\n Section 9.4. Opinions of Parent’s Counsel……………………… 32
\n Section 9.5. Certain Agreements………………………………. 32
\n Section 9.6. Stockholder Approval…………………………….. 32
\n Section 9.7. NYSE Listing……………………………………. 32
\n Section 9.8. Consents……………………………………….. 32<\/p>\n ARTICLE X <\/p>\n
Survival; Indemnification…………………………………………. 33
\n Section 10.1. Survival……………………………………….. 33
\n Section 10.2. Indemnification by Seller………………………… 33
\n Section 10.3. Indemnification Procedures……………………….. 33
\n Section 10.4. Limits on Indemnification………………………… 34
\n Section 10.5. Losses Net of Insurance………………………….. 34<\/p>\n
ARTICLE XI <\/p>\n
Termination……………………………………………………… 35
\n Section 11.1. Termination…………………………………….. 35
\n Section 11.2. Procedure and Effect of Termination……………….. 35<\/p>\n
ARTICLE XII <\/p>\n
Miscellaneous……………………………………………………. 35
\n Section 12.1. Counterparts……………………………………. 35
\n Section 12.2. Governing Law…………………………………… 35
\n Section 12.3. Jurisdiction; Waiver of Trial by Jury……………… 35
\n Section 12.4. Entire Agreement………………………………… 36
\n Section 12.5. Expenses……………………………………….. 36
\n Section 12.6. Notices………………………………………… 36
\n Section 12.7. Successors and Assigns…………………………… 37
\n Section 12.8. Headings; Definitions……………………………. 37
\n Section 12.9. Amendments and Waivers…………………………… 37
\n Section 12.10. Severability……………………………………. 37
\n Section 12.11. Interpretation………………………………….. 37
\n Signatures……………………………………………………. 38
\n<\/c><\/s><\/c><\/caption>\n<\/table>\n
Schedule 3.1(a) Jurisdictions in Which Companies and Subsidiaries are
\n Qualified to Do Business
\nSchedule 3.1(d) Violations and Accelerations
\nSchedule 3.2(a) Stock Information
\nSchedule 3.3(a) Pepe Exceptions to Applicable Accounting Principles
\nSchedule 3.3(b) Tomcan and TH Canada Exceptions to Applicable Accounting
\n Principles
\nSchedule 3.4 Real Property and Leases
\nSchedule 3.5 Absence of Certain Changes
\nSchedule 3.6 Litigation
\nSchedule 3.7(b) Consents and Approvals
\nSchedule 3.8 Labor Agreements, Disputes
\nSchedule 3.9 Compliance With Law
\nSchedule 3.10 Insurance Policies
\nSchedule 3.11 Material Transactions
\nSchedule 3.13 Affiliate Transactions
\nSchedule 3.14 Environmental Compliance
\nSchedule 3.15 Undisclosed Liabilities
\nSchedule 4.1(b) Violations and Accelerations
\nSchedule 4.2(b) Rights to Acquire Stock
\nSchedule 4.3 Authorizations and Consents
\nSchedule 4.6 SEC Filings
\nSchedule 5.2 Consents
\nSchedule 5.4 Conduct of Business by Seller
\nSchedule 6.1(a) Company of Employee Benefit Agreement
\nSchedule 6.1(d) Payments Caused by this Agreement
\nSchedule 6.2(d) Multiemployer Plans
\nSchedule 7.1(a) Income Tax Returns
\nSchedule 7.1(b) Contested Taxes; Reserves
\nSchedule 7.1(c) Tax Extensions and Powers of Attorneys
\nSchedule 7.1(d) Audits
\nSchedule 10.2(a) Retained Actions<\/p>\n
Exhibit 1.1(a) Terms of Second Amendment to the License Agreement dated
\n February 1, 1997 by and between Tommy Hilfiger Licensing,
\n Inc. and Seller, as amended
\nExhibit 1.1(b) Terms of Non-Competition Agreement
\nExhibit 1.1(c) Form of Registration Rights Agreement<\/p>\n
4<\/p>\n
STOCK PURCHASE AGREEMENT<\/p>\n
This Stock Purchase Agreement (the “Agreement”), dated as of January 31,
\n1998, is by and among Tommy Hilfiger Corporation, a British Virgin Islands
\ncorporation (“Parent”), Tommy Hilfiger U.S.A., Inc., a Delaware corporation
\nand a wholly owned subsidiary of Parent (“TH USA”), Tommy Hilfiger (Eastern
\nHemisphere) Limited, a British Virgin Islands corporation and a wholly owned
\nsubsidiary of Parent (“THEH”), and Pepe Jeans London Corporation, a British
\nVirgin Islands corporation (“Seller”).<\/p>\n
Whereas, Seller owns (a) 100% of the issued and outstanding shares of common
\nstock of Pepe Jeans USA, Inc., a California corporation (“Pepe USA”), and (b)
\n100% of the issued and outstanding ordinary shares of TJ Far East Limited, a
\nBritish Virgin Islands corporation (“Pepe Far East” and, together with Pepe
\nUSA, the “Companies”);<\/p>\n
Whereas, TH USA and THEH desire to purchase from Seller, and Seller desires
\nto sell to TH USA and THEH, 100% of the issued and outstanding shares of
\ncommon stock of Pepe USA and 100% of the issued and outstanding ordinary
\nshares of Pepe Far East, respectively, upon the terms and subject to the
\nconditions set forth herein (the “Stock Purchases”);<\/p>\n
Whereas, AIHL Investment Group Limited (“AIHL”), a British Virgin Islands
\ncorporation, has entered into a Guarantee, dated of even date herewith,
\npursuant to which AIHL has guaranteed all of the obligations of Seller under
\nthe Stock Purchase Agreement (the “AIHL Guarantee”); and<\/p>\n
Whereas, Pepe USA has agreed to purchase (the “Canada Purchase”) from
\nLawvest Holdings Inc., a British Virgin Islands corporation (“Lawvest”), all
\nof the issued and outstanding ordinary shares of Tomcan Investments, Inc., a
\nBritish Virgin Islands corporation (“Tomcan”), which will be consummated
\nimmediately after the consummation of the Stock Purchases.<\/p>\n
Now, Therefore, in consideration of the premises and of the mutual covenants
\nherein contained, the parties hereto agree as follows:<\/p>\n
ARTICLE I<\/p>\n
Certain Definitions<\/p>\n
As used in this Agreement the following terms shall have the following
\nrespective meanings:<\/p>\n
“Action” shall mean any complaint, claim, prosecution, indictment, action,
\nsuit, arbitration, investigation, inquiry or proceeding by or before any
\nGovernmental Authority.<\/p>\n
“Affiliate” shall mean any Person that directly, or indirectly through one
\nor more intermediaries, controls or is controlled by or is under common
\ncontrol with the party specified.<\/p>\n
“Agreement” shall have the meaning set forth in the preamble hereof.<\/p>\n
“AIHL” shall have the meaning set forth in the recitals hereof.<\/p>\n
“AIHL Guarantee” shall have the meaning set forth in the recitals hereof.<\/p>\n
“Amended European License Agreement” shall mean the License Agreement dated
\nas of February 1, 1997 by and between Tommy Hilfiger Licensing, Inc. and
\nSeller, as assigned by Seller to TH Europe and as amended by the First
\nAmendment thereto, as further amended by the Second Amendment thereto
\ncontaining substantially the terms set forth on Exhibit 1.1(a) hereto, to be
\nentered into between Tommy Hilfiger Licensing, Inc., Seller and TH Europe.<\/p>\n
“Ancillary Agreements” shall mean, collectively, the Amended European
\nLicense Agreement, the Canada Purchase Agreement, the Lock-Up Agreement and
\nthe Registration Rights Agreement.<\/p>\n
5<\/p>\n
“Applicable Return” shall have the meaning set forth in Section 10.1(a)
\nhereof.<\/p>\n
“Assets” shall have the meaning set forth in Section 3.4 hereof.<\/p>\n
“Bentley Trust Guarantee” shall mean the Guarantee, dated as of January 26,
\n1998 made by ATC Trustees (Cayman) Limited in trust for the Bentley Trust, in
\nfavor of Pepe USA.<\/p>\n
“Blackwatch” shall mean Blackwatch Investments Limited, a British Virgin
\nIslands corporation.<\/p>\n
“Blackwatch Note” shall have the meaning set forth in Section 5.16 hereof.<\/p>\n
“Canada Financial Statements” shall have the meaning set forth in Section
\n3.3(b) hereof.<\/p>\n
“Canadian Liabilities” shall have the meaning set forth in Section 10.2(a).<\/p>\n
“Canada Purchase” shall have the meaning set forth in the recitals hereof.<\/p>\n
“Canada Purchase Agreement” shall mean the Share Purchase Agreement, dated
\nas of January 26, 1998, between Pepe USA and Lawvest.<\/p>\n
“Canadian Subsidiaries” shall mean Tomcan and TH Canada.<\/p>\n
“Closing” shall mean the consummation of the transactions contemplated by
\nSection 2.1 of this Agreement.<\/p>\n
“Closing Date” shall have the meaning set forth in Section 2.2 hereof.<\/p>\n
“Code” shall mean the Internal Revenue Code of 1986, as amended, and any
\nsuccessor thereto.<\/p>\n
“Companies” shall have the meaning set forth in the recitals hereof.<\/p>\n
“Company Employee Benefit Plans” shall have the meaning set forth in Section
\n6.1(a) hereof.<\/p>\n
“Company Group” shall have the meaning set forth in Section 7.3(a) hereof.<\/p>\n
“Company Material Adverse Effect” shall have the meaning set forth in
\nSection 3.5 hereof.<\/p>\n
“Company Pension Plan” shall have the meaning set forth in Section 6.1(c)
\nhereof.<\/p>\n
“Continuing Affiliate” shall mean Seller, AIHL, Blackwatch, Lawvest or any
\nof their respective corporate Affiliates (other than the Companies, Tomcan,
\nParent and their respective subsidiaries).<\/p>\n
“Controlled Group Liability” shall have the meaning set forth in Section
\n6.2(f) hereof.<\/p>\n
“Covered Losses” shall mean any and all debts, losses, liabilities, claims,
\nfines, royalties, deficiencies, damages, obligations, payments (including,
\nwithout limitation, those arising out of any demand, assessment, settlement,
\njudgment or compromise relating to any Action), costs and expenses (including,
\nwithout limitation, interest and penalties due and payable with respect
\nthereto and reasonable attorneys’ and accountants’ fees and any other out-of-
\npocket expenses incurred in investigating, preparing, defending, avoiding or
\nsettling any Action or in enforcing another party’s obligations hereunder),
\nincluding, without limitation, any of the foregoing arising under, out of or
\nin connection with any Action, order or consent decree of any Governmental
\nAuthority or award of any arbitrator of any kind, or any law, rule,
\nregulation, contract, commitment or undertaking.<\/p>\n
“Determination” shall have the meaning set forth in Section 7.8(a) hereof.<\/p>\n
“Encumbrance” shall mean any mortgage, pledge, lien, easement, restrictive
\ncovenant, right of way, lease, purchase agreement, option, security interest
\nor other encumbrance and agreement.<\/p>\n
6<\/p>\n
“Environmental Law” shall have the meaning set forth in Section 3.14(a)(ii)
\nhereof.<\/p>\n
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
\namended.<\/p>\n
“ERISA Affiliate” shall have the meaning set forth in Section 6.2(e) hereof.<\/p>\n
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.<\/p>\n
“Expiration Date” shall have the meaning set forth in Section 10.1(a)
\nhereof.<\/p>\n
“Financial Statements” shall have the meaning set forth in Section 3.3(b)
\nhereof.<\/p>\n
“GAAP” shall mean United States generally accepted accounting principles.<\/p>\n
“Governmental Authority” shall have the meaning set forth in Section 3.1(d)
\nhereof.<\/p>\n
“Hazardous Substance” shall have the meaning set forth in Section 3.14(a)(i)
\nhereof.<\/p>\n
“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
\n1976, as amended.<\/p>\n
“Income Taxes” shall have the meaning set forth in Section 7.8(c).<\/p>\n
“Income Tax Returns” shall have the meaning set forth in Section 7.8(b).<\/p>\n
“Indemnification Threshold” shall have the meaning set forth in Section 10.4
\nhereof.<\/p>\n
“Indemnified Parties” shall have the meaning set forth in Section 10.2(a)
\nhereof.<\/p>\n
“Intellectual Property” means all United States and foreign (a) patents,
\npatent applications, patent disclosures and improvements thereto, (b)
\ntrademarks, service marks, logos, trade names and corporate names and
\nregistrations and applications for registration thereof, including, but not
\nlimited to, all marks registered in the United States Patent and Trademark
\nOffice, (c) copyrights and registrations and applications for registration
\nthereof, (d) computer software, data and documentation, (e) trade secrets and
\nconfidential business information (including ideas, formulas, compositions,
\ninventions (whether patentable or unpatentable and whether or not reduced to
\npractice), know-how, manufacturing and production processes and techniques,
\nresearch and development information, drawings, specifications, designs,
\nplans, proposals, technical data, copyrightable works, financial, marketing
\nand business data, pricing and cost information, business and marketing plans
\nand customer and supplier lists and information) and (f) copies and tangible
\nembodiments thereof (in whatever form or medium) in which any Company or
\nSubsidiary has any rights.<\/p>\n
“International License Agreement” shall mean the International License
\nAgreement dated August 28, 1995 between Tommy Hilfiger Licensing, Inc. and SEL
\nInternational Investments Corp., as ultimately assigned to T.H. International
\nN.V., as amended.<\/p>\n
“IRS” shall have the meaning set forth in Section 7.8(d).<\/p>\n
“Lawvest” shall have the meaning set forth in the recitals hereof.<\/p>\n
“Licenses” shall have the meaning set forth in Section 3.7(a).<\/p>\n
“Lock-Up Agreement” shall mean the Lock-Up Agreement, dated of even date
\nherewith, among Parent, Seller and certain direct and indirect stockholders of
\nSeller.<\/p>\n
“Memorandum Amendment” shall have the meaning set forth in Section 4.1(a)
\nhereof.<\/p>\n
“Multiemployer Plan” shall have the meaning set forth in Section 6.2(e)
\nhereof.<\/p>\n
7<\/p>\n
“Multiple Employer Plan” shall have the meaning set forth in Section 6.2(e)
\nhereof.<\/p>\n
“Net After-Tax Basis” shall mean, with respect to the calculation of any
\nindemnification payment owed to any party pursuant to this Agreement,
\ncalculation thereof in a manner taking into account any Taxes owing by the
\nindemnified party or its Affiliates as a result of receipt or accrual of the
\nindemnity payment and any Tax benefit received or accrued by the indemnified
\nparty or its Affiliates as a result of the indemnified liability.<\/p>\n
“Non-Competition Agreement” shall mean the Non-Competition Agreement
\ncontaining substantially the terms set forth on Exhibit 1.1(b) hereto, to be
\nentered into between the Company, Silas K.F. Chou and Lawrence S. Stroll.<\/p>\n
“Non-U.S. Company Employee Benefit Plans” shall have the meaning set forth
\nin Section 6.1(a) hereof.<\/p>\n
“Notice of Claim” shall have the meaning set forth in Section 10.3(a)
\nhereof.<\/p>\n
“NYSE” shall mean the New York Stock Exchange, Inc.<\/p>\n
“Other Taxes” shall have the meaning set forth in Section 7.8(e).<\/p>\n
“Parent” shall have the meaning set forth in the preamble hereof.<\/p>\n
“Parent SEC Reports” shall have the meaning set forth in Section 4.6(a)
\nhereof.<\/p>\n
“Parent Shares” shall mean the Ordinary Shares, $.01 par value per share, of
\nParent.<\/p>\n
“Parent Stockholders Meeting” shall have the meaning set forth in Section
\n3.16 hereof.<\/p>\n
“Pepe Balance Sheet” shall have the meaning set forth in Section 3.3(a)
\nhereof.<\/p>\n
“Pepe Far East” shall have the meaning set forth in the recitals hereof.<\/p>\n
“Pepe Far East Purchase Price” shall have the meaning set forth in Section
\n2.1(a) hereof.<\/p>\n
“Pepe Far East Shares” shall mean the Ordinary Shares, $1.00 par value per
\nshare, of Pepe Far East.<\/p>\n
“Pepe Financial Statements” shall have the meaning set forth in Section
\n3.3(a) hereof.<\/p>\n
“Pepe USA” shall have the meaning set forth in the recitals hereof.<\/p>\n
“Pepe USA Cash Purchase Price” shall have the meaning set forth in Section
\n2.1(a) hereof.<\/p>\n
“Pepe USA Shares” shall mean the shares of Common Stock, without par value,
\nof Pepe USA.<\/p>\n
“Pepe Year-End Balance Sheet” shall mean the condensed combined balance
\nsheet of Pepe USA and Pepe Far East and its subsidiaries as of December 31,
\n1997, previously provided by Seller to TH USA and THEH.<\/p>\n
“Permitted Exceptions” shall mean (a) mechanics’, materialmen’s, carriers’,
\nworkmen’s, warehousemen’s, repairmen’s, landlords’ or similar liens imposed by
\nlaw arising and incurred in the ordinary course of business and securing
\nobligations that are not delinquent, (b) liens for taxes and other
\ngovernmental charges, assessments or fees which (i) are not yet due and
\npayable or which may be paid without penalty or (ii) are being contested in
\ngood faith through appropriate procedures and in respect of which a Company or
\nSubsidiary has created adequate reserves or (c) Encumbrances which
\nindividually or in the aggregate do not detract from the value of any of the
\nproperty or assets subject thereto or interfere with the present use thereof.<\/p>\n
“Person” shall mean any individual, firm, corporation, partnership or other
\nentity (including Governmental Authorities), and shall include any successor
\n(by merger or otherwise) of such entity.<\/p>\n
8<\/p>\n
“Price Waterhouse” shall mean Price Waterhouse LLP or one of its
\ninternational affiliates.<\/p>\n
“Proxy Statement” shall have the meaning set forth in Section 5.12 hereof.<\/p>\n
“Purchase Price Cash Amount” shall have the meaning set forth in Section
\n2.1(a) hereof.<\/p>\n
“Purchase Price Shares” shall have the meaning set forth in Section 2.1(a)
\nhereof.<\/p>\n
“RCRA Hazardous Waste” shall have the meaning set forth in Section
\n3.14(a)(iii) hereof.<\/p>\n
“Real Property” shall have the meaning set forth in Section 3.4 hereof.<\/p>\n
“Registration Rights Agreement” shall mean the Registration Rights Agreement
\nin the form attached hereto as Exhibit 1.1(c), to be entered into between the
\nCompany, Seller and certain direct and indirect stockholders of Seller.<\/p>\n
“Retained Liabilities” shall have the meaning set forth in Section 10.2(a)
\nhereof.<\/p>\n
“Retained Note” shall have the meaning set forth in Section 2.1(c) hereof.<\/p>\n
“Returns” shall have the meaning set forth in Section 7.8(f).<\/p>\n
“SEC” shall mean the Securities and Exchange Commission or any successor
\nthereto.<\/p>\n
“Securities Act” shall mean the Securities Act of 1933, as amended.<\/p>\n
“Seller” shall have the meaning set forth in the preamble hereof.<\/p>\n
“Seller Affiliate” shall mean any of Seller, the Companies, the
\nSubsidiaries, the Canadian Subsidiaries, AIHL, Blackwatch, Anasta Holdings
\nLimited, Sportswear Holdings Limited, Westleigh Limited and Gadwal Limited.<\/p>\n
“Seller’s knowledge” or “knowledge of Seller” shall mean the knowledge of
\nthose individuals who as of the date hereof or at anytime thereafter are
\nofficers or directors of Seller, after due inquiry by such officers and
\ndirectors of the officers and directors of the Companies and the Subsidiaries.<\/p>\n
“Seller Note” shall have the meaning set forth in Section 5.16 hereof.<\/p>\n
“Shares” shall have the meaning set forth in Section 2.1(a) hereof.<\/p>\n
“Stock Purchases” shall have the meaning set forth in the recitals hereof.<\/p>\n
“Subsidiaries” shall mean TJ Clothing (H.K.) Limited, a Hong Kong
\ncorporation, Pepe International Limited, a Hong Kong corporation, THHK
\nWomenswear Limited, a Hong Kong corporation, and any subsidiary of a Company
\nformed after the date of this Agreement.<\/p>\n
“Taxes” shall have the meaning set forth in Section 7.8(h) hereof.<\/p>\n
“Tax Laws” shall have the meaning set forth in Section 7.8(g).<\/p>\n
“Taxing Authority” shall have the meaning set forth in Section 7.8(i)
\nhereof.<\/p>\n
“TH Canada” shall mean Tommy Hilfiger Canada, Inc., a company incorporated
\nunder the Canada Business Corporations Act.<\/p>\n
“THEH” shall have the meaning set forth in the preamble hereof.<\/p>\n
9<\/p>\n
“TH Europe” shall mean Tommy Hilfiger Europe B.V., a corporation organized
\nunder the laws of The Netherlands.<\/p>\n
“TH Incentive Plans” shall mean, collectively, the Tommy Hilfiger (Eastern
\nHemisphere) Limited 1992 Stock Incentive Plan, as amended, the Tommy Hilfiger
\nU.S.A., Inc. 1992 Stock Incentive Plan, as amended, and the Tommy Hilfiger
\nCorporation Non-Employee Directors Stock Option Plan.<\/p>\n
“T.H. International N.V.” shall mean T.H. International N.V., a corporation
\norganized under the laws of The Netherlands Antilles.<\/p>\n
“TH Licenses” shall mean, collectively, the International License Agreement;
\nthe Amended and Restated License Agreement, dated as of May 24, 1995, between
\nTH Canada and Tommy Hilfiger Licensing, Inc., as amended; the Amended and
\nRestated License Agreement, dated as of May 24, 1995, between TH Canada (d\/b\/a
\nTommy Hilfiger Shops Inc.) and Tommy Hilfiger Licensing, Inc., as amended; and
\nthe United States License Agreement, dated as of August 28, 1995, between SEL
\nInternational Investments Corp. and Tommy Hilfiger Licensing, Inc., as
\nultimately assigned to Pepe USA, as amended.<\/p>\n
“TH USA” shall have the meaning set forth in the preamble hereof.<\/p>\n
“Tomcan” shall have the meaning set forth in the recitals hereof.<\/p>\n
“Tomcan Balance Sheet” shall have the meaning set forth in Section 3.3(b)
\nhereof.<\/p>\n
“Tomcan Shares” shall mean the shares, par value $1.00 per share, of Tomcan.<\/p>\n
“Withdrawal Liability” shall have the meaning set forth in Section 6.2(d)
\nhereof.<\/p>\n
ARTICLE II<\/p>\n
Purchase and Sale of Stock; Closing<\/p>\n
Section 2.1. Purchase and Sale. (a) On the basis of the representations,
\nwarranties, covenants and agreements and subject to the satisfaction or waiver
\n(to the extent permitted) of the conditions set forth in Articles VIII and IX,
\nat the Closing Seller will sell and TH USA and THEH, respectively, will
\npurchase fifty thousand (50,000) Pepe USA Shares and one thousand (1,000) Pepe
\nFar East Shares (collectively, the “Shares”), which constitute, and will
\nconstitute as of the Closing, 100% of the issued and outstanding shares of
\ncapital stock or other equity interests of Pepe USA and Pepe Far East,
\nrespectively. In payment for such Pepe Far East Shares, simultaneously with
\nthe delivery by Seller of certificates for such Pepe Far East Shares, with all
\nappropriate stock powers and requisite tax stamps attached, properly signed,
\nin form suitable for the transfer of such Pepe Far East Shares to THEH, and
\nsubject to the satisfaction or waiver (to the extent permitted) of the
\napplicable conditions set forth herein, THEH will wire transfer $25,000,000.00
\n(the “Pepe Far East Purchase Price”) in immediately available funds to the
\naccount or accounts specified by Seller. In payment for such Pepe USA Shares,
\nsimultaneously with the delivery by Seller of certificates for such Pepe USA
\nShares, with all appropriate stock powers and requisite tax stamps attached,
\nproperly signed, in form suitable for the transfer of such Pepe USA Shares to
\nTH USA, and subject to the satisfaction or waiver (to the extent permitted) of
\nthe applicable conditions set forth herein, (i) TH USA will wire transfer
\n$730,760,000.00 (the “Pepe USA Cash Purchase Price” and, together with the
\nPepe Far East Purchase Price, the “Purchase Price Cash Amount”) in immediately
\navailable funds to the account or accounts specified by Seller and (ii) Parent
\nwill deliver to TH USA and TH USA will deliver to Seller certificates
\nrepresenting 9,045,930 Parent Shares (the “Purchase Price Shares”).<\/p>\n
(b) Certificates for the Purchase Price Shares shall be in definitive form
\nand registered in the name of Seller and shall be delivered to Seller bearing
\na legend or legends referencing restrictions under the Securities Act on
\ntransfer of the Purchase Price Shares and such other legends as the Board of
\nDirectors of Parent determines to be necessary or appropriate, including any
\nrequired by the Lock-Up Agreement.<\/p>\n
10<\/p>\n
(c) In addition, at the Closing Parent will purchase from Seller the
\n$10,000,000.00 Subordinated Promissory Note dated April 1, 1997 from Pepe USA
\nto Seller (the “Retained Note”) for an amount equal to the principal thereof
\nas of the Closing Date.<\/p>\n
Section 2.2. Time and Place of Closing. Subject to satisfaction or waiver of
\nthe conditions to Closing set forth herein, the Closing shall take place at
\nthe offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York,
\nNew York, as promptly as practicable after satisfaction or waiver, if
\npermissible, of the conditions set forth in Articles VIII and IX or at such
\nother time and date as Parent and Seller may agree (the “Closing Date”).<\/p>\n
ARTICLE III<\/p>\n
Representations and Warranties of Seller<\/p>\n
Seller hereby represents and warrants to Parent as follows:<\/p>\n
Section 3.1. Incorporation; Authorization; etc. (a) Each of the Companies
\nand Subsidiaries has been duly organized, is validly existing and in good
\nstanding under the laws of the jurisdiction of its incorporation. Each of the
\nCompanies and Subsidiaries has full corporate power and authority to own its
\nproperties and assets and to conduct its business as it is now being conducted
\nand is in good standing and is duly qualified to transact business in each
\njurisdiction in which the nature of property owned or leased by it or the
\nconduct of its business requires it to be so qualified except where the
\nfailure to be in good standing or so qualified would not have a material
\nadverse effect on the Companies and the Subsidiaries, taken as a whole. Each
\njurisdiction in which any of the Companies or Subsidiaries is qualified to do
\nbusiness is set forth on Schedule 3.1(a).<\/p>\n
(b) Seller has been duly organized, is validly existing and in good standing
\nunder the laws of the British Virgin Islands.<\/p>\n
(c) Seller has full corporate power and authority to execute and deliver
\nthis Agreement, to perform its obligations hereunder and to consummate the
\ntransactions contemplated hereby. Each Seller Affiliate has full corporate
\npower and authority to execute each of the Ancillary Agreements to which it is
\na party, to perform its obligations thereunder and to consummate the
\ntransactions contemplated thereby. The execution and delivery of this
\nAgreement, the performance of Seller’s obligations hereunder and the
\nconsummation of the transactions contemplated hereby have been duly and
\nvalidly authorized by all necessary corporate proceedings on the part of
\nSeller, and no other corporate proceeding or action on the part of Seller or
\nits Board of Directors and stockholders are necessary therefor. The execution
\nand delivery of each Ancillary Agreement to which any Seller Affiliate is a
\nparty, the performance of their respective obligations thereunder and the
\nconsummation of the transactions contemplated thereby by each Seller Affiliate
\nparty to such agreements have been duly and validly authorized by all
\nnecessary corporate proceedings on the part of such Seller Affiliate, and no
\nother corporate proceeding or action on the part of any Seller Affiliate and
\ntheir respective Boards of Directors and stockholders are necessary therefor.<\/p>\n
(d) The execution, delivery and performance of this Agreement and each of
\nthe Ancillary Agreements by the Seller Affiliates will not (i) violate or
\nconflict with any provision of the memorandum of association or articles of
\nassociation (or similar instruments) of any Seller Affiliate, (ii) except as
\nset forth on Schedule 3.1(d), conflict with, violate or constitute a default
\nunder any provision of, or be an event that is (or with the giving of notice
\nor passage of time or both will result in) a violation of or default under, or
\nresult in the acceleration of or entitle any party to accelerate (whether
\nafter the giving of notice or lapse of time or both) any obligation or right
\nunder, or result in the imposition of any lien upon or the creation of a
\nsecurity interest in any of the Shares or any of the assets or properties of
\nany of the Companies or of any of the Subsidiaries pursuant to, or require a
\nconsent or create a penalty or increase any Company’s or Subsidiary’s payment
\nor performance obligations under, any material mortgage, lien, lease,
\ninstrument, order, arbitration award, judgment or decree, or any material
\ncontract, agreement, license or permit, to which Seller, any Company or any
\nSubsidiary is a party or by which any of them or any of their property is
\nbound, or (iii) assuming that all consents, approvals, authorizations and
\nother actions described in Section 3.7(b) have been obtained and all filings
\nand obligations set forth in<\/p>\n
11<\/p>\n
Section 3.7(b) have been made, violate or conflict with in any material
\nrespect, or result in the imposition of any material lien (other than liens
\narising from any actions taken or arrangements made by Parent or any of its
\nsubsidiaries) upon any of the Shares, or any of the assets or properties of
\nany Company or any Subsidiary pursuant to, any provision of law, regulation,
\nrule, writ, injunction, decree, statute, order, judgment or ruling of any
\nfederal, state, local, foreign, supernational or supranational court or
\ntribunal (including any court or tribunal dealing with labor matters),
\ngovernmental, regulatory or administrative agency, department, bureau,
\nauthority or commission or arbitral panel (“Governmental Authority”) or any
\nother material restriction of any kind or character to which Seller, any
\nCompany or any Subsidiary is or may be subject or by which any of them or any
\nof their property is or may be bound. This Agreement, the Canada Purchase
\nAgreement and the Lock-Up Agreement have been, and, at the Closing, the
\nRegistration Rights Agreement and the Amended European License Agreement will
\nbe, duly executed and delivered by each Seller Affiliate that is a party to
\nsuch agreements, and, assuming the due execution hereof and thereof by Parent
\nand any subsidiary of Parent that is a party to such agreements, this
\nAgreement, the Canada Purchase Agreement and the Lock-Up Agreement constitute,
\nand at the Closing the Registration Rights Agreement and the Amended European
\nLicense Agreement will constitute, the legal, valid and binding obligations of
\nsuch Seller Affiliates enforceable against such parties in accordance with
\ntheir respective terms except, in each case, as such enforceability may be
\nlimited by any applicable bankruptcy, insolvency, reorganization, moratorium
\nor other similar laws affecting creditors’ rights generally, and except as the
\navailability of equitable remedies may be limited by the application of
\ngeneral principles of equity (regardless of whether such equitable principles
\nare applied in a proceeding at law or in equity).<\/p>\n
(e) Upon consummation of the Stock Purchases at the Closing, as contemplated
\nby this Agreement, Seller will deliver to TH USA and THEH good and valid title
\nto all of the outstanding Pepe USA Shares and Pepe Far East Shares,
\nrespectively, free and clear of any liens, claims, charges, security
\ninterests, options or other legal or equitable encumbrances or other rights of
\nthird parties (except those imposed by the federal securities laws or any
\naction taken or arrangement made by Parent or any of its subsidiaries).<\/p>\n
(f) Seller has made available to TH USA and THEH complete and correct copies
\nof the memorandum of association and articles of association (or similar
\ninstruments), as amended to date, of Seller and each of the Companies and
\nSubsidiaries, and has made available to TH USA and THEH the corporate minute
\nbooks containing the records of meetings of the stockholders and boards of
\ndirectors, the stock certificate books and the stock record books of the
\nCompanies and the Subsidiaries. The stock record books of the Companies and
\nthe Subsidiaries which Seller has made available to TH USA and THEH are
\ncomplete and correct in all respects and accurately reflect the ownership of
\nall of the outstanding shares of the Companies’ and the Subsidiaries’
\nrespective capital stock and all other securities issued by any of the
\nCompanies or Subsidiaries. All material corporate actions taken by the
\nCompanies and the Subsidiaries since their respective organization and
\nincorporation have been duly authorized and subsequently ratified as
\nnecessary. None of the Companies or the Subsidiaries is in default under or in
\nviolation of any provision of its memorandum of association or articles of
\nassociation (or similar instruments).<\/p>\n
Section 3.2. Capitalization; Structure. (a) The authorized capital stock of
\nPepe USA consists of 100,000 Pepe USA Shares, of which 50,000 shares are
\nissued and outstanding. The authorized capital stock of Pepe Far East consists
\nof 10,000 Pepe Far East Shares, of which 1,000 shares are issued and
\noutstanding. All of the outstanding shares of capital stock of the Companies
\nare validly issued, fully paid and nonassessable and are owned beneficially
\nand of record by Seller. All of the outstanding shares of capital stock or
\nother equity interests of the Subsidiaries, as listed on Schedule 3.2(a), are
\nvalidly issued, fully paid and nonassessable. Except as listed on Schedule
\n3.2(a), all of the outstanding shares of capital stock or other equity
\ninterests (i) of the Subsidiaries (other than Pepe International Limited) are
\nowned by Pepe Far East, (ii) of Pepe International Limited are owned by TJ
\nClothing (H.K.) Limited, (iii) of TH Canada are owned by Tomcan and (iv) of
\nTomcan are owned by Lawvest, all in the amounts set forth on Schedule 3.2(a).
\nNeither the Shares nor the shares of outstanding common stock or other equity
\ninterests of any Subsidiary have been issued in violation of, or are subject
\nto, any preemptive rights. The shares of capital stock or other equity
\ninterests of the Subsidiaries and the Shares are<\/p>\n
12<\/p>\n
owned in each case free and clear of any liens, claims, charges, security
\ninterests, options or other legal or equitable encumbrances or restrictions.
\nImmediately following the consummation of the Canada Purchase pursuant to the
\nterms of the Canada Purchase Agreement, the Tomcan Shares will be owned
\ndirectly or indirectly by Pepe USA and the shares of capital stock or other
\nequity interests of TH Canada will be owned by Tomcan, in each case free and
\nclear of any liens, claims, charges, security interests, options or other
\nlegal or equitable encumbrances or restrictions. There are no outstanding
\noptions, warrants, subscriptions or other rights of any kind to acquire, or
\nobligations to issue, shares of capital stock of any class of, or other equity
\ninterests in, any Company or, except as set forth on Schedule 3.2(a), any
\nSubsidiary, or any securities convertible into or exchangeable or exercisable
\nfor any shares of capital stock of any class of, or other equity interests in,
\nany Company or any Subsidiary.<\/p>\n
(b) None of the Companies or Subsidiaries directly or indirectly owns or has
\nthe right to acquire any capital stock of or other equity interests,
\ninvestment, partnership, joint venture or similar interest in any corporation,
\npartnership or other entity or other Person except for (i) the ownership of
\nthe outstanding shares or other equity interests of the Subsidiaries, as set
\nforth on Schedule 3.2(a) and (ii) the right of Pepe USA to purchase the Tomcan
\nShares pursuant to the Canada Purchase Agreement. Except for (i) obligations
\nor liabilities incurred in connection with its incorporation or organization,
\n(ii) ownership of the equity interests of TH Canada and (iii) as set forth on
\nthe Tomcan Balance Sheet, Tomcan has not and will not have incurred, directly
\nor indirectly, through any subsidiary or Affiliate, any obligations or
\nliabilities or engaged in any business activities of any type or kind
\nwhatsoever or entered into any agreements or arrangements with any Person.<\/p>\n
Section 3.3. Financial Statements. (a) Seller has previously furnished to TH
\nUSA true and complete copies of (i) the combined financial statements of Pepe
\nUSA and Pepe Far East and its subsidiaries, including combined balance sheets
\nas of March 31, 1997 and March 31, 1996, combined statements of operations and
\nretained earnings (accumulated deficit) and combined statements of cash flows
\nfor the fiscal-year periods ended March 31, 1997, March 31, 1996 and March 31,
\n1995 (such financial statements being audited and accompanied by the
\nunqualified opinion of Price Waterhouse) and (ii) unaudited condensed combined
\nfinancial statements for Pepe USA and Pepe Far East and its subsidiaries as of
\nand for the nine-month period ended December 31, 1997 (the “Pepe Financial
\nStatements”). The audited combined balance sheet as of March 31, 1997 is
\nreferred to in this Agreement as the “Pepe Balance Sheet.” The Pepe Financial
\nStatements (including, in each case, any notes thereto) present fairly in all
\nmaterial respects the combined financial position and results of operations
\nand cash flows of Pepe USA and Pepe Far East and its subsidiaries for the
\nrespective periods or as of the respective dates set forth therein, in each
\ncase in accordance with GAAP applied on a consistent basis throughout the
\nperiods involved (except as otherwise indicated therein or on Schedule 3.3(a)
\nand except, in the case of the unaudited Pepe Financial Statements, for
\nchanges resulting from normal and recurring year-end adjustments). The Pepe
\nFinancial Statements have been prepared from and in accordance with the books
\nand records of Pepe USA and Pepe Far East and its subsidiaries.<\/p>\n
(b) Seller has previously furnished to TH USA true and complete copies of
\nthe financial statements of (i) TH Canada, including balance sheets as of
\nMarch 31, 1997, March 31, 1996 and March 31, 1995, the statements of income
\nand retained earnings and statements of changes in financial position for the
\nfiscal-year periods ended March 31, 1997, March 31, 1996 and March 31, 1995
\nand (ii) Tomcan, including a consolidated balance sheet as of December 31,
\n1997, and statements of income and retained earnings and statements of changes
\nin financial position for the nine-month period ended December 31, 1997 (such
\nfinancial statements as of and for the fiscal-year period ended March 31, 1997
\nand as of and for the nine-month period ended December 31, 1997 being audited
\nand accompanied by the unqualified opinion of Price Waterhouse and such
\nfinancial statements as of and for the fiscal-year periods ended March 31,
\n1996 and March 31, 1995 being audited and accompanied by the unqualified
\nopinions of Ptack Schnarch Basevitz) (the “Canada Financial Statements” and
\ntogether with the Pepe Financial Statements, the “Financial Statements”). The
\nCanada Financial Statements have been prepared in accordance with GAAP applied
\non a consistent basis throughout the periods involved (except as otherwise
\nindicated therein or on Schedule 3.3(b)). The audited condensed balance sheet
\nof Tomcan as of December 31, 1997 is referred to in this Agreement as the
\n“Tomcan Balance Sheet.”<\/p>\n
13<\/p>\n
Section 3.4. Properties; Leases. Except for Permitted Exceptions or as set
\nforth on Schedule 3.4 hereto, at the Closing a Company or a Subsidiary will
\nhave good and marketable title to, or valid leasehold interests in, as the
\ncase may be, and hold free and clear of all Encumbrances, all of the
\nproperties and assets reflected in the Pepe Balance Sheet or acquired in the
\nordinary course of business since the date of the Pepe Balance Sheet (the
\n“Assets”) other than assets sold or fixtures transferred in the ordinary
\ncourse of business consistent with past practice. Schedule 3.4 sets forth a
\nlist of all real property used in conducting the businesses of the Companies
\nand the Subsidiaries (collectively, the “Real Property”). Seller has delivered
\nto TH USA and THEH or otherwise made available, correct and complete copies of
\nall leases, subleases and other material agreements or other material
\ninstruments relating to the Real Property to which any of the Companies or
\nSubsidiaries is a party, all of which are identified on Schedule 3.4 hereto.
\nThere are no pending or, to Seller’s knowledge, threatened condemnation
\nproceedings relating to any of the Real Property. None of the real property
\nimprovements (including leasehold improvements), equipment and other assets
\nowned or used by the Companies or the Subsidiaries is subject to any
\ncommitment or other arrangement for their sale or use by any Affiliate of any
\nof the Companies or the Subsidiaries or by third parties.<\/p>\n
Section 3.5. Absence of Certain Changes. Except as set forth on Schedule 3.5
\nhereto and except as contemplated by this Agreement, since March 31, 1997,
\nthere has been no (a) change or development in, or effect on, the business or
\nbusinesses of the Companies and the Subsidiaries that is, or could reasonably
\nbe expected to be, materially adverse to the business, assets, liabilities,
\ncondition (financial or otherwise), results of operations or prospects of the
\nCompanies and the Subsidiaries, taken as a whole (a “Company Material Adverse
\nEffect”) or (b) action taken by any Company or any Subsidiary which, if taken
\nfrom the date hereof through the Closing, would violate Section 5.4(b) through
\n(m).<\/p>\n
Section 3.6. Litigation; Orders. Except as set forth on Schedule 3.6 hereto,
\nthere are no Actions pending or, to the knowledge of Seller, threatened or
\nclaims asserted against any Company or Subsidiary other than routine Actions
\nin the ordinary course of business as to which the claims against the
\nCompanies and the Subsidiaries are less than $100,000 individually and
\n$250,000 in the aggregate. Except as set forth on Schedule 3.6 hereto, there
\nare no material judgments or material outstanding orders, injunctions,
\ndecrees, stipulations, settlement agreements, citations, investigations, fines
\nor awards against or binding upon any Company or Subsidiary or any of their
\nrespective properties or businesses.<\/p>\n
Section 3.7. Licenses, Approvals, Other Authorizations, Consents, Reports,
\netc. (a) The Companies and the Subsidiaries possess or have been granted all
\nmaterial registrations, filings, applications, certifications, notices,
\nconsents, licenses, permits, approvals, certificates, franchises, orders,
\nqualifications, authorizations and waivers (“Licenses”) of any Governmental
\nAuthority necessary to entitle them to conduct their businesses in the manner
\nin which they are presently being conducted.<\/p>\n
(b) Except (i) as set forth on Schedule 3.7(b) hereto, (ii) for the pre-
\nmerger notification requirements of the HSR Act and any necessary approvals or
\nfilings under the Competition Act (Canada) or the Investment Canada Act and
\n(iii) those the failure to make, file, give or obtain which would not have a
\nCompany Material Adverse Effect or prevent the consummation of the Stock
\nPurchases and the other transactions contemplated hereby, there are no
\nLicenses required to be made, filed, given or obtained by Seller, or any of
\nthe Companies or Subsidiaries with, to or from any Governmental Authority in
\nconnection with the consummation of the Stock Purchases, the Canada Purchase
\nand the other transactions contemplated under this Agreement or any of the
\nAncillary Agreements.<\/p>\n
Section 3.8. Labor Matters. Schedule 3.8 hereto sets forth all collective
\nbargaining or other agreements with labor unions, trade unions, employee
\nrepresentatives, work committees, guilds or associations representing
\nemployees of any of the Companies or Subsidiaries. As of the date hereof, none
\nof the Companies or Subsidiaries is involved in or, to Seller’s knowledge,
\nthreatened with any labor dispute, arbitration, lawsuit, grievance or
\nadministrative proceeding (other than immaterial grievances), relating to
\nlabor matters involving any current or former employee of any Company or
\nSubsidiary. Except as set forth on Schedule 3.8, as of the date hereof, no
\nunion or association organizing or election activities involving any nonunion
\nemployees of any Company or Subsidiary are in progress or, to the knowledge of
\nSeller, have been threatened since April 1, 1995.<\/p>\n
14<\/p>\n
Section 3.9. Compliance with Laws. Except as may be disclosed in Schedule
\n3.9, the conduct of the businesses of the Companies and Subsidiaries is in and
\nhas been in compliance in all material respects with all material statutes,
\nlaws, regulations, ordinances, rules, judgments, orders or decrees applicable
\nthereto. Except as set forth on Schedule 3.9, neither Seller nor any Company
\nor Subsidiary has received written notice of any alleged violation of any
\nstatute, law, regulation, ordinance, rule, judgment, order or decree from any
\nGovernmental Authority applicable to any of the Companies or Subsidiaries or
\nto their properties which has not been satisfactorily addressed and which give
\nrise to material fines or other civil penalties or to any criminal
\nliabilities. In furtherance and not in limitation of the foregoing, neither
\nSeller nor any Company or Subsidiary has, directly or indirectly, paid or
\ndelivered any fee, commission or other sum of money or item of property,
\nhowever characterized, to any government official or other governmental party,
\nin the United States or any other country, which is in any manner related to
\nthe businesses or operations of the Companies or the Subsidiaries and which
\nwas illegal under any statutes, laws, regulations, ordinances, rules,
\njudgments, orders or decrees of any Governmental Authority (including, without
\nlimitation, the U.S. Foreign Corrupt Practices Act).<\/p>\n
Section 3.10. Insurance. Each of the Companies and Subsidiaries is covered
\nby valid and currently effective insurance policies issued in its favor that
\nare customary in scope and amount of coverage for privately-owned companies of
\nsimilar size and financial condition in the industry and locale in which it
\noperates. Schedule 3.10 lists all insurance policies which are in effect
\ncovering any of the Companies, the Subsidiaries or their employees, or the
\nReal Property and such Schedule lists each of the parties to such policies.
\nExcept as set forth on Schedule 3.10, all such policies are in full force and
\neffect, all premiums due thereon have been paid and the Companies and the
\nSubsidiaries have complied with the provisions of such policies in all
\nmaterial respects.<\/p>\n
Section 3.11. Material Contracts. Except as set forth on Schedule 3.11
\nhereto, neither any Company nor any Subsidiary is a party to or bound by any
\nwritten or oral (a) employment, consulting or non-competition agreement or
\ncontract requiring payments of compensation to any one Person in excess of
\n$75,000 per year or aggregate payments of compensation to any one Person in
\nexcess of $150,000; (b) joint venture or partnership contract or agreement;
\n(c) contract or agreement restricting the right of any of the Companies or the
\nSubsidiaries to compete in any way with any other Person; (d) other than trade
\npayables in the ordinary course of business, agreement or contract creating,
\nevidencing or securing, as of the date hereof, obligations of any of the
\nCompanies or the Subsidiaries for (i) borrowed money, (ii) purchase money
\nindebtedness, (iii) any guarantee or assumption of an obligation for borrowed
\nmoney or purchase money indebtedness or other obligations of reimbursement of
\nany maker of a letter of credit or any guaranty of minimum equity or capital
\nor any make-whole or similar agreement, (iv) any loan or extension of credit
\nby any Company or Subsidiary or (v) bankers acceptance; (e) agreement or
\ncontract relating to any outstanding commitment for capital expenditures in
\nexcess of the amount set forth on the capital budget provided to Parent prior
\nto the date hereof; (f) licenses, whether as licensor or licensee, of any
\nIntellectual Property; (g) any material lease as lessee or lessor of real or
\npersonal property; (h) capitalized lease or sale-leaseback or material
\nconditional sale agreement; (i) distributorship or franchise agreement; (j)
\nmaterial raw material or other supply agreements or any exclusive dealing,
\nrequirements or take-or-pay contracts; (k) other than as identified in Section
\n3.12, any brokerage or finders fee agreements; or (l) other contract or
\nagreement, entered into other than in the ordinary course of business,
\ninvolving an estimated total future payment or payments in excess of $100,000.
\nEach contract or agreement set forth on Schedule 3.11 hereto is in full force
\nand effect, and, to Seller’s knowledge, is legal, valid and binding and
\nenforceable against each other Person party thereto. Neither any of the
\nCompanies or Subsidiaries, nor, to Seller’s knowledge, any other party to any
\nsuch contract or agreement, is in material breach thereof or default
\nthereunder and there does not exist under any provision thereof, any event
\nthat, with the giving of notice or the lapse of time or both, would constitute
\nsuch a breach or default by any Company or Subsidiary or, to Seller’s
\nknowledge, by any other party to any such contract or agreement, except for
\nsuch breaches, defaults and events as to which requisite waivers or consents
\nhave been or prior to the Closing will have been obtained. Seller has made
\navailable to TH USA and THEH true and correct copies of each of such written
\nagreements and contracts or provided written summaries of any such oral
\nagreements and contracts.<\/p>\n
Section 3.12. Brokers, Finders, etc. No Seller Affiliate has employed, or is
\nsubject to any valid claim of, any broker, finder, or other similar
\nintermediary in connection with the transactions contemplated by this<\/p>\n
15<\/p>\n
Agreement or the Ancillary Agreements who might be entitled to a fee or
\ncommission in connection with such transactions, other than pursuant to an
\nengagement letter with each of Allen & Company Incorporated and Smith Barney
\nCanada, true and correct copies of which Seller has previously provided to TH
\nUSA and THEH, the fees and expenses of which will be payable by Pepe USA and
\nTH Canada, respectively.<\/p>\n
Section 3.13. Affiliate Transactions. Except as disclosed in the notes to
\nthe Financial Statements or as set forth on Schedule 3.13 hereto, (a) no
\nContinuing Affiliate or any officer, director or employee of any Continuing
\nAffiliate provides or causes to be provided to any of the Companies or the
\nSubsidiaries any assets, loans, advances, services or facilities and (b) none
\nof the Companies or Subsidiaries provides or causes to be provided to any such
\nofficer, director or employee or Continuing Affiliate any assets, loans,
\nadvances, services or facilities. Except as set forth on Schedule 3.13 hereto,
\nnone of the Companies or the Subsidiaries, jointly with any Continuing
\nAffiliate, purchases or sells goods or services.<\/p>\n
Section 3.14. Environmental Compliance. (a) For purposes of this Section
\n3.14, (i) “Hazardous Substance” means any pollutant, contaminant, hazardous or
\ntoxic substance or waste, solid waste, petroleum, petroleum product, by-
\nproduct or breakdown product, or any other chemical, substance or material
\nlisted or identified in or regulated by or under any Environmental Law; (ii)
\n“Environmental Law” means the Comprehensive Environmental Response,
\nCompensation and Liability Act, 42 U.S.C. (S) 9601 et seq., the Solid Waste
\nDisposal Act, as amended by the Resource Conservation and Recovery Act, 42
\nU.S.C. (S) 6901 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq., the
\nClean Air Act, 42 U.S.C. (S) 7401 et seq., the Toxic Substances Control Act,
\n15 U.S.C. (S) 2601 et seq., the Safe Drinking Water Act, 42 U.S.C. (S) 300f et
\nseq., the Emergency Planning and Community Right to Know Act, 42 U.S.C. (S)
\n11001 et seq., the Occupational Safety and Health Act, 29 U.S.C. (S) 651 et
\nseq., the Oil Pollution Act, 33 U.S.C. (S) 2701 et seq., in each case as
\namended from time to time, and any other statute, rule, regulation, law, by-
\nlaw, ordinance or directive of any Governmental Authority dealing with the
\npollution or protection of natural resources or the indoor or ambient
\nenvironment or with the protection of human health or safety; and (iii) “RCRA
\nHazardous Waste” means a solid waste that is listed or classified as a
\nhazardous waste, as that term is defined in or pursuant to the Resource
\nConservation and Recovery Act, as amended, 42 U.S.C. (S) 6901 et seq.<\/p>\n
(b) Except as set forth on Schedule 3.14, there are no claims pending or, to
\nthe knowledge of Seller, threatened, and none of Seller, the Companies or
\nSubsidiaries has received any written notice, alleging, warning or notifying
\nany Company or Subsidiary that any Company or Subsidiary is, has been or may
\nbe in violation of, or non-compliance with, in any material respect, any
\nEnvironmental Law.<\/p>\n
(c) Except as set forth on Schedule 3.14, to the knowledge of Seller, no
\nHazardous Substances have ever been buried, spilled, leaked, discharged,
\nemitted, generated, stored, used or released, and no Hazardous Substances are
\nnow present in amounts, concentrations or conditions requiring investigation,
\nstudy, removal, remediation or any other response action or corrective action
\nunder, or forms the basis of a claim pursuant to, any Environmental Law, in,
\non, from or under the Real Property or any other property with respect to
\nwhich any Company or Subsidiary may be identified as a potentially responsible
\nparty or otherwise bear liability, except for immaterial quantities stored or
\nused by any Company or Subsidiary in the ordinary course of its business and
\nin accordance, in all material respects, with all applicable Environmental
\nLaws.<\/p>\n
(d) Except as set forth on Schedule 3.14, the Real Property is not being
\nused and, to the knowledge of Seller, never has been used in connection with
\nthe business of manufacturing, storing or transporting Hazardous Substances,
\nand, to the knowledge of Seller, no RCRA Hazardous Wastes have been treated,
\nstored or disposed of there.<\/p>\n
(e) Except as set forth on Schedule 3.14, to Seller’s knowledge, there are
\nnot now and never have been any underground or above ground storage tanks or
\nother containment facilities of any kind on the Real Property which contain or
\ncontained any Hazardous Substances.<\/p>\n
(f) Except as set forth on Schedule 3.14, none of the Real Property is or
\nhas been listed on the National Priorities List, the Comprehensive
\nEnvironmental Response, Compensation and Liability Information System or<\/p>\n
16<\/p>\n
any similar federal, state, local or foreign list, schedule, log, inventory or
\ndatabase of sites or facilities with potential, threatened, suspected or
\nactual releases of Hazardous Substances.<\/p>\n
(g) Schedule 3.14 identifies, and Seller has provided to TH USA and THEH
\ntrue and correct copies of, all environmental audits or assessments relating
\nin whole or in part to any of the Companies or the Subsidiaries undertaken by
\nor on behalf of any of the Seller Affiliates, or, to Seller’s knowledge, by
\nGovernmental Authorities or other third parties, and any written
\ncommunications by the Companies or the Subsidiaries or, to Seller’s knowledge,
\nrelating in whole or in part to any of the Companies or the Subsidiaries with
\nenvironmental agencies, within the past six years which describe the status of
\nany Real Property or the compliance of the owners or lessees thereof with
\nrespect to any Environmental Law.<\/p>\n
(h) Except as set forth on Schedule 3.14, no Seller Affiliate has received
\nany written notice from any Governmental Authority or other third party that
\nany of the Companies or Subsidiaries or any of their predecessors is or may be
\na potentially responsible party or may otherwise bear liability for any actual
\nor threatened release of Hazardous Substances at or from any site or facility
\nother than the Real Property.<\/p>\n
Section 3.15. Undisclosed Liabilities. Except (a) as disclosed in Schedule
\n3.15 hereto, (b) obligations to consummate the Canada Purchase pursuant to the
\nCanada Purchase Agreement, (c) as and to the extent disclosed or reserved
\nagainst on the Pepe Balance Sheet or identified in the notes thereto, (d) as
\nand to the extent disclosed on the face of the Pepe Year-End Balance Sheet or
\nidentified in the notes thereto, (e) as incurred after the date of the Pepe
\nBalance Sheet in the ordinary course of business consistent with prior
\npractice and not prohibited by this Agreement or (f) liabilities or
\nobligations relating to Actions, contracts, agreements or environmental
\nmatters disclosed on or not required to be disclosed on Schedules 3.6, 3.11 or
\n3.14, respectively, the Companies and Subsidiaries do not have any liabilities
\nor obligations of any nature, whether known or unknown, absolute, accrued,
\ncontingent or otherwise and whether due or to become due.<\/p>\n
Section 3.16. Proxy Statement. The information supplied by Seller, the
\nCompanies or the Subsidiaries for inclusion in the Proxy Statement (as defined
\nin Section 5.12) to be sent to the stockholders of Parent in connection with
\nthe meeting of the stockholders of Parent to consider this Agreement (the
\n“Parent Stockholders Meeting”), will not, on the date the Proxy Statement (or
\nany amendment thereof or supplement thereto) is first mailed to the
\nstockholders of Parent, at the time of the Parent Stockholders Meeting or on
\nthe Closing Date, contain any statement which, at such time and in light of
\nthe circumstances under which it shall be made, is false or misleading with
\nrespect to any material fact, or shall omit to state any material fact
\nnecessary in order to make the statements made therein not false or
\nmisleading. If at any time prior to the Closing Date any event relating to
\nSeller or any of the Companies or Subsidiaries or any of their respective
\nAffiliates, officers or directors should be discovered by Seller, any of the
\nCompanies or any of the Subsidiaries which should be set forth in an amendment
\nor supplement to the Proxy Statement, Seller shall promptly inform Parent.<\/p>\n
Section 3.17. Acquisition of Shares for Investment. Seller has such
\nknowledge and experience in financial and business matters that it is capable
\nof evaluating the merits and risks of Seller’s acquisition of the Purchase
\nPrice Shares and has been provided access to personnel and books of Parent and
\nits subsidiaries for purposes of making its evaluation. Seller is acquiring
\nthe Purchase Price Shares for investment and not with a view toward or for
\nsale in connection with any distribution thereof, or with any present
\nintention of distributing or selling the Purchase Price Shares. Seller agrees
\nthat the Purchase Price Shares may not be sold, transferred, offered for sale,
\npledged, hypothecated or otherwise disposed of without registration under the
\nSecurities Act, except pursuant to an exemption from such registration
\navailable under the Securities Act.<\/p>\n
17<\/p>\n
ARTICLE IV<\/p>\n
Representations and Warranties of Parent<\/p>\n
Parent hereby represents and warrants to Seller as follows:<\/p>\n
Section 4.1. Incorporation; Authorization; etc. (a) Parent has been duly
\nincorporated and is validly existing as a company limited by shares in good
\nstanding under the laws of the British Virgin Islands. Each of TH USA and THEH
\nhas been duly incorporated and is validly existing and in good standing under
\nthe laws of the jurisdiction of its incorporation. Parent has full corporate
\npower and authority to own its property and to conduct its business as it is
\nnow being conducted and is duly qualified as a foreign corporation to transact
\nbusiness and is in good standing in each jurisdiction in which the conduct of
\nits business or ownership or leasing of property requires such qualification,
\nexcept to the extent that the failure to be so qualified or be in good
\nstanding would not have a material adverse effect on Parent and its
\nsubsidiaries, taken as a whole. Parent and each subsidiary of Parent which is
\na party to this Agreement or any of the Ancillary Agreements has full
\ncorporate power and authority to execute and deliver this Agreement and each
\nof the Ancillary Agreements to which Parent or such subsidiary is a party, to
\nperform its obligations hereunder and thereunder and to consummate the
\ntransactions contemplated hereby and thereby. Each of (i) the execution and
\ndelivery of this Agreement and each of the Ancillary Agreements to which
\nParent or any of its subsidiaries is a party, and the performance by Parent or
\nsuch subsidiaries of their respective obligations hereunder and thereunder and
\nthe consummation of the transactions contemplated hereby and thereby by Parent
\nor such subsidiaries and (ii) an amendment to the memorandum of association of
\nParent to increase the number of authorized Parent Shares to 75,000,000 (the
\n“Memorandum Amendment”) have been duly authorized by the Board of Directors of
\nParent and each such subsidiary, as applicable, and no other corporate
\nproceedings on the part of Parent or its subsidiaries or their respective
\nBoards of Directors or stockholders are necessary therefor, other than the
\napproval of this Agreement by a majority of the votes cast at the Parent
\nStockholders Meeting. The Board of Directors of Parent has directed that this
\nAgreement be submitted to Parent’s stockholders for approval at the Parent
\nStockholders Meeting and has recommended that Parent’s stockholders approve
\nthis Agreement.<\/p>\n
(b) The execution, delivery and performance by Parent and its subsidiaries
\nof this Agreement and each of the Ancillary Agreements to which Parent or any
\nsuch subsidiary is a party will not (i) (assuming the stockholder approval set
\nforth in Section 4.1(a) is obtained and the Memorandum Amendment has become
\neffective) violate or conflict with any provision of the memorandum of
\nassociation or articles of association (or similar instruments) of Parent or
\nsuch subsidiaries, (ii) except as set forth on Schedule 4.1(b), conflict with,
\nviolate or constitute a default under any provision of, or be an event that is
\n(or with the giving of notice or passage of time or both will result in) a
\nviolation of or default under, or result in the acceleration of or entitle any
\nparty to accelerate (whether after the giving of notice or lapse of time or
\nboth) any obligation or right under, or result in the imposition of any lien
\nupon or the creation of a security interest in any of the Purchase Price
\nShares or any of the assets or properties of Parent or its subsidiaries
\npursuant to, or require a consent or create a penalty or increase Parent’s or
\nany of its subsidiary’s payment or performance obligations under, any material
\nmortgage, lien, lease, instrument, order, arbitration award, judgment or
\ndecree, or any material contract, agreement, license or permit, to which
\nParent or any of its subsidiaries is a party or by which any of them or any of
\ntheir property is bound, or (iii) assuming that all consents, approvals,
\nauthorizations and other actions described in Section 4.3 have been obtained
\nand all filings and obligations set forth in Section 4.3 have been made,
\nviolate or conflict with in any material respect, or result in the imposition
\nof any material lien (other than liens arising from any actions taken or
\narrangements made by any Seller Affiliate) upon any of the Purchase Price
\nShares, or any of the assets or properties of Parent or any of its
\nsubsidiaries pursuant to, any provision of law, regulation, rule, writ,
\ninjunction, decree, statute, order, judgment or ruling of any Governmental
\nAuthority or any other material restriction of any kind or character to which
\nParent or any of its subsidiaries is or may be subject or by which any of them
\nor any of their property is or may be bound. This Agreement and the Lock-Up
\nAgreement have been, and, as of the Closing, the Registration Rights Agreement
\nand the Amended European License Agreement will be, duly executed and
\ndelivered by Parent and each of its subsidiaries parties to such agreements
\nand, assuming the due execution hereof and thereof by Seller and the
\nsubsidiaries of Seller parties to such agreements,<\/p>\n
18<\/p>\n
this Agreement and the Lock-Up Agreement constitute, and as of the Closing the
\nRegistration Rights Agreement and the Amended European License Agreement will
\nconstitute, the legal, valid and binding obligations of Parent and such
\nsubsidiaries enforceable against such parties in accordance with their
\nrespective terms except, in each case, as such enforceability may be limited
\nby any applicable bankruptcy, insolvency, reorganization, moratorium or other
\nsimilar laws affecting creditors’ rights generally, and except as the
\navailability of equitable remedies may be limited by the application of
\ngeneral principles of equity (regardless of whether such equitable principles
\nare applied in a proceeding at law or in equity).<\/p>\n
(c) Upon consummation of the Stock Purchases at the Closing, as contemplated
\nby this Agreement, Parent will deliver to TH USA and TH USA will deliver to
\nSeller good and valid title to the Purchase Price Shares free and clear of any
\nliens, claims, charges, security interests, options or other legal or
\nequitable encumbrances or other rights of third parties (except those imposed
\nby the federal securities laws or any action taken or arrangement made by any
\nContinuing Affiliate).<\/p>\n
Section 4.2. Capitalization. (a) As of January 30, 1998, the authorized
\ncapital stock of Parent consisted of (i) 50,000,000 Ordinary Shares, $.01 par
\nvalue per share (“Parent Shares”), of which: 37,436,929 shares were issued and
\noutstanding, all of which are validly issued, fully paid and nonassessable, no
\nshares were held in treasury, 2,769,410 shares were reserved for future
\nissuance upon exercise of outstanding options to purchase Parent Shares under
\nthe TH Incentive Plans, and an additional 775,085 shares were reserved for
\nissuance under the TH Incentive Plans; and (ii) 5,000,000 Preference Shares,
\n$.01 par value per share, of which no shares were issued and outstanding.<\/p>\n
(b) Except (i) as set forth on Schedule 4.2(b) or in the Parent SEC Reports,
\n(ii) as contemplated by this Agreement and (iii) for stock options issued
\npursuant to the TH Incentive Plans, there are no outstanding options,
\nwarrants, subscriptions or other rights of any kind to acquire, or obligations
\nto issue, shares of capital stock of any class of, or other equity interests
\nin, Parent or any securities convertible into or exchangeable or exercisable
\nfor any shares of capital stock of any class of, or other equity interests in,
\nParent. The Purchase Price Shares, when issued as contemplated herein, will be
\nduly authorized, validly issued, fully paid and nonassessable, and will not
\nhave been issued in violation of, or be subject to, any preemptive rights.<\/p>\n
Section 4.3. Other Authorizations, Consents, Reports, etc. Except (a) as set
\nforth on Schedule 4.3 hereto, (b) for applicable requirements, if any, of the
\nSecurities Act, the Exchange Act, the Blue Sky Laws, the pre-merger
\nnotification requirements of the HSR Act, any necessary approvals or filings
\nunder the Competition Act (Canada) or the Investment Canada Act, the filing of
\nan amendment to Parent’s Memorandum of Association evidencing the Memorandum
\nAmendment and the listing requirements of the NYSE and (c) those the failure
\nto make, file, give or obtain which would not have a material adverse effect
\non Parent and its subsidiaries taken as a whole or prevent the consummation of
\nthe Stock Purchases and the other transactions contemplated hereby, there are
\nno Licenses required to be made, filed, given or obtained by Parent with, to
\nor from any Governmental Authority in connection with the consummation of the
\nStock Purchases and the transactions contemplated under this Agreement or any
\nof the Ancillary Agreements.<\/p>\n
Section 4.4. Brokers, Finders, etc. Except for the services of Morgan
\nStanley & Co. Incorporated and Wasserstein Perella & Co., Inc., Parent has not
\nemployed, nor is Parent subject to any valid claim of, any broker, finder, or
\nother similar intermediary in connection with the transactions contemplated by
\nthis Agreement who might be entitled to a fee or commission in connection with
\nsuch transactions. No Continuing Affiliate has or will have any obligations to
\nMorgan Stanley & Co. Incorporated and Wasserstein Perella & Co., Inc. with
\nrespect to the transactions contemplated by this Agreement or the Ancillary
\nAgreements.<\/p>\n
Section 4.5. Acquisition of Shares for Investment. Each of TH USA and THEH
\nhas such knowledge and experience in financial and business matters that it is
\ncapable of evaluating the merits and risks of its purchase of the Shares and
\nhas been provided access to personnel and books of the Companies and the
\nSubsidiaries for purposes of making its evaluation. Each of TH USA and THEH is
\nacquiring the Shares for investment and not with a view toward or for sale in
\nconnection with any distribution thereof, or with any present intention of<\/p>\n
19<\/p>\n
distributing or selling the Shares. Each of TH USA and THEH agrees that the
\nShares may not be sold, transferred, offered for sale, pledged, hypothecated
\nor otherwise disposed of without registration under the Securities Act, except
\npursuant to an exemption from such registration available under the Securities
\nAct.<\/p>\n
Section 4.6. SEC Filings; Financial Statements. (a) Parent has filed all
\nforms, reports, statements and other documents required to be filed by it with
\nthe SEC since March 31, 1996 (such forms, reports, statements and other
\ndocuments are hereinafter referred to as the “Parent SEC Reports”). Except as
\ndisclosed in Schedule 4.6 hereto, the Parent SEC Reports (i) were prepared in
\nall material respects in accordance with the applicable requirements of the
\nSecurities Act or the Exchange Act, as the case may be, and (ii) did not at
\nthe time they were filed (or if amended or superseded by a filing prior to the
\ndate of this Agreement, then on the date of such filing) contain any untrue
\nstatement of a material fact or omit to state a material fact required to be
\nstated therein or necessary in order to make the statements therein, in the
\nlight of the circumstances under which they were made, not misleading.<\/p>\n
(b) The consolidated financial statements (including, in each case, any
\nnotes thereto) contained in the Parent SEC Reports were prepared in accordance
\nwith GAAP applied on a consistent basis throughout the periods involved
\n(except as may be indicated therein or in the notes thereto) and fairly
\npresented in all material respects the consolidated financial position,
\nresults of operations and cash flows of Parent and its consolidated
\nsubsidiaries as at the respective dates thereof, except that the unaudited
\ninterim financial statements were or are subject to normal and recurring year-
\nend adjustments.<\/p>\n
Section 4.7. Proxy Statement. The information supplied by Parent for
\ninclusion in the Proxy Statement to be sent to the stockholders of Parent in
\nconnection with the Parent Stockholders Meeting, will not, on the date the
\nProxy Statement (or any amendment thereof or supplement thereto) is first
\nmailed to the stockholders of Parent, at the time of the Parent Stockholders
\nMeeting or on the Closing Date, contain any statement which, at such time and
\nin light of the circumstances under which it shall be made, is false or
\nmisleading with respect to any material fact, or shall omit to state any
\nmaterial fact necessary in order to make the statements made therein not false
\nor misleading. Notwithstanding the foregoing, Parent makes no representation
\nor warranty with respect to any information supplied by Seller which is
\ncontained or incorporated by reference in the Proxy Statement or any amendment
\nor supplement thereto.<\/p>\n
ARTICLE V<\/p>\n
Covenants of Seller and Parent<\/p>\n
Section 5.1. Investigation of Business; Access to Properties and
\nRecords. (a) Prior to the Closing Date, Seller shall and shall cause the
\nCompanies and the Subsidiaries to, and Parent shall, afford to representatives
\nof the other party full access to their respective personnel, offices, plants,
\nproperties, books and records during normal business hours, in order that
\nSeller and Parent may have full opportunity to make such investigations as
\nsuch party desires of the affairs and assets of Parent, on the one hand, or
\nthe Companies and Subsidiaries on the other hand; provided, however, that such
\ninvestigation by Seller and Parent shall not unreasonably disrupt the
\npersonnel and operations of Parent, on the one hand, or the Companies or
\nSubsidiaries, on the other hand.<\/p>\n
(b) At the Closing or as soon thereafter as practicable, Seller will deliver
\nor cause to be delivered to TH USA and THEH all corporate records of the
\nCompanies and Subsidiaries, and all other original (or copies thereof, if
\noriginals are not immediately available) agreements, documents, books and
\nrecords relating to the businesses of the Companies and the Subsidiaries.<\/p>\n
(c) Except as required by law and except to the extent such information
\nbecomes publicly available other than as a result of any action taken by any
\nContinuing Affiliate, from and after the Closing Date, the Continuing
\nAffiliates shall maintain the confidentiality of non-public information with
\nrespect to the Companies and Subsidiaries. In the event that any of the
\nContinuing Affiliates after the Closing Date is requested, or becomes<\/p>\n
20<\/p>\n
required by law, to disclose any confidential information relating to the
\nCompanies and the Subsidiaries, Seller will provide Parent with prompt notice
\nthereof (before such information is disclosed if practicable) so that Parent
\nmay seek a protective order or other appropriate remedy and\/or waive
\ncompliance with the terms of this Section 5.1(c).<\/p>\n
Section 5.2. Efforts; Obtaining Consents. (a) Subject to the terms and
\nconditions herein provided, each of Seller and Parent agrees to use all
\nreasonable efforts to take, or cause to be taken, all actions and to do, or
\ncause to be done, all things necessary, proper or advisable to consummate and
\nmake effective as promptly as practicable the transactions contemplated by
\nthis Agreement and to cooperate with the other in connection with the
\nforegoing, including using its reasonable efforts (i) to obtain all waivers,
\nconsents and approvals from other parties to loan agreements, leases,
\nmortgages and other contracts necessary for the consummation of the
\ntransactions contemplated hereby including, without limitation, the credit
\nagreements listed on Schedule 5.2 hereto, (ii) to make all filings with, and
\nto obtain all consents, approvals and authorizations that are required to be
\nobtained from, Governmental Authorities, including without limitation the
\nfiling by or on behalf of Parent with the Registrar of Companies of the
\nBritish Virgin Islands of a notice of amendment to the Memorandum of
\nAssociation of Parent to reflect the Memorandum Amendment, (iii) to lift or
\nrescind any injunction, restraining order, decree or other order adversely
\naffecting the ability of the parties hereto to consummate the transactions
\ncontemplated hereby, (iv) to effect all necessary registrations and filings
\nand submissions of information requested by Governmental Authorities, and (v)
\nto fulfill all conditions to this Agreement. Each of Seller and Parent shall
\nuse all reasonable efforts to prevent the entry, enactment or promulgation of
\nany threatened or pending preliminary or permanent injunction or other order,
\ndecree or ruling or statute, rule, regulation or executive order that would
\nadversely affect the ability of the parties hereto to consummate the
\ntransactions contemplated hereby.<\/p>\n
(b) Seller and Parent shall promptly file or cause to be filed with the
\nAntitrust Division of the United States Department of Justice and the Federal
\nTrade Commission pursuant to the HSR Act all requisite documents and
\nnotifications in connection with the transactions contemplated by this
\nAgreement. Parent shall pay the filing fee incurred in connection with such
\nfilings under the HSR Act. Each party hereto shall promptly inform the other
\nof any material communication from the Federal Trade Commission, the
\nDepartment of Justice or any other Governmental Authority regarding any of the
\ntransactions contemplated hereby. If either Parent or Seller or any Affiliate
\nthereof receives a request for additional information or documentary material
\nfrom any such government or Governmental Authority with respect to the
\ntransactions contemplated hereby, then such party shall endeavor in good faith
\nto make, or cause to be made, as soon as reasonably practicable and after
\nconsultation with the other party, an appropriate response in compliance with
\nsuch request. Each of Parent and Seller will advise the other promptly in
\nrespect of any understandings, undertakings or agreements (oral or written)
\nwhich it proposes to make or enter into with the Federal Trade Commission, the
\nDepartment of Justice or any other Governmental Authority in connection with
\nthe transactions contemplated hereby.<\/p>\n
Section 5.3. Further Assurances. Seller, Parent, TH USA and THEH agree that,
\nfrom time to time, whether before, at or after the Closing Date, each of them
\nwill take such other action (including, on the part of Seller, using its best
\nefforts to cause the Continuing Affiliates to take such action and, on the
\npart of Parent, using its best efforts to cause its subsidiaries to take such
\naction) as may be necessary to carry out the purposes and intents of this
\nAgreement and the Ancillary Agreements including, without limitation, Parent
\nand TH USA taking such actions as may be necessary to enable TH USA to deliver
\nto Seller the Purchase Price Shares.<\/p>\n
Section 5.4. Conduct of Business by Seller. From the date hereof through the
\nClosing, except as disclosed on Schedule 5.4 hereto or otherwise provided for
\nin this Agreement, and, except as consented to or approved by Parent in
\nwriting, Seller covenants and agrees that:<\/p>\n
(a) each of the Companies and the Subsidiaries shall operate its business in
\nthe ordinary and usual course in accordance with past practices;<\/p>\n
(b) neither any Company nor any Subsidiary shall issue, sell or agree to
\nissue or sell (i) any shares of its capital stock, or (ii) any securities
\nconvertible into, or options with respect to, or warrants to purchase or
\nrights<\/p>\n
21<\/p>\n
to subscribe for, any shares of its capital stock or make any change in its
\nissued and outstanding capital stock or redeem, purchase or otherwise acquire
\nany of its capital stock;<\/p>\n
(c) neither any Company nor any Subsidiary shall (i) increase in any manner
\nthe compensation of, or enter into any new bonus or incentive agreement or
\narrangement with, any of its directors, officers or other employees other than
\nincreases in compensation in the ordinary course of business and consistent
\nwith past practice and which are not material in the aggregate; (ii) pay or
\nagree to pay any pension, retirement allowance or other employee benefit to
\nany director, officer or employee, whether past or present, other than as
\nrequired by applicable law, contracts or plan documents in effect on the date
\nof this Agreement; (iii) enter into any new employment, severance, consulting,
\nor other compensation agreement with any director, officer or employee or
\nother person other than in connection with any new hires or promotions in the
\nordinary course and consistent with past practice; or (iv) commit itself to
\nany additional pension, profit-sharing, deferred compensation, group
\ninsurance, severance pay, retirement or other employee benefit plan, fund or
\nsimilar arrangement or adopt or amend or commit itself to adopt or amend any
\nof such plans, funds or similar arrangements in existence on the date hereof;<\/p>\n
(d) neither any Company nor any Subsidiary shall (i) amend its memorandum or
\narticles of association (or similar instruments), (ii) declare any dividend or
\nmake any distribution with respect to its capital stock, (iii) assume, incur
\nor guarantee any obligation for borrowed money other than trade payables in
\nthe ordinary course of business consistent with past practice, (iv) cancel or
\ncompromise, except for compromises of current or former short-term trade
\nreceivables or other current assets in the ordinary course of business
\nconsistent with past practice, any debts owed to it, or (v) waive or release
\nany rights of material value;<\/p>\n
(e) neither any Company nor any Subsidiary shall (i) sell, transfer, lease
\nor otherwise dispose of any of its assets other than inventory, accounts
\nreceivable or fixtures in the ordinary course of business consistent with
\nprior practice, (ii) create or permit to exist any new security interest, lien
\nor encumbrance on any of its properties or assets, other than Permitted
\nExceptions, (iii) enter into any joint venture, partnership or other similar
\narrangement, (iv) make any investment in or purchase any securities of any
\nPerson other than in connection with (A) the cash management activities of the
\nCompanies and the Subsidiaries in the ordinary course of business consistent
\nwith past practice or (B) the formation of a wholly owned subsidiary or (v)
\npurchase any assets of any Person other than in the ordinary course of
\nbusiness consistent with past practice;<\/p>\n
(f) neither any Company nor any Subsidiary shall permit a change in its
\nmethods of maintaining its books, accounts or business records or, except as
\nrequired by GAAP (in which event prior notice shall be given to Parent),
\nchange any of its accounting principles or the methods by which such
\nprinciples are applied for tax or financial reporting purposes;<\/p>\n
(g) the Companies and the Subsidiaries together shall incur capital
\nexpenditures only in the ordinary course of business consistent with prior
\npractice and not in excess of the capital budget provided to Parent prior to
\nthe date hereof;<\/p>\n
(h) neither any of the Companies nor any of the Subsidiaries shall (i) enter
\ninto or terminate any material lease, contract or agreement, or make any
\nchange in any of their material leases, contracts and agreements, (ii) enter
\ninto any transaction with any Continuing Affiliate or any director, officer or
\nshareholder of any Continuing Affiliate other than as contemplated by Sections
\n5.11 and 5.16, (iii) reclassify any assets or liabilities, or (iv) do any
\nother act that (A) would cause any representation or warranty of Seller in
\nthis Agreement to be or become untrue in any material respect or (B) could
\nreasonably be expected to have a Company Material Adverse Effect;<\/p>\n
(i) the Companies and Subsidiaries will comply in all material respects with
\nall material laws and regulations applicable to them;<\/p>\n
(j) the Canada Purchase Agreement and the Bentley Trust Guarantee shall not
\nbe amended nor shall any obligations of the parties thereunder be waived;<\/p>\n
22<\/p>\n
(k) neither any of the Companies nor any of the Subsidiaries will make any
\npayment of interest on or principal of any intercompany indebtedness to any
\nContinuing Affiliate, other than payment of accrued interest on the Retained
\nNote;<\/p>\n
(l) neither any of the Companies nor any of the Subsidiaries shall make any
\nelection with respect to Taxes, consent to any waiver or extension of time to
\nassess or collect any Taxes without the consent of Parent (which consent shall
\nnot be unreasonably withheld) or file any Return other than a Return filed in
\nthe ordinary course of business and prepared in a manner consistent with past
\npractice; and<\/p>\n
(m) neither any of the Companies nor any of the Subsidiaries shall agree to
\ntake any action prohibited by this Section 5.4.<\/p>\n
Section 5.5. Conduct of Business by Parent. From the date hereof through the
\nClosing, except as otherwise contemplated in this Agreement and except as
\nconsented to or approved by Seller in writing, Parent covenants and agrees
\nthat it shall not (a) except for issuances of Parent Shares upon exercise of
\noutstanding stock options under the TH Incentive Plans and grants of stock
\noptions pursuant to the TH Incentive Plans, issue, sell or agree to issue or
\nsell (i) any shares of its capital stock or (ii) any securities convertible
\ninto, or options with respect to, or warrants to purchase or rights to
\nsubscribe for, any shares of its capital stock or make any change in its
\nissued and outstanding capital stock or redeem, purchase or otherwise acquire
\nany of its capital stock; (b) except pursuant to the Memorandum Amendment,
\namend its memorandum or articles of association; (c) declare any dividend or
\nmake any distribution with respect to its capital stock; or (d) purchase any
\nParent Shares other than in open market transactions.<\/p>\n
Section 5.6. Preservation of Business. From the date hereof until the
\nClosing, subject to the terms and conditions of this Agreement, Seller and
\nParent shall, and shall cause each of their respective subsidiaries to, use
\nall reasonable efforts to preserve the business of the Companies and
\nSubsidiaries intact, to preserve the good will of customers, suppliers,
\nemployees and others having business relations with the Companies and
\nSubsidiaries, to retain its key employees, and to maintain insurance in full
\nforce and effect.<\/p>\n
Section 5.7. Non-Solicitation. Except with respect to the Canada Purchase or
\nas otherwise contemplated in this Agreement, the Continuing Affiliates shall
\nnot, and shall not permit the Companies or Subsidiaries to, directly or
\nindirectly, (a) solicit any inquiries or proposals for, or enter into or
\ncontinue or resume any discussions with respect to or enter into any
\nnegotiations or agreements relating to the sale or exchange of any Shares, any
\nshares of capital stock of any Subsidiary or all, or a substantial part, of
\nthe assets of any of the Companies or Subsidiaries or (b) furnish or cause to
\nbe furnished any non-public information concerning the business and operations
\nof the Companies or Subsidiaries to any Person (other than to or at the
\nrequest of Parent and its representatives) other than in the ordinary course
\nof business consistent with past practice.<\/p>\n
Section 5.8. Notice of Developments. Each party shall promptly notify the
\nother party in writing of any events, facts and occurrences which would result
\nin any breach of any representation or warranty or breach of any covenant by
\nsuch party contained in this Agreement.<\/p>\n
Section 5.9. License Agreements. (a) At the Closing, Parent shall cause
\nTommy Hilfiger Licensing, Inc. to, and Seller shall and shall cause TH Europe
\nto, execute and deliver the Amended European License Agreement.<\/p>\n
(b) Effective as of the consummation of the Stock Purchases and the
\nexecution and delivery of the Amended European License Agreement, Seller shall
\nand shall cause T.H. International N.V. to, and Parent shall cause Tommy
\nHilfiger Licensing, Inc. to, cancel the International License Agreement and
\nany sublicenses thereunder.<\/p>\n
Section 5.10. Financial Statements. Prior to the Closing, Seller shall
\ndeliver to Parent promptly after they are prepared such monthly or other
\nfinancial statements or financial reports of the Companies and the
\nSubsidiaries as are prepared by or relating to the Companies, the Subsidiaries
\nand the Canadian Subsidiaries in the ordinary course of business and such
\nother financial information as Parent may reasonably request, promptly<\/p>\n
23<\/p>\n
after such request. Seller shall use its reasonable efforts to have Price
\nWaterhouse’s and Ptack Schnarch Basevitz’s consent to Parent’s use of and
\nreliance on the Financial Statements and such other financial statements of
\nthe Companies, the Subsidiaries and the Canadian Subsidiaries as may be
\nrequired in connection with filings under the federal securities laws.<\/p>\n
Section 5.11. Intercompany Accounts; Indebtedness. Except for the Retained
\nNote and the Blackwatch Note, all intercompany and intracompany payables and
\nreceivables (other than payables and receivables for goods and services,
\nincluding buying office commissions, in the ordinary course) and loans between
\nthe Companies and the Subsidiaries, on the one hand, and the Continuing
\nAffiliates, on the other hand, shall be eliminated, released or forgiven,
\nwithout the transfer of any cash and without the need for any further
\ndocumentation, by dividends or capital contributions, as appropriate,
\nimmediately prior to the Closing. The note outstanding from AIHL to Tommy
\nHilfiger Licensing, Inc. dated August 28, 1995 in the face amount of $5
\nmillion shall be cancelled as of the Closing without the transfer of any cash
\nand without the need for any further documentation.<\/p>\n
Section 5.12. Proxy Statement. (a) As promptly as practicable after the
\nexecution of this Agreement, Parent shall prepare and file with the SEC (with
\nappropriate requests for confidential treatment) under the Exchange Act a
\nproxy statement and a form of proxy (such proxy statement, together with any
\namendments thereof or supplements thereto, in the form delivered to the
\nstockholders of Parent, the “Proxy Statement”) relating to Parent Stockholders
\nMeeting and the vote of the stockholders of Parent with respect to this
\nAgreement and the transactions contemplated hereby. Parent will cause the
\nProxy Statement to comply as to form in all material respects with the
\nExchange Act and the rules and regulations thereunder. Parent shall use all
\nreasonable efforts to cause the Proxy Statement to be cleared with the SEC as
\npromptly as reasonably practicable thereafter, and shall take any and all
\nactions required under any applicable federal or state securities or Blue Sky
\nLaws in connection with the issuance of the Purchase Price Shares. Parent
\nshall provide Seller an opportunity to review and comment upon the Proxy
\nStatement prior to any filing with the SEC. Seller shall use all reasonable
\nefforts to cooperate with Parent in connection with the preparation and
\nclearance of the Proxy Statement. Without limiting the generality of the
\nforegoing, Parent and Seller shall each notify the other as promptly as
\npracticable upon becoming aware of any event or circumstance which should be
\ndescribed in an amendment of, or a supplement to, the Proxy Statement. To the
\nextent required to comply with the federal securities laws, upon notification
\nby Seller to Parent pursuant to the preceding sentence and prior to the Parent
\nStockholders Meeting, Parent shall use all reasonable efforts to prepare and
\nfile with the SEC an amendment or supplement to the Proxy Statement reflecting
\nsuch event or circumstance.<\/p>\n
(b) The Proxy Statement shall include the recommendation of the Board of
\nDirectors of Parent in favor of this Agreement.<\/p>\n
Section 5.13. Stockholders Meeting. Parent shall cause the Parent
\nStockholders Meeting to be held as promptly as reasonably practicable and in
\naccordance with applicable laws for the purpose of voting upon the approval of
\nthis Agreement. Parent shall use all reasonable efforts to hold such
\nstockholders meeting as soon as reasonably practicable after the date on which
\nthe Proxy Statement is cleared by the SEC.<\/p>\n
Section 5.14. NYSE Listing. Parent shall promptly prepare and submit to the
\nNYSE a supplemental listing application covering the Purchase Price Shares,
\nand shall use all reasonable efforts to cause such shares to be approved for
\nlisting on the NYSE, subject to official notice of issuance, prior to the
\nconsummation of the Stock Purchases.<\/p>\n
Section 5.15. Financing. (a) Parent shall, and shall cause its subsidiaries
\nto, use all reasonable efforts to obtain the financing for the Purchase Price
\nCash Amount and to enter into appropriate documentation with respect thereto.<\/p>\n
(b) Parent and Seller shall, and shall cause their respective subsidiaries
\nto, cooperate with each other to arrange the financing for the Purchase Price
\nCash Amount and to provide such information as Parent’s financing sources
\nshall reasonably request or that Parent shall reasonably request in connection
\nwith such financing.<\/p>\n
24<\/p>\n
Section 5.16. Blackwatch Note. Immediately prior to the transaction
\ncontemplated by the next sentence, Blackwatch shall deliver to Seller an
\ninterest-bearing demand note of Blackwatch to Seller in the principal amount
\nof the Purchase Price (as defined in the Canada Purchase Agreement) (the
\n“Blackwatch Note”) in exchange for a demand note of Seller in the principal
\namount and with the interest rate of the Blackwatch Note (the “Seller Note”).
\nImmediately prior to the Closing, Seller shall make a capital contribution to
\nPepe USA of the Blackwatch Note. Immediately after the Closing, Seller shall
\nrepay the Seller Note in full and Blackwatch shall repay the Blackwatch Note
\nin full.<\/p>\n
Section 5.17. Resignation of Directors. At the Closing, Seller shall cause
\nto be delivered to Parent duly signed resignations, effective as of the
\nClosing, of all directors and officers of all of the Companies and
\nSubsidiaries designated in writing by Parent to Seller at least five business
\ndays prior to the Closing Date, or shall take such other action as is
\nnecessary to ensure that such persons are not directors or officers of the
\nCompanies or Subsidiaries after the Closing.<\/p>\n
ARTICLE VI<\/p>\n
Employee Benefits<\/p>\n
Section 6.1. Employee Benefit Plans. Seller hereby represents and warrants
\nto Parent as follows:<\/p>\n
(a) Schedule 6.1(a) includes a complete list of all employee benefit plans,
\nprograms, policies, practices, and other arrangements providing benefits to
\nany employee or former employee primarily employed in the United States or
\nsubject to the laws of the United States or any state or jurisdiction thereof
\nor any beneficiary or dependent thereof, whether covering one person or more
\nthan one person, sponsored or maintained by any of the Companies or the
\nSubsidiaries or to which any of the Companies or the Subsidiaries contribute
\nor are obligated to contribute, other than solely by reason of being an ERISA
\nAffiliate of another entity (collectively, “Company Employee Benefit Plans”).
\nWithout limiting the generality of the foregoing, the term “Company Employee
\nBenefit Plans” includes all employee welfare benefit plans within the meaning
\nof Section 3(1) of ERISA and all employee pension benefit plans within the
\nmeaning of Section 3(2) of ERISA. Schedule 6.1(a) also includes a complete
\nlist of all employee benefit plans, programs, policies, retirement schemes,
\npractices, and other arrangements for any employee or former employee
\n(including arrangements for the payment to employees or their retirement or
\ndeath or on the occurrence of any permanent or temporary disability) primarily
\nemployed in countries other than the United States or subject to the laws of
\ncountries other than the United States or any beneficiary or dependent
\nthereof, whether covering one person or more than one person, sponsored or
\nmaintained by any of the Companies or the Subsidiaries or to which any of the
\nCompanies or the Subsidiaries contribute or are obligated to contribute
\n(collectively, “Non-U.S. Company Employee Benefit Plans”).<\/p>\n
(b) With respect to each Company Employee Benefit Plan and Non-U.S. Company
\nEmployee Benefit Plan, Seller has delivered or made available to Parent a
\ntrue, correct and complete copy of (i) each writing constituting a part of
\nsuch Company Employee Benefit Plan and Non-U.S. Company Employee Benefit Plan,
\nincluding without limitation all plan documents, benefit schedules,
\nparticipant agreements, trust agreements, and insurance contracts and other
\nfunding vehicles; (ii) the three most recent Annual Reports (Form 5500 Series
\nwhere applicable) and accompanying schedules, if any; (iii) the current
\nsummary plan description, if any; (iv) the most recent annual financial
\nreport, if any; and (v) the most recent determination letter from the IRS or
\nother relevant Taxing Authority, if any. Except as specifically provided in
\nthe foregoing documents delivered or made available to Parent, there are no
\namendments to any Company Employee Benefit Plan or Non-U.S. Company Employee
\nBenefit Plan that have been adopted or approved nor has Seller or any Company
\nor Subsidiary taken any formal steps to make any such amendments.<\/p>\n
(c) Schedule 6.1(a) identifies each Company Employee Benefit Plan that is
\nintended to be a “qualified plan” satisfying the requirements of Section
\n401(a) of the Code (a “Company Pension Plan”).<\/p>\n
(d) Except as otherwise set forth in Schedule 6.1(d) hereto, none of the
\nexecution and delivery of this Agreement, the Ancillary Agreements or the
\nconsummation of the transactions contemplated hereby or thereby<\/p>\n
25<\/p>\n
will (either alone or in conjunction with any related event, including without
\nlimitation, termination of employment) (i) result in any payment (including,
\nwithout limitation, severance, unemployment compensation, an “excess parachute
\npayment” (as defined in Section 280G of the Code) or otherwise) becoming due
\nfrom the Companies or the Subsidiaries under any Company Employee Benefit Plan
\nor Non-U.S. Company Employee Benefit Plan or any collective bargaining
\nagreement, (ii) increase any compensation or benefits otherwise payable under
\nany such Company Employee Benefit Plan or Non-U.S. Company Employee Benefit
\nPlan or collective bargaining agreement or (iii) accelerate any liability
\nunder any Company Employee Benefit Plan or Non-U.S. Company Employee Benefit
\nPlan because of an acceleration of the time of payment or vesting of any
\nrights or benefits to which employees may be entitled thereunder.<\/p>\n
Section 6.2. Company Employee Benefit Plans. Seller hereby represents and
\nwarrants to Parent as follows: (a) All Company Employee Benefit Plans which
\nare “employee benefit plans,” as defined in Section 3(3) of ERISA, are in
\ncompliance with and have been administered in all material respects in
\ncompliance with their terms and with all applicable requirements of law,
\nincluding but not limited to the Code and ERISA, and all contributions
\nrequired to be made to each such plan under the terms of such plan, ERISA or
\nthe Code for all periods of time prior to the Closing Date will by the Closing
\nDate be timely made or paid in full or, to the extent not required to be made
\nor paid to each such Plan on or before the Closing Date, have been fully
\nreflected on the Pepe Balance Sheet or the balance sheets of the Companies and
\nthe Subsidiaries as of the Closing Date.<\/p>\n
(b) A favorable determination letter as to the qualification of each Company
\nPension Plan under Section 401(a) of the Code has been issued and remains in
\neffect and the related trust has been determined to be exempt from taxation
\nunder Section 501(a) of the Code and any amendment made or event relating to
\nsuch Company Pension Plan subsequent to the date of such determination letter
\nhas not adversely affected the qualified status of such Company Pension Plan.
\nNo issue concerning qualification of any Company Pension Plan is pending
\nbefore or, to the best knowledge and belief of Seller, threatened by, the IRS.
\nNone of Seller, the Companies or the Subsidiaries or any other “disqualified
\nperson” (as defined in Section 4975 of the Code) or “party-in-interest” (as
\ndefined in Section 3(14) of ERISA) has engaged in any nonexempt “prohibited
\ntransaction” (as such term is defined in Section 4975 of the Code or Section
\n406 of ERISA), which could subject any Company Employee Benefit Plan (or its
\nrelated trust), the Companies or the Subsidiaries or any officer, director or
\nemployee of the Companies or the Subsidiaries to tax or penalty imposed under
\nSection 4975 of the Code. The Companies and the Subsidiaries have not
\nincurred, and do not reasonably expect to incur, any material liability to the
\nPension Benefit Guaranty Corporation (except for required premium payments and
\ncontributions, which payments and contributions have been made when due).<\/p>\n
(c) No Company Employee Benefit Plan is subject to Title IV or Section 302
\nof ERISA or Section 412 or 4971 of the Code (including any Multiemployer
\nPlan).<\/p>\n
(d) There does not now exist, nor do any circumstances exist that could
\nresult in, any Controlled Group Liability that would be a material liability
\nof the Companies or the Subsidiaries following the Closing. “Controlled Group
\nLiability” means any and all liabilities under (i) Title IV of ERISA, (ii)
\nsection 302 of ERISA, (iii) sections 412 and 4971 of the Code, (iv) the
\ncontinuation coverage requirements of section 601 et seq. of ERISA and section
\n4980B of the Code, and (v) corresponding or similar provisions of foreign laws
\nor regulations, other than such liabilities that arise solely out of, or
\nrelate solely to, the Company Employee Benefit Plans. For purposes of this
\nSection 6.2, “ERISA Affiliate” means, with respect to any entity, trade or
\nbusiness, any other entity, trade or business that is a member of a group
\ndescribed in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
\nof ERISA that includes the first entity, trade or business, or that is a
\nmember of the same “controlled group” as the first entity, trade or business
\npursuant to Section 4001(a)(14) of ERISA.<\/p>\n
(e) There are no pending or, to Seller’s knowledge, threatened claims (other
\nthan claims for benefits in the ordinary course), lawsuits, audits,
\ninvestigations or arbitrations which have been threatened, asserted or
\ninstituted against the Company Employee Benefit Plans, any fiduciaries thereof
\nwith respect to their duties to the Company Employee Benefit Plans or the
\nassets of any of the trusts under any of the Company Employee Benefit Plans
\nwhich could reasonably be expected to result in any material liability of the
\nCompanies or the Subsidiaries to the<\/p>\n
26<\/p>\n
Pension Benefit Guaranty Corporation, the Department of Treasury, the
\nDepartment of Labor or any Multiemployer Plan.<\/p>\n
Section 6.3. Non-U.S. Company Employee Benefit Plans. Seller hereby
\nrepresents and warrants to Parent as follows:<\/p>\n
(a) The Non-U.S. Company Employee Benefit Plans comply in all material
\nrespects with, and have been managed in accordance with, their terms and all
\napplicable laws, regulations and requirements.<\/p>\n
(b) Where Non-U.S. Company Employee Benefit Plans are funded or insured, all
\ncontributions and other amounts due to or in respect of them or any state
\npension arrangements by the Companies and the Subsidiaries have been fully
\npaid at Closing. Where such Non-U.S. Company Employee Benefit Plans are
\nunfunded or underfunded, appropriate reserves are established therefor in the
\nFinancial Statements. The Companies and the Subsidiaries have not by any act
\nor omission, direct or indirect, materially increased their liabilities or
\nobligations to the Non-U.S. Company Employee Benefit Plans since the date of
\nthe last actuary’s report described in Section 6.3(c) below.<\/p>\n
(c) Seller has given or made available to Parent the actuary’s report on the
\nlatest actuarial valuation of each of the Non-U.S. Company Employee Benefit
\nPlans or such other information which accurately describes the financial
\nposition of each of the Non-U.S. Company Employee Benefit Plans. Nothing has
\nhappened since the date of that information which would adversely affect the
\nfunding position of the Non-U.S. Company Employee Benefit Plans in a material
\nway.<\/p>\n
(d) There is no material dispute about the entitlements or benefits payable
\nunder any of the Non-U.S. Company Employee Benefit Plans, no material claim by
\nor against the managers or administrators of the Non-U.S. Company Employee
\nBenefit Plans or any of the Companies or the Subsidiaries has been made or
\nthreatened, and there are no circumstances which would reasonably be expected
\nto give rise to any such claim.<\/p>\n
Section 6.4. Administration. Seller and Parent shall each make their
\nappropriate employees available to the other at such reasonable times as may
\nbe necessary for the proper administration by the other of any and all matters
\nrelating to employee benefits affecting employees of the Companies and the
\nSubsidiaries, including benefits to which such employees may become entitled
\nafter the Closing Date under any tax-qualified retirement plan maintained by
\nthe Continuing Affiliates.<\/p>\n
Section 6.5. Reportable Event. Seller represents and warrants that the
\nconsummation of the transactions contemplated hereby will not result in a
\nreportable event within the meaning of Section 4043 of ERISA with respect to
\neither (a) a Company Employee Benefit Plan, or (b) any other employee benefit
\nplan sponsored by or maintained by Seller, the Companies, the Subsidiaries or
\nany of their respective ERISA Affiliates to which Section 4043(b) of ERISA is
\napplicable. Seller shall not give any notice of a reportable event pursuant to
\nSection 4043 of ERISA before the Closing.<\/p>\n
ARTICLE VII<\/p>\n
Tax Matters<\/p>\n
Section 7.1. Tax Returns of the Companies and the Subsidiaries. Seller
\nrepresents and warrants to Parent that:<\/p>\n
(a) Except as set forth in Schedule 7.1(a) (i) all Income Tax Returns
\nrequired to be filed for taxable periods ending on or prior to the Closing
\nDate by the Companies or the Subsidiaries have been or will be timely filed
\nand all Taxes shown to be due on such Income Tax Returns have been or will be
\npaid and (ii) all other material Returns required to be filed before the
\nClosing Date by the Companies or the Subsidiaries have been or will be timely
\nfiled and all Taxes shown as due on such Returns have been or will be paid.<\/p>\n
27<\/p>\n
(b) Except as set forth on Schedule 7.1(b), (i) to the knowledge of Seller,
\nno claim has been made by any authority in a jurisdiction where the Companies
\nor the Subsidiaries do not file Returns that any of the Companies or the
\nSubsidiaries are or may be subject to taxation by that jurisdiction; (ii)
\nexcept for Taxes being contested in good faith and by appropriate proceedings
\nand for which appropriate reserves are established on the Pepe Year-End
\nBalance Sheet, all Taxes owed by any of the Companies and the Subsidiaries
\nwith respect to any taxable period (or portion thereof) ending on or prior to
\nDecember 31, 1997 (whether or not shown on any Return) have (or by the Closing
\nDate will have) been duly and timely paid; and (iii) all material Taxes
\nrequired to be withheld from employee salaries, wages and other compensation
\nand from royalty payments by or on behalf of each of the Companies and the
\nSubsidiaries with respect to periods for which the statute of limitations has
\nnot expired have been withheld, and such withheld Taxes have been duly and
\ntimely paid to the proper Taxing Authorities.<\/p>\n
(c) Except as set forth on Schedule 7.1(c), no agreement or other document
\nextending, or having the effect of extending, the period of assessment,
\npayment or collection of any material Taxes for which any of the Companies or
\nthe Subsidiaries or any of their predecessors may be held liable and no power
\nof attorney with respect to any such material Taxes have been executed or
\nfiled with the IRS or any other Taxing Authority.<\/p>\n
(d) Seller has provided to Parent copies of all federal, state and local
\nIncome Tax Returns that have been filed for all taxable periods for which the
\nstatute of limitations has not expired, examination reports, and statements of
\ndeficiencies assessed against or agreed to by any of the Companies or the
\nSubsidiaries. Except as set forth on Schedule 7.1(d), (i) no lien exists with
\nrespect to any asset of any of the Companies or the Subsidiaries that arose in
\nconnection with any failure to pay Taxes (other than for Taxes not yet due and
\npayable); (ii) there are no material Taxes for which any of the Companies or
\nthe Subsidiaries could be held liable which have been asserted in writing by
\nany Taxing Authority to be due; and (iii) there are no pending audits,
\nexaminations, or investigations with respect to any material Taxes of any of
\nthe Companies or the Subsidiaries.<\/p>\n
(e) No consent or election has been made to have the provisions of Section
\n341(f) of the Code apply to any of the Companies or the Subsidiaries.<\/p>\n
(f) None of the Companies or the Subsidiaries is party to or bound by any
\nclosing agreement, gain recognition agreement, tax sharing, tax indemnity, tax
\nallocation or similar agreement or arrangement.<\/p>\n
Section 7.2. Allocation of Certain Taxes. Each of Parent and Seller agrees
\nthat if any of the Companies are permitted but not required under applicable
\nstate or local Income Tax laws to treat the Closing Date as the last day of a
\ntaxable period, Parent and Seller shall treat such day as the last day of a
\ntaxable period.<\/p>\n
Section 7.3. Filing Responsibility. (a) Seller shall prepare and file or
\nshall cause each of the Companies and the Subsidiaries to prepare and file all
\nReturns with respect to each of the Companies and the Subsidiaries required to
\nbe filed (taking into account any extension of time within which to file) on
\nor before the Closing Date. Seller shall prepare and file or shall cause to be
\nfiled any consolidated, combined, unitary or group relief system Returns
\n(other than any consolidated, combined, unitary or group relief system Returns
\nof an affiliated group (within the meaning of Section 1504(a) of the Code
\nwithout regard to the limitations of Section 1504(b) of the Code) of which any
\nof the Companies or the Subsidiaries is the common parent (each, a “Company
\nGroup”)).<\/p>\n
(b) Parent, the Companies and the Subsidiaries shall file all other Returns
\nwith respect to the Companies and the Subsidiaries.<\/p>\n
(c) With respect to any state, local or foreign Income Tax Return for
\ntaxable periods beginning before the Closing Date and ending after the Closing
\nDate, Parent shall cause each of the Companies and the Subsidiaries to consult
\nwith Seller concerning such Return. Each of the Companies and the Subsidiaries
\nshall provide Seller a copy of its proposed Return to review and comment upon
\nat least 30 days prior to the filing of such Return, and Seller may provide
\ncomments to each of the Companies and the Subsidiaries, which comments shall
\nbe delivered to each of the Companies and the Subsidiaries within 10 days of
\nreceiving such copies from each of the<\/p>\n
28<\/p>\n
Companies and the Subsidiaries. The Companies and the Subsidiaries shall make
\nsuch revisions to such Tax Returns as are reasonably requested by Seller.<\/p>\n
Section 7.4. Refunds and Carrybacks. (a) Seller shall be entitled to any
\nrefunds or amounts credited against Taxes for which Seller is liable (except
\nfor refunds or credits accrued on the Pepe Year-End Balance Sheet) pursuant to
\nSection 7.6.<\/p>\n
(b) Parent, the Companies or the Subsidiaries, as the case may be, shall be
\nentitled to all other refunds or credits of Taxes other than refunds or
\ncredits of consolidated, combined, unitary or group relief system Taxes for a
\nTax year in which the Companies or the Subsidiaries were included in a
\nconsolidated, combined, unitary or group relief system Return, unless such
\nReturn is a Return of a Company Group.<\/p>\n
(c) Parent shall cause each of the Companies and the Subsidiaries promptly
\nto forward to Seller or to reimburse Seller for any refunds or credits due
\nSeller (pursuant to the terms of this Article VII) after receipt thereof, and
\nSeller shall promptly forward to Parent or reimburse Parent for any refunds or
\ncredits due Parent (pursuant to the terms of this Article VII) after receipt
\nthereof.<\/p>\n
(d) Except (i) as required by a Determination, (ii) as otherwise required by
\napplicable law, or (iii) in connection with a matter described in the second
\nsentence of Section 7.5(d), none of Parent, the Companies nor the Subsidiaries
\nwill, after the Closing Date, amend any tax return relating to a period ending
\non or before the Closing Date without the prior written consent of Seller,
\nwhich consent will not unreasonably be withheld.<\/p>\n
Section 7.5. Cooperation and Exchange of Information. (a) Seller shall
\nprepare and submit to Parent no later than three months after the Closing
\nDate, 1997 blank tax return workpaper packages for Tax Returns for which
\nParent has responsibility to prepare pursuant to Section 7.3. Parent shall and
\nshall cause each of the Companies and the Subsidiaries to prepare completely
\nand accurately and to submit to Seller within three months of receipt all
\ninformation as Seller shall reasonably request in such tax return workpaper
\npackages.<\/p>\n
(b) As soon as practicable, but in any event within 30 days after Seller’s
\nrequest, from and after the Closing Date, Parent shall provide Seller with
\nsuch cooperation and shall deliver to Seller such information and data
\nconcerning the pre-Closing operations of each of the Companies and the
\nSubsidiaries and make available such knowledgeable employees of the Companies
\nand the Subsidiaries as Seller may reasonably request, including providing the
\ninformation and data required by Seller’s customary tax and accounting
\nquestionnaires, in order to enable Seller to complete and file all Returns
\nwhich it may be required to file with respect to the operations and business
\nof each of the Companies and the Subsidiaries through the Closing Date or to
\nrespond to audits by any Taxing Authorities with respect to such operations
\nand to otherwise enable Seller to satisfy its internal accounting, tax and
\nother legitimate requirements. Such cooperation and information shall include
\nwithout limitation provision of powers of attorney for the purpose of signing
\nReturns and defending audits and promptly forwarding copies of appropriate
\nnotices and forms or other communications received from or sent to any Taxing
\nAuthority which relate to each of the Companies and the Subsidiaries, and
\nproviding copies of all relevant Returns, together with accompanying schedules
\nand related workpapers, documents relating to rulings or other determinations
\nby any Taxing Authority and records concerning the ownership and tax basis of
\nproperty, which Parent, the Companies and the Subsidiaries may possess.
\nParent, the Companies and the Subsidiaries shall make their employees and
\nfacilities available on a mutually convenient basis to provide explanation of
\nany documents or information provided hereunder.<\/p>\n
(c) Parent and Seller and their respective Affiliates shall cooperate in the
\npreparation of all Returns relating in whole or in part to taxable periods
\nending on or before or including the Closing Date that are required to be
\nfiled after such date. Such cooperation shall include, but not be limited to,
\nfurnishing prior years’ Returns or return preparation packages illustrating
\nprevious reporting practices or containing historical information relevant to
\nthe preparation of such Returns, and furnishing such other information within
\nsuch party’s possession requested by the party filing such Returns as is
\nrelevant to their preparation. In the case of any state, local or foreign
\njoint, consolidated, combined, unitary or group relief system Returns, such
\ncooperation shall also relate to any other taxable periods in which one party
\ncould reasonably require the assistance of the other party in obtaining any
\nnecessary information.<\/p>\n
29<\/p>\n
(d) Seller shall have the right, at its own expense, to control any audit or
\nexamination by any Taxing Authority (“Tax Audit”), initiate any claim for
\nrefund, contest, resolve and defend against any assessment, notice of
\ndeficiency, or other adjustment or proposed adjustment which in any such case
\nrelates to Taxes for which Seller is liable pursuant to Section 7.6, with
\nrespect to each of the Companies and the Subsidiaries; provided, however, that
\nno claim, contest or settlement shall be resolved by Seller if such claim,
\ncontest, or settlement could reasonably be expected to have a material adverse
\neffect on such Companies or Subsidiaries after the Closing. Parent shall have
\nthe right, at its own expense, to control any other Tax Audit, initiate any
\nother claim for refund, and contest, resolve and defend against any other
\nassessment, notice of deficiency, or other adjustment or proposed adjustment;
\nprovided, however, any such resolution shall not have a material adverse
\neffect on the Seller. Seller shall furnish Parent and each of the Companies
\nand the Subsidiaries with its cooperation in a manner comparable to that
\ndescribed in Section 7.5(b) hereof to effect the purposes of this Section
\n7.5(d).<\/p>\n
Section 7.6. Tax Indemnification by Seller. Seller shall be liable for, and
\nshall hold Parent and each of the Companies and the Subsidiaries and any
\nsuccessor corporations thereto or Affiliates thereof harmless from and
\nagainst, on a Net After-Tax Basis, the following Taxes:<\/p>\n
(a) any and all Taxes imposed upon, or with respect to the income or
\noperations of, any of the Companies or the Subsidiaries (i) with respect to
\nany taxable period ending on or before December 31, 1997 and (ii) in the case
\nof any taxable period beginning before and ending after December 31, 1997,
\nallocable to the portion of such period beginning before and ending on
\nDecember 31, 1997, in each case to the extent such Taxes are not reflected in
\nthe reserve for Tax liabilities (rather than any reserve for deferred Taxes
\nestablished to reflect timing differences between book and Tax income) shown
\non the Pepe Year-End Balance Sheet; and<\/p>\n
(b) any and all Taxes attributable to the operations of an entity (other
\nthan the Companies and the Subsidiaries or any of their predecessors) for
\nwhich the Companies or the Subsidiaries may be held liable by virtue of a
\nrelationship to or affiliation with such entity under Treasury Regulation
\nSection 1.1502-6 (relating to several liability) or any comparable or similar
\nprovision providing for joint and\/or several liability under state, local or
\nforeign Tax Laws.<\/p>\n
Section 7.7. Tax Certification. On or before the Closing Date, Seller shall
\nprovide Parent a copy of a statement, dated not more than 30 days prior to the
\nClosing Date, issued by Pepe USA, meeting the requirements of Treasury
\nRegulation Sections 1.897-2(h) and 1.1445-2(c)(3), substantially in the form
\nof the sample certification set forth therein.<\/p>\n
Section 7.8. Definitions. For purposes of this Article VII, the following
\nterms shall have the meanings ascribed to them below:<\/p>\n
(a) “Determination” means a determination as defined by Section 1313(a) of
\nthe Code.<\/p>\n
(b) “Income Tax Returns” means federal, state, local or foreign Returns
\nrelating to Income Taxes required to be filed with any Taxing Authority that
\ninclude any of the Companies or the Subsidiaries.<\/p>\n
(c) “Income Taxes” means federal, state, local or foreign income, profits,
\ncapital gains, franchise taxes or other taxes measured by reference to income,
\nprofits, capital gains and all other taxes reported on any Returns, together
\nwith any interest, penalties, charges or fees imposed with respect thereto.<\/p>\n
(d) “IRS” means the United States Internal Revenue Service.<\/p>\n
(e) “Other Taxes” means all Taxes which are not Income Taxes.<\/p>\n
(f) “Returns” means returns, reports and forms required to be filed with any
\nTaxing Authority.<\/p>\n
(g) “Tax Laws” means the Code, federal, state, county, local, or foreign
\nlaws relating to Taxes and any regulations or official administrative
\npronouncements released thereunder.<\/p>\n
30<\/p>\n
(h) “Taxes” means all taxes (whether federal, state, local or foreign) based
\nupon or measured by income and any other tax whatsoever, including, without
\nlimitation, gross receipts, profits, sales, levies, imposts, deductions,
\ncharges, rates, duties, use, occupation, value added, ad valorem, transfer,
\nfranchise, withholding, payroll and social security, employment, excise, stamp
\nduty or property taxes, together with any interest, penalties, charges or fees
\nimposed with respect thereto.<\/p>\n
(i) “Taxing Authority” means any Governmental Authority including social
\nsecurity administration, domestic or foreign, having responsibility for or
\njurisdiction over the assessment, determination, collection, or other
\nimposition of Tax.<\/p>\n
ARTICLE VIII<\/p>\n
Conditions to Parent’s, TH USA’s and THEH’s
\n Obligations to Close<\/p>\n
The respective obligations of Parent, TH USA and THEH to consummate the
\nStock Purchases shall be subject to the satisfaction on or prior to the
\nClosing Date of all of the following conditions:<\/p>\n
Section 8.1. Representations, Warranties and Covenants of Seller. The
\nrepresentations and warranties of Seller contained in this Agreement shall be
\ntrue and correct when made and, except for representations and warranties that
\nspeak as of a specific date or time (which need only be true and correct as of
\nsuch date or time), on and as of the Closing Date with the same effect as
\nthough such representations and warranties had been made on and as of such
\ndate, except for such inaccuracies or breaches as would not, individually or
\nin the aggregate, have a Company Material Adverse Effect, and the covenants
\nand agreements of Seller contained in this Agreement to be performed on or
\nbefore the Closing Date in accordance with this Agreement shall have been duly
\nperformed in all material respects, and Parent shall have received at the
\nClosing a certificate to the effect of the foregoing dated the Closing Date
\nand validly executed by the President or a Vice President of Seller.<\/p>\n
Section 8.2. Regulatory Approvals. (a) All applicable waiting periods under
\nthe HSR Act shall have expired or been terminated, (b) a notice of amendment
\nto the Memorandum of Association of Parent to reflect the Memorandum Amendment
\nshall have been filed by or on behalf of Parent with the Registrar of
\nCompanies of the British Virgin Islands and (c) any necessary approvals or
\nfilings under the Competition Act (Canada) or the Investment Canada Act shall
\nhave been obtained or made.<\/p>\n
Section 8.3. No Orders or Injunctions. No order or injunction shall have
\nbeen issued by any Governmental Authority which prevents or prohibits the
\nconsummation of the Stock Purchases or any other transaction contemplated by
\nthis Agreement.<\/p>\n
Section 8.4. Opinions of Seller’s Counsel. Parent shall have received at
\nClosing opinions addressed to Parent and dated the Closing Date from counsel
\nto Seller in form and substance reasonably satisfactory to Parent with respect
\nto certain corporate matters in Sections 3.1 and 3.2.<\/p>\n
Section 8.5. Certain Agreements. The International License and any
\nsublicenses thereunder shall have been cancelled, the Amended European License
\nAgreement shall have been executed and delivered by TH Europe and Seller, the
\nNon-Competition Agreement shall have been executed and delivered by the
\nparties thereto other than Parent, and the Bentley Trust Guarantee and the
\nAIHL Guarantee shall be in full force and effect.<\/p>\n
Section 8.6. Stockholder Approval. This Agreement shall have been approved
\nby a majority of the votes cast at the Parent Stockholders Meeting.<\/p>\n
Section 8.7. Canada Purchase. All of the conditions to Pepe USA’s and
\nLawvest’s respective obligations to consummate the transactions contemplated
\nby the Canada Purchase Agreement, other than the delivery by Lawvest of the
\nTomcan Shares and the delivery by Pepe USA of the Purchase Price (as defined
\nin the Canada Purchase Agreement) pursuant to Article II thereof, shall have
\nbeen satisfied, without any waiver<\/p>\n
31<\/p>\n
thereof and Parent shall have received at the Closing a certificate to such
\neffect dated the Closing Date and validly executed by the President, a Vice
\nPresident or other senior officer of each of Lawvest and Seller.<\/p>\n
Section 8.8. NYSE Listing. The Purchase Price Shares shall have been
\napproved for listing on the NYSE, subject to official notice of issuance.<\/p>\n
Section 8.9. Parent Financing. Parent and\/or its subsidiaries shall have
\nreceived the financing for the Purchase Price Cash Amount on terms and
\nconditions reasonably satisfactory to Parent.<\/p>\n
Section 8.10. Consents. All consents or waivers of the parties to (i) the
\ncredit agreements set forth on Schedule 5.2 hereto shall have been obtained or
\nsuch credit agreements shall have been renegotiated on terms reasonably
\nsatisfactory to Parent and (ii) the agreements listed on Schedule 3.1(d)
\nreasonably requested by Parent shall have been obtained.<\/p>\n
ARTICLE IX<\/p>\n
Conditions to Seller’s Obligation to Close<\/p>\n
Seller’s obligation to consummate the Stock Purchases shall be subject to
\nthe satisfaction on or prior to the Closing Date of all of the following
\nconditions:<\/p>\n
Section 9.1. Representations, Warranties and Covenants of Parent. The
\nrepresentations and warranties of Parent contained in this Agreement shall be
\ntrue and correct when made and, except for representations and warranties that
\nspeak as of a specific date or time (which need only be true and correct as of
\nsuch date or time), on and as of the Closing Date with the same effect as
\nthough such representations and warranties had been made on and as of such
\ndate, except for such inaccuracies or breaches as would not, individually or
\nin the aggregate, have a material adverse effect on Parent and its
\nsubsidiaries taken as a whole, and the covenants and agreements of Parent
\ncontained in this Agreement to be performed on or before the Closing Date in
\naccordance with this Agreement shall have been duly performed in all material
\nrespects, and Seller shall have received at the Closing a certificate to the
\neffect of the foregoing dated the Closing Date and validly executed by the
\nPresident, a Vice President or other senior officer of Parent.<\/p>\n
Section 9.2. Regulatory Approvals. (a) All applicable waiting periods under
\nthe HSR Act shall have expired or been terminated, (b) a notice of amendment
\nto the Memorandum of Association of Parent to reflect the Memorandum Amendment
\nshall have been filed by or on behalf of Parent with the Registrar of
\nCompanies of the British Virgin Islands and (c) any necessary approvals or
\nfilings under the Competition Act (Canada) or the Investment Canada Act shall
\nhave been obtained or made.<\/p>\n
Section 9.3. No Orders or Injunctions. No order or injunction shall have
\nbeen issued by any Governmental Authority which prevents or prohibits the
\nconsummation of the Stock Purchases or any other transaction contemplated by
\nthis Agreement.<\/p>\n
Section 9.4. Opinions of Parent’s Counsel. Seller shall have received at
\nClosing opinions from counsel to Parent in form and substance reasonably
\nsatisfactory to Seller with respect to certain corporate matters in Sections
\n4.1 and 4.2.<\/p>\n
Section 9.5. Certain Agreements. Tommy Hilfiger Licensing, Inc. shall have
\nexecuted and delivered the Amended European License Agreement and Parent shall
\nhave executed and delivered the Registration Rights Agreement.<\/p>\n
Section 9.6. Stockholder Approval. This Agreement shall have been approved
\nby a majority of the votes cast at the Parent Stockholders Meeting.<\/p>\n
Section 9.7. NYSE Listing. The Purchase Price Shares shall have been
\napproved for listing on the NYSE, subject to official notice of issuance.<\/p>\n
Section 9.8. Consents. All consents or waivers of the parties to the credit
\nagreements set forth on Schedule 5.2 hereto to which any of the Companies or
\nSubsidiaries is a party shall have been obtained or such credit agreements
\nshall have been renegotiated on terms reasonably satisfactory to Seller.<\/p>\n
32<\/p>\n
ARTICLE X<\/p>\n
Survival; Indemnification<\/p>\n
Section 10.1. Survival. (a) The representations and warranties of Seller
\ncontained in this Agreement shall survive the Closing until September 30,
\n1999, except the representations and warranties set forth (i) in Sections
\n3.1(e) and 3.2(a) which shall survive the Closing indefinitely, (ii) in
\nSection 3.14 which shall survive the Closing until the third anniversary of
\nthe Closing Date and (iii) in Article VII which shall survive the Closing
\nuntil expiration of the relevant statute of limitations (including any
\nextensions thereof) or, if later, until resolution of any disputes arising
\nduring such period applicable to the income tax return (the “Applicable
\nReturn”) of each of the Companies and Subsidiaries for the period ending on
\nthe Closing Date (such later date being the “Expiration Date”).<\/p>\n
(b) The covenants and agreements contained in this Agreement which by their
\nterms do not contemplate performance after the Closing Date shall survive the
\nClosing until September 30, 1999. The covenants and agreements contained in
\nthis Agreement which by their terms contemplate performance after the Closing
\nDate (including but not limited to the indemnities) shall survive the
\ncompletion of the transactions contemplated herein.<\/p>\n
Section 10.2. Indemnification by Seller. (a) Subject to Section 10.4 hereof,
\nfrom and after the Closing Date, Seller shall indemnify and hold harmless
\nParent and its subsidiaries and their respective officers and directors
\n(collectively, the “Indemnified Parties”), on a Net After-Tax Basis, from and
\nagainst any and all Covered Losses suffered by such Indemnified Parties
\nresulting from or arising out of (i) any inaccuracy in or breach of any of the
\nrepresentations or warranties of Seller when made, and, except for
\nrepresentations and warranties that speak of a specific date or time (which
\nneed only be true and correct as of such date and time), on and as of the
\nClosing Date, (ii) any breach or nonfulfillment of any covenants or agreements
\nmade by any Seller Affiliate herein, (iii) any liability or obligation of the
\nCompanies or Subsidiaries arising from or relating to any business other than
\nthe business of the Companies, the Subsidiaries, Tomcan and TH Canada
\nconducted under the TH Licenses, including without limitation all liabilities
\nand obligations of the Companies and Subsidiaries, if any, under the Actions
\nset forth on Schedule 10.2(a) hereto (collectively, “Retained Liabilities”)
\nand (iv) the failure by Lawvest or the Guarantor (as defined in the Bentley
\nTrust Guarantee) to timely satisfy upon demand therefor its liabilities and
\nobligations to Pepe USA pursuant to the indemnification provisions of the
\nCanada Purchase Agreement or the Bentley Trust Guarantee, as applicable
\n(“Canadian Liabilities”). The indemnity by Seller under this Section 10.2
\nshall not affect or limit the indemnification provided by Seller under Section
\n7.6.<\/p>\n
(b) The Indemnified Parties shall not be entitled to assert any
\nindemnification pursuant to clause (i) or (ii) (in the case of covenants and
\nagreements which by their terms do not contemplate performance after the
\nClosing Date) of Section 10.2(a): (i) after the Expiration Date, with respect
\nto inaccuracies in or breaches of the representations and warranties by Seller
\ncontained in Article VII, (ii) after the third anniversary of the Closing
\nDate, with respect to such covenant breaches or inaccuracies in or breaches of
\nthe representations and warranties by Seller contained in Section 3.14 or
\n(iii) after September 30, 1999, with respect to all other inaccuracies in or
\nbreaches of the representations and warranties by Seller contained in any
\nother Section hereof (other than Sections 3.1(e) and 3.2(a), which shall have
\nno such limitation) or any breach or nonfulfillment of any covenants or
\nagreements made by Seller herein which by their terms were required to be
\nperformed prior to the Closing Date; provided that if on or prior to such
\nExpiration Date, third anniversary of the Closing Date or September 30, 1999,
\nas the case may be, a Notice of Claim shall have been given to Seller pursuant
\nto Section 10.3 hereof for such indemnification, the Indemnified Parties shall
\ncontinue to have the right to be indemnified on a Net After-Tax Basis with
\nrespect to such indemnification claim until such claim for indemnification has
\nbeen satisfied or otherwise resolved as provided in this Article X.<\/p>\n
Section 10.3. Indemnification Procedures. (a) Upon obtaining knowledge of
\nany claim or demand which has given rise to, or is expected to give rise to, a
\nclaim for indemnification hereunder, Parent shall give written notice (“Notice
\nof Claim”) of such claim or demand to Seller. Parent shall furnish to Seller
\nin reasonable detail<\/p>\n
33<\/p>\n
such information as the Indemnified Parties may have with respect to such
\nindemnification claim (including copies of any summons, complaint or other
\npleading which may have been served on it and any written claim, demand,
\ninvoice, billing or other document evidencing or asserting the same). Subject
\nto the limitations set forth in Section 10.2(b) hereof, no failure or delay by
\nParent in the performance of the foregoing shall reduce or otherwise affect
\nthe obligation of Seller to indemnify and hold the Indemnified Parties
\nharmless on a Net After-Tax Basis, except to the extent that such failure or
\ndelay shall have actually adversely affected Seller’s ability to defend
\nagainst, settle or satisfy any Losses for which the Indemnified Parties are
\nentitled to indemnification hereunder.<\/p>\n
(b) If the claim or demand set forth in the Notice of Claim given by Parent
\npursuant to Section 10.3(a) hereof is a claim or demand asserted by a third
\nparty, Seller shall have 15 days after the date on which Notice of Claim is
\ngiven to notify Parent in writing of its election to defend such third party
\nclaim or demand on behalf of the Indemnified Party. If Seller elects to defend
\nsuch third party claim or demand, Parent shall make available to Seller and
\nits agents and representatives all records and other materials which are
\nreasonably required in the defense of such third party claim or demand and
\nshall otherwise cooperate with, and assist Seller in the defense of, such
\nthird party claim or demand, and so long as Seller is defending such third
\nparty claim in good faith, the Indemnified Parties shall not pay, settle or
\ncompromise such third party claim or demand. If Seller elects to defend such
\nthird party claim or demand, the Indemnified Party shall have the right to
\nparticipate in the defense of such third party claim or demand, at such
\nIndemnified Party’s own expense. In the event, however, that such Indemnified
\nParty reasonably determines that representation by counsel to Seller of both
\nSeller and such Indemnified Party could reasonably be expected to present such
\ncounsel with a conflict of interest, then the Indemnified Party may employ
\nseparate counsel to represent or defend it in any such action or proceeding
\nand Seller will pay the fees and expenses of such counsel; provided, that
\nSeller shall not, in connection with any proceeding or related proceedings in
\nthe same jurisdiction, be liable for the fees and expenses of more than one
\nseparate firm of attorneys (in addition to local counsel) at any time for all
\nIndemnified Parties. If Seller does not elect to defend such third party claim
\nor demand or does not defend such third party claim or demand in good faith,
\nthe Indemnified Party shall have the right, in addition to any other right or
\nremedy it may have hereunder, at Seller’s expense, to defend such third party
\nclaim or demand; provided, however, that (i) such Indemnified Party shall not
\nhave any obligation to participate in the defense of, or defend, any such
\nthird party claim or demand; (ii) such Indemnified Party’s defense of or its
\nparticipation in the defense of any such third party claim or demand shall not
\nin any way diminish or lessen the obligations of Seller under the agreements
\nof indemnification set forth in this Article X; and (iii) such Indemnified
\nParty may not settle any claim without the consent of Seller (which consent
\nshall not be unreasonably withheld or delayed).<\/p>\n
(c) Seller and Parent shall cooperate in the defense of any claim or
\nlitigation subject to this Article X and the records of each shall be
\navailable to the other with respect to such defense.<\/p>\n
(d) Except for third party claims being defended in good faith, Seller shall
\nsatisfy its obligations under this Article X in respect of a valid claim for
\nindemnification hereunder which is not contested by Seller in good faith in
\ncash within 30 days after the date on which Notice of Claim is given.<\/p>\n
Section 10.4. Limits on Indemnification. Seller shall have no liability for
\nindemnification pursuant to this Article X with respect to Covered Losses
\nunless such Covered Losses exceed in the aggregate $500,000 (the
\n“Indemnification Threshold”); provided, however, that in the event that
\nCovered Losses shall exceed in the aggregate the Indemnification Threshold,
\nSeller shall be liable hereunder for all such Covered Losses; and provided,
\nfurther, that Covered Losses with respect to Retained Liabilities or the
\nCanadian Liabilities shall not be subject to the Indemnification Threshold.
\nNotwithstanding anything herein to the contrary, in no event shall Seller be
\nrequired to indemnify Parent and its subsidiaries pursuant to this Article X
\nfor Covered Losses in excess of $1,128,000,000.00; provided, however, that
\nSeller shall be entitled to satisfy in full its obligations under this Article
\nX by delivery to the Indemnified Parties of the Purchase Price Cash Amount and
\nthe Purchase Price Shares.<\/p>\n
Section 10.5. Losses Net of Insurance. The amount of any Covered Loss for
\nwhich indemnification is provided under this Article X shall be net of any
\namounts recovered by the Indemnified Parties under insurance<\/p>\n
34<\/p>\n
policies with respect to such Covered Loss. In the event that the Indemnified
\nParties shall later collect any such amounts recovered under insurance
\npolicies with respect to any Covered Loss for which any of them has previously
\nreceived payments under this Article X from Seller, such Indemnified Party
\nshall promptly repay to Seller such amount recovered.<\/p>\n
ARTICLE XI<\/p>\n
Termination<\/p>\n
Section 11.1. Termination. This Agreement may be terminated at any time
\nprior to the Closing:<\/p>\n
(a) by mutual consent of Seller and Parent;<\/p>\n
(b) by either Seller or Parent, if any Governmental Authority of competent
\njurisdiction shall have issued an injunction, restraining order or decree that
\nrestrains or prohibits the consummation of the Stock Purchases or the
\nperformance by the parties hereto of the other obligations hereunder, and such
\ninjunction, restraining order or decree shall have become final and
\nnonappealable;<\/p>\n
(c) by either Seller or Parent, if the Closing has not occurred by the close
\nof business on September 30, 1998, unless the failure of the Closing to occur
\nby such date shall be due to the failure of the party seeking to terminate
\nthis Agreement to perform or observe in all material respects the covenants
\nand agreements of such party set forth herein; or<\/p>\n
(d) by either Seller or Parent if this Agreement shall not have been
\napproved by a majority of the votes cast at the Parent Stockholders Meeting.<\/p>\n
Section 11.2. Procedure and Effect of Termination. In the event of
\ntermination of this Agreement by either or both of Seller and Parent pursuant
\nto Section 11.1, written notice thereof shall forthwith be given by the
\nterminating party or parties to the other party or parties hereto, and this
\nAgreement shall thereupon terminate and become void and have no effect, and
\nthe transactions contemplated hereby shall be abandoned without further action
\nby the parties hereto, except that the provisions of Section 12.5 shall
\nsurvive the termination of this Agreement; provided, however, that such
\ntermination shall not relieve any party hereto of any liability for any wilful
\nbreach of this Agreement (other than a breach of a representation, as to which
\nno party shall be liable hereunder). If this Agreement is terminated as
\nprovided herein all filings, applications and other submissions contemplated
\nby Sections 3.7 and 4.3 and Article V shall, to the extent practicable, be
\nwithdrawn from the agency or other persons to which they were made.<\/p>\n
ARTICLE XII<\/p>\n
Miscellaneous<\/p>\n
Section 12.1. Counterparts. This Agreement may be executed in one or more
\ncounterparts, all of which shall be considered one and the same agreement, and
\nshall become effective when one or more counterparts have been signed by each
\nof the parties and delivered to the other party.<\/p>\n
Section 12.2. Governing Law. This Agreement shall be governed by and
\nconstrued in accordance with the laws of the State of New York as applied to
\ncontracts to be performed in New York.<\/p>\n
Section 12.3. Jurisdiction; Waiver of Trial by Jury. The parties hereby
\nconsent to the jurisdiction of the United States District Court for the
\nSouthern District of New York and any of the courts of the state of New York
\nin any dispute arising under this Agreement and agree further that service of
\nprocess or notice in any such action, suit or proceeding shall be effective if
\nin writing and delivered in person or sent as provided in Section 12.6 hereof.
\nANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION ARISING OUT OF
\nTHIS AGREEMENT OR IN CONNECTION HEREWITH IS HEREBY WAIVED.<\/p>\n
35<\/p>\n
Section 12.4. Entire Agreement. This Agreement (including the Ancillary
\nAgreements) and the Schedules and Exhibits hereto contain the entire agreement
\nbetween the parties with respect to the subject matter hereof and there are no
\nagreements, understandings, representations or warranties between the parties
\nother than those set forth or referred to herein. Except for the provisions of
\nArticle X, which are intended to benefit, and to be enforceable by, any of the
\nIndemnified Parties, this Agreement is not intended to confer and shall not
\nconfer upon any Person not a party hereto any rights or remedies hereunder.<\/p>\n
Section 12.5. Expenses. Except as otherwise set forth in this Agreement, if
\nthe transactions contemplated hereby are not consummated, all legal and other
\ncosts and expenses incurred in connection with this Agreement and the
\ntransactions contemplated hereby shall be paid by the party incurring such
\ncosts and expenses. If the transactions contemplated hereby are consummated,
\nthe legal and other expenses incurred in connection with this Agreement shall
\nbe paid by Pepe USA and TH USA.<\/p>\n
Section 12.6. Notices. All notices hereunder shall be sufficiently given for
\nall purposes hereunder if in writing and delivered personally, sent by
\ndocumented overnight delivery service or, to the extent receipt is confirmed,
\ntelecopy, telefax or other electronic transmission service to the appropriate
\naddress or number as set forth below. Notices to Seller shall be addressed to:<\/p>\n
Pepe Jeans London Corporation
\n 11 Lower Square
\n Old Isleworth
\n Middlesex
\n United Kingdom
\n Attn: Sydney R. Neil
\n Telecopier No.: 44-181-568-4111<\/p>\n
with a copy to:<\/p>\n
Simpson Thacher & Bartlett
\n 425 Lexington Avenue
\n New York, NY 10017
\n Attn: Gary I. Horowitz
\n Telecopier No.: (212) 455-2502<\/p>\n
or at such other address and to the attention of such other person as Seller
\nmay designate by written notice to Parent.<\/p>\n
Notices to Parent, TH USA or THEH shall be made to Parent and shall be
\naddressed to:<\/p>\n
Tommy Hilfiger Corporation
\n c\/o Tommy Hilfiger U.S.A., Inc.
\n 25 West 39th Street
\n New York, New York 10018,
\n Attn: Joel J. Horowitz
\n Telecopier No.: (212) 548-1818<\/p>\n
with a copy to:<\/p>\n
Wachtell, Lipton, Rosen & Katz
\n 51 West 52nd Street
\n New York, NY 10019
\n Attn: Eric S. Robinson
\n Telecopier No: (212) 403-2000<\/p>\n
or at such other address and to the attention of such other person as Parent
\nmay designate by written notice to Seller.<\/p>\n
36<\/p>\n
Section 12.7. Successors and Assigns. This Agreement shall be binding upon
\nand inure to the benefit of the parties hereto and their respective successors
\nand assigns; provided, however, that no party hereto will assign its rights or
\ndelegate its obligations under this Agreement without the express prior
\nwritten consent of each other party hereto. Notwithstanding the foregoing,
\nParent may assign its rights under this Agreement to any wholly-owned
\nsubsidiary of Parent; provided that no such assignment by Parent of its rights
\nhereunder to any wholly-owned subsidiary shall in any way affect Parent’s
\nobligations or liabilities under this Agreement.<\/p>\n
Section 12.8. Headings; Definitions. The Section and Article headings
\ncontained in this Agreement are inserted for convenience of reference only and
\nwill not affect the meaning or interpretation of this Agreement. All
\nreferences to Sections or Articles contained herein mean Sections or Articles
\nof this Agreement unless otherwise stated. All capitalized terms defined
\nherein are equally applicable to both the singular and plural forms of such
\nterms.<\/p>\n
Section 12.9. Amendments and Waivers. This Agreement may not be modified or
\namended except by an instrument or instruments in writing signed by the party
\nagainst whom enforcement of any such modification or amendment is sought. Any
\nparty hereto may, only by an instrument in writing waive compliance by the
\nother parties hereto with any term or provision of this Agreement on the part
\nof such other parties hereto to be performed or complied with. The waiver by
\nany party hereto of a breach of any term or provision of this Agreement shall
\nnot be construed as a waiver of any subsequent breach.<\/p>\n
Section 12.10. Severability. In the event that this Agreement, or any of its
\nprovisions, or the performance of any provision, is found to be illegal or
\nunenforceable under applicable law now or hereafter in effect, the parties
\nshall be excused from performance of such portions of this Agreement as shall
\nbe found to be illegal or unenforceable under the applicable laws or
\nregulations without affecting the validity of the remaining provisions of the
\nAgreement; provided that (i) the remaining provisions of the Agreement shall
\nin their totality constitute a commercially reasonable agreement, and (ii)
\nshould any method of termination of this Agreement or a portion thereof be
\nfound to be illegal or unenforceable, such method shall be reformed to comply
\nwith the requirements of applicable law so as, to the greatest extent
\npossible, to allow termination by that method. Nothing herein shall be
\nconstrued as a waiver of any party’s right to challenge the validity of such
\nlaw.<\/p>\n
Section 12.11. Interpretation. For the purposes of this Agreement, (i) a
\n“subsidiary” of an entity means any entity more than 50% of the voting power
\nof whose outstanding voting securities or equity interests are directly or
\nindirectly owned by such other entity, and (ii) “including” shall mean
\n“including without limitation.”<\/p>\n
37<\/p>\n
In Witness Whereof, this Agreement has been signed by or on behalf of each
\nof the parties as of the day first above written.<\/p>\n
TOMMY HILFIGER CORPORATION<\/p>\n
By: \/s\/ Joel J. Horowitz
\n ——————————————-
\n Name: Joel J. Horowitz
\n Title: Chief Executive Officer and
\n President<\/p>\n
TOMMY HILFIGER U.S.A., INC.<\/p>\n
By: \/s\/ Joel J. Horowitz
\n ——————————————-
\n Name: Joel J. Horowitz
\n Title: Chief Executive Officer<\/p>\n
TOMMY HILFIGER (EASTERN HEMISPHERE) LIMITED<\/p>\n
By: \/s\/ Joel J. Horowitz
\n ——————————————-
\n Name: Joel J. Horowitz
\n Title: Chief Executive Officer and
\n President<\/p>\n
PEPE JEANS LONDON CORPORATION<\/p>\n
By: \/s\/ Lawrence S. Stroll
\n ——————————————-
\n Name: Lawrence S. Stroll
\n Title: Group CEO<\/p>\n
38<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[7775],"corporate_contracts_industries":[9396],"corporate_contracts_types":[9622,9627],"class_list":["post-43715","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-hilfiger-tommy-corp","corporate_contracts_industries-consumer__clothing","corporate_contracts_types-planning","corporate_contracts_types-planning__purchase"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43715","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43715"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43715"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43715"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43715"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}