such month. Within thirty (30) days
after the end of each Calendar Quarter, Tenant shall pay to Landlord as
Percentage Rent the amount, if any, by which the aggregate Gross Sales for
the Calendar Year in which such Calendar Quarter occurs up to the end of
such Calendar Quarter exceeds the Breakpoint for such period, or a pro-rata
portion thereof for a partial Calendar Quarter, if applicable, multiplied
by the Percentage Rent Rate. Within ninety (90) days after the end of each
Calendar Year, including any partial Calendar Year at the beginning of the
Term, and after the end of the Term, Tenant shall submit to Landlord a
statement certified by an independent certified public accountant stating
the Gross Sales (including an itemization of all claimed deductions
therefrom) and the Percentage Rent for such Calendar Year, or partial
Calendar Year if the Term shall begin on a date other than a January 1st
and/or end on a date other than a December 31st, as the case may be, and if
the Percentage Rent so stated for such period is more or less than the
Percentage Rent paid for such period, Tenant shall pay to Landlord the
deficiency, or Landlord shall refund to Tenant the excess, within twenty
(20) days after submission of such statement of Gross Sales. For at least
thirty-six (36) months after the expiration of each Calendar Year,
including any partial Calendar Year at the beginning of the Term, and after
the end of the Term, Tenant shall keep and maintain (and shall cause all
subtenants, concessionaires and licensees to keep and maintain) in the
Demised Premises or the main office of Tenant full and accurate books of
account and records from which the Gross Sales can be determined. The
books and records maintained shall include, but shall not be limited to (i)
cash register tapes showing continuous grand total (from a sealed cash
register), (ii) original source documents, (iii) sequentially numbered
receipts, (iv) federal, state & local tax returns, (v) receipts from daily
bank deposits, (vi) computer printouts and (vii) bank statements. Landlord
shall have the right from time to time during such thirty-six (36) month
period to inspect and audit all such books and records relating to Gross
Sales, and Tenant, each subtenant, concessionaire and licensee will produce
the same on request of Landlord. If any such inspection and audit
discloses that the Gross Sales were understated, Tenant shall forthwith pay
to Landlord any additional Percentage Rent shown to be payable, and if the
Gross sales for any Calendar Year or partial Calendar Year were understated
40
<PAGE>
by more than One Thousand Dollars ($1,000.00), Tenant shall also pay the
cost of Landlord's inspection and audit. Landlord does not in any way, or
for any purpose, become a partner or joint venturer with Tenant hereunder.
The provisions of this Lease relating to Percentage Rent are included
solely for the purpose of providing a method whereby rentals are to be
measured and ascertained.
g. Calendar Quarter: Any three-month period commencing on either a January 1,
an April 1, a July 1 or an October 1.
R4. Section R3 (a through g) shall not prevail if the 2,500 square feet of
Retail Space is used as an Employee Purchase Center that is available only to
employees of Tommy Hilfiger and its licensees. Upon request, Tenant shall
deliver to Landlord a representation stating same.
R5. Landlord further covenants and covenants and represents that, as of
the Commencement Date, the Building is structurally sound. Landlord represents
to Tenant that, to the best of its knowledge, the Building is in compliance
with all presently applicable laws affecting the Building, which compliance
shall be deemed to be satisfied upon issuance of the permanent or continuing
certificate of occupancy. Landlord shall defend, indemnify and save Tenant
harmless from and against all claims, loss, damage, liability and expense
(including reasonable attorney's fees and expenses) which the Tenant may sustain
as a result of or on account of non-compliance of the Building with applicable
laws as a result of conditions existing on the Building prior to the
Commencement Date.
HARTZ MOUNTAIN INDUSTRIES, INC.
By: /s/ Irwin A. Horowitz
--------------------------------------
Irwin A. Horowitz
Executive Vice President
PEPE JEANS USA, INC.
By: /s/ Arthur A. Bargonetti
--------------------------------------
Name: Arthur A. Bargonetti
Title: Executive Vice President
41
<PAGE>
Exhibit 10.24
Conformed Copy
SECOND AMENDMENT TO LICENSE AGREEMENT
DATED FEBRUARY 1, 1997
BETWEEN TOMMY HILFIGER LICENSING, INC.
AND TOMMY HILFIGER EUROPE B.V. AND
PEPE JEANS LONDON CORPORATION
AGREEMENT entered into this 8th day of May, 1998, by and among TOMMY
HILFIGER LICENSING, INC., having an address at 913 N. Market Street, Wilmington,
Delaware 19801 (hereinafter referred to as "Licensor"), TOMMY HILFIGER EUROPE
B.V., having its offices at Atlanta Building, Stadhouderskade 6, 1054 ES
Amsterdam, The Netherlands (hereinafter referred to as "Licensee"), and PEPE
JEANS LONDON CORPORATION, having its registered address at Craigmuir Chambers.
P.O. Box 71, Road Town, Tortola, British Virgin Islands (hereinafter referred to
as "PJLC").
WITNESSETH:
WHEREAS, Licensor and PJLC entered into a license agreement dated
February 1, 1997, which license agreement was assigned, on June 1, 1997, by PJLC
to Licensee and thereafter was amended by the First Amendment thereto, dated
December 1, 1997 (as amended, the "License Agreement"); and
WHEREAS, Tommy Hilfiger Corporation, Tommy Hilfiger U.S.A., Inc.,
Tommy Hilfiger (Eastern Hemisphere) Limited and PJLC have entered into that
certain Stock Purchase Agreement, dated as of January 31, 1998 (the "Stock
Purchase Agreement"); and
WHEREAS, the Stock Purchase Agreement contemplates that the parties
hereto will amend the License Agreement effective as of the closing of the
transactions under the Stock Purchase Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the
consummation of the transactions contemplated by the Stock Purchase Agreement
and the mutual agreements herein contained and promises herein expressed, and
for other good and valuable consideration acknowledged by each of them to be
satisfactory and adequate, do hereby agree as follows:
1. All capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the License Agreement.
2. Paragraph 1.12 of the License Agreement shall be deleted in its
entirety and replaced with the following:
<PAGE>
"1.12 LICENSED PRODUCTS shall mean mens and boys
sportswear, and mens, womens and childrens jeanswear and jeans
related apparel (including womens and girls casualwear). In
addition, Licensed Prroducts shall, to the extent permitted by
Licensor from time to time, include accessories and other
products which are produced by licensees of Licensor."
3. Paragraph 1.13 of the License Agreement shall be deleted in its
entirety and replaced with the following:
"1.13 MANUFACTURED PRODUCTS shall mean Licensed Products
which are manufactured by or for Licensee through sources
approved by Licensor other than Tommy Hilfiger (Eastern
Hemisphere) Limited ("THEH") and Tommy Hilfiger U.S.A., Inc.
("THUSA"), or any of their designated subsidiaries."
4. The second and third sentences of Subparagraph 2.12(a) of the
License Agreement shall be deleted in their entirety and replaced with the
following:
"Licensee shall enter into exclusive buying office agreements
with THEH and THUSA or their designated subsidiaries, for the
purchases of Purchased Products. Pursuant to such buying office
agreements, Licensee shall pay to THEH or THUSA or such
designated subsidiaries a buying office commission of * of
the F.O.B. price of all Purchased Products."
5. Subparagraph 2.12(b) of the License Agreement shall be deleted in
its entirety and replaced with the following:
"(b) In the event Licensee purchases Purchased Products
(other than mens and boys sportswear, and mens, womens and
childrens jeanswear and jeans related apparel (including womens
and girls casualwear)) from a source other than Licensor or its
designee, which shall in all events be a source approved by
Licensor, Licensee shall pay to Licensor an administrative fee in
the amount equal to * of the invoice price of all such
Purchased Products."
6. The first two sentences of Subparagraph 2.12(c) of the License
Agreement shall be deleted in their entirety and replaced with the following:
"Licensee may only source Licensed Products directly, without
THEH or THUSA or their designated subsidiaries, if the type of
approved Licensed Product is not then being sourced by THEH or
THUSA or such designated subsidiaries. For example, if THEH or
THUSA or
* This information has been omitted pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission.
-2-
<PAGE>
any of their designated subsidiaries are, at the applicable time,
not in the business of sourcing tailored clothing through their
sources approved by Licensor, then Licensee may source the
tailored clothing through its sources approved by Licensor."
7. The chart following the second sentence of Paragraph 4.2 of the
License Agreement shall be deleted in its entirety and replaced with the
following:
<TABLE>
<CAPTION>
"Annual Period Minimum Sales Level
------------- -------------------
<S> <C>
First *
Second *
Third *
Fourth *
Fifth *
each Annual Period thereafter *
</TABLE>
8. The chart following the second sentence of Subparagraph 5.2(a)
of the License Agreement shall be deleted in its entirety and replaced with
the following:
<TABLE>
<CAPTION>
"Annual Period Guaranteed Minimum Royalty
------------- --------------------------
<S> <C>
First *
Second *
Third *
Fourth *
Fifth *
each Annual Period thereafter *
</TABLE>
9. The first sentence of Paragraph 7.2 of the License Agreement
shall be deleted in its entirety and replaced with the following
"Licensee agrees that, during each of the First and Second Annual
Periods, it shall spend the greater of * or * of the
actual Net Sales, and for each Annual Period thereafter, shall
spend the greater of * of the Minimum Sales Level or *
of the Actual Net Sales for each such Annual Period, for direct
media advertising of the Licensed Products not including any
cooperative advertising, trade shows, sampling, or any other
promotional or sales material normally produced for the sale of
the Licensed Products (the "Advertising Expenditure")."
* This information has been omitted pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission.
-3-
<PAGE>
10. Article 17 of the License Agreement shall be deleted in its
entirety and replaced with the following:
"ARTICLE 17. ASSIGNMENT AND TRANSFER
17.1 NO ASSIGNMENT WITHOUT CONSENT. The license and rights
granted to Licensee hereunder are personal in nature, and Licensee may
not and shall not sell, transfer, lease, sublicense or assign this
Agreement or its rights and interests hereunder, or any part hereof,
by operation of law or otherwise, without the prior written consent of
Licensor, which consent may be withheld by Licensor in its sole and
absolute discretion, except that Licensor shall not unreasonably
withhold its consent to an assignment or sublicense of this Agreement
to Affiliates of Licensee.
17.2 SALE OF ASSETS. A sale or other transfer of all or
substantially all of the assets of Licensee shall be deemed an
assignment of Licensee's rights and interests under this Agreement to
which the terms and conditions of Article 17.1 of this Agreement shall
apply.
17.3 ASSIGNMENT BY LICENSOR. Licensor shall have a complete and
unrestricted right to sell, transfer, lease or assign its rights and
interests in this Agreement to any domestic or foreign corporation or
other business entity, providing that such transferee agrees to be
bound by all of the terms hereof and is the holder of the Trademark in
the Territory. When Licensor wishes to sell, transfer, lease or
assign its rights and interests in this Agreement, Licensor shall do
so on notice to Licensee.
17.4 CERTAIN DEFINITIONS. For purposes of this Article 17, the
following terms shall have the following respective meanings:
"DESIGNEE" shall mean an affiliate or affiliates of Licensor
designated by it.
"IPO" shall mean the closing of a public offering of any Pepe
Europe Shares pursuant to a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), or any
similar securities laws of any foreign jurisdiction.
"PEPE EUROPE BUSINESS" shall mean the business conducted by
Licensee under this Agreement, or, if this Agreement shall have been
assigned to another affiliate of PJLC, by such affiliate.
"PEPE EUROPE SHARES" shall mean the shares of capital stock of
Licensee, or such other affiliate of PJLC or Licensee as shall then be
conducting the Pepe Europe Business, having the right generally to
vote in the election of directors of such Licensee or such affiliate,
as the case may be.
-4-
<PAGE>
"THIRD PARTY" shall mean any individual, corporation,
partnership, joint venture, trust or other entity that is not an
affiliate of PJLC or Licensee.
17.5 INITIAL PROHIBITION ON TRANSFERS. Subject to Paragraph
17.11, during the period beginning May 8, 1998 until May 8, 2000 (the
"Initial Restriction Period"), without the prior written consent of
Licensor, which consent may be withheld by Licensor in its sole and
absolute discretion, PJLC shall not, and shall cause Licensee and its
affiliates not to, directly or indirectly, (i) offer, sell, contract
to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or
otherwise dispose of any Pepe Europe Shares or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of any Pepe Europe
Shares, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of shares of capital stock, in cash
or otherwise (any such transaction, whether or not for consideration,
being referred to herein as a "Transfer"). The issuance of Pepe Europe
Shares to other than the existing shareholders or their affiliates
shall be deemed to be a Transfer of those Pepe Europe Shares for the
purposes of this Article 17.
17.6 NO TRANSFER OF GREATER THAN 50% WITHOUT CONSENT. From and
after the Initial Restriction Period until the first anniversary of an
IPO, without the prior written consent of Licensor, which consent may
be withheld by Licensor in its sole and absolute discretion, PJLC
shall not, and shall cause Licensee and its affiliates not to,
Transfer, in one or a series of transactions, an aggregate of 50% or
more of the Pepe Europe Shares to any Third Party or Third Parties.
17.7 RIGHT OF FIRST REFUSAL ON CERTAIN TRANSFERS OF LESS THAN
50%. (a) From and after the Initial Restriction Period, if PJLC or
Licensee or any of its affiliates shall propose to Transfer to any
Third Party less than 50% of the Pepe Europe Shares other than
pursuant to an IPO, PJLC shall, in accordance with the provisions of
subparagraph (b) hereof, first offer to Transfer the same to Licensor
(or its Designee).
(b) The offer shall be made by sending to Licensor a notice (the
"Offering Notice") setting forth: (i) the number of Pepe Europe Shares
proposed to be Transferred; (ii) that PJLC has received a bona fide
written offer from a prospective purchaser of said Pepe Europe Shares;
(iii) the name and address of the prospective purchaser; (iv) the
terms and conditions of such proposed transaction; and (v) that PJLC
is offering to transfer the said Pepe Europe Shares to Licensor (or
its Designee) on the same terms and conditions as contained in the
bona fide offer.
-5-
<PAGE>
(c) Licensor (or its Designee) may elect to purchase all of the
Pepe Europe Shares so offered by giving written notice of such
acceptance to PJLC within thirty (30) days after the date the Offering
Notice was received by Licensor.
(d) Each acceptance made hereunder shall constitute a separate,
binding contract obligating PJLC to transfer, and Licensor (or its
Designee) to purchase, the Pepe Europe Shares accepted at the price
and upon the terms and conditions as set forth in the Offering Notice.
The transaction shall be closed at such place as shall have been
designated in the Offering Notice, not later than sixty (60) days
after the date the Offering Notice was given as such period may be
extended by any applicable waiting periods required by the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
or any other applicable law. At the closing, PJLC shall deliver to
Licensor (or its Designee) such Pepe Europe Shares, together with duly
executed and acknowledged instruments of assignment and transfer, and
simultaneously therewith Licensor (or its Designee) shall pay PJLC for
such Pepe Europe Shares in accordance with the terms of the Offering
Notice. Such other instruments shall be executed and delivered at the
closing as shall be called for by the terms of the Offering Notice.
(e) If all of the Pepe Europe Shares so offered shall not be
accepted by Licensor (or its Designee) in the manner and within the
period herein provided, the offer shall be deemed revoked and
cancelled as though never made. In such event, PJLC shall have the
right, within sixty (60) days after the expiration of the thirty (30)
day period required for acceptance (as such period may be extended by
the applicable requirements of the HSR Act or other applicable laws),
to Transfer the Pepe Europe Shares to the Third Party designated in
the Offering Notice, at the price and upon the terms and conditions
set forth therein and such Third Party shall be entitled to receive
such Pepe Europe Shares free of all restrictions of this Agreement.
If, for any reason whatsoever, such transaction is not consummated
within the said sixty (60) day period (as so extended, if applicable),
the Pepe Europe Shares so offered shall remain subject to the
restrictions of this Agreement and PJLC may not otherwise Transfer the
Pepe Europe Shares, or any part thereof, without again first complying
with the provisions of this Article 17.
17.8 RIGHT OF FIRST OFFER ON IPO. (a) From and after the
Initial Restriction Period, if PJLC or Licensee (or such other
affiliate of PJLC or Licensee as shall then be conducting the Pepe
Europe Business) proposes to Transfer in an IPO less than 50% of the
Pepe Europe Shares then outstanding (after giving effect to any
primary issuance of Pepe Europe Shares in the proposed IPO), it shall
first give written notice of such proposed IPO to
-6-
<PAGE>
Licensor (the "IPO Notice"), which notice shall specify the number of
Pepe Europe Shares proposed to be Transferred in the IPO. Licensor
may, within thirty (30) days of receipt of the IPO Notice, give
written notice to PJLC of Licensor's (or its Designee's) irrevocable
offer to purchase all, but not less than all, of the Pepe Europe
Shares then outstanding (the "Licensor Offer"), which Licensor Offer
shall set forth the price proposed to be paid per Pepe Europe Share.
(b) PJLC shall have the right to accept the terms of the offer
contained in the Parent Offer by giving written notice (the "Offer
Acceptance") to Licensor within thirty (30) days after the date the
Licensor Offer was received. The transaction shall be closed at such
place as shall have been designated in the Licensor Offer, not later
than sixty (60) days after the date the IPO Notice was given as such
period may be extended by any applicable waiting periods required by
the HSR Act or any other applicable law. At the closing, PJLC shall
deliver to Licensor (or its Designee) all of the outstanding Pepe
Europe Shares duly executed and acknowledged instruments of assignment
and transfer, and simultaneously therewith Licensor (or its Designee)
shall pay PJLC for such Pepe Europe Shares at the purchase price per
Pepe Europe Share specified in the Licensor Notice.
(c) In the event that PJLC rejects the offer contained in the
Licensor Offer or does not give the Offer Acceptance within the thirty
day period required for such acceptance, PJLC or Licensee (or such
other affiliate of PJLC or Licensee as shall then be conducting the
Pepe Europe Business) shall have the right, within six months after
the expiration of the thirty (30) day period referred to in
subparagraph (a) above, to consummate the IPO as specified in the IPO
Notice at a price to public per share equal to not less than 110% of
of the price per share specified in the Licensor Offer.
(d) In the event that Licensor shall not have given the Licensor
Offer within the thirty (30) day time period referred to in
subparagraph (a) above, PJLC or Licensee (or such other affiliate of
PJLC or Licensee as shall then be conducting the Pepe Europe Business)
shall have the right, within six months after the expiration of the
thirty (30) day period required by subparagraph (a) above, to
consummate an IPO with respect to no greater than that number of Pepe
Europe Shares as specified in the IPO Notice, and the Pepe Europe
Shares sold in the IPO shall thereafter be free of all restrictions of
this Agreement. If, for any reason whatsoever, such IPO is not
consummated within the said six month time period, the Pepe Europe
Shares shall remain subject to the restrictions of this Agreement and
PJLC may not otherwise Transfer the Pepe Europe Shares, or any part
thereof, without again first complying with the provisions of this
Agreement.
-7-
<PAGE>
17.9 CALL RIGHT FOLLOWING IPO. (a) From and after the six
month anniversary of the IPO until the first anniversary thereof,
Licensor (or its Designee) shall have the right to purchase all, but
not less than all, of the then outstanding Pepe Europe Shares, other
than those Pepe Europe Shares which shall have theretofore been
Transferred in the IPO in accordance with subparagraph (b) below.
(b) Licensor (or its Designee) may exercise such right by giving
written notice of such exercise to PJLC (the "Call Notice"). The
transaction shall be closed at such place as shall have been
designated in the Call Notice, not later than sixty (60) days after
the date such Call Notice was given as such period may be extended by
any applicable waiting periods required by the HSR Act or any other
applicable law. At the closing, PJLC shall deliver to Licensor (or
its Designee) the Pepe Europe Shares subject to the Call Notice
together with duly executed and acknowledged instruments of assignment
and transfer, and simultaneously therewith Licensor (or its Designee)
shall pay PJLC for such Pepe Europe Shares a purchase price per Pepe
Europe Share equal to the average closing market price (as reported on
the principal securities exchange on which the Pepe Europe Shares are
then listed) of the Pepe Europe Shares over the thirty (30) trading
day period ending on the last trading day prior to the date that the
Call Notice was given.
17.10 OTHER PERMITTED TRANSFERS. From and after the first
anniversary of an IPO, PJLC or Licensee (or such other affiliate of
PJLC or Licensee as shall then be conducting the Pepe Europe Business)
shall have the right to Transfer Pepe Europe Shares (a) in a public
offering pursuant to a registration statement under the Securities
Act, (b) pursuant to Rule 144 promulgated under the Securities Act,
(c) pursuant to the securities laws of a foreign jurisdiction in a
transaction that does not violate the Federal securities laws of the
United States or (d) to a Third Party; provided that prior to any
Transfer pursuant to clause (d) above, PJLC shall first have first
offered to sell such Pepe Europe Shares to Licensor and shall have
complied with the provisions of subparagraphs (b) through (e) of
Paragraph 17.7 with respect to the Pepe Europe Shares proposed to be
so Transferred.
17.11 RESTRICTIONS ON TRANSFERS TO AFFILIATES. During the term
of this Agreement, any Transfer of Pepe Europe Shares to an affiliate
of PJLC shall be subject to the prior written consent of Licensor,
which consent shall not be unreasonably withheld, provided that the
transferee pursuant to any such Transfer shall agree in writing to be
bound by the terms of this Agreement as and to the extent that PJLC
was so bound prior to such Transfer.
17.12 ACCESS TO INFORMATION. During the term of this Agreement,
PJLC shall, and shall cause Licensee and its affiliates to, afford to
the
-8-
<PAGE>
representatives of Licensor (and its Designee) reasonable access to
the business and financial records of Licensee or such affiliate of
PJLC or Licensee as is then conducting the Pepe Europe Business,
including financial projections prepared by the management of Licensee
or such affiliate, during normal business hours, in order that
Licensor may have full opportunity to make such investigations as
Licensor desires in connection with the exercise of its rights under
this Article 17."
11. Except as modified hereby, all other paragraphs contained in
the License Agreement shall remain in full force and effect and nothing
contained herein shall alter them in any way and they are hereby in all
respects ratified and affirmed.
12. This Amendment may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
13. This Amendment shall be interpreted and construed in
accordance with the laws of the State of New York with the same force and
effect as if fully executed and to be performed therein.
14. The parties hereby consent to the jurisdiction of the United
States District Court for the Southern District of New York and any of the
courts of the state of New York in any dispute arising under this Amendment
and agree further that service of process or notice in any such action, suit
or proceeding shall be effective if in writing and delivered in person or sent
as provided in Section 20.1 of the License Agreement.
-9-
<PAGE>
IN WITNESS WHEREOF, Licensor, Licensee and PJLC have signed this
Amendment as of the date first written above.
TOMMY HILFIGER LICENSING, INC.
/s/ Virginia M. Cleary
By: Virginia M. Cleary
Title: Assistant Secretary
TOMMY HILFIGER EUROPE B.V.
/s/ Sydney R. Neil
By: Sydney R. Neil
Title: Director
PEPE JEANS LONDON CORPORATION
/s/ Lawrence S. Stroll
By: Lawrence S. Stroll
Title: Group CEO
<PAGE>
EXHIBIT 10.26
Conformed Copy
REGISTRATION RIGHTS AGREEMENT
by and among
TOMMY HILFIGER CORPORATION,
PEPE JEANS LONDON CORPORATION,
BLACKWATCH INVESTMENTS LIMITED,
AIHL INVESTMENT GROUP LIMITED,
ANASTA HOLDINGS LIMITED,
SPORTSWEAR HOLDINGS LIMITED,
WESTLEIGH LIMITED,
FLAIR INVESTMENT HOLDINGS LIMITED,
THOMAS J. HILFIGER
and
JOEL J. HOROWITZ
Dated as of May 8, 1998
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of May 8,
---------
1998 (the "Agreement"), is by and among Tommy Hilfiger Corporation, a British
Virgin Islands corporation (the "Company"), Pepe Jeans London Corporation, a
-------
British Virgin Islands corporation ("PJLC"), Blackwatch Investments Limited, a
----
British Virgin Islands corporation, AIHL Investment Group Limited, a British
Virgin Islands corporation ("AIHL"), Anasta Holdings Limited, a British Virgin
----
Islands corporation, Sportswear Holdings Limited, a British Virgin Islands
corporation, Westleigh Limited, a British Virgin Islands Corporation, Flair
Investment Holdings Limited, a British Virgin Islands corporation, Thomas J.
Hilfiger ("TJH") and Joel J. Horowitz ("JJH"). The parties hereto other than
--- ---
the Company are sometimes collectively referred to herein as the "Stockholders."
RECITALS
--------
WHEREAS, the Company, certain subsidiaries of the Company and PJLC
have entered into a Stock Purchase Agreement dated as of January 31, 1998 (the
"Stock Purchase Agreement") (all capitalized terms used but not defined herein
- -------------------------
have the meanings given to them in the Stock Purchase Agreement);
WHEREAS, pursuant to the Stock Purchase Agreement, upon consummation
of the Stock Purchases, among other things, the Company will deliver to TH USA
and TH USA will deliver to PJLC 9,045,930 Ordinary Shares, par value $.01 per
share, of the Company (the "Shares");
------
WHEREAS, AIHL has entered into a Guarantee, dated of the date of the
Stock Purchase Agreement, pursuant to which AIHL has guaranteed all of the
obligations of PJLC under the Stock Purchase Agreement;
WHEREAS, the parties hereto have entered into a lock-up agreement,
dated as of the date of the Stock Purchase Agreement (the "Lock-Up Agreement"),
-----------------
pursuant to which the Stockholders have agreed to certain restrictions on the
sale, transfer or other disposition of the Shares; and
WHEREAS, the Company has agreed to grant to the Stockholders certain
registration rights with respect to the Shares.
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
Section 1. Definitions.
-----------
(a) As used in this Agreement, the following terms shall have the
following meanings:
<PAGE>
"Agreement" shall have the meaning set forth in the preamble.
---------
"Closing Date" shall mean the date of closing of the Stock Purchases
------------
under the Stock Purchase Agreement.
"Company" shall have the meaning set forth in the preamble and shall
-------
also include the Company's successors.
"Cutback" shall have the meaning set forth in Section 2(a)(iii).
-------
"Demand Notice" shall have the meaning set forth in Section 2(a)(i).
-------------
"Demand Request" shall have the meaning set forth in Section 2(a)(i).
--------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time.
"Incidental Registration" shall mean a registration required to be
-----------------------
effected pursuant to Section 2(b).
"Incidental Registration Statement" shall mean a registration
---------------------------------
statement of the Company, as provided in Section 2(b), which covers any of the
Registrable Securities on an appropriate form in accordance with the Securities
Act and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"NASD" shall mean the National Association of Securities Dealers, Inc.
----
"Ordinary Shares" shall mean the Ordinary Shares, par value $.01 per
---------------
share, of the Company.
"Participating Stockholders" shall mean those Stockholders electing to
-------------------------
participate in a Required Registration pursuant to Section 2(a) or in an
Incidental Registration pursuant to Section 2(b).
"Person" shall mean any individual, limited or general partnership,
------
corporation, trust, joint venture, association, joint stock company or
unincorporated organization or any government or agency, regulatory body or
other authority or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a Registration
----------
Statement, including any preliminary Prospectus, and any such Prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities and by all other
amendments and supplements to such Prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
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<PAGE>
"Registrable Securities" shall mean the Shares and any securities
----------------------
issued or issuable in respect of the Shares by way of conversion, exchange,
stock dividend, split, combination, recapitalization, merger, consolidation or
other reorganization; provided that any Registrable Security shall cease to be a
Registrable Security when (i) a registration statement covering such Registrable
Security has been declared effective by the SEC and such Registrable Security
has been disposed of pursuant to such effective registration statement, (ii) it
is sold pursuant to Rule 144 promulgated under the Securities Act, (iii) it has
been otherwise transferred, upon which transfer the Company has delivered a new
certificate or other evidence of ownership for such Registrable Security not
bearing the legend required by Section 4(a)(i) of the Lock-Up Agreement and it
may be resold without subsequent registration under the Securities Act, (iv) the
restrictive legends set forth on the certificates representing such Registrable
Security shall be removed pursuant to Section 4(b) of the Lock-Up Agreement or
the holder thereof shall otherwise be able to sell such shares pursuant to Rule
144(k) under the Securities Act or (v) it shall have ceased to be outstanding.
"Registration Expenses" shall mean all expenses incurred in compliance
---------------------
with this Agreement by the Company and its subsidiaries, including:
(i) all fees and expenses incurred in connection with compliance
with state securities or blue sky laws and compliance with the rules of the
NASD (including reasonable fees and disbursements of counsel in connection
with such compliance and the preparation of a Blue Sky Memorandum and legal
investment survey),
(ii) all preparing, printing and mailing costs of any Registration
Statement, any Prospectus, any amendments or supplements thereto, any
underwriting agreements and stock certificates, and
(iii) the fees and disbursements of counsel for the Company and of
the independent public accountants of the Company;
provided, however, that Registration Expenses shall not include (x) SEC, stock
- -------- -------
exchange, NASD and other registration, listing and filing fees attributable to
the Registrable Securities, (y) underwriting discounts or commissions
attributable to Registrable Securities or (z) the fees and disbursements of
counsel for any Stockholder.
"Registration Statement" shall mean any registration statement of the
----------------------
Company which covers any Registrable Securities and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Required Registration" shall mean a registration required to be
---------------------
effected pursuant to Section 2(a).
-4-
<PAGE>
"Required Registration Statement" shall mean a registration statement
-------------------------------
of the Company which covers all of the Registrable Securities requested to be
included therein pursuant to the provisions of Section 2(a) on an appropriate
form pursuant to the Securities Act, and which form shall be available for the
sale of the Registrable Securities in accordance with the intended method or
methods of distribution thereof, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
---
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time.
"Underwriter" shall have the meaning set forth in Section 5(a).
-----------
"Underwritten Offering" shall mean a sale of securities of the Company
---------------------
to an Underwriter or Underwriters for reoffering to the public.
Section 2. Registration Under the Securities Act.
-------------------------------------
(a) Required Registration.
---------------------
(i) Right to Request Registration. Subject to Section 2(a)(ii), at
-----------------------------
any time or from time to time following the second anniversary of the Closing
Date, any Stockholder shall have the right to request in writing (a "Demand
------
Request") (which request shall specify the number of Registrable Securities
- -------
intended to be disposed of by such Stockholder and the intended method of
distribution thereof) that the Company register such Registrable Securities by
filing with the SEC a Required Registration Statement. The Company will, within
10 days of receiving a Demand Request, give written notice thereof (a "Demand
------
Notice") to all remaining Stockholders and will, not later than the 60th
- ------
calendar day after the receipt of such a Demand Request, cause to be filed a
Required Registration Statement covering all the Registrable Securities which
the Stockholders shall request in writing to be included in such Required
Registration Statement (which written requests by the remaining Stockholders
shall specify the number of Registrable Securities requested to be included and,
if the initiator of the Demand Request did not propose to sell through an
Underwritten Offering, the means of distribution, and which written request
shall be given within 10 days of receipt of the Demand Notice) and any Ordinary
Shares that the Company proposes to register, providing for the registration
under the Securities Act of such Registrable Securities to the extent necessary
to permit the disposition of such Registrable Securities so to be registered in
accordance with the intended method of distribution thereof specified in such
request (provided that the Company may delay such filing by not more than 120
--------
days if the Company, prior to the time it would otherwise have been required to
file such Registration Statement, determines in good faith that the filing of
the Registration Statement would require the disclosure of non-public material
information that, in the reasonable
-5-
<PAGE>
judgment of the Company, would be detrimental to the Company if so disclosed or
would otherwise adversely affect a financing, acquisition, disposition, merger
or other material transaction; provided, further that the Stockholders may
-------- -------
withdraw the Demand Request upon prompt notice to the Company if such delay
exceeds 30 days), and shall use its reasonable efforts to have such Required
Registration Statement declared effective by the SEC as soon as practicable
thereafter and to keep such Required Registration Statement continuously
effective for a period of at least 180 calendar days following the date on which
such Required Registration Statement is declared effective (or such shorter
period which will terminate when all of the Registrable Securities covered by
such Required Registration Statement have been sold pursuant thereto),
including, if necessary, by filing with the SEC a post-effective amendment or a
supplement to the Required Registration Statement or the related Prospectus or
any document incorporated therein by reference or by filing any other required
document or otherwise supplementing or amending the Required Registration
Statement, if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Required Registration
Statement or by the Securities Act, any state securities or blue sky laws, or
any rules and regulations thereunder.
The registration rights granted pursuant to the provisions of this
paragraph (a) shall be in addition to the registration rights granted pursuant
to the other provisions of this Section 2.
(ii) Number of Registrations; Size of Offering. The Company shall not
-----------------------------------------
be required, pursuant to this Section 2(a), to effect more than four (4)
Required Registrations. In addition, the Company shall not be required to file a
Required Registration Statement if (x) less than 180 calendar days have elapsed
since the effective date of (i) a prior Registration Statement with respect to
which the Stockholders were given the opportunity to register their Registrable
Securities (without being subject to any reduction, pursuant to Section
2(b)(ii), in the maximum number of Registrable Securities which they may
register) or (ii) a prior Registration Statement filed pursuant to a Required
Registration or (y) the total number of Registrable Securities requested by the
Stockholders to be included in the registration is less than 1,000,000 (which
number shall be adjusted from time to time for any stock splits, stock dividends
or combinations of Ordinary Shares after the date of this Agreement).
(iii) Pro Rata Participation in Required Registrations. If a
------------------------------------------------
registration pursuant to this Section 2(a) involves an Underwritten Offering of
both Registrable Securities and Ordinary Shares offered by the Company, and the
Underwriter or the managing Underwriter, as the case may be, of such
Underwritten Offering shall advise the Company in writing (with a copy to the
initiating Stockholder and each other Participating Stockholder) on or before
the date 5 days prior to the date then scheduled for such offering that, in its
opinion, the amount of securities (including Registrable Securities) requested
to be included in such registration exceeds the amount which can be sold in (or
during the time of) such offering without adversely affecting the distribution
of the securities being offered, then the number of shares included in such
offering by the Company and the Participating Stockholders shall be reduced pro
rata on the basis of the number of the securities requested to be included by
the Company and the Participating
-6-
<PAGE>
Stockholders (a "Cutback"); provided, however, that in the event the Company
------- -------- -------
will not, by virtue of this Section 2(a)(iii), include in any such registration
all of the Registrable Securities of a Participating Stockholder requested to be
included in such registration, such Participating Stockholder may, upon written
notice to the Company given within 3 days of the time such Participating
Stockholder first is notified of such matter, reduce the amount of its
Registrable Securities it desires to be included in such registration, in which
event (A) only the Registrable Securities, if any, it desires to have included
will be included and (B) the number of Registrable Securities it would otherwise
have been able to include, but for such requested reduction, shall be
reallocated to the other Participating Stockholders on a pro rata basis based on
the number of Registrable Securities that such Participating Stockholders
initially had requested to be included. If the number of Registrable Securities
subject to the Cutback exceeds 25% of the Registrable Securities proposed to be
sold by all Participating Stockholders as a result of the Company participating
in such Underwritten Offering, such Underwritten Offering shall not be deemed to
be a Required Registration for purposes of the first sentence of Section
2(a)(ii).
(b) Incidental Registration.
-----------------------
(i) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time or from time to time after the second anniversary of the Closing Date,
proposes to register any of its Ordinary Shares under the Securities Act or
proposes to register any other securities under the Securities Act on a form
that would permit registration of the Registrable Securities for resale by the
Stockholders (other than (A) any registration of public sales or distributions
solely by and for the account of the Company of securities issued (x) pursuant
to any employee benefit or similar plan or any dividend reinvestment plan or (y)
in any acquisition by the Company, or (B) pursuant to paragraph (a) of this
Section 2, or (C) pursuant to a registration statement filed in connection with
an exchange offer), whether in connection with a primary or secondary offering,
and there are Registrable Securities which at such time are not then registered
under another Registration Statement which is then effective, the Company will,
each time it intends to effect such a registration, give written notice to the
Stockholders at least 20 days prior to the initial filing of a Registration
Statement with the SEC pertaining thereto, informing the Stockholders of its
intent to file such Registration Statement, the intended method of distribution
thereof and of the Stockholders' right to request the registration of the
Registrable Securities under this paragraph (b). Upon the written request of a
Stockholder made within 10 days after any such notice is given (which request
shall specify the Registrable Securities intended to be disposed of by such
Stockholder), the Company will use its reasonable efforts to effect the
registration under the Securities Act of such Registrable Securities which the
Company has been so requested to register by the Stockholders; provided,
--------
however, that if, at any time after giving written notice of its intention to
- -------
register any Ordinary Shares and prior to the effective date of the Incidental
Registration Statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
Ordinary Shares, the Company may, at its election, give written notice of such
determination to the Stockholders and, thereupon, (A) in the case of a
determination not to register, the Company shall be relieved of its obligation
to register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses incurred in connection
therewith), and (B) in the
-7-
<PAGE>
case of a determination to delay such registration, the Company shall be
permitted to delay registration of any Registrable Securities requested to be
included in such Incidental Registration Statement for the same period as the
delay in registering such other securities. The Stockholders may not elect to
exercise their rights under this paragraph (b)(i) with respect to less than the
lesser of (A) 500,000 Registrable Securities (which number shall be adjusted
from time to time for any stock splits, stock dividends or combinations of
Ordinary Shares after the date of this Agreement) and (B) all of the remaining
Registrable Securities then held by the Stockholders.
The registration rights granted pursuant to the provisions of this
paragraph (b) shall be in addition to the registration rights granted pursuant
to the other provisions of this Section 2.
(ii) Priority in Incidental Registrations. If a registration
------------------------------------
pursuant to this paragraph (b) involves an Underwritten Offering of the
securities so being registered, whether or not for sale for the account of the
Company, which securities are to be distributed (on a firm commitment basis) by
or through one or more Underwriters of recognized standing under underwriting
terms appropriate for such transaction, and the Underwriter or the managing
Underwriter, as the case may be, of such Underwritten Offering shall advise the
Company in writing (with a copy to the Participating Stockholders) on or before
the date 5 days prior to the date then scheduled for such offering that, in its
opinion, the amount of securities (including Registrable Securities) requested
to be included in such registration exceeds the amount which can be sold in (or
during the time of) such offering without adversely affecting the distribution
of the securities being offered, then the Company will include in such
registration first, all the securities proposed to be sold by the Company
-----
pursuant to such registration statement, and second, the amount of other
------
securities (including Registrable Securities) requested to be included in such
registration that the Company is so advised can be sold in (or during the time
of) such offering, allocated, if necessary, pro rata among the holders
(including the Participating Stockholders) thereof requesting such registration
on the basis of the number of the securities (including Registrable Securities)
requested to be included by all such holders; provided, however, that in the
-------- -------
event the Company will not, by virtue of this sub-paragraph (b)(ii), include in
any such registration all of the Registrable Securities of any Participating
Stockholder requested to be included in such registration, such Participating
Stockholder may, upon written notice to the Company given within 3 days of the
time such Participating Stockholder first is notified of such matter, withdraw
all of its Registrable Securities from such registration.
(c) Expenses. The Participating Stockholders shall pay all
--------
Registration Expenses in connection with each registration pursuant to Section
2(a) in which the Company is not offering any Ordinary Shares, and the Company
agrees to pay all Registration Expenses in connection with each registration
pursuant to Section 2(b) and each registration pursuant to Section 2(a) in which
the Company is offering Ordinary Shares. The Participating Stockholders shall
pay all SEC, stock exchange, NASD and other registration, listing and filing
fees and all discounts and commissions payable to underwriters, selling brokers,
managers or other similar Persons, in each case attributable to the
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<PAGE>
sale or disposition of their respective Registrable Securities pursuant to any
such registration, and the fees and disbursements of their respective counsel.
(d) Effective Registration Statement; Suspension. A Registration
--------------------------------------------
Statement pursuant to this Section 2 will not be deemed to have become effective
(and the related registration will not be deemed to have been effected) unless
it has been declared effective by the SEC.
If at any time the Required Registration Statement or any prospectus
included therein contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statement therein not misleading, the Company shall notify the Participating
Stockholders who shall forthwith discontinue sales thereunder. The Company
shall use its reasonable efforts to prepare a supplement or post-effective
amendment to the Required Registration Statement or the related prospectus. Any
period during which the Company fails to keep any Required Registration
Statement effective and usable for resale of Registrable Securities as a result
of such an omission or misstatement shall be referred to as a "Suspension
----------
Period." A Suspension Period shall commence on and include the date that the
- ------
Company gives notice that any Required Registration Statement is no longer
effective or usable for resale of Registrable Securities to and including the
date the Stockholders either receive the copies of the supplemented or amended
Prospectus or are advised in writing by the Company that the use of the
Prospectus may be resumed. In the event of one or more Suspension Periods, the
180-day time periods referenced in paragraph (a) of this Section 2 shall be
extended by the number of days included in each such Suspension Period. If in
connection with a Required Registration a Suspension Period due to an omission
or misstatement of the Company exceeds 60 days, the Stockholders may withdraw
the Demand Request upon prompt notice to the Company, and such Underwritten
Offering shall not be deemed to be a Required Registration for purposes of the
first sentence of Section 2(a)(ii).
(e) Selection of Underwriters. If any securities under an Incidental
-------------------------
Registration Statement are to be sold in an Underwritten Offering, the Company
will select the investment banker or investment bankers and manager or managers
that will serve as Underwriter with respect to the Underwritten Offering. If
any securities under a Required Registration Statement are to be sold in an
Underwritten Offering, the holders of a majority of the Registrable Securities
proposed to be sold by the Participating Stockholders in such Underwritten
Offering may select a nationally recognized investment banking firm reasonably
acceptable to the Company as the manager or managers that will serve as
Underwriter with respect to the Underwritten Offering; provided, however, the
-------- -------
Company will select the manager or managers in any Underwritten Offering in
which the Company is offering to sell more Ordinary Shares than the
Participating Stockholders taken as a whole. No Stockholder may participate in
any Underwritten Offering hereunder unless such Stockholder completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such Underwritten
Offering, in each case, in the form and upon terms reasonably acceptable to the
Company.
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<PAGE>
Section 3. Restrictions on Public Sale by Stockholders.
-------------------------------------------
If any Stockholder's Registrable Securities are covered by an
Incidental Registration Statement filed pursuant to Section 2, such Stockholder
agrees, if the offering is an Underwritten Offering, that to the extent
requested by the Underwriter or managing Underwriter in such an Underwritten
Offering, not to effect any public sale or distribution of Ordinary Shares
during the 14-day period prior to, and during the 120-day period beginning on,
the effective date of the Registration Statement.
Section 4. Registration Procedures.
-----------------------
In connection with the obligations of the Company pursuant to Section
2, the Company shall use its reasonable efforts to effect or cause to be
effected the registration of the Registrable Securities under the Securities Act
to permit the sale of such Registrable Securities by the Stockholders as set
forth in Section 2, and the Company shall use reasonable efforts to:
(a) (i) prepare and file a Registration Statement with the SEC,
within the time period specified in paragraph (a) of Section 2 with respect to a
Required Registration, which Registration Statement (x) shall be on a form
selected by the Company for which the Company qualifies and shall be reasonably
acceptable to counsel for the Stockholders, (y) shall be available for the sale
of the Registrable Securities in accordance with the intended method of
distribution by the Stockholders, and (z) shall comply as to form in all
material respects with the requirements of the applicable form and include all
financial statements required by the SEC to be filed therewith, (ii) cause such
Registration Statement to become effective and remain effective in accordance
with Section 2, and (iii) cause each Registration Statement prepared pursuant to
Section 2 and the related Prospectus and any amendment or supplement thereto, as
of the effective date of such Registration Statement, amendment or supplement
(x) to comply in all material respects with any requirements of the Securities
Act and the rules and regulations of the SEC and (y) not to contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each such Registration Statement, as may be necessary to keep such
Registration Statement effective for the applicable period; cause each such
Prospectus to be supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities Act; and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by each Registration Statement during the applicable
period in accordance with the intended method of distribution by the
Stockholders, as set forth in such Registration Statement;
(c) furnish to each Stockholder participating in a registration
pursuant to Section 2 and to each Underwriter of an Underwritten Offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such
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<PAGE>
Stockholder or such Underwriter may reasonably request in order to facilitate
the public sale or other disposition of the Registrable Securities;
(d) (i) register or qualify the Registrable Securities, no later
than the time the applicable Registration Statement is declared effective by the
SEC, under all applicable state securities or "blue sky" laws of such
jurisdictions as each Underwriter, if any, or each Participating Stockholder
shall reasonably request; and (ii) keep each such registration or qualification
effective during the period such Registration Statement is required to be kept
effective; provided, however, that the Company shall not be obligated to qualify
-------- -------
as a foreign corporation or as a dealer in securities in any jurisdiction in
which it is not so qualified or to subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so subject or to
consent to be subject to general service of process (other than service of
process in connection with such registration or qualification or any sale of
Registrable Securities in connection therewith) in any such jurisdiction;
(e) notify each Participating Stockholder promptly (i) when a
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of the issuance by the
SEC or any state securities authority of any stop order, injunction or other
order or requirement suspending the effectiveness of a Registration Statement or
the initiation of any proceedings for that purpose, (iii) if, between the
effective date of a Registration Statement and the closing of any sale of
securities covered thereby pursuant to any agreement to which the Company is a
party, the representations and warranties of the Company contained in such
agreement cease to be true and correct in all material respects or if the
Company receives any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and (iv) of the occurrence of any
Suspension Period;
(f) furnish counsel for each such Underwriter, if any, and for each
participating Stockholder copies of any request by the SEC or any state
securities authority for amendments or supplements to a Registration Statement
and Prospectus or for additional information;
(g) obtain the withdrawal of any order suspending the effectiveness
of a Registration Statement at the earliest possible time;
(h) upon request, furnish to the Underwriter or managing Underwriter
of an Underwritten Offering of Registrable Securities, if any, without charge,
at least one signed copy of each Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits; and furnish to each
Participating Stockholder, without charge, one conformed copy of each
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
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<PAGE>
(i) in the case of an Underwritten Offering, enter into underwriting
agreements in customary form which include provisions with respect to
indemnification and contribution in customary form and consistent with the
provisions relating to indemnification and contribution contained herein;
(j) cause all Registrable Securities to be listed on any securities
exchange on which the Ordinary Shares are then listed or to be quoted in any
inter-dealer quotations system in which the Ordinary Shares are then quoted if
so requested by the Participating Stockholders or by the Underwriter or
Underwriters of an Underwritten Offering of Registrable Securities, if any; and
(k) comply with all applicable rules and regulations of the SEC and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
Each Stockholder agrees, as a condition to the registration
obligations provided herein, to furnish to the Company such information
regarding such Stockholder, the ownership of Registrable Securities by such
Stockholder and the proposed distribution by such Stockholder of such
Registrable Securities as the Company may from time to time reasonably request
in writing.
Each Stockholder agrees that, upon receipt of any notice from the
Company of the happening of a Suspension Period, such Stockholder will forthwith
discontinue disposition of Registrable Securities pursuant to the affected
Registration Statement until such Stockholder's receipt of the copies of any
supplemented or amended Prospectus, and, if so directed by the Company, such
Stockholder will deliver to the Company (at the expense of the Company) all
copies in its possession, other than permanent file copies then in such
Stockholder's possession, of the Prospectus covering such Registrable Securities
which was current at the time of receipt of such notice.
Section 5. Indemnification; Contribution.
-----------------------------
(a) Indemnification by the Company. The Company agrees to indemnify
------------------------------
and hold harmless each Person who participates as an underwriter (any such
Person being an "Underwriter"), each Stockholder and their respective partners,
-----------
directors, officers and employees and each Person, if any, who controls any
Stockholder or any Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act against any and all losses,
liabilities, claims, damages, judgments and reasonable expenses arising out of
any untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement (or any amendment thereto) pursuant to which
Registrable Securities were registered under the Securities Act, including all
documents incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto), including all documents incorporated therein
by reference, or the omission or alleged omission
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<PAGE>
therefrom of a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that this indemnity agreement does not apply to any
- -------- -------
Stockholder or any Underwriter or their respective partners, directors, officers
and employees and each Person, if any, who controls any Stockholder or any
Underwriter within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act with respect to any loss, liability, claim, damage, judgment
or expense to the extent arising out of any untrue statement or omission or
alleged untrue statement or omission (A) made in reliance upon and in conformity
with written information furnished to the Company by such Stockholder or such
Underwriter expressly for use in a Registration Statement (or any amendment
thereto) or any Prospectus (or any amendment or supplement thereto) or (B) if
such untrue statement or omission or alleged untrue statement or omission was
corrected in an amended or supplemented Registration Statement or Prospectus and
the Company had furnished copies thereof to the selling Underwriter or the
selling Stockholder prior to the relevant date of sale by such Underwriter or
such Stockholder to the Person asserting such loss, liability, claim, damage,
judgment or expense (provided, in the case of an Underwritten Offering, the
--------
limitation in this clause (B) shall not apply to a Participating Stockholder).
(b) Indemnification by Stockholders, Underwriters, Etc. Each
--------------------------------------------------
Stockholder agrees to indemnify and hold harmless the Company and each
Underwriter, and each of their respective partners, directors, officers and
employees (including each officer of the Company who signed the Registration
Statement), and each Person, if any, who controls the Company, or any
Underwriter within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, against any and all losses, liabilities, claims, damages,
judgments and expenses described in the indemnity contained in paragraph (a) of
this Section 5, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Stockholder for use in such Registration Statement (or any
amendment thereto) or such Prospectus (or any amendment or supplement thereto).
The Company shall be entitled to receive indemnification and contribution from
or on behalf of underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution to the same
extent as provided above with respect to information so furnished in writing by
such Persons for inclusion in any Prospectus or Registration Statement.
(c) Conduct of Indemnification Proceedings. Each indemnified party
--------------------------------------
or parties shall give reasonably prompt notice to each indemnifying party or
parties of any action or proceeding commenced against it in respect of which
indemnity may be sought hereunder, but failure so to notify an indemnifying
party or parties shall not relieve it or them from any liability which it or
they may have under this indemnity agreement, except to the extent that the
indemnifying party is materially prejudiced by such failure to give notice. If
the indemnifying party or parties so elects within a reasonable time after
receipt of such notice, the indemnifying party or parties may assume the defense
of such action or proceeding at such indemnifying party's or parties' expense
with counsel chosen by the indemnifying party or parties and approved by the
indemnified party defendant in such action or proceeding, which approval shall
not be unreasonably withheld. In the event,
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<PAGE>
however, that an indemnified party reasonably determines that representation by
counsel to an indemnifying party of both the indemnifying party and such
indemnified party could reasonably be expected to present such counsel with a
conflict of interest, then the indemnified party may employ separate counsel to
represent or defend it in any such action or proceeding and the indemnifying
party will pay the fees and expenses of such counsel; provided, that the
--------
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to local counsel) at any
time for all indemnified parties. If an indemnifying party or parties does not
assume such defense within 30 days, after having received the notice referred to
in the first sentence of this paragraph (c), the indemnifying party or parties
will pay the reasonable fees and expenses of counsel for the indemnified party
or parties (limited in each jurisdiction to one counsel for all indemnified
parties under this Agreement). In such event, however, no indemnifying party or
parties will be liable for any settlement effected without the written consent
of such indemnifying party or parties which consent shall not unreasonably be
withheld or delayed. If an indemnifying party assumes the defense of such action
or proceeding in accordance with this paragraph (c), such indemnifying party or
parties shall not, except as otherwise provided in this paragraph (c), be liable
for any fees and expenses of counsel for the indemnified parties incurred in
connection with such action or proceeding.
(d) Contribution. (i) In order to provide for just and equitable
------------
contribution in circumstances in which the indemnity agreement provided for in
this Section 5 is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms in respect of any
losses, liabilities, claims, damages, judgments and expenses suffered by an
indemnified party referred to therein, each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, liabilities,
claims, damages, judgments and expenses in such proportion as is appropriate to
reflect the relative fault of such indemnifying party on the one hand and of
such indemnified party on the other (including, in each case, that of their
respective officers, directors, employees and agents) in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages, judgments or expenses, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party on the one hand
and of the indemnified party on the other (including, in each case, that of
their respective officers, directors, employees and agents) shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by such indemnifying party, on the
one hand, or by or on behalf of such indemnified party, on the other, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(ii) For purposes of this Section 5, each Person, if any, who
controls a Stockholder or an Underwriter within the meaning of Section 15 of the
Securities Act
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<PAGE>
shall have the same rights to contribution as such Stockholder or such
Underwriter; and each director of the Company, each officer of the Company who
signed the Registration Statement, and each Person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act, shall have the
same rights to contribution as the Company.
Section 6. Securities Act Exemptions.
-------------------------
(a) The Company (i) shall comply in all material respects with the
reporting requirements of the Exchange Act in a timely manner and (ii) shall
comply in all material respects with all other public information reporting
requirements required by the SEC as a condition to the availability of an
exemption from the registration requirements of the Securities Act for the sale
of the Registrable Securities currently existing or hereafter adopted.
(b) The Company shall cooperate with the Stockholders in supplying
such information as may reasonably be necessary for the Stockholders to
determine the availability of an exemption from the registration requirements of
the Securities Act for the sale of the Registrable Securities and for the
Stockholders to complete and file any information reporting forms currently or
hereafter required by the SEC as a condition to the availability of such
exemption.
Section 7. Miscellaneous.
-------------
(a) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand delivery, registered first
class mail, telecopier, or any courier guaranteeing overnight delivery (i) if to
a Stockholder, at the most current address given by such Stockholder to the
Company by means of a notice given in accordance with the provisions of this
paragraph (a), or (ii) if to the Company, initially c/o Tommy Hilfiger U.S.A.,
Inc., 25 West 39th Street, New York, New York 10018, Attention: Joel J.
Horowitz, and thereafter at such other address, notice of which is given in
accordance with the provisions of this paragraph (a), with a copy to Wachtell,
Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019, Attention:
Eric S. Robinson, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; four business
days after being deposited in the mail, first-class postage prepaid, if mailed;
when receipt is acknowledged, if telecopied; and on the next business day if
timely delivered to a courier guaranteeing overnight delivery.
(b) Successors and Assigns. No Stockholder may transfer or assign
----------------------
any of its rights and obligations under this Agreement without the prior written
consent of the Company, except that without the prior written consent of the
Company, any Stockholder may assign its rights and obligations hereunder to any
Transferee (as defined in the Lock-Up Agreement) in connection with a Transfer
(as defined in the Lock-Up Agreement) that is not prohibited pursuant to the
Lock-Up Agreement so long as such Transferee shall
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<PAGE>
comply with Section 1(c) of the Lock-Up Agreement, to the extent applicable;
provided, however, that no such assignment shall relieve any Stockholder of
liability for any breach of this Agreement by such assignees. Except as
otherwise provided herein, this Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties.
(c) Amendment; Beneficiaries. No person or entity other than the
------------------------
parties hereto, their successors and permitted assigns shall have any right to
enforce any of the provisions of this Agreement or to sue hereunder. This
Agreement and the provisions hereof may be amended, altered, modified or waived
only by the mutual agreement in writing of each of the parties hereto, and the
consent of no person or entity other than each party hereto shall be required to
amend, alter, modify or waive this Agreement or any provision hereof. No person
or entity other than a party hereto shall be deemed a beneficiary or a third-
party beneficiary under this Agreement.
(d) Counterparts. This Agreement may be executed in counterparts,
------------
all of which taken together, shall constitute one and the same agreement.
(e) Descriptive Headings, Etc. The headings in this Agreement are
-------------------------
for convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise requires: (i) words of any gender shall be deemed to include each
other gender; (ii) words using the singular or plural number shall also include
the plural or singular number, respectively; (iii) the words "hereof," "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Section and paragraph, references are to the Sections and
paragraphs to this Agreement unless otherwise specified; (iv) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation," unless otherwise specified; (A) the word "or"
is not exclusive; and (B) provisions apply to successive events and
transactions.
(f) GOVERNING LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY, AND
--------------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO
CONTRACTS TO BE PERFORMED IN NEW YORK. EACH OF THE PARTIES HERETO CONSENTS TO
AND HEREBY SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN
THE STATE OF NEW YORK FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF
THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
THE PROVISIONS CONTAINED IN THIS PARAGRAPH (F) SHALL SURVIVE ANY TERMINATION OF
THIS AGREEMENT. ANY RIGHT TO TRIAL BY JURY WITH
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<PAGE>
RESPECT TO ANY CLAIM OR ACTION ARISING OUT OF THIS AGREEMENT OR IN CONNECTION
HEREWITH IS HEREBY WAIVED.
(g) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, premises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
TOMMY HILFIGER CORPORATION
By: /s/ Joel J. Horowitz
Name: Joel J. Horowitz
Title: Chief Executive Officer
PEPE JEANS LONDON CORPORATION
By: /s/ Lawrence S. Stroll
Name: Lawrence S. Stroll
Title: Group CEO
BLACKWATCH INVESTMENTS LIMITED
By: /s/ Silas K.F. Chou
Name: Silas K.F. Chou
Title: CEO
AIHL INVESTMENT GROUP LIMITED
By: /s/ Silas K.F. Chou
Name: Silas K.F. Chou
Title: CEO
ANASTA HOLDINGS LIMITED
By: /s/ Linda Massac
Name: Linda Massac
Title: Director
SPORTSWEAR HOLDINGS LIMITED
By: /s/ Silas K.F. Chou
Name: Silas K.F. Chou
Title: Director
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<PAGE>
WESTLEIGH LIMITED
By: /s/ Silas K.F. Chou
Name: Silas K.F. Chou
Title: Director
FLAIR INVESTMENT HOLDINGS LIMITED
By: /s/ Lawrence S. Stroll
Name: Lawrence S. Stroll
Title: Director
/s/ Thomas J. Hilfiger
Thomas J. Hilfiger
/s/ Joel J. Horowitz
Joel J. Horowitz
<PAGE>
Exhibit 10.27
NON-COMPETITION AGREEMENT
-------------------------
THIS AGREEMENT is entered into as of the 8th day of May, 1998, by and
among Silas K.F. Chou, Lawrence S. Stroll (each, an "Executive" and together,
the "Executives") and Tommy Hilfiger Corporation (the "Company").
WHEREAS, the Company, Tommy Hilfiger U.S.A., Inc. ("TH USA"), Tommy
Hilfiger (Eastern Hemisphere) Limited ("THEH") and Pepe Jeans London Corporation
("PJLC") have entered into a Stock Purchase Agreement (the "Stock Purchase
Agreement"), dated as of January 31, 1998, pursuant to which TH USA will
purchase from PJLC all of the outstanding capital stock of Pepe Jeans USA, Inc.
("Pepe USA") and THEH will purchase from PJLC all of the outstanding capital
stock of TJ Far East Limited (collectively, the "Acquisition"); and
WHEREAS, each of the Executives has an indirect beneficial ownership
interest in PJLC; and
WHEREAS, it is a condition to the Company's obligation to consummate
the Acquisition that the Executives enter into this Agreement.
NOW, THEREFORE, in consideration of the Company's performance under
the Stock Purchase Agreement, the mutual promises and agreements hereinafter set
forth, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Term of Agreement. The term of this Agreement shall begin on the
-----------------
date hereof and shall end on May 8, 2002 (the "Non-Competition Period").
2. Non-Competition. During the Non-Competition Period, each of the
---------------
Executives agrees that, without the consent of the disinterested directors of
the Company, he will not become an officer, director, employee, consultant,
partner or investor (other than as a passive investor in less than 5% of the
outstanding capital stock of a publicly-traded corporation) in any entity that
is, or is intended to become, a direct and substantial competitor in the United
States or Canada of the businesses engaged in by Pepe USA prior to the date
hereof, other than passive investments in an entity in which the annual revenues
for the most recently completed fiscal year relating to the business of such
entity that competes with Pepe USA are less than 20% of such entity's total
revenues for such fiscal year.
3. Violation. Each Executive acknowledges that he has carefully read
---------
and considered the terms of this Agreement and knows them to have been essential
to induce the Company to consummate the Stock Purchase Agreement and that
remedies at law will not be sufficient in the event of any breach of the
provisions contained herein. Therefore, in the event of a breach of this
Agreement, the Company shall be entitled, in addition to any other remedy at law
or in equity to which it may be fully entitled, to equitable relief against such
Executive, including, without limitation, an injunction to restrain such
Executive from such breach or threatened breach and to compel compliance with
this Agreement in protecting or enforcing its
<PAGE>
rights and remedies and enforcement of specific performance by such Executive of
this Agreement. Each Executive agrees to waive any requirement for the posting
of any bond in connection with such injunction or equitable relief.
4. Modification. The parties further agree and acknowledge that the
------------
duration, scope and geographic area of the covenant not to compete described in
Sections 1 and 2 are fair, reasonable and necessary in order to protect the
future operations and profitability of the Company and other legitimate
interests of the Company, that adequate consideration has been received by the
Executive for such obligations, and that these obligations do not prevent the
Executive from earning a livelihood. If, however, for any reason any court
determines that the restrictions in Sections 1 and 2 are not reasonable, that
consideration is inadequate or that the Executive has been prevented unlawfully
from earning a livelihood, such restrictions shall be interpreted, modified or
rewritten to include as much of the duration, scope and geographic area
identified in Sections 1 and 2 as will render such restrictions valid and
enforceable.
5. Notices. All notices hereunder, to be effective, shall be in
-------
writing and shall be deemed delivered when delivered by hand, upon confirmation
of receipt by telecopy or three (3) days after mailing by first-class, certified
mail, postage and fees prepaid, as follows:
(a) For notices and communications to the Company:
Tommy Hilfiger Corporation
c/o Tommy Hilfiger U.S.A., Inc.
25 West 39th Street
New York, NY 10018
Attn: Joel J. Horowitz
Telecopier No.: (212) 548-1818
(b) For notices and communications to Mr. Chou:
c/o Novel Enterprises Limited
12/F, Novel Industrial Building
850-870 Lai Chi Kok Road
Cheung Sha Wan, Kowloon
Hong Kong
Telecopier No.: 852-2370-1305
(c) For notices and communications to Mr. Stroll:
c/o Tommy Hilfiger Canada Inc.
7077, avenue du Parc, Suite 502
Montreal, Quebec, Canada H3N 1X7
Telecopier No.: 514-278-6184
By notice complying with the foregoing provisions of this Section, each party
shall have the right to change the address for future notices and communications
to the other parties.
-2-
<PAGE>
6. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
7. Modification; Waiver. No provision of this Agreement may be
--------------------
modified or waived unless such modification or waiver is agreed to in writing
and executed by each Executive affected thereby and by a duly authorized officer
of the Company. No waiver by any party hereto at any time of any breach by
another party hereto of, or failure to comply with, any condition or provision
of this Agreement to be performed or complied with by such other party shall be
deemed a waiver of any similar or dissimilar conditions or provisions at the
same or at any prior or subsequent time. Failure by an Executive or the Company
to insist upon strict compliance with any provision of this Agreement or to
assert any right which such Executive or the Company may have hereunder shall
not be deemed to be a waiver of such provision or right or any other provision
of or right under this Agreement.
8. Assignment. This Agreement and all rights hereunder are personal
----------
to each of the Executives and may not, unless otherwise specifically permitted
herein, be assigned by him. Notwithstanding anything else in this Agreement to
the contrary, the Company may assign this Agreement to and all rights hereunder
shall inure to the benefit of any person, firm or corporation succeeding to all
or substantially all of the business or assets of the Company whether by
purchase, merger or consolidation.
9. Captions. Captions herein have been inserted solely for
--------
convenience of reference and in no way define, limit or describe the scope or
substance of any provision of this Agreement.
10. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York as applied to contracts to
be performed in New York.
11. Jurisdiction; Waiver of Trial by Jury. Each of the parties hereto
-------------------------------------
consents to the jurisdiction of the United States District Court for the
Southern District of New York and any of the courts of the state of New York in
any dispute arising under this Agreement and agrees further that service of
process or notice in any such action, suit or proceeding shall be effective if
in writing and delivered in person or sent as provided in Section 5 hereof. ANY
RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION ARISING OUT OF THIS
AGREEMENT OR IN CONNECTION HEREWITH IS HEREBY WAIVED.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement in a binding contract as of the day and year first above written.
TOMMY HILFIGER CORPORATION
By: /s/ Joel J. Horowitz
Name: Joel J. Horowitz
Title: Chief Executive Officer
/s/ Silas K.F. Chou
Silas K.F. Chou
/s/ Lawrence S. Stroll
Lawrence S. Stroll
<PAGE>
EXHIBIT 11
----------
TOMMY HILFIGER CORPORATION
COMPUTATION OF NET INCOME PER ORDINARY SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
March 31, March 31, March 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
FINANCIAL STATEMENT PRESENTATION
BASIC
Weighted average shares outstanding................ 37,374 37,059 35,767
======== ======= =======
Net Income......................................... $113,180 $86,382 $61,500
======== ======= =======
Per Share Amount................................... $ 3.03 $ 2.33 $ 1.72
======== ======= =======
DILUTED
Weighted average shares outstanding................ 37,374 37,059 35,767
Net effect of dilutive stock options based on the
treasury stock method using average market price... 512 826 1,474
-------- ------- -------
Total.............................................. 37,886 37,885 37,241
======== ======= =======
Net Income......................................... $113,180 $86,382 $61,500
======== ======= =======
Per Share Amount................................... $ 2.99 $ 2.28 $ 1.65
======== ======= =======
</TABLE>
<PAGE>
EXHIBIT 21
----------
SUBSIDIARIES OF
TOMMY HILFIGER CORPORATION
State or Other Jurisdiction
Name of Subsidiary of Incorporation or Organization
- ------------------ --------------------------------
Tommy Hilfiger U.S.A., Inc. Delaware
Pepe Jeans USA, Inc. California
Tomcan Investments Inc. Delaware
Tommy Hilfiger Canada Inc. Canada
Tommy Hilfiger Retail, Inc. Delaware
Tommy Hilfiger Licensing, Inc. Delaware
Tommy Hilfiger Hungary Ltd. Hungary
Tommy Hilfiger Flagship Stores, Inc. Delaware
TH Flagship Holding Corporation I Delaware
TH Flagship Holding Corporation II Delaware
Tommy Hilfiger Retail (UK) Company United Kingdom
Tommy Hilfiger (Eastern Hemisphere) Limited British Virgin Islands
TJ Far East Limited British Virgin Islands
THHK Womenswear Limited Hong Kong
TJ Clothing (H.K.) Limited Hong Kong
Pepe International Limited Hong Kong
Tommy Hilfiger (HK) Limited Hong Kong
Tommy Hilfiger (India) Limited British Virgin Islands
Tommy Hilfiger (Singapore) Pte. Ltd. Singapore
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3
(No. 333-48355/48355-01) and in the Registration Statements on Form S-8
(Nos. 33-52810, 33-77168, 33-89298, 33-80439, 333-20993, and 333-42241) of Tommy
Hilfiger Corporation of our report dated May 20, 1998 appearing under Item 8 in
this Annual Report on Form 10-K.
/s/ PRICE WATERHOUSE LLP
New York, New York
June 24, 1998
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
-----------------
WHEREAS, Tommy Hilfiger Corporation proposes to file with Securities and
Exchange Commission, under the Securities and Exchange Act of 1934, as amended,
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz my true and lawful
attorney with power to act and with full power of substitution and
resubstitution, to execute in my name, place, and stead, in any and all
capacities, said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission, all as fully to all intents and purposes as I might or
could do in person, and I hereby ratify and approve the acts of said attorney.
IN WITNESS WHEREOF, I have executed this instrument this 20th day of May,
1998.
/s/ Benjamin M.T. Ng
--------------------
Benjamin M.T. Ng
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Tommy Hilfiger Corporation proposes to file with Securities and
Exchange Commission, under the Securities and Exchange Act of 1934, as amended,
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998:
NOW, THEREFORE, I hereby appoint Benjamin M.T. Ng my true and lawful
attorney with power to act and with full power of substitution and
resubstitution, to execute in my name, place, and stead, in any and all
capacities, said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission, all as fully to all intents and purposes as I might or
could do in person, and I hereby ratify and approve the acts of said attorney.
IN WITNESS WHEREOF, I have executed this instrument this 20th day of May,
1998.
/s/ Joel J. Horowitz
--------------------
Joel J. Horowitz
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Tommy Hilfiger Corporation proposes to file with Securities and
Exchange Commission, under the Securities and Exchange Act of 1934, as amended,
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and Benjamin M.T. Ng,
each of them severally, my true and lawful attorney or attorneys with power to
act with or without the other and with full power of substitution and
resubstitution, to execute in my name, place, and stead, in any and all
capacities, said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission, all as fully to all intents and purposes as I might or
could do in person, and I hereby ratify and approve the acts of said attorneys.
IN WITNESS WHEREOF, I have executed this instrument this 20th day of May,
1998.
/s/ Silas K.F. Chou
-------------------
Silas K.F. Chou
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Tommy Hilfiger Corporation proposes to file with Securities and
Exchange Commission, under the Securities and Exchange Act of 1934, as amended,
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and Benjamin M.T. Ng,
each of them severally, my true and lawful attorney or attorneys with power to
act with or without the other and with full power of substitution and
resubstitution, to execute in my name, place, and stead, in any and all
capacities, said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission, all as fully to all intents and purposes as I might or
could do in person, and I hereby ratify and approve the acts of said attorneys.
IN WITNESS WHEREOF, I have executed this instrument this 20th day of May,
1998.
/s/ Thomas J. Hilfiger
----------------------
Thomas J. Hilfiger
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Tommy Hilfiger Corporation proposes to file with Securities and
Exchange Commission, under the Securities and Exchange Act of 1934, as amended,
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and Benjamin M.T. Ng,
each of them severally, my true and lawful attorney or attorneys with power to
act with or without the other and with full power of substitution and
resubstitution, to execute in my name, place, and stead, in any and all
capacities, said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission, all as fully to all intents and purposes as I might or
could do in person, and I hereby ratify and approve the acts of said attorneys.
IN WITNESS WHEREOF, I have executed this instrument this 20th day of May,
1998.
/s/ Lawrence S. Stroll
----------------------
Lawrence S. Stroll
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Tommy Hilfiger Corporation proposes to file with Securities and
Exchange Commission, under the Securities and Exchange Act of 1934, as amended,
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and Benjamin M.T. Ng,
each of them severally, my true and lawful attorney or attorneys with power to
act with or without the other and with full power of substitution and
resubstitution, to execute in my name, place, and stead, in any and all
capacities, said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission, all as fully to all intents and purposes as I might or
could do in person, and I hereby ratify and approve the acts of said attorneys.
IN WITNESS WHEREOF, I have executed this instrument this 20th day of May,
1998.
/s/ Joseph M. Adamko
--------------------
Joseph M. Adamko
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Tommy Hilfiger Corporation proposes to file with Securities and
Exchange Commission, under the Securities and Exchange Act of 1934, as amended,
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and Benjamin M.T. Ng,
each of them severally, my true and lawful attorney or attorneys with power to
act with or without the other and with full power of substitution and
resubstitution, to execute in my name, place, and stead, in any and all
capacities, said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission, all as fully to all intents and purposes as I might or
could do in person, and I hereby ratify and approve the acts of said attorneys.
IN WITNESS WHEREOF, I have executed this instrument this 20th day of May,
1998.
/s/ Clinton V. Silver
---------------------
Clinton V. Silver
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Tommy Hilfiger Corporation proposes to file with Securities and
Exchange Commission, under the Securities and Exchange Act of 1934, as amended,
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and Benjamin M.T. Ng,
each of them severally, my true and lawful attorney or attorneys with power to
act with or without the other and with full power of substitution and
resubstitution, to execute in my name, place, and stead, in any and all
capacities, said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission, all as fully to all intents and purposes as I might or
could do in person, and I hereby ratify and approve the acts of said attorneys.
IN WITNESS WHEREOF, I have executed this instrument this 20th day of May,
1998.
/s/ Ronald K.Y. Chao
--------------------
Ronald K.Y. Chao
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Tommy Hilfiger Corporation proposes to file with Securities and
Exchange Commission, under the Securities and Exchange Act of 1934, as amended,
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and Benjamin M.T. Ng,
each of them severally, my true and lawful attorney or attorneys with power to
act with or without the other and with full power of substitution and
resubstitution, to execute in my name, place, and stead, in any and all
capacities, said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission, all as fully to all intents and purposes as I might or
could do in person, and I hereby ratify and approve the acts of said attorneys.
IN WITNESS WHEREOF, I have executed this instrument this 20th day of May,
1998.
/s/ Lester M.Y. Ma
------------------
Lester M.Y. Ma
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Tommy Hilfiger Corporation proposes to file with Securities and
Exchange Commission, under the Securities and Exchange Act of 1934, as amended,
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and Benjamin M.T. Ng,
each of them severally, my true and lawful attorney or attorneys with power to
act with or without the other and with full power of substitution and
resubstitution, to execute in my name, place, and stead, in any and all
capacities, said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission, all as fully to all intents and purposes as I might or
could do in person, and I hereby ratify and approve the acts of said attorneys.
IN WITNESS WHEREOF, I have executed this instrument this 20th day of May,
1998.
/s/ Simon Murray
----------------
Simon Murray
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Tommy Hilfiger Corporation proposes to file with Securities and
Exchange Commission, under the Securities and Exchange Act of 1934, as amended,
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and Benjamin M.T. Ng,
each of them severally, my true and lawful attorney or attorneys with power to
act with or without the other and with full power of substitution and
resubstitution, to execute in my name, place, and stead, in any and all
capacities, said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission, all as fully to all intents and purposes as I might or
could do in person, and I hereby ratify and approve the acts of said attorneys.
IN WITNESS WHEREOF, I have executed this instrument this 20th day of May,
1998.
/s/ Joseph Scirocco
-------------------
Joseph Scirocco
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Tommy
Hilfiger Corporation Consolidated Balance Sheet as of March 31, 1998 and
Consolidated Statement of Operations for the year then ended and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> $157,051
<SECURITIES> 0
<RECEIVABLES> 104,732
<ALLOWANCES> 0
<INVENTORY> 150,947
<CURRENT-ASSETS> 438,284
<PP&E> 160,089
<DEPRECIATION> 0
<TOTAL-ASSETS> 618,010
<CURRENT-LIABILITIES> 92,398
<BONDS> 0
0
0
<COMMON> 376
<OTHER-SE> 518,686
<TOTAL-LIABILITY-AND-EQUITY> 618,010
<SALES> 0
<TOTAL-REVENUES> 847,110
<CGS> 0
<TOTAL-COSTS> 447,524
<OTHER-EXPENSES> 230,816
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 168,770
<INCOME-TAX> 55,590
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 113,180
<EPS-PRIMARY> 3.03
<EPS-DILUTED> 2.99
</TABLE>
