Delaware | 5600 | 20-3842867 | ||
(State or other jurisdiction
of
incorporation or organization) |
(Primary standard industrial
classification code number) |
(I.R.S. employer
identification number) |
Barry M. Abelson
John P. Duke Pepper Hamilton LLP 3000 Two Logan Square 18th and Arch Streets Philadelphia, PA 19103-2799 (215) 981-4000 |
Kevin P. Kennedy
Simpson Thacher & Bartlett LLP 2550 Hanover Street Palo Alto, CA 94034 (650) 251-5000 |
8
46
57
69
F-16
II-5
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The
information in this preliminary prospectus is not complete and
may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an
offer to sell these securities and it is not soliciting an offer
to buy these securities in any jurisdiction where the offer or
sale is not permitted.
Per
Share
Total
$
$
$
$
$
$
$
$
Goldman,
Sachs & Co.
Merrill
Lynch & Co.
Credit
Suisse
UBS
Investment Bank
William
Blair & Company
CIBC
World Markets
Wachovia
Securities
Thomas
Weisel Partners LLC
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Initial Public
Offering and Secondary Offering
,
2007
Underwriters
Net Proceeds
to
Price to the
Discounts and
Net Proceeds
to
the Selling
U.S.$
U.S.$
U.S.$
U.S.$
U.S.$
U.S.$
U.S.$
U.S.$
(1)
The offering price for shares of
our common stock has been determined by negotiation between us
and the Underwriters.
See Underwriting.
(2)
Before deducting expenses of this
offering, which are estimated to be approximately
U.S.$5,000,000, which will be paid by us out of our general
corporate funds.
(3)
The Selling Stockholders will pay
the Underwriters discounts and commissions in respect of
the shares of common stock sold by the Selling Stockholders.
None of the expenses of the offering will be borne by the
Selling Stockholders. Pursuant to the Agreement and Plan of
Reorganization dated April 26, 2007, between us, our
stockholders and certain other parties, we agreed to pay all
expenses of the offering. See Principal and Selling
Stockholders.
(4)
Assumes an initial public offering
price of U.S.$11.00 per share (the midpoint of the currently
estimated price range of U.S.$10.00 to U.S.$12.00).
(5)
Certain of the Selling Stockholders
have granted an option to the Underwriters, exercisable in whole
or in part for a period of 30 days from the closing of this
offering, to purchase up to 2,730,000 additional shares of
common stock on the terms as set forth above. If this option is
exercised in full, the total Price to the Public,
Underwriters Discounts and Commissions and Net Proceeds to
the Selling Stockholders will be
U.S.$ ,
U.S.$ and
U.S.$ , respectively. This
prospectus qualifies the distribution of the option and the
distribution of the additional shares of common stock sold upon
the exercise of the option. See Underwriting.
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Creativity is maximized when youre living in the moment.
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lululemon athletica creates components for people to
LIVE LONGER, HEALTHIER AND MORE FUN LIVES.
Fiscal Year Ended
January 31,
Three Months
Ended April 30,
$
0.662
$
0.788
$
0.849
$
0.874
$
0.910
$
0.893
$
0.904
$
0.621
$
0.653
$
0.716
$
0.787
$
0.846
$
0.853
$
0.844
$
0.654
$
0.754
$
0.807
$
0.874
$
0.848
$
0.893
$
0.904
$
0.639
$
0.729
$
0.776
$
0.834
$
0.882
$
0.876
$
0.875
1
10
30
32
32
33
41
43
45
48
81
93
99
121
126
130
138
141
145
148
153
153
153
154
154
154
155
155
155
155
156
F-1
C-1
C-2
Fiscal Year Ended
January 31,
Three Months
Ended April 30,
$
0.662
$
0.788
$
0.849
$
0.874
$
0.910
$
0.893
$
0.904
$
0.621
$
0.653
$
0.716
$
0.787
$
0.846
$
0.853
$
0.844
$
0.654
$
0.754
$
0.807
$
0.874
$
0.848
$
0.893
$
0.904
$
0.639
$
0.729
$
0.776
$
0.834
$
0.882
$
0.876
$
0.875
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design and develop innovative athletic apparel that combines
performance with style and incorporates real-time customer
feedback;
locate our stores in street locations, lifestyle centers and
malls that position each lululemon athletica store as an
integral part of its community;
create an inviting and educational store environment that
encourages product trial and repeat visits; and
market on a grassroots level in each community, including
through influential fitness practitioners who embrace and create
excitement around our brand.
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2
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the possibility that we may not be able to manage operations at
our current size or manage growth effectively;
the possibility that we may not be able to locate suitable
locations to open new stores or attract customers to our stores;
the possibility that we may not be able to successfully expand
in the United States and other new markets;
the possibility that we may not be able to finance our growth
and maintain sufficient levels of cash flow;
increased competition causing us to reduce the prices of our
products or to increase significantly our marketing efforts in
order to avoid losing market share;
3
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the possibility that we may not be able to effectively market
and maintain a positive brand image;
the possibility that we may not be able to maintain recent
levels of comparable store sales or average sales per square
foot;
the possibility that we may not be able to continually innovate
and provide our consumers with improved products;
the possibility that our suppliers or manufacturers may not
produce or deliver our products in a timely or cost-effective
manner; and
the dilution of $10.70 per share that new investors will
experience upon purchase of our common stock, based on an
assumed initial public offering price of $11.00 per share.
4
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Common stock offered by us
2,290,909 shares
Common stock offered by the selling stockholders
15,909,091 shares
Common stock outstanding after this offering
75,309,860 shares
The number of shares of our common stock outstanding after this
offering is based on the assumptions outlined in the bullets
below. As described below, the number of shares outstanding
after this offering depends in part on the initial public
offering price and the effective date of our corporate
reorganization.
Use of proceeds
We expect to receive net proceeds from this offering of
approximately $18.4 million, based upon an assumed initial
public offering price of $11.00 per share, the midpoint of the
range set forth on the cover of this prospectus, and after
deducting underwriting discounts and estimated offering expenses
payable by us. We will not receive any proceeds from the sale of
shares in this offering by the selling stockholders, including
upon the sale of shares if the underwriters exercise their
option to purchase additional shares from certain of the selling
stockholders in this offering.
We intend to use the net proceeds of this offering, together
with cash flow from operations, to fund new store openings and
working capital, and for other general corporate purposes, which
may include general and administrative expenses and potential
acquisitions of franchises. For fiscal 2007 and fiscal 2008, we
have budgeted an aggregate of $28.0 million to
$34.0 million for new store openings, although the actual
amounts that we spend on such items may vary. See Use of
Proceeds.
Risk factors
See Risk Factors on page 10 and the other
information in this prospectus for a discussion of the factors
you should consider before you decide to invest in our common
stock.
Directed share program
The underwriters have reserved for sale, at the initial public
offering price, up to 910,000 shares of our common stock
being offered for sale to our business associates, employees,
friends and family members of our employees. The number of
shares available for sale to the general public in this offering
will be reduced to the extent these persons purchased reserved
shares. Any reserved shares not purchased will be offered by the
underwriters to the general public on the same terms as the
other shares.
Nasdaq Global Market symbol
LULU
Toronto Stock Exchange symbol
LLL
5
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assumes an initial public offering price of $11.00 per
share (the midpoint of the price range set forth on the front
cover of this prospectus);
reflects the consummation of our corporate reorganization on an
assumed date of July 24, 2007, and (assuming an initial
public offering price of $11.00 per share) the issuance of
48,767,976 shares of our common stock and the issuance by
Lulu Canadian Holding, Inc., our wholly owned subsidiary, of
24,250,975 exchangeable shares in connection therewith, as
described in Pre-Offering Transactions included
elsewhere in this prospectus;
assumes the issuance of 24,250,975 shares of our common
stock issuable upon the exchange of all of the exchangeable
shares of Lulu Canadian Holding, Inc. to be outstanding as a
result of our corporate reorganization;
assumes the underwriters option to purchase additional
shares in this offering has not been exercised;
excludes 4,478,726 shares of our common stock issuable upon
exercise of options outstanding as of the date of this
prospectus under our 2007 Equity Incentive Plan at a weighted
average exercise price of $0.58; and
excludes an additional 5,521,274 shares of our common stock
reserved for future issuance under our 2007 Equity Incentive
Plan, including 230,616 shares of our common stock issuable
upon exercise of options expected to be granted in connection
with this offering, each with an exercise price equal to the
initial public offering price.
A $1.00 increase in the assumed initial public offering price of
$11.00 per share would decrease the number of shares of
common stock outstanding after this offering by approximately
1,862,000 shares, assuming that our corporate
reorganization occurs on July 24, 2007;
A $1.00 decrease in the assumed initial public offering price of
$11.00 per share would increase the number of shares of
common stock outstanding after this offering by approximately
2,234,000 shares, assuming that our corporate
reorganization occurs on July 24, 2007; and
If our corporate reorganization occurred five days later or
earlier than the assumed date of July 24, 2007, the common
stock outstanding after this offering would increase or
decrease, respectively, by approximately 21,500 shares,
assuming an initial public offering price of $11.00 per
share.
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Fiscal Year Ended
January 31,
Three Months
Ended April 30,
(In thousands,
except share data)
$
40,748
$
84,129
$
148,885
$
28,184
$
44,789
19,448
41,177
72,903
13,664
21,979
21,300
42,952
75,982
14,519
22,811
10,840
26,416
52,540
8,406
15,963
12,134
12,809
7,228
(1,674
)
3,727
16,213
6,113
6,848
(11
)
(55
)
(142
)
(26
)
(110
)
46
51
47
3
3
(1,709
)
3,730
16,308
6,136
6,955
(298
)
2,336
8,753
2,955
3,449
(112
)
(36
)
$
(1,411
)
$
1,394
$
7,666
$
3,181
$
3,542
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Fiscal Year Ended
January 31,
Three Months
Ended April 30,
(In thousands,
except share data)
24,250,975
24,250,975
48,767,976
48,767,976
49,565,399
50,139,576
$
0.10
$
0.05
$
0.10
$
0.05
14
27
41
30
47
*
$
1,328
$
1,279
$
1,411
$
1,277
$
1,447
18
%
19
%
25
%
15
%
20
%
*
We closed one corporate-owned
oqoqo
store on May 15, 2007.
Figures for the Three Months Ended
April 30, 2006 and 2007, are calculated on the basis of net
revenue for the twelve months ended April 30, 2006 and
2007, respectively.
(1)
Includes stock-based compensation
as follows:
Fiscal Year Ended
January 31,
Three Months
Ended April 30,
(In thousands)
$
$
755
$
360
$
94
$
169
1,945
2,470
262
1,239
$
$
2,700
$
2,830
$
356
$
1,408
(2)
We have not computed basic and
diluted earnings per share as the combined consolidated results
reflect the results of two separate companies (lululemon
athletica inc. and LIPO Investments (Canada) Inc.), each with
its own distinct and separate capital structure. As a result of
our corporate reorganization, various securities (including
Series A preferred stock issued by lululemon athletica inc.
and common stock equivalents issued by LIPO Investments (Canada)
Inc.) will be exchanged for shares of our common stock based in
part on the quotient of the value of accrued but unpaid
dividends (which, where applicable, accrue on a daily basis
until the consummation of our corporate reorganization) to our
initial public offering price. We have accordingly presented pro
forma earnings per share for the fiscal year ended
January 31, 2007 and for the three months ended
April 30, 2007 giving effect to our corporate
reorganization as if it had been consummated on the first day of
that period. In addition, the outstanding stock options of the
two companies will be converted into options to purchase shares
of our common stock. See Pre-Offering Transactions
and note 12 to our combined consolidated financial
statements appearing elsewhere in this prospectus.
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on an actual basis, derived from our unaudited combined
consolidated balance sheet as of April 30, 2007;
on a pro forma basis, giving effect to:
the consummation of our corporate reorganization on an assumed
date of July 24, 2007, and (assuming an initial public
offering price of $11.00 per share) the issuance of
48,767,976 shares of our common stock;
the issuance by Lulu Canadian Holding, Inc., our wholly owned
subsidiary, of 24,250,975 exchangeable shares in connection
therewith, as described in Pre-Offering Transactions
included elsewhere in this prospectus, and the issuance of
24,250,975 shares of our common stock upon the exchange of
the Lulu Canadian Holding exchangeable shares; and
on a pro forma as adjusted basis, further reflecting
the sale by us of 2,290,909 shares of our common stock in
this offering (assuming an initial public offering price of
$11.00 per share, and after deducting estimated offering
expenses and underwriting discounts and commissions payable by
us).
As of
April 30, 2007
Pro Forma
(In thousands)
$
4,393
$
4,383
$
22,819
8,840
8,840
8,840
21,169
21,169
21,169
69,034
69,024
87,460
44,490
44,490
62,926
9
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identify suitable store locations, the availability of which is
outside of our control;
negotiate acceptable lease terms, including desired tenant
improvement allowances;
hire, train and retain store personnel and field management;
assimilate new store personnel and field management into our
corporate culture;
source sufficient inventory levels; and
successfully integrate new stores into our existing operations
and information technology systems.
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economic downturns in a particular area;
competition from nearby retailers selling athletic apparel;
changing consumer demographics in a particular market;
changing lifestyle choices of consumers in a particular market;
and
the closing or decline in popularity of other businesses located
near our store.
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introduction of new products may be delayed, which may allow our
competitors to introduce similar products in a more timely
fashion, which could hurt our goal to be viewed as a leader in
technical athletic apparel innovation;
if our expanded product offerings fail to maintain and enhance
our distinctive brand identity, our brand image may be
diminished and our sales may decrease;
implementation of these plans may divert managements
attention from other aspects of our business and place a strain
on our management, operational and financial resources, as well
as our information systems; and
incorporation of novel technologies into our products that are
not accepted by our customers or that are inferior to similar
products offered by our competitors.
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the timing of new store openings;
net revenue and profits contributed by new stores;
increases or decreases in comparable store sales;
changes in our product mix; and
the timing of new advertising and new product introductions.
a substantial increase or decrease in consumer demand for our
products or for products of our competitors;
our failure to accurately forecast customer acceptance for our
new products;
new product introductions or pricing strategies by competitors;
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more limited historical store sales information for our newer
markets;
weakening of economic conditions or consumer confidence in
future economic conditions, which could reduce demand for
discretionary items, such as our products; and
acts or threats of war or terrorism which could adversely affect
consumer confidence and spending or interrupt production and
distribution of our products and our raw materials.
19
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increasing our vulnerability to general adverse economic and
industry conditions;
limiting our ability to obtain additional financing;
requiring a substantial portion of our available cash to pay our
rental obligations, thus reducing cash available for other
purposes;
limiting our flexibility in planning for or reacting to changes
in our business or in the industry in which we compete; and
placing us at a disadvantage with respect to some of our
competitors.
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political unrest, terrorism, labor disputes and economic
instability resulting in the disruption of trade from foreign
countries in which our products are manufactured;
the imposition of new laws and regulations, including those
relating to labor conditions, quality and safety standards,
imports, duties, taxes and other charges on imports, as well as
trade restrictions and restrictions on currency exchange or the
transfer of funds;
reduced protection for intellectual property rights, including
trademark protection, in some countries, particularly the
Peoples Republic of China;
disruptions or delays in shipments; and
changes in local economic conditions in countries where our
manufacturers, suppliers or customers are located.
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actual or anticipated fluctuations in quarterly operating
results or other operating metrics, such as comparable store
sales, that may be used by the investment community;
changes in financial estimates by us or by any securities
analysts who might cover our stock;
speculation about our business in the press or the investment
community;
conditions or trends affecting our industry or the economy
generally;
stock market price and volume fluctuations of other publicly
traded companies and, in particular, those that are in the
technical athletic apparel industry;
announcements by us or our competitors of new products,
significant acquisitions, strategic partnerships or divestitures;
changes in product mix between high and low margin products;
capital commitments;
our entry into new markets;
timing of new store openings;
percentage of sales from new stores versus established stores;
additions or departures of key personnel;
actual or anticipated sales of our common stock, including sales
by our directors, officers or significant stockholders;
significant developments relating to our manufacturing,
distribution, joint venture or franchise relationships;
customer purchases of new products from us and our competitors;
investor perceptions of the apparel industry in general and our
company in particular;
major catastrophic events;
volatility in our stock price, which may lead to higher
stock-based compensation expense under applicable accounting
standards; and
changes in accounting standards, policies, guidance,
interpretation or principles.
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Number
of shares and
Immediately after this offering.
180 days after the date of
this prospectus due to contractual obligations and
lock-up
agreements between the holders of these shares and the
underwriters. However, the underwriters can waive the provisions
of these
lock-up
agreements and allow these stockholders to sell their shares at
any time, provided their respective one-year holding periods
under Rule 144 have expired.
From time to time after the date
180 days after the date of this prospectus upon expiration
of their respective one-year holding periods in the U.S. or
in Canada.
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the classification of our board of directors into three classes,
with one class elected each year;
prohibiting cumulative voting in the election of directors;
the ability of our board of directors to issue preferred stock
without stockholder approval;
a special meeting of stockholders may only be called by our
chairman or Chief Executive Officer, or upon a resolution
adopted by an affirmative vote of a majority of the board of
directors, and not by our stockholders;
prohibiting stockholder action by written consent; and
our stockholders must comply with advance notice procedures in
order to nominate candidates for election to our board of
directors or to place stockholder proposals on the agenda for
consideration at any meeting of our stockholders.
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our ability to manage operations at our current size or manage
growth effectively;
our ability to locate suitable locations to open new stores and
to attract customers to our stores;
our ability to successfully expand in the United States and
other new markets;
our ability to finance our growth and maintain sufficient levels
of cash flow;
increased competition causing us to reduce the prices of our
products or to increase significantly our marketing efforts in
order to avoid losing market share;
our ability to effectively market and maintain a positive brand
image;
our ability to maintain recent levels of comparable store sales
or average sales per square foot;
our ability to continually innovate and provide our consumers
with improved products;
the ability of our suppliers or manufacturers to produce or
deliver our products in a timely or cost-effective manner;
our lack of long-term supplier contracts;
our lack of patents or exclusive intellectual property rights in
our fabrics and manufacturing technology;
our ability to attract and maintain the services of our senior
management and key employees;
the availability and effective operation of management
information systems and other technology;
changes in consumer preferences or changes in demand for
technical athletic apparel and other products;
our ability to accurately forecast consumer demand for our
products;
our ability to accurately anticipate and respond to seasonal or
quarterly fluctuations in our operating results;
our ability to find suitable joint venture partners and expand
successfully outside North America;
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our ability to maintain effective internal controls; and
changes in general economic or market conditions, including as a
result of political or military unrest or terrorist attacks.
the continued and growing demand for our products;
the impact of competition;
the ability to obtain and maintain existing financing on
acceptable terms; and
currency exchange and interest rates.
31
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108,495 shares of series A preferred stock; and
116,994 shares of series TS preferred stock.
33
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(1)
Dennis Wilson is the controlling
stockholder of LIPO Investments (USA) and LIPO Investments
(Canada). He holds common shares in these companies in his
individual capacity and in his capacity as trustee under a trust
arrangement established for the benefit of the other
stockholders of these companies, all of whom are Lululemon
employees.
34
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35
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its pro rata portion of 52,965,988 shares of our common
stock (which we refer to as the common share amount); and
with respect to each share of our series A preferred stock
held by such stockholder, the number of shares of our common
stock that is equal to (x) $978.33 (representing the stated
value of each such share plus accrued and unpaid dividends
through the assumed reorganization date, assuming that such
share of series A preferred stock was issued on
December 5, 2005), divided by (y) the initial public
offering price per share of our common stock.
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the LIPO Entities pro rata portion of the common share
amount; and
the number of shares of our common stock that is equal to
(x) $114,459,361 (representing the stated value of our
series TS preferred stock and Lulu Canada class B
shares held by the LIPO Entities, plus accrued and unpaid
dividends through the assumed reorganization date) divided by
(y) the initial public offering price per share of our
common stock.
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48,767,976 shares of our common stock assuming an initial
public offering price of $11.00 per share and a
reorganization date of July 24, 2007;
24,250,975 shares of our special voting stock;
options to purchase 4,478,726 shares of our common stock at
a weighted average exercise price of $0.58 per share
(issued in exchange for the options to purchase shares of
Lulu USA common stock or Lulu Canada class C shares);
and
options to purchase an additional 230,616 shares of our
common stock, each with an exercise price equal to the initial
offering price, that are expected to be granted in connection
with this offering (but not as part of our corporate
reorganization).
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39
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40
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on an actual basis, derived from our unaudited combined
consolidated balance sheet as of April 30, 2007;
on a pro forma basis, giving effect to:
the consummation of our corporate reorganization on an assumed
date of July 24, 2007, and (assuming an initial public
offering price of $11.00 per share) the issuance of
48,767,976 shares of our common stock;
the issuance by Lulu Canadian Holding, Inc., our wholly owned
subsidiary, of 24,250,975 shares of its exchangeable common
stock in connection therewith, as described in
Pre-Offering Transactions included elsewhere in this
prospectus, and the issuance of 24,250,975 shares of our
common stock upon the exchange of the Lulu Canadian Holding
exchangeable shares; and
on a pro forma as adjusted basis, further reflecting
the sale by us of 2,290,909 shares of our common stock in
this offering (assuming an initial public offering price of
$11.00 per share, and after deducting estimated offering
expenses and underwriting discounts and commissions payable by
us).
A $1.00 increase in the assumed initial public offering price of
$11.00 per share would decrease the number of shares of
common stock outstanding after this offering by approximately
1,862,000 shares, assuming that our corporate
reorganization occurs on July 24, 2007;
A $1.00 decrease in the assumed initial public offering price of
$11.00 per share would increase the number of shares of
common stock outstanding after this offering by approximately
2,234,000 shares, assuming that our corporate
reorganization occurs on July 24, 2007; and
If our corporate reorganization occurred five days later or
earlier than the assumed date of July 24, 2007, the common
stock outstanding after this offering would increase or
decrease, respectively, by approximately 21,500 shares,
assuming an initial public offering price of $11.00 per
share.
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April 30,
2007
Pro Forma
(In thousands)
(Unaudited)
$
$
$
567
557
557
2
0
730
753
100,518
99,790
118,203
(57,135
)
(57,135
)
(57,135
)
1,106
1,106
1,106
44,490
44,490
62,926
$
45,058
$
45,048
$
63,484
(1)
Stockholders equity and
components thereof consist of capital of two related companies,
lululemon athletica inc. and LIPO Investments (Canada), Inc.
(2)
A $1.00 increase or decrease in the
assumed public offering price of $11.00 per share, the
midpoint of the range set forth on the cover of this prospectus,
would increase or decrease, respectively, each of additional
paid-in capital, total stockholders equity and total
capitalization by $2.1 million, assuming the number of
shares offered by us, as set forth on the cover page of this
prospectus, remains the same and after deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by us.
4,478,726 shares of our common stock issuable upon exercise
of options outstanding as of April 30, 2007 at a weighted
average exercise price of $0.58 per share; and
an additional 5,521,274 shares of our common stock reserved
for future issuance under our 2007 Equity Incentive Plan,
including 230,616 shares of our common stock issuable upon
exercise of options expected to be granted in connection with
this offering, each with an exercise price equal to the initial
public offering price.
42
Table of Contents
$
11.00
$
0.50
0.23
0.73
$
10.27
43
Table of Contents
Shares
Purchased
Total
Consideration
Average Price
73,018,951
97.0
%
$
93,583,270
78.8
%
$
1.28
2,290,909
3.0
%
$
25,199,999
21.2
%
$
11.00
75,309,860
100.0
%
$
118,783,269
100.0
%
pro forma net tangible book value per share would remain
constant at $0.73 and would not further dilute new investors;
our existing stockholders, including the holders of these
options, would own 77.2%, and our new investors would own 22.8%,
of the total number of shares of our common stock outstanding
upon the completion of this offering; and
our existing stockholders, including the holders of these
options, would have paid 79.2% of total consideration, at an
average price per share of $1.24, and our new investors would
have paid 20.8% of total consideration.
44
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45
Table of Contents
Fiscal Year Ended
January 31,
Three Months
Ended April 30,
(In thousands,
except share data)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
$
5,903
$
18,188
$
40,748
$
84,129
$
148,885
$
28,184
$
44,789
3,079
8,748
19,448
41,177
72,903
13,664
21,979
2,823
9,439
21,300
42,952
75,982
14,519
22,811
1,173
4,896
10,840
26,416
52,540
8,406
15,963
1,314
3,782
12,134
12,809
7,228
336
761
(1,674
)
3,727
16,213
6,113
6,848
(11
)
(55
)
(142
)
(26
)
(110
)
4
46
51
47
3
3
336
757
(1,709
)
3,730
16,308
6,136
6,955
41
437
(298
)
2,336
8,753
2,955
3,449
(112
)
(36
)
$
295
$
319
$
(1,411
)
$
1,394
$
7,666
$
3,181
$
3,542
24,250,975
24,250,975
48,767,976
48,767,976
49,565,399
50,139,576
$
0.10
$
0.05
$
0.10
$
0.05
(1)
Includes stock-based compensation
as follows:
Fiscal Year
Ended
Three Months
Ended
January
31,
April 30,
(In thousands)
(Unaudited)
(Unaudited)
$
$
755
$
360
$
94
$
169
1,945
2,470
$
262
$
1,239
$
$
2,700
$
2,830
$
356
$
1,408
(2)
We have not computed basic and
diluted earnings per share as the combined consolidated results
reflect the results of two separate companies (lululemon
athletica inc. and LIPO Investments (Canada) Inc.), each with
its own distinct and separate capital structures. As a result of
our corporate reorganization, various securities (including
Series A preferred stock issued by lululemon athletica inc.
and common stock equivalents issued by LIPO Investments (Canada)
Inc.) will be exchanged for shares of our common stock based in
part on the
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quotient of the value of accrued
but unpaid dividends (which, where applicable, accrue on a daily
basis until the consummation of our corporate reorganization) to
our initial public offering price. We have accordingly presented
pro forma earnings per share for the year ended
January 31, 2007 and for the three months ended
April 30, 2007 giving effect to our corporate
reorganization as if it had been consummated on the first day of
that period. In addition, the outstanding stock options of the
two companies will be converted into options to purchase shares
of our common stock. See
Pre-Offering
Transactions and note 12 to our combined consolidated
financial statements appearing elsewhere in this prospectus.
As of
As of January
31,
April 30,
(In thousands)
$
433
$
7
$
2,652
$
3,877
$
16,029
4,393
2,323
11,448
21,148
41,914
71,855
69,034
594
272
419
810
(604
)
28,052
37,379
44,490
47
Table of Contents
CONDITION AND RESULTS OF OPERATIONS
48
Table of Contents
49
Table of Contents
corporate-owned store net revenue, which includes sales to
customers through corporate-owned stores (including stores
operated by our majority owned joint venture);
franchises net revenue, which consists of licensing fees and
royalties as well as sales of our products to
franchises; and
other net revenue, which includes sales to wholesale accounts,
telephone sales, including related shipping and handling
charges, warehouse sales and sales from company operated
showrooms;
50
Table of Contents
the location of new stores relative to existing stores;
consumer preferences, buying trends and overall economic trends;
our ability to anticipate and respond effectively to customer
preferences for technical athletic apparel;
competition;
changes in our merchandise mix;
pricing;
the timing of our releases of new merchandise and promotional
events;
the effectiveness of our grassroots marketing efforts;
the level of customer service that we provide in our stores;
our ability to source and distribute products
efficiently; and
the number of stores we open, close (including for temporary
renovations) and expand in any period.
the cost of purchased merchandise, inbound freight, duty and
non-refundable taxes incurred in delivering goods to our
distribution centers;
the cost of our production and design departments including
salaries, stock-based compensation and benefits, and operating
expenses;
the cost of occupancy related to store operations (such as rent
and utilities) and the depreciation and amortization related to
store-level capital expenditures;
the cost of our distribution centers (such as rent and
utilities) as well as other fees we pay to third parties to
operate our distribution centers and the depreciation and
amortization related to our distribution centers;
the cost of outbound freight and handling costs incurred upon
shipment of merchandise; and
shrink and valuation reserves.
51
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52
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the valuation did not coincide with the option grant dates; and
the valuation incorrectly included a minority interest discount.
in July 2006, management and our board of directors did not
believe an initial public offering was possible in the near
future because the board of directors was still in the process
of augmenting the management team and enhancing infrastructure
related to expanding our operations into United States;
in July 2006, we had only seven stores in the United States,
four of which were located in California, and, because of our
limited experience outside of Canada, there was still
uncertainty that our stores would be successful in the United
States and that management would be able to identify suitable
markets and retail sites; and
in 2006, we were in the process of identifying suitable
off-shore manufacturers with the necessary quality standards and
capacity to satisfy our current and future manufacturing needs;
this process involved meaningful risk requiring significant
management focus and attention as well as additional management
resources.
in the third and fourth quarter of 2006, we appointed both a
Chief Financial Officer and a Chief Operating Officer with past
public company roles in a similar capacity;
revenue growth in fiscal 2006 was 77%, to $148.9 million,
compared to revenue in fiscal 2005 of $84.1 million;
net revenue, income from operations and net income for the first
quarter of fiscal 2007 increased 58.9%, 12.0%, and 11.3%,
respectively, from the first quarter of fiscal 2006,
outperforming managements internal estimates;
53
Table of Contents
favorable exchange rate movement between the U.S. dollar
and the Canadian dollar in the first five months of fiscal 2007,
which was anticipated to have a positive impact on income from
operations in fiscal 2007; and
since February 1, 2007, we opened 11 new stores.
Number of
Options
Exercise
Original Fair
Value
Reassessed Fair
Value
Granted
Price
Assessment of
Options
Assessment of
Options
2,898,893
$
0.58
$
0.33
$
0.91
5,954
$
0.58
$
0.33
$
8.09
1,308,880
$
0.58
$
0.33
$
8.09
357,299
$
0.58
$
0.33
$
8.09
54
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55
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Three Months
Ended April 30,
(In thousands)
(unaudited)
(unaudited)
$
40,748
$
84,129
$
148,885
$
28,184
$
44,789
19,448
41,177
72,903
13,664
21,979
21,300
42,952
75,982
14,519
22,811
10,840
26,416
52,540
8,406
15,963
12,134
12,809
7,228
(1,674
)
3,727
16,213
6,113
6,848
(11
)
(55
)
(142
)
(26
)
(110
)
46
51
47
3
3
(1,709
)
3,730
16,308
6,136
6,955
(298
)
2,336
8,753
2,955
3,449
(112
)
(36
)
$
(1,411
)
$
1,394
$
7,666
$
3,181
$
3,542
56
Table of Contents
Fiscal Year Ended
January 31,
Three Months
Ended April 30,
(% of net revenue)
100.0
100.0
100.0
100.0
100.0
47.7
48.9
49.0
48.5
49.0
52.3
51.1
51.0
51.5
50.9
26.6
31.4
35.3
29.8
35.6
29.8
15.2
4.9
(4.1
)
4.4
10.9
21.7
15.3
(0.0
)
(0.1
)
(0.1
)
(0.1
)
(0.0
)
0.1
0.1
0.0
0.0
0.0
(4.2
)
4.4
11.0
21.8
15.5
(0.7
)
2.8
5.9
10.5
7.7
(0.0
)
(0.0
)
(3.5
)
1.7
5.1
11.3
7.9
Three Months
Ended April 30,
2006
2007
(In thousands)
$
22,146
$
38,008
4,364
4,918
1,674
1,864
$
28,184
$
44,789
New stores opened during fiscal 2006 prior to sales from such
stores becoming part of our comparable store sales base
contributed $9.5 million, or 59.9%, of the increase. During
fiscal 2006, we opened 13 corporate-owned stores, consisting of
7 in Canada, 5 in the United States and 1 in Japan.
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Comparable store sales growth of 20.0% in the first quarter of
fiscal 2007 contributed $4.3 million, or 27.2%, of the
increase. Assuming the average exchange rate between the
Canadian and the United States dollars for the first quarter of
fiscal 2006 remained constant, our comparable store sales would
have increased $4.4 million or 20.0% for the first quarter
of fiscal 2007. The increase in comparable store sales was
driven primarily by the strength of our existing product lines,
successful introduction of new products and increasing
recognition of the lululemon athletica brand name.
The acquisition of three Calgary franchise stores on
April 1, 2007 contributed $1.7 million, or 10.5%, of
the increase.
New stores opened during the first quarter of fiscal 2007
contributed $0.4 million, or 2.4%, of the increase. During
the first quarter of fiscal 2007, we opened three
corporate-owned stores, consisting of one in Canada, one in the
United States and one in Japan.
New and existing wholesale accounts contributed
$0.6 million of the increase.
Phone sales revenue accounted for $0.2 million of the
increase.
Warehouse and showroom sales decreased $0.6 million due to
no warehouse sales in the first quarter of fiscal 2007 compared
to two warehouse sales in the first quarter of fiscal 2006,
partially offset by four showrooms open at the end of the first
quarter of fiscal 2007 compared to one showroom open at the end
of the first quarter of fiscal 2006.
an increase of $15.9 million in net revenue from our
corporate-owned stores segment;
an increase of $0.6 million in net revenue from our
franchises segment; and
an increase of $0.2 million in net revenue from our other
segment.
an increase in product costs of $5.6 million associated
with our sale of goods through corporate-owned stores,
franchises and other segments;
an increase in occupancy costs of $1.4 million related to
an increase in corporate-owned stores;
an increase of $0.7 million in expenses related to our
production, design and distribution departments (including
stock-based compensation expense) principally due to the hiring
of additional employees to support our growth; and
an increase in depreciation of $0.6 million primarily
related to an increase in corporate-owned stores.
58
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an increase in occupancy costs in new markets that contributed
to a decrease in gross margin of 1.0%; and
an increase in depreciation that contributed to a decrease in
gross margin of 0.5%.
a decrease in product costs as a percentage of net revenue that
contributed to an increase in gross margin of 0.5% due to an
increase in pricing to our franchises, partially offset by an
increased percentage of our net revenue being derived from our
factory outlet stores, which generate lower gross margins than
our other corporate-owned stores, and a short-term increase in
expenses during our transition to the use of more off-shore
manufacturers; and
a decrease in expenses related to our production, design and
distribution departments (including stock-based compensation
expense) as a percentage of net revenue from fiscal 2005 to
fiscal 2006 which contributed to an increase in gross margin of
0.5%.
an increase in corporate compensation of $3.6 million or
48.2% principally due to hiring of additional employees to
support our growth;
an increase in store employee compensation of $2.3 million
or 31.0% related to opening additional corporate-owned stores;
an increase in other corporate expenses such as travel expenses
and rent associated with corporate facilities of
$0.3 million or 4.0%; and
an increase in other store operating expenses such as supplies,
packaging and credit card fees of $0.9 million or 12.3%.
59
Table of Contents
our corporate-owned stores segment increased $4.3 million,
or 54.8%, to $12.2 million for the first quarter of fiscal
2007 from $7.9 million for the first quarter of fiscal 2006
primarily due to an increase in corporate-owned stores gross
profit of $7.6 million, offset by an increase of
$2.3 million in store employee expenses and an increase of
$0.9 million in other store expenses;
our franchises segment increased $0.4 million, or 20.9%, to
$2.3 million for the first quarter of fiscal 2007 from
$1.9 million for the first quarter of fiscal 2006 primarily
due to an increase of $0.2 million in royalty revenue and
an increase of $0.2 million in gross profit associated with
our sale of our products to franchises; and
our other segment increased $0.3 million, or 58.8%, to
$0.8 million for the first quarter of fiscal 2007 from
$0.5 million for the first quarter of fiscal 2006 primarily
due to an increase in revenue of $0.2 million and a
decrease of $0.1 million in product costs.
60
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(In thousands)
$
65,578
$
120,733
14,555
21,360
3,997
6,792
$
84,129
$
148,885
New stores opened during fiscal 2005 prior to sales from such
stores becoming part of our comparable store sales base
contributed $22.2 million or 40.3% of the increase. During
fiscal 2005, we opened 13 corporate-owned stores,
consisting of 12 in Canada and 1 in the United States.
New stores opened during fiscal 2006 contributed
$16.7 million or 30.3% of the increase. During fiscal 2006,
we opened 13 corporate-owned stores, consisting of 7 in
Canada, 5 in the United States and 1 in Japan.
Comparable store sales in fiscal 2006 contributed
$16.2 million or 29.4% of the increase. Assuming the
average exchange rate between the Canadian and the United States
dollars for fiscal 2005 remained constant, our comparable store
sales would have increased $12.8 million or 20% for fiscal
2006. The increase in comparable store sales on a constant
currency basis was driven primarily by the strength of our
existing product lines, successful introduction of new products
and increasing recognition of the lululemon athletica brand name.
Warehouse and showroom sales accounted for $2.1 million or
73.7% of the increase due to four warehouse sales in fiscal
2006 compared to one new warehouse sale in fiscal 2005 and three
showrooms open at the end of fiscal 2006 compared to one
showroom open at the end of fiscal 2005.
Phone sales revenue accounted for $0.5 million or 17.9% of
the increase.
New wholesale accounts at fitness clubs and yoga studios in the
United States accounted for $0.2 million or 8.4% of the
increase.
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Table of Contents
an increase of $55.2 million in net revenue from our
corporate-owned stores segment;
an increase of $6.8 million in net revenue from our
franchises segment; and
an increase of $2.8 million net revenue from in our other
segment.
an increase in product costs of $22.2 million associated
with our sale of goods through corporate-owned stores,
franchises and other segments;
an increase in occupancy costs of $6.1 million due to
higher occupancy costs in new markets;
an increase of $1.9 million in expenses related to our
production, design and distribution departments (including
stock-based compensation expense) principally due to the hiring
of additional employees to support our growth, partially offset
by the absence in fiscal 2006 of the cash bonus paid to
employees in fiscal 2005 in conjunction with our
recapitalization; and
an increase in depreciation of $1.6 million related to
opening new corporate-owned stores.
higher occupancy costs in new markets that contributed to a
decrease in gross margin of 2.1%; and
an increase in depreciation that contributed to a decrease in
gross margin of 0.3% related to opening new corporate-owned
stores.
a decrease in product costs as a percentage of net revenue that
contributed to an increase in gross margin of 0.7% due to an
increase in pricing to our franchises and wholesale customers,
partially offset by an increased percentage of our net revenue
being derived from our oqoqo and factory outlet stores, which
generate lower gross margins than our other corporate-owned
stores, and a short-term increase in expenses during our
transition to the use of more off-shore manufacturers; and
a decrease in expenses related to our production, design and
distribution departments (including stock-based compensation
expense) as a percentage of net revenue from fiscal 2005 to
fiscal 2006 which contributed to an increase in gross margin of
1.6%.
$7.8 million or 29.9% resulted from an increase in store
employee compensation related to opening additional
corporate-owned stores;
$5.1 million or 19.4% resulted from an increase in
consulting fees paid to third parties to analyze and implement
new accounting and logistics processes and from an increase in
fees
62
Table of Contents
associated with retaining professional search firms in
connection with identifying qualified senior management
candidates;
$4.6 million or 17.7% resulted from an increase in
corporate compensation principally due to hiring of additional
employees to support our growth, partially offset by the absence
in fiscal 2006 of the cash bonus paid to employees in fiscal
2005 in conjunction with our recapitalization;
$3.9 million or 15.1% resulted from an increase in other
corporate expenses such as travel expenses and rent associated
with corporate facilities;
$3.6 million or 13.7% resulted from an increase in other
store operating expenses such as supplies, packaging, and credit
card fees; and
$0.6 million or 2.1% resulted from an increase in
depreciation resulting from our move into a new corporate
headquarters at the beginning of fiscal 2006.
our corporate-owned stores segment increased $17.0 million,
or 82.2%, to $37.8 million for fiscal 2006 from
$20.7 million for fiscal 2005 primarily due to an increase
in corporate-owned stores gross profit of $28.4 million,
offset by an increase of $7.8 million in store employee
expenses and an increase of $3.6 million in other store
expenses;
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our franchises segment increased $3.4 million to
$10.7 million for fiscal 2006 from $7.3 million for
fiscal 2005 primarily due to an increase of $2.4 million in
royalty revenue and an increase of $0.9 million in gross
profit associated with our sale of our products to
franchises; and
our other segment increased $1.3 million to
$2.7 million for fiscal 2006 from $1.5 million for
fiscal 2005 primarily due to an increase in revenue of
$2.8 million, offset by an increase of $1.5 million in
product costs.
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(In thousands)
$
29,906
$
65,578
7,363
14,555
3,480
3,997
$
40,748
$
84,129
New stores opened during fiscal 2004 prior to sales from such
stores becoming part of our comparable store sales base
contributed $11.0 million or 30.7% of the increase. During
fiscal 2004, we opened seven corporate-owned stores, consisting
of five in Canada and two in the United States.
New stores opened during fiscal 2005 contributed
$19.6 million or 54.9% of the increase. During fiscal 2005,
we opened 13 corporate-owned stores, consisting of 12 in
Canada and 1 in the United States.
Comparable store sales in fiscal 2005 contributed
$5.1 million or 14.4% of the increase. Assuming the average
exchange rate between the Canadian and the United States dollars
for fiscal 2004 remained constant, our comparable store sales
would have increased $3.1 million or 12% for fiscal 2005.
The increase in comparable store sales on a constant currency
basis was driven primarily by the strength of our existing
product lines, successful introduction of new products and
increasing recognition for the lululemon athletica brand name.
An increase of $0.4 million from warehouse and showroom
revenue due to increased sales at our one warehouse sale in
fiscal 2005 compared to our one warehouse sale in fiscal 2004
and the addition of one showroom in fiscal 2005 where none
existed in fiscal 2004.
An increase of $0.3 million in wholesale revenue.
65
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an increase of $35.7 million in net revenue from our
corporate-owned stores segment;
an increase of $7.2 million in net revenue from our
franchises segment; and
an increase of $0.5 million net revenue from in our other
segment.
an increase in product costs of $14.5 million associated
with our sale of goods through corporate-owned stores,
franchises and other segments;
an increase in occupancy costs of $2.1 million due to
higher occupancy costs in new markets;
an increase of $4.0 million in expenses related to our
production, design and distribution departments due to an
increase in compensation from an employee stock compensation
program introduced in December 2005 and a cash bonus paid to
employees of these departments in conjunction with our
recapitalization in December 2005; and
an increase in depreciation of $1.1 million related to
opening new corporate-owned stores.
an increase in expenses related to our production, design and
distribution departments that contributed to a decrease in gross
margin of 2.6%;
an increase in occupancy costs that contributed to a decrease in
gross margin of 0.4%; and
an increase in depreciation that contributed to a decrease in
gross margin of 0.7%.
an increase of $6.7 million or 42.8% in corporate employee
costs due to hiring additional employees, an increase in
stock-based compensation from stock grants made under an
employee stock compensation program introduced in December 2005
and a cash bonus paid to corporate employees in conjunction with
our recapitalization in December 2005;
an increase of $5.5 million or 35.6% in store employee
compensation related to opening additional corporate-owned
stores;
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an increase of $1.8 million or 11.7% in other corporate
expenses such as travel expenses and rent associated with
corporate facilities;
an increase of $1.3 million or 8.3% in other store
operating expenses such as supplies, packaging, and credit card
fees;
an increase of $0.4 million or 2.5% in professional
fees; and
an increase of $0.3 million or 1.6% in depreciation.
our corporate-owned stores segment increased $10.9 million,
or 111.8%, to $20.7 million for fiscal 2005 from
$9.8 million for fiscal 2004 primarily due to an increase
in corporate-owned stores gross profit of $17.8 million,
partially offset by an increase of $5.5 million in store
employee expenses and an increase of $1.3 million in other
store expenses;
our franchises segment increased $4.2 million to
$7.3 million for fiscal 2005 from $3.1 million for
fiscal 2004 primarily due to an increase of $2.3 million in
royalty revenue and an increase of $1.9 million in gross
profit associated with our sale of our products to
franchises; and
our other segment decreased $0.3 million to
$1.5 million for fiscal 2005 from $1.8 million for
fiscal 2004 primarily due to our decision to cease operation of
our retail website and a decline
67
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in the profitability of our one warehouse sale in fiscal 2005 as
compared to fiscal 2004, notwithstanding the increase in net
revenue from the sale in fiscal 2005.
greater losses in the United States in fiscal 2005 which we are
unable to offset against our income in Canada for tax purposes;
and
an increase in stock-based compensation expenses from $0 in
fiscal 2004 to $2.7 million in fiscal 2005, which were not
deductible for tax purposes during these periods.
68
Table of Contents
Fiscal
2005
Fiscal
2006
Fiscal
2007
First
Second
Third
Fourth
First
Second
Third
Fourth
First
(In thousands)
(unaudited)
Combined consolidated statements
of income
:
$
15,630
$
17,126
$
19,984
$
31,390
$
28,184
$
32,517
$
35,968
$
52,216
44,789
8,207
7,940
9,613
15,416
13,664
16,614
17,227
25,397
21,979
7,423
9,186
10,371
15,973
14,519
15,903
18,740
26,819
22,811
3,574
4,473
5,338
13,032
8,406
12,667
14,046
17,421
15,963
3,667
4,634
4,508
7,228
182
79
525
2,941
6,113
3,236
4,694
2,170
6,848
(16
)
(27
)
(6
)
(6
)
(26
)
(34
)
(52
)
(30
)
(110
)
10
8
15
19
3
12
8
23
3
188
98
516
2,929
6,136
3,258
4,738
2,176
6,955
(31
)
(41
)
160
2,249
2,955
1,318
3,132
1,348
3,449
(58
)
(54
)
(36
)
$
219
$
139
$
356
$
680
$
3,181
$
1,940
$
1,664
$
882
$
3,542
24
26
30
37
40
42
46
51
54
Fiscal
2005
Fiscal
2006
Fiscal
2007
First
Second
Third
Fourth
First
Second
Third
Fourth
First
(% of net revenue)
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
52.5
46.4
48.1
49.1
48.5
51.1
47.9
48.6
49.0
47.5
53.6
51.9
50.9
51.5
48.9
52.1
51.4
50.9
22.9
26.1
26.7
41.5
29.8
39.0
39.1
33.4
35.6
23.5
27.1
22.6
13.8
1.2
0.5
2.6
9.4
21.7
10.0
13.1
4.2
15.3
(0.1
)
(0.2
)
(0.0
)
(0.0
)
(0.1
)
(0.1
)
(0.1
)
(0.1
)
(0.0
)
0.1
0.0
0.1
0.1
0.0
0.0
0.0
0.0
0.0
1.2
0.6
2.6
9.3
21.8
10.0
13.2
4.2
15.5
(0.2
)
(0.2
)
0.8
7.2
10.5
4.1
8.7
2.6
7.7
(0.2
)
(0.1
)
(0.0
)
1.4
0.8
1.8
2.2
11.3
6.0
4.6
1.7
7.9
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Three Months
Ended
Fiscal Year Ended
January 31,
April 30,
(In thousands)
$
(1,411
)
$
1,394
$
7,666
$
3,181
$
3,542
1,123
2,466
4,619
893
1,504
(107
)
(175
)
(3,077
)
(801
)
2,375
230
2,700
2,830
356
1,408
10
563
(5
)
5,737
(16,677
)
12,869
(1,493
)
(14,421
)
$
5,342
$
(10,282
)
$
25,699
$
2,133
$
(5,594
)
an increase in income taxes payable of $3.8 million and a
decrease of $5.4 million in the first quarter of fiscal
2006 and the first quarter of fiscal 2007, respectively;
an increase in accrued liabilities of $0.1 million and a
decrease of $7.2 million in the first quarter of fiscal
2006 and the first quarter of fiscal 2007, respectively; and
a decrease in trade accounts payable of $4.7 million and
$1.9 million in the first quarter of fiscal 2006 and the
first quarter of fiscal 2007, respectively.
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Fiscal Year
Ended
Three Months
Ended
January
31,
April 30,
(In thousands)
$
(3,806
)
$
(7,846
)
$
(12,414
)
$
(2,761
)
$
(3,045
)
(461
)
(512
)
(5,001
)
$
(3,806
)
$
(8,307
)
$
(12,926
)
$
(2,761
)
$
(8,045
)
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Fiscal Year
Ended
Three Months
Ended
January
31,
April 30,
(In thousands)
$
$
93,037
$
446
$
$
(453
)
(69,005
)
(300
)
634
4,325
7,832
222
(2,527
)
(11,143
)
(65
)
1,455
$
1,433
$
20,086
$
669
$
$
1,002
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74
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Payments
due by Period
(Year Ended
January 31,)
$
8,797
$
9,823
$
9,056
$
7,384
$
34,675
*
Includes $250, $250, $250, $250 and
$270 for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and
thereafter for one store lease which has been terminated on
May 15, 2007.
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76
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20
%
30
%
30
%
30
%
77
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78
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79
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80
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design and develop innovative athletic apparel that combines
performance with style and incorporates real-time customer
feedback;
locate our stores in street locations, lifestyle centers and
malls that position each lululemon athletica store as an
integral part of its community;
create an inviting and educational store environment that
encourages product trial and repeat visits; and
market on a grassroots level in each community, including
through influential fitness practitioners who embrace and create
excitement around our brand.
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Premium Active Brand.
lululemon
athletica stands for leading a healthy, balanced and fun life.
We believe customers associate the lululemon athletica brand
with high quality premium athletic apparel that incorporates
technically advanced materials, innovative functional features
and style. We believe our focus on women differentiates us and
positions lululemon athletica to address a void in the growing
market for womens athletic apparel. The premium nature of
our brand is reinforced by our vertical retail strategy and our
selective distribution through yoga studios and fitness clubs
that we believe are the most influential within the fitness
communities of their respective markets. We believe this
approach allows us to further control our brand image and
merchandising. While our brand has its roots in yoga, our
products are increasingly being designed and used for other
athletic and casual lifestyle pursuits. We work with local
athletes and fitness practitioners to enhance our brand
awareness and broaden our product appeal.
Distinctive Retail Experience.
We
locate our stores in street locations, lifestyle centers and
malls that position lululemon athletica stores to be an integral
part of their communities. Our retail concept is based on a
community-centric philosophy designed to offer customers an
inviting and educational experience. We believe that this
environment encourages product trial, purchases and repeat
visits. We coach our store sales associates, who we refer to as
educators, to develop a personal connection with
each guest. Our educators embody our core values and
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are typically experienced fitness practitioners. They receive
approximately 30 hours of in-house training within the
first three months of the start of their employment and are well
prepared to explain the technical and innovative design aspects
of each product. Each of our stores features a community board
with local information regarding yoga, fitness and other
activities. Our educators also serve as knowledgeable references
for information on fitness classes, instructors and events in
the local community. We believe that these characteristics
contribute to the productivity of our stores which exhibit
strong operating metrics, including sales per square foot and
average payback period on new store investments.
Innovative Design Process.
We offer
high-quality premium apparel that is designed for performance,
comfort, functionality and style. We attribute our ability to
develop superior products to a number of factors, including:
Our feedback-based design process through which our design and
product development team proactively and frequently seek input
from our customers and local fitness practitioners;
Close collaboration with our third-party suppliers to formulate
innovative and technically advanced fabrics and features for our
products; and
Although we typically bring products from design to market in 8
to 10 months, our vertical retail strategy enables us to
bring select products to market in as little as one month,
thereby allowing us to respond quickly to customer feedback,
changing market conditions and apparel trends.
Community-Based Marketing Approach.
We
differentiate lululemon athletica through an innovative,
community-based approach to building brand awareness and
customer loyalty. We use a multi-faceted grassroots marketing
strategy that includes partnering with local fitness
practitioners and retail educators and creating in-store
community boards. To create excitement and reinforce the premium
image for our brand, we often initiate our grassroots marketing
efforts in advance of opening our first store. Each of our
stores has a dedicated community coordinator who organizes
fitness or philanthropic events that heighten the image of our
brand in the community. We believe this grassroots approach
allows us to successfully increase brand awareness and broaden
our appeal while reinforcing our premium brand image.
Deep Rooted Culture Centered on Training and Personal
Growth.
We believe our core values and distinctive
corporate culture allow us to attract passionate and motivated
employees who are driven to succeed and share our vision. We
provide our employees with a supportive, goal-oriented
environment and encourage them to reach their full professional,
health and personal potential. We offer programs such as
personal development workshops and goal coaching to assist our
employees in realizing their long-term objectives. We believe
our relationship with our employees is exceptional and a key
contributor to our success. The passion and dedication of our
employees allows us to execute on our business strategy which
promotes repeat visits and strengthens our brand loyalty.
Experienced Management Team with Proven Ability to
Execute.
Our founder, Mr. Wilson, leads our design
team and plays a central role in corporate strategy and in
promoting our distinctive corporate culture. Our Chief Executive
Officer, Robert Meers, whose experience includes 15 years
at Reebok International Ltd., most recently serving as the chief
executive officer of the Reebok brand from 1996 to 1999, joined
us in December 2005. Messrs. Wilson and Meers have
assembled a management team with a complementary mix of retail,
design, operations, product sourcing and marketing experience
from leading apparel and retail companies such as
Abercrombie & Fitch Co., Limited Brands, Inc., Nike,
Inc. and Reebok. We believe our management team is well
positioned to execute the long-term growth strategy for our
business.
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Grow our Store Base in North
America.
As of July 1, 2007, our
products were sold through 59 stores, including 38 in
Canada and 17 in the United States. We expect that most of
our near-term store growth will occur in the United States. We
have demonstrated strong sales to date in the United States,
supporting the portability of our brand and retail concept. We
plan to add new stores to strengthen existing markets and
selectively enter new markets in the United States and Canada.
We anticipate opening between 20 and 25 stores in fiscal 2007
and between 30 and 35 additional stores in fiscal 2008 in the
United States and Canada.
Increase our Brand Awareness.
We will
continue to increase brand awareness and customer loyalty
through our grassroots marketing efforts and planned store
expansion. In existing markets, our community coordinators
organize frequent events and generate excitement around our
brand to enhance our profile in the local community. We also
seek to cluster our new stores within a given area when
appropriate to leverage our community marketing efforts. Our
ability to initiate our grassroots marketing efforts in advance
of selected store openings allows us to actively develop brand
awareness in new markets. We believe that increased brand
awareness will result in increased comparable-store sales and
sales productivity over time.
Introduce New Product Technologies.
We
remain focused on developing and offering products that
incorporate technology-enhanced fabrics and performance features
that differentiate us in the market. Collaborating with leading
fabric manufacturers, we have jointly developed and trademarked
names for innovative fabrics such as Luon and Silverescent, and
natural stretch fabrics using organic elements such as bamboo,
soy, and seaweed. Among our ongoing efforts, we are jointly
developing encapsulation enhanced fabrics to provide advanced
features such as UV protection and temperature control. In
addition, we will continue to develop differentiated
manufacturing techniques that provide greater support,
protection, and comfort. We believe that incorporating new
technologies into our products will reinforce the authenticity
and appeal of our products and encourage brand loyalty.
Broaden the Appeal of our Products.
We
will selectively seek opportunities to expand the appeal of our
brand to improve store productivity and increase our overall
addressable market. To enhance our product appeal, we intend to:
Grow our Mens Business.
We
believe the premium quality and technical rigor of our products
will continue to appeal to men and that there is an opportunity
to expand our mens business as a proportion of our total
sales.
Expand our Product Categories.
We plan
to expand our product offerings in complementary existing and
new categories such as bags, undergarments, outerwear and
sandals.
Increase the Range of Athletic Activities our Products
Target.
We expect customers to increasingly
purchase our products for activities such as running, dance and
general fitness as we educate them on the versatility of our
products and expand our offering.
Expand Beyond North America.
As of
July 1, 2007, we operated three stores in Japan through a
joint venture and one franchise store in Australia, which we
intend to transition to a joint venture. Given the attractive
demographics of and our early success in both markets, we plan
to open additional stores in Japan and Australia with our joint
venture partners. Over time, we intend to pursue additional
joint venture opportunities in other Asian and European markets.
We believe partnering in these regions reduces our risk and
improves the probability of success in these markets, as we are
able to leverage our partners local market knowledge and
existing infrastructure.
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Corporate-Owned
Franchise
9
2
14
7
4
1
1
35
3
8
1
1
2
1
1
1
1
1
14
3
3
1
3
1
85
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*
Gives effect to the closing of one
corporate-owned
oqoqo
store on May 15, 2007.
86
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Luon
, included in more than half of our products, wicks
away moisture, moves with the body and is designed to eliminate
irritation;
Silverescent
incorporates silver directly into the fabric
to reduce odors as a result of the antibacterial properties of
the silver in the fabric; and
Vitasea
, derived from a seaweed compound, releases amino
acids, minerals and vitamins directly into the skin.
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89
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90
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Approximate
Lease
Executive and Administrative
Offices
30,000
January 2009
Distribution Center
50,000
January 2008
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Name
and
Vancouver, British Columbia
52
Chairman of the Board of Directors
and Chief Product Designer
Boston, Massachusetts
38
Director
Boston, Massachusetts
54
Director
Memphis, Tennessee
55
Director
Pasadena, California
63
Director and Chief Executive
Officer
Boston, Massachusetts
44
Director
Clyde Hill, Washington
52
Director
Chestnut Hill, Massachusetts
58
Director
North Vancouver, British Columbia
51
Chief Financial Officer
Columbus, Ohio
41
Chief Operating Officer
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the Class I directors will be Ms. Costin and
Mr. Martin, whose terms will expire at the annual meeting
of stockholders to be held in 2008;
the Class II directors will be Ms. Pitcher,
Mr. Collins and Mr. Meers, whose terms will expire at
the annual meeting of stockholders to be held in 2009; and
the Class III directors will be Messrs. Mussafer,
Stemberg and Wilson, whose terms will expire at the annual
meeting of stockholders to be held in 2010.
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review and assess the adequacy of the Audit Committee and its
charter at least annually;
evaluate, determine the selection of, and if necessary, the
replacement/rotation of, our independent public accountants;
review our audited financial statements;
review whether interim accounting policies and significant
events or changes in accounting estimates were considered by our
independent public accountants to have affected the quality of
our financial reporting;
review our financial reports and other information submitted to
any governmental body or the public;
review with management and our independent public accountants
their judgments about the quality of disclosures in our
financial statements;
obtain from our independent public accountants their
recommendation regarding our internal controls and review
managements report on its assessment of the design and
effectiveness of our internal controls;
review our major financial risk exposures;
pre-approve all audit and permitted non-audit services and
related fees;
establish, review and update periodically our code of business
conduct and ethics;
establish and review policies for approving related party
transactions between us and our directors, officers or employees;
adopt procedures for receipt, retention and treatment of
complaints received by us regarding accounting, internal
accounting controls or auditing matters; and
adopt regular and separate systems of reporting to our Audit
Committee by management and our internal auditors regarding
controls and operations of our business units.
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Evaluates the performance of our executive officers in light of
the goals and objectives of our compensation programs;
Annually evaluates each of our executive officers
performance;
Reviews and approves our compensation programs;
Reviews and recommends new executive compensation programs;
Annually reviews the operation and efficacy of our executive
compensation programs;
Periodically reviews that executive compensation programs
comport with the compensation committees stated
compensation philosophy;
Establishes and periodically reviews policies in the area of
management perquisites;
Reviews and recommends to the board of directors the terms of
any employment agreements entered into with executive officers;
Reviews and recommends to the board of directors the appropriate
structure and amount of compensation for our directors;
Reviews and approves material changes in our employee benefit
plans;
Establishes and periodically reviews policies for the
administration of our equity compensation plans; and
Reviews the adequacy of the Compensation Committee and its
charter and recommends any proposed changes to the board of
directors not less than annually.
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98
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attract, retain, motivate and reward talented executives;
tie annual and long-term compensation incentives to achievement
of specified performance objectives inherent in our business
strategy;
create long-term value for our stockholders by aligning the
interests of our executives with those of our
stockholders; and
provide our executives with a total compensation package that
recognizes individual contributions, as well as overall business
results.
base salary;
annual cash incentives linked to corporate and individual
performance;
long-term incentive awards in the form of equity-based
compensation; and
other benefits such as automobile and housing allowances,
reimbursement of relocation expense and tax consulting services.
99
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corporate performance and the performance of each individual
executive officer;
new responsibilities delegated to each executive officer during
the year; and
competitive marketplace for executive talent, including a
comparison of base salaries for comparable positions at other
similarly situated companies operating in the retail apparel
industry.
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Fiscal 2006 Base
Salary
600,000
529,200
392,111
345,842
325,000
286,650
280,000
246,960
250,000
220,500
186,000
164,052
(1)
The dollar amounts shown in this
column reflect the US$ equivalent of the amounts paid to the
executive officers listed. The amounts were converted to
U.S. dollars from Canadian dollars using the average of the
exchange rates on the last business day of each month during
fiscal 2006. Applying this formula to fiscal 2006, CDN$1.00 was
equal to US$0.882.
CDN$
600,000
CDN$
392,111
CDN$
325,000
CDN$
250,000
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Fiscal 2006
Bonus
213,800
188,572
80,200
70,736
39,000
34,398
24,000
21,168
(1)
The dollar amounts shown in this
column reflect the US$ equivalent of the amounts paid to the
named executive officers listed. The amounts were converted to
U.S. dollars from Canadian dollars using the average of the
exchange rates on the last business day of each month during
fiscal 2006. Applying this formula to fiscal 2006, CDN$1.00 was
equal to US$0.882.
(2)
Mr. Tattersfields
performance bonus was pro-rated based on the number of days he
was employed by us during the year.
align management with our strategic plan and critical
performance goals;
encourage teamwork and collaboration;
motivate and reward achievement of specific, measurable
company-based as well as individual annual performance
objectives;
provide payouts commensurate with our performance; and
provide competitive total compensation opportunities.
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EBITDA, after deduction of all executive and management bonus
payments;
adjusted operating margin, which is equal to our EBITDA less
other net revenue divided by our retail sales;
comparable store sales, which relates to net revenue of
corporate-owned stores that have been open for at least
12 months; and
annual inventory turnover, which is equal to our annual cost of
goods sold divided by our average quarterly inventory.
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the executive officers position, responsibility and
anticipated contributions toward stockholder value;
the objective of providing a competitive total compensation
package to attract highly skilled executives; and
the allocation between cash and equity compensation, with the
goal of providing the appropriate mix of each to properly retain
and motivate each executive officer over a period of time.
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105
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Option
All Other
Name
and
Salary
Bonus
Awards
Compensation
Total
2006
529,200
188,572
624,996
41,331
1,384,099
2005
41,700
83,400
6,107
131,207
2004
2006
20,580
55,434
76,014
2005
2004
2006
220,500
70,736
36,928
328,164
2005
521,250
12,809,142
3,023
13,333,415
2004
199,626
12,134,019
12,333,645
2006
28,820
106,449
80,842
12,882
228,993
2005
2004
2006
164,052
21,168
2,310
17
187,547
2005
108,420
133,357
182,195
11
423,983
2004
72,446
8,400
80,846
2006
134,917
49,882
101,220
286,019
2005
2004
(1)
For fiscal 2006, bonuses consist
of: (a) payments made pursuant to discretionary performance
bonuses to the following individuals in the following amounts:
Mr. Meers $188,572, Mr. Wilson
$70,736, Mr. Tattersfield $34,398 and
Mr. Bacon $21,168; and (b) payments made
pursuant to signing bonuses to the following individuals in the
following amounts: Mr. Tattersfield $72,051 and
Mr. Jones $49,882.
For fiscal 2005, bonuses consist
of: (a) a signing bonus paid to Mr. Meers in the
amount of $83,400; (b) a bonus paid to Mr. Wilson in
the amount of $12,809,142 that is equal to our Canadian taxable
income for that year
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above a particular threshold; and
(c) a one time special bonus and a discretionary bonus paid
to Mr. Bacon in the amount of $87,334 and $46,023,
respectively.
For fiscal 2004, bonuses consist
of: (a) a bonus paid to Mr. Wilson in the amount of
$12,134,019 that is equal to our Canadian taxable income for
that year above a particular threshold; and (b) a
discretionary bonus paid to Mr. Bacon in the amount of
$8,400.
(2)
This column reflects the dollar
amount recognized for financial accounting reporting purposes
for the fiscal year in accordance with SFAS 123(R). See the
Grants of Plan Based Awards Table for information on
stock options granted to our named executives officers in fiscal
2006 (and, with respect to Mr. Bacon, fiscal 2005 as well).
These amounts reflect our accounting expense for these awards,
and do not correspond to the actual value that will be realized
by the executive officer. The assumptions used in the
calculation of the amounts are described in note 11 to our
combined consolidated financial statements included in this
prospectus.
(3)
For fiscal 2006, all other
compensation consist of: (a) payments made on behalf of
Mr. Meers for housing and other living expenses in the
amount of $28,823 and for expenses associated with a vehicle
lease in the amount of $12,508; (b) imputed interest in
connection with an interest free loan we made to Mr. Wilson
in the amount of $36,917; (c) payments made on behalf of
Mr. Tattersfield for housing and other living expenses in
the amount of $12,747 and for a Canadian work permit in the
amount of $132; (d) payments made on behalf of
Mr. Jones for housing, living and relocation expenses in
the amount of $59,009 and travel expenses in the amount of
$42,211; portions of Mr. Jones reimbursed expenses
are in dispute between us and Mr. Jones; and (e) life
insurance premiums paid on behalf of the following individuals
in the following amounts: Mr. Wilson $12,
Mr. Tattersfield $3 and
Mr. Bacon $17.
For fiscal 2005, all other
compensation consists of: (a) payments made on behalf of
Mr. Meers for housing and other living expenses in the
amount of $5,208 and for expenses associated with a vehicle
lease in the amount of $899; (b) imputed interest in
connection with an interest free loan we made to Mr. Wilson
in the amount of $3,007; and (c) life insurance premiums
paid on behalf of the following individuals in the following
amounts: Mr. Wilson $16 and Mr. Bacon $11.
(4)
Mr. Meers joined us as our
Chief Executive Officer in December 2005.
(5)
Mr. Currie joined us as our
Chief Financial Officer in January 2007.
(6)
Mr. Tattersfield joined us as
our Chief Operating Officer in November 2006.
(7)
Mr. Bacon, although no longer
an executive officer, served as our principal financial officer
during fiscal 2004, fiscal 2005 and fiscal 2006.
(8)
Mr. Jones joined us as an
employee in April 2006. Mr. Jones left our employ in
January 2007.
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All Other
Option
Grant Date
Awards:
Exercise or
Fair Value
Estimated Future
Payouts Under
Number of
Base Price
of Stock
Equity Incentive
Plan Awards
Securities
of Option
and Option
Approval
Threshold
Target
Maximum
Underlying
Awards
Awards
07/03/06
01/27/06
15,546
200,728
301,091
0.49
449,997
07/03/06
01/27/06
70,382
914,049
1,371,073
0.60
2,049,987
01/03/07
12/27/06
64,335
0.49
520,290
01/03/07
12/27/06
292,964
0.60
2,370,210
12/27/06
12/27/06
75,058
0.49
607,005
12/27/06
12/27/06
341,791
0.60
2,765,245
12/27/06
12/27/06
2,144
0.49
17,343
12/27/06
12/27/06
9,765
0.60
79,007
12/27/06
12/27/06
8,578
0.49
69,372
12/27/06
12/27/06
39,061
0.60
316,028
(1)
Mr. Meers performance-vested
options will vest pursuant to certain return multiples received
in connection with the sale of substantially all of our assets
or the sale by certain of our stockholders of at least 80% of
their capital stock in one transaction or a series of
transactions.
(2)
None of Mr. Jones stock
options had vested at the time he left our employ and all of his
options terminated according to their terms.
Equity
Incentive
Plan Awards:
Market
Number of
Number of
Number of
Number of
Value of
Securities
Securities
Securities
Shares or
Shares or
Underlying
Underlying
Underlying
Option
Units of
Units of
Unexercised
Unexercised
Unexercised
Exercise
Option
Stock That
Stock That
Options (#)
Options (#)
Unearned
Price
Expiration
Have Not
Have Not
75,273
225,818
(2)
200,728
(1)
0.49
01/16/16
342,768
1,028,305
(2)
914,049
(1)
0.60
01/16/16
64,335
(3)
0.49
01/02/17
292,964
(3)
0.60
01/02/17
75,058
(4)
0.49
12/26/16
341,791
(4)
0.60
12/26/16
2,144
(5)
0.49
12/26/16
9,765
(5)
0.60
12/26/16
19,826
(6)(7)
122,202
(7)(8)
0.18
(7)(9)
12/31/10
10,170
(7)(10)
111,870
46,771
(7)(11)
514,481
8,578
0.49
(12
)
39,061
0.60
(12
)
(1)
The options will vest pursuant to certain return multiples
received in connection with a sale of substantially all of our
assets or the sale by certain of our stockholders of at least
80% of their capital stock in one transaction or a series of
transactions.
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(2)
The options will vest in equal
installments on each of January 27, 2008, 2009 and 2010
provided that Mr. Meers remains employed with us.
(3)
The options will vest 25% per
year on each of January 3, 2008, 2009, 2010 and 2011
provided that Mr. Currie remains employed with us.
(4)
The options will vest 25% per
year on each of December 27, 2007, 2008, 2009 and 2010
provided that Mr. Tattersfield remains employed with us.
(5)
The options will vest 25% per
year on each of December 27, 2007, 2008, 2009 and 2010
provided that Mr. Bacon remains employed with us.
(6)
Represents 19,826 shares of
our common stock that will be issued to Mr. Bacon upon
exercise of his options to purchase 355,068 common shares
of LIPO USA. Upon exercise of such options, LIPO USA will
deliver shares of our common stock it holds in lieu of common
shares of LIPO USA. See Employee Benefit Plans
Stockholder Sponsored Plans LIPO Investments (USA),
Inc.
(7)
Assumes (a) that our corporate
reorganization described in Pre-Offering
Transactions elsewhere in this prospectus has been
completed, and (b) an initial public offering price of
$11.00 per share.
(8)
Represents 122,202 shares of
our common stock that may be issued to Mr. Bacon upon
exercise of his options to purchase 2,364,713 common shares
of LIPO USA. Upon exercise of such options, LIPO USA will
deliver shares of our common stock it holds in lieu of common
shares of LIPO USA. The options to purchase common shares of
LIPO USA will vest as follows: 717,582 options will vest on
December 5, 2007; 717,582 options will vest on
December 5, 2008; 596,720 options will vest on
December 5, 2009 and 332,829 options will vest on
December 5, 2010. See Employee Benefit
Plans Stockholder Sponsored Plans LIPO
Investments (USA), Inc.
(9)
Represents the equivalent per share
exercise price per option as if the option was being exchanged
directly into shares of our common stock. Each outstanding
option to purchase common shares of LIPO USA has a per share
exercise price equal to CDN$0.01.
(10)
Represents 10,170 shares of
our common stock that may be issued to Mr. Bacon upon the
vesting and exchange of restricted stock awards to purchase
180,353 common shares of LIPO USA. The restricted stock
awards to purchase common shares of LIPO USA will vest as
follows: 76,346 shares will vest on December 5, 2007,
76,346 shares will vest on December 5, 2008 and
27,661 shares will vest on December 5, 2009.
(11)
Represents restricted exchangeable
shares of Lulu Canadian Holding, Inc. that are held by
Mr. Wilson, in trust for the benefit of Mr. Bacon.
Upon vesting, Mr. Wilson will transfer the vested
exchangeable shares to Mr. Bacon. If Mr. Bacons
employment with us terminates, his unvested exchangeable shares
will be forfeited. The exchangeable shares will vest as follows:
19,779 exchangeable shares will vest on December 5, 2007,
19,799 exchangeable shares will vest on December 5,
2008 and 7,173 exchangeable shares will vest on December 5,
2009.
(12)
None of Mr. Jones stock
options had vested at the time he left our employ and all of his
options terminated according to their terms.
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Optioned
Shares
Exercise Price
(#)
($)
Expiration
Date
200,728
0.49
(1)
01/26/16
914,049
0.60
(1)
01/26/16
301,091
0.49
01/26/16
1,371,073
0.60
01/26/16
64,335
0.49
01/02/17
292,964
0.60
01/02/17
75,058
0.49
12/26/16
341,791
0.60
12/26/16
10,079
0.49
01/26/16
45,897
0.60
01/26/16
5,039
0.49
01/26/16
22,948
0.60
01/26/16
2,144
0.49
08/14/16
9,764
0.60
08/14/16
147,959
0.49
12/26/16
673,807
0.60
12/26/16
(1)
Represents performance vested
options that will vest pursuant to certain return multiples
received in connection with the sale of substantially all of our
assets or the sale by certain of our stockholders of at least
80% of their capital stock in one transaction or a series of
transactions.
Optioned
Shares
Exercise Price
1,582,140
(1)
$
0.18
(2)
12/31/10
(1)
Represents shares of our common
stock that may be issued to our employees upon exercise of their
options to purchase 30,604,625 common shares of LIPO USA.
Upon exercise of such options, LIPO USA will deliver shares of
our common stock it holds in lieu of common shares of LIPO USA
See Employee Benefit Plans Stockholder
Sponsored Plans LIPO Investments (USA), Inc.
(2)
Represents the equivalent per share
exercise price per option as if the option was being exchanged
directly into shares of our common stock. Each outstanding
option to purchase common shares of LIPO USA has a per share
exercise price equal to CDN$0.01.
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Stock
Awards
Value Realized
Number of
Shares
on Vesting
4,262
(2)
46,882
19,799
(3)
217,789
(1)
Assumes (a) that our corporate
reorganization described in Pre-Offering
Transactions elsewhere in this prospectus has been
completed, and (b) an initial public offering price of
$11.00 per share.
(2)
Represents 4,262 shares of our
common stock that may be issued to Mr. Bacon upon the
vesting of 76,346 restricted stock awards to purchase
common shares of LIPO Investments (USA), Inc.
(3)
Represents 19,799 exchangeable
shares of Lulu Canadian Holding, Inc. that are held by
Mr. Wilson, in trust for the benefit of Mr. Bacon.
Upon vesting, Mr. Wilson will transfer the vested
exchangeable shares in the name of Mr. Bacon. If
Mr. Bacon is no longer employed with us, his unvested
exchangeable shares will be forfeited.
Change in
Pension Value
Fees Earned
Non-Equity
and
Nonqualified
or Paid in
Stock
Option
Incentive Plan
Deferred
All Other
Cash
Awards
Awards
Compensation
Compensation
Compensation
Total
23,318
12,690
(3)
94,004
(4)
130,012
23,318
12,690
(5)
225,566
(6)
261,574
(1)
This column reflects the dollar
amount recognized for financial accounting reporting purposes
for the fiscal year in accordance with SFAS 123(R). See the
Grants of Plan Based Awards Table for information on
stock options granted to our named executives officers in fiscal
2006. These amounts reflect our accounting expense for these
awards, and do not correspond to the actual value that will be
recognized by the executive officer. The assumptions used in the
calculation of the amounts are described in note 11 to our
combined consolidated financial statements included in this
prospectus.
(2)
Ms. Conrad served as a
director of ours from December 2005 until March 2007.
Mr. Wilson, our Chairman and Chief Product Designer, is
Ms. Conrads
brother-in-law.
(3)
As of January 31, 2007,
Ms. Conrad had outstanding options to purchase 55,976
shares of our common stock, 13,994 of which had previously
vested. In connection with her resignation from our board of
directors on March 29, 2007, Ms. Conrad forfeited
27,987 of her outstanding options, our board of directors
immediately accelerated an additional 13,993 of her options to
purchase shares of our common stock and extended the exercise
period of her vested options until December 31, 2007. The
grant date fair value of the option award in accordance with
SFAS 123(R) is equal to $0.91.
(4)
Represents a stock-based
compensation expense recognized by us in the amount of $94,004
in connection with the sale by us to Ms. Conrad of
250 shares of series A preferred stock.
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(5)
As of January 31, 2007, Ms.
Pitcher had outstanding options to purchase 55,976 shares of our
common stock. The grant date fair value of the option award in
accordance with SFAS 123(R) is equal to $0.91.
(6)
All other compensation for
Ms. Pitcher consists of the following: (a) fees and
expenses paid to Ms. Pitcher for human resources consulting
services provided to us in the amount of $131,562 and (b) a
stock-based compensation expense recognized by us in the amount
of $94,004 in connection with the sale by us to Ms. Pitcher
of 250 shares of series A preferred stock.
Each non-employee director will be paid an annual cash retainer
(pro rated for partial-year service) of $30,000.
The chair of our Audit Committee will be paid an additional
$15,000 annual retainer, and the chair of our Compensation
Committee will be paid an annual retainer of $10,000.
In addition, each non-employee director will be paid meeting
fees of (1) $1,000 per regular or special meeting for
in-person attendance, (2) $500 per committee meeting,
and (3) $500 per regular or special board meeting for
telephone participation.
Directors will be reimbursed for reasonable expenses incurred in
connection with attending meetings of the board of directors or
its committees.
Equity compensation will consist of (1) an annual grant of
restricted stock awards under our 2007 Equity Incentive Plan
having a fair value at the time of grant equal to $30,000,
subject to one year vesting and (2) an annual option grant
under our 2007 Equity Incentive Plan having a fair value at the
time of grant equal to $80,000 subject to four year vesting at
25% per year on each anniversary of the grant date. Other
than the first equity grant under the policy, such annual
non-employee grants will be made at the conclusion of each
annual meeting of stockholders if the director is then a member
of our board of directors. Stock option grants will have a
10-year term and an exercise price equal to the fair market
value on the date of grant. The first equity grants under the
policy will be made on the date of this prospectus with an
exercise price equal to the initial public offering price.
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payment of all accrued and unpaid base salary through the date
of such termination;
payment for all unused vacation and personal days accrued
through the date of such termination;
monthly severance payments equal to one-twelfth of his base
salary as of the date of termination for a period equal to the
greater of 24 months or the period remaining until
December 5, 2009; and
payment of any otherwise unpaid annual bonus payable to him with
respect to the fiscal year ending prior to the date of such
termination.
dishonesty by Mr. Meers in the course of his employment or
the misappropriation of funds by Mr. Meers;
a material breach of any agreement with or duty owed to us;
a refusal to perform the lawful and reasonable directives of our
board of directors; or
any other conduct that would constitute just cause at common law.
participate in a company that competes against us in the United
States or Canada;
become interested in a company that competes against us;
influence or attempt to influence any of our employees,
consultants, suppliers, licensors, licensees, contractors,
agents, strategic partners, distributors, customers or other
persons to terminate or modify such persons agreement or
arrangement with us or any of our affiliates; or
solicit for employment or employ or retain (or arrange to have
any other person or entity employ or retain) any person who has
been employed or retained by us or any of our affiliates within
the prior 12 months.
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payment of all accrued and unpaid base salary through the date
of such termination;
payment for all unused vacation and personal days accrued
through the date of such termination;
monthly severance payments equal to one-twelfth of his base
salary as of the date of such termination for a period of
twenty-four months; and
payment of any otherwise unpaid annual bonus payable with
respect to the fiscal year ending prior to the date of such
termination.
theft, embezzlement, fraud, or similar acts of misconduct or
misappropriation by Mr. Wilson;
a material breach of any agreement with or duty owed to us;
a refusal to perform the lawful and reasonable directives of our
board of directors;
any other conduct that would constitute just cause at common law.
participate in a company that competes against us in the United
States or Canada;
become interested in a company that competes against us;
influence or attempt to influence any of our employees,
consultants, suppliers, licensors, licensees, contractors,
agents, strategic partners, distributors, customers or other
persons to terminate or modify such persons agreement or
arrangement with us or any of our affiliates; or
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solicit for employment or employ or retain (or arrange to have
any other person or entity employ or retain) any person who has
been employed or retained by us or any of our affiliates within
the prior 12 months.
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Intrinsic Value
of
Intrinsic Value
of
Time-Vested
Options
Performance-Vested
Options
Subject to
that vest as a
result of an
Salary
Continuation
Acceleration
Investor Sale
(CDN$)
($) (1)
($) (1)
1,700,000
(2)
13,063,347
(3)(4)
8,932,424
(4)(5)
(1)
An Investor Sale may also constitute a Change in Control for
purposes of accelerated vesting of Mr. Meers
time-vested options, however, for the purposes of this
disclosure, we have assumed each to be discrete transactions.
(2)
This amount represents Mr. Meers monthly base salary
for a period of 34 months (i.e., February 1,
2007 December 5, 2009). Such amount will be
payable over a 34 month period.
(3)
This amount represents the intrinsic value as of
January 31, 2007 of the time-vested portion of
Mr. Meers stock options that would become vested on
an accelerated basis upon a Change in Control. For purposes of
this calculation, we have determined the intrinsic value based
on the difference between the option exercise price of $0.58 and
an assumed Change in Control price equal to the midpoint of the
estimated per share offering price range of our common stock
indicated on the cover page of this prospectus.
(4)
Because the amounts actually realized with respect to any option
grant will depend on the price of our common stock on the date
the award is exercised, the amount may or may not ultimately
reflect the actual value that could be realized by
Mr. Meers with respect to this award.
(5)
This amount represents the intrinsic value as of
January 31, 2007 of the performance vested portion of
Mr. Meers stock option that would become vested upon
an Investor Sale on that date. For purposes of this calculation,
we have assumed that the price paid in connection with that
Investor Sale will be equal to the midpoint of the estimated per
share offering price range of our common stock indicated on the
cover page of this prospectus. This price will, in turn,
determine the return realized by our principal investors; their
return will, in turn, determine the portion of the option that
then becomes vested. Based on this price, the performance vested
portion of the option would become vested with respect to
857,650 shares.
Salary
Continuation
(CDN$)
500,000
(1)
(1)
This amount represents Mr. Wilsons monthly base
salary for a period of 24 months. Such amount will be
payable over a 24 month period.
Continuation
of Medical
Salary
Continuation
Benefits
(CDN$)
(CDN$)
392,112
(1)
17,382
(2)
(1)
This amount represents Mr. Tattersfields monthly base
salary for a period of 12 months. Such amount will be
payable in either a lump sum or monthly at our discretion.
(2)
This amount represents the estimated cost to us to provide
Mr. Tattersfield with medical benefits for a period of
12 months.
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117
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118
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the acquisition by any person of direct or indirect ownership of
securities representing more than 50% of the voting power of our
then outstanding stock;
our consolidation, share exchange, reorganization or merger
resulting in our stockholders immediately prior to such event
not owning at least a majority of the voting power of the
resulting entitys securities outstanding immediately
following such event;
the sale of substantially all of our assets;
our liquidation or dissolution; or
the occurrence of any similar transaction deemed by our board of
directors to be a change of control.
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120
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We issued an aggregate of 107,995 shares of our
series A preferred stock resulting in aggregate proceeds to
us of approximately $92.8 million. Of these shares,
85,796 shares of series A preferred stock were issued
to funds managed by our affiliate, Advent International
Corporation, resulting in aggregate proceeds to us of
approximately $73.7 million.
We issued 116,994 shares of our series TS preferred
stock to one of our then current stockholders, an entity
controlled by Mr. Wilson, in exchange for
115,594 shares of participating preferred stock of
lululemon usa inc.
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122
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123
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124
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Our Audit Committee approves or ratifies such transaction in
accordance with the terms of the policy; or
the chair of our Audit Committee pre-approves or ratifies such
transaction and the amount involved in the transaction is less
than $100,000, provided that for the Related Party Transaction
to continue it must be approved by our Audit Committee at its
next regularly scheduled meeting.
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each person, or group of affiliated persons, known by us to own
beneficially more than 5% of our outstanding shares of common
stock;
each of our directors;
the selling stockholders;
each of our named executive officers; and
all of our current executive officers and directors as a group.
Shares
Beneficially
Shares
Shares
Beneficially
Owned Before
Offering
Being
Owned After
Offering
36,399,425
49.8
%
6,818,182
29,581,243
39.3
%
27,785,536
38.1
%
7,222,220
20,563,316
27.3
%
6,994,963
9.6
%
1,818,182
5,176,781
6.9
%
194,313
*
50,507
143,806
*
*
*
*
*
*
*
418,041
*
418,041
*
27,785,536
38.1
%
7,222,220
20,563,316
27.3
%
91,643
*
91,643
*
*
*
137,178
*
137,178
*
*
*
*
*
*
*
64,694,645
88.1
%
14,040,402
50,654,243
66.9
%
*
Less than 1%.
126
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(1)
Includes 22,150,284 shares of
our common stock issuable upon the exchange of an equal number
of exchangeable shares of Lulu Canadian Holding, Inc. held by
Mr. Wilson, 6,820,059 shares of our common stock held
by LIPO Investments (USA), Inc., with respect to which
Mr. Wilson exercises voting control, 6,818,182 shares
of our common stock held by Slinky Financial ULC, an entity
Mr. Wilson controls, 608,100 shares of our common
stock issuable upon the exchange of an equal number of
exchangeable shares of Lulu Canadian Holding, Inc. held by
Mr. Wilson as trustee and 2,800 shares of our common
stock issuable upon the exchange of an equal number of
exchangeable shares of Lulu Canadian Holding, Inc. held by Five
Boys Investments ULC, an entity which Mr. Wilson controls.
In the offering, Slinky Financial ULC will be entitled to sell
6,818,182 shares of our common stock. Immediately prior to
this offering, Mr. Wilson will beneficially own 36,399,425
shares (or 49.8%) of our common stock, or 47.0% of our common
stock on a fully diluted basis. Immediately after this offering,
Mr. Wilson will beneficially own 29,581,243 shares,
(or 39.3%) of our common stock, or 37.1% of our common stock on
a fully diluted basis.
(2)
Includes 3,700,377 shares
owned by Advent International GPE V Limited Partnership,
9,190,381 shares owned by Advent International GPE V-A
Limited Partnership, 7,765,415 shares owned by Advent
International GPE V-B Limited Partnership, 5,932,392 shares
owned by Advent International GPE V-G Limited Partnership,
890,279 shares owned by Advent International GPE V-I
Limited Partnership, 47,931 shares owned by Advent Partners
III Limited Partnership, 128,894 shares owned by Advent
Partners GPE V Limited Partnership, 47,931 shares owned by
Advent Partners GPE V-A Limited Partnership and
81,936 shares owned by Advent Partners GPE V-B Limited
Partnership (collectively, the Advent Funds) prior
to the offering. The Advent Funds collectively purchased their
interest in shares of our capital stock on December 5,
2005. Immediately prior to this offering, the Advent Funds will
own 27,785,536 shares (or 38.1%) of our common stock, or
35.9% of our common stock on a fully diluted basis. In the
offering, Advent International GPE V Limited Partnership will be
entitled to sell 961,829 shares of our common stock (or a
total of 1,250,666 shares if the underwriters exercise in
full their option to purchase additional shares), Advent
International GPE V-A Limited Partnership will be entitled to
sell 2,388,831 shares of our common stock (or a total of
3,106,197 shares if the underwriters exercise in full their
option to purchase additional shares), Advent International GPE
V-B Limited Partnership will be entitled to sell
2,018,443 shares of our common stock (or a total of
2,624,582 shares if the underwriters exercise in full their
option to purchase additional shares), Advent International GPE
V-G Limited Partnership will be entitled to sell
1,541,991 shares of our common stock (or a total of
2,005,051 shares if the underwriters exercise in full their
option to purchase additional shares), Advent International GPE
V-I Limited Partnership will be entitled to sell
231,408 shares of our common stock (or a total of
300,900 shares if the underwriters exercise in full their
option to purchase additional shares), Advent Partners III
Limited Partnership will be entitled to sell 12,459 shares
of our common stock (or a total of 16,200 shares if the
underwriters exercise in full their option to purchase
additional shares), Advent Partners GPE V Limited Partnership
will be entitled to sell 33,503 shares of our common stock
(or a total of 43,564 shares if the underwriters exercise
in full their option to purchase additional shares), Advent
Partners GPE V-A Limited Partnership will be entitled to sell
12,459 shares of our common stock (or a total of
16,200 shares if the underwriters exercise in full their
option to purchase additional shares) and Advent Partners GPE
V-B Limited Partnership will be entitled to sell
21,297 shares of our common stock (or a total of
27,693 shares if the underwriters exercise in full their
option to purchase additional shares). Immediately after this
offering, the Advent Funds will own 20,563,316 shares (or
27.3%) of our common stock, or 25.8% of our common stock on a
fully diluted basis. If the underwriters exercise in full their
option to purchase additional shares, the Advent Funds will
beneficially own 18,394,483 shares (or 24.4%) of our common
stock, or 23.1% of our common stock on a fully diluted basis.
Advent International Corporation is the managing member of
Advent International LLC which is the general partner of GPE GP
Limited Partnership which is the general partner of each of
Advent International GPE V Limited Partnership, Advent
International GPE V-A Limited Partnership, Advent International
GPE V-B Limited Partnership, Advent International GPE
V-G
Limited
Partnership and Advent International GPE
V-I
Limited
Partnership. Advent International Corporation is the managing
member of Advent International LLC which is the general partner
of each of Advent Partners III Limited Partnership, Advent
Partners GPE V Limited Partnership, Advent Partners GPE V-A
Limited Partnership and Advent Partners GPE V-B Limited
Partnership. Advent International Corporation exercises voting
and investment power over the shares held by each of these
entities and may be deemed to have beneficial ownership of these
shares. The address of Advent International Corporation and each
of the funds listed above is c/o Advent International
Corporation, 75 State Street, Boston, MA 02109.
(3)
Includes 4,377,882 shares
owned by Highland Capital Partners VI Limited Partnership
(Highland Capital VI), 2,400,097 shares owned
by Highland Capital Partners VI-B Limited Partnership
(Highland Capital VI-B), and 216,984 shares
owned by Highland Entrepreneurs Fund VI Limited
Partnership (Highland Entrepreneurs
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Fund and together with
Highland Capital VI and Highland Capital VI-B, the
Highland Investing Entities) prior to this offering.
The Highland Investing Entities collectively purchased their
shares of our capital stock on December 5, 2005.
Immediately prior to this offering, the Highland Investing
Entities will own 6,994,963 shares (or 9.6%) of our common
stock, or 9.0% of our common stock on a fully diluted basis. In
the offering, Highland Capital VI will be entitled to sell
1,137,931 shares of our common stock (or a total of
1,479,652 shares if the underwriters exercise in full their
option to purchase additional shares), Highland Capital VI-B
will be entitled to sell 623,851 shares of our common stock
(or a total of 811,193 shares if the underwriters exercise
in full their option to purchase additional shares), and
Highland Entrepreneurs Fund will be entitled to sell
56,400 shares of our common stock (or a total of
73,337 shares if the underwriters exercise in full their
option to purchase additional shares). Immediately after this
offering, the Highland Investing Entities will own
5,176,781 shares (or 6.9%) of our common stock, or 6.5% of
our common stock on a fully diluted basis. If the underwriters
exercise in full their option to purchase additional shares, the
Highland Investing Entities will beneficially own
4,630,781 shares (or 6.2%) of our common stock, or 5.8% of
our common stock on a fully diluted basis. Highland Management
Partners VI Limited Partnership (HMP) is the general
partner of Highland Capital VI and Highland Capital VI-B. HEF VI
Limited Partnership (HEF) is the general partner of
Highland Entrepreneurs Fund. Highland Management Partners
VI, Inc. (Highland Management) is the general
partner of both HMP and HEF. Robert J. Davis,
Robert F. Higgis, Paul A. Maeder, Daniel J. Nova,
Jon G. Auerbach, Sean M. Dalton, Corey M. Mulloy,
and Fergal J. Mullen are the managing directors of Highland
Management (together, the Managing Directors).
Highland Management, as the general partner of the general
partners of the Highland Investing Entities, may be deemed to
have beneficial ownership of the shares held by the Highland
Investing Entities. The Managing Directors have shared voting
and investment control over all the shares held by the Highland
Investing Entities and therefore may be deemed to share
beneficial ownership of the shares held by Highland Investing
Entities by virtue of their status as controlling persons of
Highland Management. Each of the Managing Directors disclaims
beneficial ownership of the shares held by the Highland
Investing Entities, except to the extent of such Managing
Directors pecuniary interest therein. The address for the
entities affiliated with Highland Capital Partners is 92 Hayden
Avenue, Lexington, MA 02421.
(4)
Includes 155,451 shares owned
by Brooke Private Equity Advisors Fund I-A, Limited
Partnership and 38,862 shares owned by Brooke Private
Equity Advisors Fund I (D), Limited Partnership
(collectively, the Brooke Funds) prior to this
offering. The Brooke Funds collectively purchased their interest
in shares of our capital stock on December 5, 2005.
Immediately prior to this offering, the Brooke Funds will own
194,313 shares (or 0.3%) of our common stock, or 0.3% of
our common stock on a fully diluted basis. In the offering,
Brooke Private Equity Advisors
Fund I-A,
Limited Partnership will be entitled to sell 40,406 shares
of our common stock (or a total of 52,540 shares if the
underwriters exercise in full their option to purchase
additional shares) and Brooke Private Equity Advisors
Fund I (D), Limited Partnership will be entitled to sell
10,101 shares of our common stock (or a total of
13,134 shares if the underwriters exercise in full their
option to purchase additional shares). Immediately after this
offering, the Brooke Funds will own 143,806 shares (or
0.2%) of our common stock, or 0.2% of our common stock on a
fully diluted basis. If the underwriters exercise in full their
option to purchase additional shares, the Brooke Funds will
beneficially own 128,639 shares (or 0.2%) of our common
stock, or 0.2% of our common stock on a fully diluted basis.
Brooke Private Equity Advisors, L.P. is the general partner of
Brooke Private Equity Management, LLC which is the general
partner of each of Brooke Private Equity Advisors
Fund I-A
and Brook Private Equity Advisors Fund I(D). Brooke Private
Equity Advisors, L.P. as the managing member of the general
partner of each of the Brooke Funds, may be deemed to have
beneficial ownership of the shares held by each of these
entities. Voting and investment power over the shares
beneficially owned by Brooke Private Equity Advisors L.P. is
shared by Peter A. Brooke, John F. Brooke and H.J. von
der Goltz. The address of Brooke Private Equity Advisors and
each of the funds listed above is
c/o Brooke
Private Equity Advisors, 114 State Street, 6th Floor,
Boston, MA 02109.
(5)
Includes 418,041 shares of our
common stock issuable upon exercise of options held by
Mr. Meers that may be exercised within 60 days of
July 24, 2007.
(6)
Mr. Mussafer is the Managing
Director of Advent International Corporation and may be deemed
to beneficially own the shares held by the Advent Funds.
Immediately prior to this offering, Advent International
Corporation will beneficially own 27,785,536 shares (or
38.1%) of our common stock, or 35.9% of our common stock on a
fully diluted basis. Immediately after this offering, Advent
International Corporation will beneficially own
20,563,316 shares (or 27.3%) of our common stock, or 25.8%
of our common stock on a fully diluted basis. If the
underwriters exercise in full their option to purchase
additional shares, Advent International Corporation will
beneficially own 18,394,483 shares (or 24.4%) of our common
stock, or 23.1% of the shares of common stock on a fully diluted
basis, of which Mr. Mussafer will be deemed to beneficially
owned. Mr. Mussafer disclaims beneficial ownership of all
shares held by Advent International Corporation.
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(7)
Includes 13,994 shares of our
common stock issuable upon exercise of options held by
Ms. Pitcher that may be exercised within 60 days of
July 24, 2007. Immediately prior to this offering,
Ms. Pitcher will own 77,649 shares or (0.1%) of our
common stock, or 0.1% of our common stock on a fully diluted
basis. Immediately after this offering, Ms. Pitcher will
own 77,649 shares (or 0.1%) of our common stock, or 0.1% of
our common stock on a fully diluted basis.
(8)
Includes 107,691 shares of our
common stock issuable upon the exchange of an equal number of
exchangeable shares of Lulu Canadian Holding, Inc. held by
Mr. Bacon, 19,826 shares of our common stock issuable upon
the exchange of vested options to purchase common shares of LIPO
Investments (USA), Inc. and 9,661 shares of our common stock
issuable upon the exchange of nonforfeitable shares to purchase
common shares of LIPO Investments (USA), Inc. Immediately prior
to this offering, Mr. Bacon will own 137,178 shares (or
0.2%) of our common stock, or 0.2% of our common stock on a
fully diluted basis. Immediately after this offering,
Mr. Bacon will own 137,178 shares (or 0.2%) of our common
stock, or 0.2% of our common stock on a fully diluted basis.
129
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restricting dividends on the common stock;
diluting the voting power of the common stock;
impairing the liquidation rights of the common stock; or
delaying or preventing a change in our control without further
action by the stockholders.
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Any holder of exchangeable shares is entitled at any time to
require Lulu Canadian Holding to redeem any or all of the
exchangeable shares registered in such holders name in
exchange for one share of our common stock for each exchangeable
share presented and surrendered, plus a cash payment in an
amount equal to any accrued and unpaid dividends on such
exchangeable shares at the time of redemption. However, shares
of our common stock issuable upon an exchange of exchangeable
shares will not be delivered other than pursuant to an effective
registration statement filed with the SEC, which we will not
file prior to the first anniversary of the closing of this
offering, or pursuant to an exemption from registration under
U.S. and Canadian securities laws. The right of a holder of
exchangeable shares to require Lulu Canadian Holding to redeem
such holders exchangeable shares is referred to herein as
the put right.
If we declare a dividend on our common stock, the holders of
exchangeable shares are entitled to receive from Lulu Canadian
Holding the same dividend, or an economically equivalent
dividend, on their exchangeable shares.
Holders of exchangeable shares are not entitled to receive
notice of or to attend any meeting of the stockholders of Lulu
Canadian Holding or to vote at any such meeting, except as
required by law or as specifically provided in the exchangeable
share conditions.
Lulu Canadian Holding will have the right to force the exchange
of all exchangeable shares for shares of our common stock (and
payment of any accrued and unpaid dividends on the
131
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exchangeable shares) at any time after the earlier of
(i) the 40th anniversary of our corporate
reorganization, (ii) the date on which fewer than 10% of the
originally issued exchangeable shares remain outstanding or
(iii) the occurrence of certain specified events such as a
change of control of us. The right of Lulu Canadian Holding to
force the exchange of all exchangeable shares is referred to
herein as the call right.
The right of holders of exchangeable shares to require Lulu
Canadian Holding to redeem their exchangeable shares and the
right of Lulu Canadian Holding to redeem the exchangeable
shares, both as described above, are subject to the overriding
right of Lululemon Callco ULC, or Callco, our wholly owned
subsidiary, to purchase such shares at a rate of one share of
our common stock for each exchangeable share, together with all
declared and unpaid dividends on such exchangeable share.
Holders of exchangeable shares will be entitled to vote their
special voting shares.
no outstanding exchangeable shares or shares or rights
convertible into or exchangeable for exchangeable shares are
held by a beneficiary (other than by us or any of our
subsidiaries); and
we and Lulu Canadian Holding together elect in writing to
terminate the exchange trust agreement and such termination is
approved by the beneficiaries as set forth in the provisions to
the exchangeable shares.
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Lulu Canadian Holding and we will take all actions and do all
things as are reasonably necessary or desirable to enable and
permit it and us, in accordance with applicable law, to perform
our respective obligations and complete all such actions and all
such things as are necessary or desirable to enable and permit
us to deliver or cause to be delivered shares of our common
stock to the holders of exchangeable shares who exercise their
put rights.
Lulu Canadian Holding, Callco and we will take all such actions
and do all things as are necessary or desirable to enable and
permit them and us, in accordance with applicable law, to
perform our respective obligations arising upon the exercise by
Lulu Canadian Holding or Callco of their rights to acquire
exchangeable shares, including without limitation all such
actions and all such things as are necessary or desirable to
enable and permit us to deliver or cause to be delivered shares
of our common stock to the holders of exchangeable shares in
accordance with the provisions of the such rights.
Neither we nor Lulu Canadian Holding may take any action in
order to liquidate, dissolve or
wind-up,
each a voluntary liquidation, or proceed with any voluntary
liquidation, unless the other concurrently takes action to
voluntarily liquidate or proceeds with a voluntary liquidation.
133
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any breach of their duty of loyalty to the corporation or the
stockholder;
acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
134
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unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware
General Corporation Law; or
any transaction from which the director derived an improper
personal benefit.
135
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prior to such date, the board of directors of the corporation
approved either the business combination or the transaction that
resulted in the stockholder becoming an interested holder;
upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares
outstanding those shares owned by persons who are directors and
also officers and by employee stock plans in which employee
participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a
tender or exchange offer; and
on or subsequent to such date, the business combination is
approved by the board of directors and authorized at an annual
or special meeting of the stockholders, and not by written
consent,
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by the affirmative vote of at least
66
2
/
3
%
of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines business combination to include the
following:
any merger or consolidation involving the corporation and the
interested stockholder;
any sale, transfer, pledge or other disposition of 10% or more
of the assets of the corporation involving the interested
stockholder;
subject to certain exceptions, any transaction that results in
the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder;
any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock or any class or
series of the corporation beneficially owned by the interested
stockholder; or
the receipt by the interested stockholder of the benefit of any
loss, advances, guarantees, pledges, or other financial benefits
by or through the corporation.
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Shares
Eligible
32,858,885
Lock-up terminates; shares
eligible for sale under Rule 144 and Rule 701
24,250,975
Shares eligible for sale upon
expiration of their respective one-year holding period
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one percent of the number of shares of our common stock then
outstanding, which will equal 753,099 shares immediately
after this offering; and
the average weekly trading volume of our common stock during the
four calendar weeks preceding the filing of a notice on
Form 144 with respect to the sale.
by persons other than affiliates, subject only to the
manner-of-sale
provisions of Rule 144; and
by affiliates, subject to the
manner-of-sale,
current public information, and filing requirements of
Rule 144.
139
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140
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an individual who is not a citizen or resident of the U.S.;
a corporation (including any entity treated as a corporation for
U.S. federal income tax purposes) that is not organized or
created in or under the laws of the United States or any State
thereof or the District of Columbia;
an estate that is not taxable in the United States on its
worldwide income; or
a trust that (i) is not subject to primary supervision over
its administration by a U.S. court or is not subject to the
control of a U.S. person with respect to all substantial
trust decisions and (ii) has not elected to be treated as a
U.S. person pursuant to applicable Treasury regulations.
the discussion assumes that a
non-U.S. holder
holds our common stock as a capital asset and that the
non-U.S. holder
does not have a special tax status, such as a financial
institution, an insurance company, a hybrid entity, a tax-exempt
organization or a broker-dealer or trader in securities;
the discussion does not consider tax consequences that depend
upon a
non-U.S. holders
particular tax situation;
the discussion does not consider special tax rules that may
apply to a
non-U.S. holder
who holds our common stock as part of a straddle, hedge,
conversion transaction, synthetic security or other integrated
investment;
the discussion does not consider special tax provisions that may
be applicable to a
non-U.S. holder
that has relinquished U.S. citizenship or residence;
the discussion does not cover U.S. federal gift tax
consequences, state, local or
non-U.S. tax
consequences;
141
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the discussion does not consider the tax consequences for
stockholders, partners, owners or beneficiaries of a
non-U.S. holder; and
we have not requested a ruling from the Internal Revenue
Service, or IRS, on the tax consequences of owning the common
stock. As a result, the IRS could disagree with portions of this
discussion.
the gain is effectively connected with a trade or business
conducted by the
non-U.S. holder
in the United States and, if required by an applicable tax
treaty, the gain is attributable to a permanent establishment
maintained by the
non-U.S. holder
in the United States, in which case
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the gain will be subject to U.S. federal income tax on a
net income basis at the regular graduated rates and in the
manner applicable to U.S. persons, unless an applicable
treaty provides otherwise, and, if the
non-U.S. holder
is a foreign corporation, the branch profits tax described above
may also apply;
we are or have been a United States real property holding
corporation, or USRPHC, for U.S. federal income tax
purposes at any time during the shorter of the five-year period
ending on the date of disposition or the period that the
non-U.S. holder
held our common stock; in this case, the
non-U.S. holder
may be subject to U.S. federal income tax on its net gain
derived from the disposition of our common stock at regular
graduated rates. Generally, a corporation is a USRPHC if the
fair market value of its U.S. real property interests
equals or exceeds 50% of the sum of the fair market value of its
worldwide real property interests plus its other assets used or
held for use in a trade or business. If we are, or were to
become, a USRPHC, gain realized upon disposition of our common
stock by a
non-U.S. holder
that did not directly or indirectly own more than 5% of our
common stock during the shorter of the five-year period ending
on the date of disposition or the period that the
non-U.S. holder
held our common stock generally would not be subject to
U.S. federal income tax, provided that our common stock is
regularly traded on an established securities market
within the meaning of Section 897(c)(3) of the Code. We
believe that we are not currently, and we do not anticipate
becoming in the future, a USRPHC; or
if a
non-U.S. holder
(i) is an individual, (ii) holds the common stock as a
capital asset, (iii) is present in the United States for
183 or more days during the taxable year of the sale and
(iv) certain conditions are met, then the
non-U.S. holder
will be subject to a flat 30% tax on the gain derived from the
sale, which may be offset by U.S. source capital losses,
even though the
non-U.S. holder
is not considered a resident of the U.S.
143
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144
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145
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146
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147
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18,200,000
$
$
$
$
$
$
$
$
148
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149
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150
Table of Contents
(a)
to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
(b)
to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts;
(c)
to fewer than 100 natural or legal persons (other than qualified
investors as defined in the Prospectus Directive) subject to
obtaining the prior consent of the representatives for any such
offer; or
(d)
in any other circumstances which do not require the publication
by the Issuer of a prospectus pursuant to Article 3 of the
Prospectus Directive.
1.1
it has only communicated or caused to be communicated and will
only communicate or cause to be communicated an invitation or
inducement to engage in investment activity (within the meaning
of Section 21 of the Financial Services and Markets Act
2000, or FSMA) received by it in connection with the issue or
sale of the shares in circumstances in which Section 21(1)
of the FSMA does not apply to the Issuer; and
1.2
it has complied and will comply with all applicable provisions
of the FSMA with respect to anything done by it in relation to
the shares in, from or otherwise involving the United Kingdom.
151
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152
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153
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154
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155
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combined consolidated balance sheets of Lululemon as at
January 31, 2006 and January 31, 2007; and
combined consolidated statement of income (loss),
stockholders equity and comprehensive income (loss) and
cash flows for each of the years in the three-year period ended
January 31, 2007.
156
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F-2
F-3
F-4
F-5
F-6
F-7
F-1
Table of Contents
Chartered Accountants
Vancouver, British Columbia, Canada
June 19, 2007
F-2
Table of Contents
Director
F-3
Table of Contents
Fiscal Year Ended
January 31,
Three Months
Ended April 30,
(Unaudited)
(Unaudited)
$
40,748,376
$
84,129,093
$
148,884,834
$
28,183,582
$
44,789,456
19,448,431
41,176,981
72,903,112
13,664,329
21,978,546
21,299,945
42,952,112
75,981,722
14,519,253
22,810,910
10,840,138
26,416,262
52,539,998
8,405,887
15,962,780
12,134,019
12,809,142
7,228,310
(1,674,212
)
3,726,708
16,213,414
6,113,366
6,848,130
(10,686
)
(54,562
)
(141,736
)
(25,948
)
(110,051
)
45,549
51,020
47,348
3,377
3,055
34,863
(3,542
)
(94,388
)
(22,571
)
(106,996
)
(1,709,075
)
3,730,250
16,307,802
6,135,937
6,955,126
(298,043
)
2,336,146
8,753,336
2,954,762
3,448,653
(111,865
)
(35,590
)
$
(1,411,032
)
$
1,394,104
$
7,666,331
$
3,181,175
$
3,542,063
24,250,975
24,250,975
48,767,976
48,767,976
49,565,399
50,139,576
$
0.10
$
0.05
$
0.10
$
0.05
F-4
Table of Contents
Accumulated
Other
Total
Lululemon
Lululemon
Additional
Retained
Comprehensive
Comprehensive
Total
Paid-in
Earnings
Income
Income
Stockholders
Amount
Amount
Capital
(Deficit)
(Loss)
(Loss)
Equity
100
2
100
100,000
678,329
31,439
809,770
(1,411,032
)
(1,411,032
)
(1,411,032
)
(2,923
)
(2,923
)
(2,923
)
100
2
100
100,000
(732,703
)
28,516
(1,413,955
)
(604,185
)
lululemon
Amount
Amount
107,995
1,080
92,043,184
92,044,264
116,994
1,170
1,091,416
1,092,586
115,253,853
1
1
(100,002
)
1,746,508
(69,005,127
)
(69,005,127
)
2,699,916
2,699,916
1,394,104
1,394,104
1,394,104
530,227
530,227
530,227
224,989
2,250
117,000,361
1
95,834,516
(68,343,726
)
558,743
1,924,331
28,051,784
500
5
634,422
634,427
2,641,564
2,641,564
7,666,331
7,666,331
7,666,331
(1,615,308
)
(1,615,308
)
(1,615,308
)
225,489
2,255
117,000,361
1
99,110,502
(60,677,395
)
(1,056,565
)
6,051,023
37,378,798
1,407,533
1,407,533
3,542,063
3,542,063
3,542,063
2,162,105
2,162,105
2,162,105
225,489
2,255
117,000,361
1
100,518,035
(57,135,332
)
1,105,540
5,704,168
44,490,499
*
The balance of capital for LAI and
Lulu US was $100,000 and $2, respectively on December 5,
2005.
**
Issued in exchange for interests in
Lulu US and Lululemon Athletica Inc. resulting in the
elimination of share capital amounts for these two companies
from total stockholders equity.
F-5
Table of Contents
Fiscal Year Ended
January 31,
Three Months
Ended April 30,
(Unaudited)
(Unaudited)
$
(1,411,032
)
$
1,394,104
$
7,666,331
$
3,181,175
$
3,542,063
1,122,686
2,466,298
4,618,512
892,896
1,503,738
(107,142
)
(174,901
)
(3,076,876
)
(800,844
)
2,374,662
229,950
2,699,916
2,829,572
356,663
1,407,533
10,000
562,587
(4,888
)
(339
)
5,737,198
(16,677,486
)
12,869,203
(1,492,501
)
(14,421,197
)
5,341,710
(10,282,069
)
25,699,279
2,132,501
(5,593,540
)
(3,805,512
)
(7,846,264
)
(12,413,833
)
(2,761,205
)
(3,044,588
))
(460,567
)
(511,850
)
(5,000,822
)
(3,805,512
)
(8,306,831
)
(12,925,683
)
(2,761,205
)
(8,045,410
)
93,036,851
446,419
(452,937
)
(69,005,127
)
(299,636
)
(634,467
)
4,325,346
7,831,694
222,440
(2,527,250
)
(11,143,141
)
(65,141
)
1,454,775
1,433,319
20,085,810
668,859
1,001,838
(317,743
)
(271,667
)
(1,290,938
)
270,729
1,001,179
2,651,774
1,225,243
12,151,517
(357,975
)
(11,635,933
)
2,651,774
3,877,017
3,877,017
16,028,534
$
2,651,774
$
3,877,017
$
16,028,534
$
3,519,042
$
4,392,601
F-6
Table of Contents
1
Nature of
Operations and Basis of Presentation
F-7
Table of Contents
2
Summary of
Significant Accounting Policies
F-8
Table of Contents
20%
30%
30%
30%
F-9
Table of Contents
F-10
Table of Contents
F-11
Table of Contents
F-12
Table of Contents
F-13
Table of Contents
F-14
Table of Contents
3
Inventories
January 31,
January 31,
April 30,
(Unaudited)
$
13,076,666
$
21,310,791
$
23,161,246
1,868,569
1,634,196
547,465
6,377,275
4,644,620
2,847,848
(244,629
)
(961,494
)
(1,150,983
)
$
21,077,881
$
26,628,113
$
25,405,576
4
Property and
Equipment
January 31,
2006
Accumulated
Cost
Amortization
Net
8,857,568
2,121,163
6,736,405
2,764,784
412,300
2,352,484
1,190,913
435,414
755,499
867,620
375,798
491,822
71,109
18,315
52,794
86,341
48,550
37,791
13,838,335
3,411,540
10,426,795
F-15
Table of Contents
January 31,
2007
Accumulated
Cost
Amortization
Net
17,039,752
4,713,551
12,326,201
5,287,109
1,051,952
4,235,157
1,941,252
770,278
1,170,974
1,591,572
582,748
1,008,824
90,808
37,102
53,706
83,398
56,021
27,377
26,033,891
7,211,652
18,822,239
April 30,
2007
Accumulated
Cost
Amortization
Net
$
$
$
(Unaudited)
18,495,993
5,905,495
12,590,498
6,614,297
1,379,956
5,234,341
2,463,004
937,926
1,525,078
2,422,252
690,558
1,731,694
103,498
43,670
59,828
88,860
61,513
27,347
30,187,904
9,019,118
21,168,786
5
Goodwill and
Intangible Assets Net
January 31,
January 31,
April 30,
(Unaudited)
$
771,375
$
840,325
$
811,678
68,950
(28,647
)
53,173
$
840,325
$
811,678
$
864,851
Table of Contents
January 31,
2006
Accumulated
Cost
Amortization
Net
2,681,031
608,037
2,072,994
790,167
421,422
368,745
3,471,198
1,029,459
2,441,739
January 31,
2007
Accumulated
Cost
Amortization
Net
2,835,441
904,980
1,930,461
769,252
559,702
209,550
3,604,693
1,464,682
2,140,011
April 30,
2007
Accumulated
Cost
Amortization
Net
(Unaudited)
8,130,367
940,024
7,190,343
813,229
637,029
176,200
8,943,596
1,577,053
7,366,543
(Unaudited)
744,787
896,750
845,868
845,868
845,868
3,187,402
7,366,543
F-17
Table of Contents
$
(Unaudited)
407,355
52,492
500,274
5,006,059
5,966,180
403,359
403,359
5,562,821
6
Other Non-current
Assets
January 31,
January 31,
April 30,
(Unaudited)
$
$
$
3,213,825
801,012
999,470
1,204,477
$
801,012
$
999,470
$
4,418,302
F-18
Table of Contents
7
Accrued
Liabilities
January 31,
January 31,
April 30,
(Unaudited)
$
$
7,228,310
$
1,037,338
1,877,065
1,266,128
940,604
2,816,751
2,992,092
2,155,549
534,351
927,555
1,243,900
475,415
1,670,952
2,534,525
$
2,987,708
$
14,520,633
$
10,192,194
8
Other
Liabilities
January 31,
January 31,
April 30,
2007
(Unaudited)
$
711,633
$
1,585,097
$
1,848,668
2,609,422
3,307,044
3,406,646
3,321,055
4,892,141
5,255,314
2,247,646
2,652,491
2,909,734
$
1,073,409
$
2,239,650
$
2,345,580
9
Long-term Debt
and Credit Facilities
F-19
Table of Contents
10
Combined
Stockholders Equity
F-20
Table of Contents
F-21
Table of Contents
F-22
Table of Contents
11
Equity Incentive
Compensation Plans
F-23
Table of Contents
F-24
Table of Contents
LIPO Investments
(Canada), Inc.
LIPO Investments
(USA), Inc.
Weighted
Weighted
Average
Weighted
Average
Weighted
Exercise
Average
Exercise
Average
Number of
Price
Contract Life
Number of
Price
Contract Life
11,062,179
0.99
11,062,179
0.01
11,062,179
0.99
59
11,062,179
0.01
59
2,239,395
0.99
59
2,239,395
0.01
59
585,902
0.99
585,902
0.01
10,476,277
0.99
47
10,476,277
0.01
47
4,307,262
0.99
47
4,307,262
0.01
47
10,476,277
0.99
44
10,476,277
0.01
44
4,307,262
0.99
41
4,307,262
0.01
41
LIPO Investments
(Canada), Inc.
LIPO Investments
(USA), Inc.
Weighted
Weighted
Average
Weighted
Average
Weighted
Purchase
Average
Purchase
Average
Number of
Price
Contract Life
Number of
Price
Contract Life
5,295,952
0.00001
5,295,952
0.00001
1,746,508
0.00001
1,746,508
0.00001
3,549,444
0.00001
47
3,549,444
0.00001
47
10,798
0.00001
10,798
0.00001
1,197,999
0.00001
1,197,999
0.00001
2,340,647
0.00001
35
2,340,647
0.00001
35
2,340,647
0.00001
32
2,340,647
0.00001
32
F-25
Table of Contents
Number of
Options/Shares Vesting
Number of
Options/Shares Vesting
LIPO Investments
(Canada), Inc.
LIPO Investments
(USA), Inc.
Forfeitable
Series B
Forfeitable
Series B
1,746,508
2,239,395
3,985,903
1,746,508
2,239,395
3,985,903
1,197,999
2,067,867
3,265,866
1,197,999
2,067,867
3,265,866
1,197,999
2,067,867
3,265,866
1,197,999
2,067,867
3,265,866
863,566
2,019,682
2,883,248
863,566
2,019,682
2,883,248
289,880
1,669,519
1,959,399
289,880
1,669,519
1,959,399
997,849
997,849
997,849
997,849
5,295,952
11,062,179
16,358,131
5,295,952
11,062,179
16,358,131
0
%
45
%
5
%
5.0
F-26
Table of Contents
Lululemon
Athletica Inc.
Lululemon
Athletica USA Inc.
Weighted
Weighted
Weighted
Weighted
Average
Average
Average
Average
Exercise
Contract
Exercise
Contract
Number of
Price
Life
Number of
Price
Life
1,451,000
1.18
118
1,451,000
0.21
118
(20,000
)
1.18
119
(20,000
)
0.21
119
1,431,000
1.18
118
1,431,000
0.21
118
187,250
1.18
115
187,250
0.21
115
1,243,750
1.18
119
1,243,750
0.21
119
1,431,000
1.18
115
1,431,000
0.21
115
(13,750
)
1.18
115
(13,750
)
0.21
119
193,125
1.18
112
193,125
0.21
112
1,224,125
1.18
116
1,224,125
0.21
116
1,417,250
1.18
112
1,417,250
0.21
112
F-27
Table of Contents
Lululemon
Lululemon
Athletica
Inc.
Athletica
USA Inc.
5,000
5,000
131,250
131,250
37,500
37,500
181,375
181,375
131,250
131,250
37,500
37,500
181,375
181,375
131,250
131,250
37,500
37,500
181,375
181,375
131,250
131,250
37,500
37,500
1,224,125
1,224,125
Lululemon
Lululemon
0
%
0
%
50
%
50
%
5
%
5
%
7.0
7.0
F-28
Table of Contents
12
Earnings Per
Share
F-29
Table of Contents
Quarter
Fiscal Year
Ended
Ended
April 30,
2007
Jan 31,
2007
(Unaudited)
$
7,666,331
$
3,542,063
$
2,546,134
$
1,176,386
$
5,120,197
$
2,365,677
24,250,975
24,250,975
48,767,976
48,767,976
$
0.10
$
0.05
$
0.10
$
0.05
48,767,976
48,767,976
796,514
1,370,691
909
909
49,565,399
50,139,576
$
0.10
$
0.05
F-30
Table of Contents
$
0.003
$
0.001
$
0.003
$
0.001
13
Common Control
Transaction
14
Commitments and
Contingencies
8,796,902
9,822,764
9,056,498
7,383,664
34,675,481
F-31
Table of Contents
15
Related Party
Transactions and Balances
January 31,
January 31,
April 30,
(Unaudited)
$
222,440
$
$
192,302
191,739
51,283
$
273,723
$
192,302
$
191,739
$
36,947
$
$
595,594
$
632,541
$
$
F-32
Table of Contents
F-33
Table of Contents
16
Supplemental Cash
Flow Information
January 31,
January 31,
January 31,
April 30,
April 30,
(Unaudited)
(Unaudited)
$
(134,847
)
$
(663,245
)
$
(1,153,663
)
$
(44,601
)
$
(1,257,223
)
(74,455
)
(553,983
)
(141,809
)
520,224
(182,831
)
(4,329,108
)
(10,693,625
)
(5,430,998
)
(254,357
)
1,629,892
531,529
(765,980
)
133,938
563
18,986
(681,480
)
(194,362
)
(532,149
)
(51,543
)
21,013
4,571,376
(1,228,825
)
(4,670,278
)
(1,854,332
)
9,259,771
(11,062,197
)
11,532,925
57,168
(7,219,291
)
1,115,005
1,823,963
1,571,086
(530,781
)
(40,184
)
(139,167
)
50,176
8,680,829
3,828,335
(5,446,248
)
$
5,737,198
$
(16,677,486
)
$
12,869,203
$
(1,492,501
)
$
(14,421,197
)
$
(56,434
)
$
2,466,900
$
3,091,552
$
3,091,552
$
6,715,845
$
45,549
$
51,020
$
47,348
$
3,377
$
3,055
17
Income
Taxes
January 31,
January 31,
January 31,
April 30,
(Unaudited)
$
(1,709,075
)
$
3,730,250
$
16,307,802
$
6,955,126
(581,086
)
1,268,285
5,544,652
2,364,743
897,352
912,465
476,776
90,549
47,123
9,601
4,309
2,500
21,908
11,240
2,702
122,071
28,359
1,808,368
474,162
38,957
214,844
86,864
67,923
34,162
252,166
39,097
$
(298,043
)
$
2,336,146
$
8,753,336
$
3,448,653
F-34
Table of Contents
2006
2007
232,452
1,866,777
4,132
50,362
395,233
209,609
343,814
2,522,898
446,193
5,179,084
14,138
522,569
384,354
536,707
384,354
(90,514
)
4,794,730
(259,421
)
(2,067,789
)
(349,935
)
2,726,941
179,511
359,032
61,354
4,384,281
4,984,178
F-35
Table of Contents
2005
2006
2007
(498,545
)
(150,047
)
(2,229,966
)
(1,210,530
)
3,880,297
18,537,768
(1,709,075
)
3,730,250
16,307,802
2,500
21,908
11,240
(198,101
)
2,493,089
11,818,972
(195,601
)
2,514,997
11,830,212
(102,442
)
(178,851
)
(3,076,876
)
(102,442
)
(178,851
)
(3,076,876
)
(298,043
)
2,336,146
8,753,336
18
Segmented
Financial Information
F-36
Table of Contents
January 31,
January 31,
January 31,
April 30,
April 30,
(Unaudited)
(Unaudited)
$
29,905,624
$
65,577,622
$
120,732,774
$
22,146,069
$
38,007,778
7,362,992
14,554,606
21,360,005
4,363,910
4,917,506
3,479,760
3,996,865
6,792,055
1,673,603
1,864,172
$
40,748,376
$
84,129,093
$
148,884,834
$
28,183,582
$
44,789,456
$
9,796,555
$
20,744,932
$
37,789,660
$
7,864,114
$
12,176,948
3,102,826
7,297,532
10,655,095
1,935,470
2,339,280
1,807,809
1,483,829
2,735,322
514,591
817,356
14,707,190
29,526,293
51,180,077
10,314,175
15,333,584
16,381,402
25,799,585
34,966,663
4,200,809
8,485,454
(1,674,212
)
3,726,708
16,213,414
6,113,366
6,848,130
34,863
(3,542
)
(94,388
)
(22,571
)
(106,996
)
$
(1,709,075
)
$
3,730,250
$
16,307,802
$
6,135,937
$
6,955,126
$
2,806,242
$
6,096,870
$
11,274,993
999,270
2,283,503
1,995,391
$
3,805,512
$
8,380,373
$
13,270,384
$
449,251
$
1,520,878
$
3,077,574
295,446
549,069
1,105,715
$
744,697
$
2,069,947
$
4,183,289
F-37
Table of Contents
2005
2006
2007
37,936,384
76,983,758
129,706,897
2,511,121
6,469,631
17,363,904
300,871
675,704
1,814,033
40,748,376
84,129,093
148,884,834
2006
2007
9,308,017
13,500,195
1,118,778
5,049,599
272,445
10,426,795
18,822,239
19
Financial
Instruments
F-38
Table of Contents
20
Variable Interest
Entity
21
Seasonal Nature
of the Business
F-39
Table of Contents
By:
By:
Chief Executive Officer
Chief Financial Officer
By:
By:
Director
C-1
Table of Contents
Goldman
Sachs Canada Inc.
Merrill
Lynch Canada Inc.
By:
Credit
Suisse Securities (Canada) Inc.
UBS
Securities Canada Inc.
By:
C-2
Table of Contents
Table of Contents
Table of Contents
BRETHE DEEPLY
and appreciate the moment. Living in the moment. Living in the moment could be the meaning of life.
Table of Contents
Goldman,
Sachs & Co.
Merrill
Lynch & Co.
Credit
Suisse
UBS
Investment Bank
William
Blair & Company
CIBC
World Markets
Wachovia
Securities
Thomas
Weisel Partners LLC
Table of Contents
Table of Contents
Item 13.
Other Expenses
of Issuance and Distribution.
Amount
$
7,737
23,500
354,000
10,000
800,000
3,050,000
725,000
20,000
9,763
$
5,000,000
*
To be filed by amendment
Item 14.
Indemnification
of Directors and Officers.
Item 15.
Recent Sales
of Unregistered Securities.
II-1
Table of Contents
On December 5, 2005, we issued an aggregate of
107,995 shares of our series A preferred stock to
certain investors resulting in aggregate proceeds to us of
approximately $92.8 million. Of these shares,
85,796 shares of series A preferred stock were issued
to funds managed by our affiliate, Advent International
Corporation, resulting in aggregate proceeds to us of
approximately $73.7 million. The issuance of these
securities was exempt from registration under the Securities Act
in reliance on Section 4(2) thereof or Regulation D
promulgated thereunder relating to sales not involving a public
offering.
On December 5, 2005, we issued 116,994 shares of our
series TS preferred stock to one of our then current
stockholders in exchange for 115,594 shares of
participating preferred stock of lululemon usa inc. (Lulu USA)
The issuance of these securities was exempt from registration
under the Securities Act in reliance on Section 4(2)
thereof or Regulation D promulgated thereunder relating to
sales not involving a public offering or Regulation S
promulgated under the Securities Act, with respect to securities
offered and sold outside the United States to investors who were
neither citizens nor residents of the United States.
On June 13, 2006, we issued an aggregate of 250 shares
of our series A preferred stock to one of our directors
resulting in aggregate proceeds to us of CDN$250,000. The
issuance of these securities was exempt from registration under
the Securities Act in reliance on Section 4(2) thereof or
Regulation D promulgated thereunder relating to sales not
involving a public offering.
On July 6, 2006, we issued an aggregate of 250 shares
of our series A preferred stock to one of our directors
resulting in aggregate proceeds to us of CDN$250,000. The
issuance of these securities was exempt from registration under
the Securities Act in reliance on Section 4(2) thereof or
Regulation D promulgated thereunder relating to sales not
involving a public offering.
On April 26, 2007, we entered into an agreement with our
stockholders, Lulu USA, lululemon canada inc. (Lulu Canada),
LIPO Investments (Canada), Inc. (LIPO Investments Canada), Lulu
Canadian Holding, Inc. (Lulu Canadian Holding) and Dennis
Wilson, in his individual capacity and in his capacity as
trustee pursuant to a trust arrangement established for the
benefit of the minority stockholders of LIPO Canada and LIPO
USA, pursuant to which we agreed to the following issuances of
our capital stock in order to effect a reorganization whereby
Lulu USA and Lulu Canada will in effect become our direct or
indirect wholly-owned subsidiaries. This reorganization will
occur immediately following the effectiveness of this
registration statement. We refer to this date as the
reorganization date.
Series A Preferred Stock.
Each
holder of our series A preferred stock will be entitled to
receive:
its pro rata portion of 52,965,985 shares of our common
stock (which we refer to as the common share amount); and
with respect to each share of series A preferred stock held
by such stockholder, the number of shares of our common stock
that is equal to (
x
) $978.33 (representing the stated
value of each such share, plus accrued and unpaid dividends
through the assumed reorganization date, assuming that such
share of series A preferred stock was issued on
December 5, 2005), divided by (
y
) the initial public
offering price per share of our common stock.
II-2
Table of Contents
Shares Held by LIPO USA and LIPO
Canada.
LIPO USA and LIPO Canada, or the LIPO
Entities, are the holding companies formed by Mr. Wilson to
hold his interests in the company, Lulu USA , and Lulu Canada.
In our corporate reorganization, we and Lulu Canadian Holding
will issue a combination of shares of our common stock and
exchangeable shares of Lulu Canadian Holding, respectively, in
exchange for the securities of our company, Lulu USA and Lulu
Canada that are held by the LIPO Entities in the following
amount (the LIPO Share Amount):
the LIPO Entities pro rata portion of the common share
amount; and
the number of shares of our common stock that is equal to
(
x
) $114,459,361 (representing the stated value of our
series TS preferred stock and Lulu Canada class B
shares held by the LIPO Entities, plus accrued and unpaid
dividends through the assumed reorganization date), divided by
(
y
) the initial public offering price per share of our
common stock.
Lulu USA and Lulu Canada Stock
Options.
Each option to purchase shares of
Lulu USA common stock or Lulu Canada class C shares will
automatically adjust and become options to purchase shares of
our common stock at an adjusted exercise price. Upon completion
of this option adjustment, we will have outstanding options to
purchase 4,478,726 shares of our common stock at a weighted
average per share exercise price of $0.58.
II-3
Table of Contents
Item 16.
Exhibits and
Financial Statement Schedules.
Exhibit
1
.1
Form of Underwriting Agreement
2
.1(1)
Agreement and Plan of
Reorganization dated as of April 26, 2007, by and among the
parties named therein
3
.1(1)
Amended and Restated Certificate
of Incorporation of lululemon athletica inc. as filed with the
Secretary of State of the State of Delaware on December 2,
2005
3
.2(1)
Certificate of Correction to the
Amended and Restated Certificate of Incorporation of lululemon
athletica inc. as filed with the Secretary of State of the State
of Delaware on January 12, 2006
3
.3(1)
Certificate of Amendment to the
Amended and Restated Certificate of Incorporation of lululemon
athletica inc. as filed with the Secretary of State of the State
of Delaware on March 27, 2007
3
.4(3)
Certificate of Amendment to the
Amended and Restated Certificate of Incorporation of lululemon
athletica inc. as filed with the Secretary of State of the State
of Delaware on June 12, 2007
3
.5
Form of Amended and Restated
Certificate of Incorporation of lululemon athletica inc. (to
become effective immediately prior to the effectiveness of this
offering)
3
.6
Form of Amended and Restated
Certificate of Incorporation of lululemon athletica inc. (to
become effective immediately upon completion of this offering)
3
.7(1)
Bylaws of lululemon athletica inc.
3
.8(3)
Form of Amended and Restated
Bylaws of lululemon athletica inc. (to become effective
immediately upon completion of this offering)
4
.1
Form of Specimen Common Stock
Certificate of lululemon athletica inc.
5
.1
Opinion of Pepper Hamilton LLP
10
.1#
lululemon athletica inc. 2007
Equity Incentive Plan
10
.2#
Form of Non-Qualified Stock Option
Award Agreement under the 2007 Equity Incentive Plan
10
.3(1)#
Amended and Restated LIPO
Investments (USA), Inc. Option Plan and form of Award Agreement
10
.4(1)#
Employment and Restrictive
Covenant Agreement with Robert Meers dated as of
December 5, 2005
10
.5(1)#
Employment and Restrictive
Covenant Agreement with Dennis Wilson dated as of
December 5, 2005
10
.6(2)
Offer Letter with Mike
Tattersfield dated as of October 4, 2006, as amended on
April 25, 2007
10
.7(1)#
Offer Letter with John Currie
dated December 20, 2006
10
.8(1)
Stockholders Agreement dated
December 5, 2005 among lululemon athletica inc. and the
persons listed on Schedule A thereto
10
.9(1)
Registration Rights Agreement
dated December 5, 2005 by and among lululemon athletica
inc. and the Investors named therein
10
.10(1)
Form of Amended and Restated
Registration Rights Agreement between the parties named therein
10
.11(1)
Form of Exchange
Trust Agreement between lululemon athletica inc. and Lulu
Canadian Holding, Inc. and Computershare Trust Company of Canada
10
.12(1)
Form of Exchangeable Share Support
Agreement between lululemon athletica inc. and Lululemon Callco
ULC and Lulu Canadian Holding, Inc.
10
.13
Form of Amended and Restated
Declaration of Trust for Forfeitable Exchangeable Shares, by and
among the parties named therein
10
.14
Amended and Restated Arrangement
Agreement dated as of June 18, 2007, by and among the
parties named therein (including Plan of Arrangement and
Exchangeable Share Provisions)
10
.15(1)
Credit Facility between lululemon
canada inc. and Royal Bank of Canada dated as of April 11,
2007.
II-4
Table of Contents
Exhibit
10
.16
Form of Indemnification Agreement
between lululemon athletica inc. and its directors and certain
officers
10
.17(1)
Lease for 2285 Clark Drive,
Vancouver, British Columbia, Canada dated as of January 25,
2006
10
.18(1)
Lease for 507 West Broadway,
Vancouver, British Columbia, Canada dated as of July 14,
2006
10
.19(1)
Lease for 2955 Hebb Street,
Vancouver, British Columbia, Canada dated as of October 21,
2004
10
.20(1)
Lease Expansion and Amending
Agreement for 2955 Hebb Street, Vancouver, British Columbia,
Canada dated as of August 16, 2005
10
.21(1)
Lease for 5595 Trapp Avenue,
Burnaby, British Columbia, Canada dated as of December 15,
2006
10
.22(1)
Outside Director Compensation Plan
10
.23(2)
Stock Purchase Agreement dated as
of December 5, 2005 by and among lululemon athletica inc.,
Highland Funds, Advent
International GPE V-A
Limited Partnership, lululemon usa inc., Oyoyo Holdings, Inc.,
LIPO Investments (USA) Inc. and Dennis Wilson
10
.24(2)
Subscription Agreement dated as of
April 12, 2006 between Susanne Conrad and lululemon
athletica inc.
10
.25(2)
Subscription Agreement dated as of
April 12, 2006 between Rhoda Pitcher and lululemon
athletica inc.
10
.26(2)
Franchise Agreement dated
August 1, 2005 between lululemon canada inc. and Ryan Smith
and Kim Smith, on behalf of themselves and CB Ventures
10
.27(2)
Franchise Agreement dated
October 16, 2002 between lululemon canada inc. and Oqqo
Enterprises
10
.28(2)
Franchise Agreement Amendment
dated December 20, 2006 between lululemon canada inc. and
Oqqo Enterprises
10
.29(2)
Franchise Agreement Amendment
No. 2 dated January 2, 2007 between lululemon canada
inc. and Oqqo Enterprises
10
.30(2)
Franchise Agreement dated
October 15, 2004 between lululemon canada inc. and
Lululemon Athletica (Australia) Pty. Ltd.
10
.31(2)
Agreement dated January 31,
2007 by and among David Andrew Lawn, lululemon canada inc. and
Lululemon Athletica (Australia) Pty. Ltd. (including
certain amendments to the franchise agreement)
21
.1(3)
Subsidiaries of lululemon
athletica inc.
23
.1
Consent of PricewaterhouseCoopers
LLP
23
.2
Consent of Pepper Hamilton LLP
(included in Exhibit 5.1)
24
.1(1)
Powers of Attorney (included in
the signature page to the registration statement)
#
Indicates management contract or
compensatory plan
(1)
Previously filed as an exhibit to
the registrants Registration Statement on
Form S-1
(file
No. 333-142477)
filed with the Commission on May 1, 2007
(2)
Previously filed as an exhibit to
the registrants Amendment No. 1 to the Registration
Statement on
Form S-1
filed with the Commission on June 11, 2007
(3)
Previously filed as an exhibit to
the registrants Amendment No. 2 to the Registration
Statement on
Form S-1
filed with the Commission on June 19, 2007
Item 17.
Undertakings.
Table of Contents
II-6
Table of Contents
By:
Chief Financial Officer
* By:
Attorney in-fact
II-7
Table of Contents
Exhibit
1
.1
Form of Underwriting Agreement
2
.1(1)
Agreement and Plan of
Reorganization dated as of April 26, 2007, by and among the
parties named therein
3
.1(1)
Amended and Restated Certificate
of Incorporation of lululemon athletica inc. as filed with the
Secretary of State of the State of Delaware on December 2,
2005
3
.2(1)
Certificate of Correction to the
Amended and Restated Certificate of Incorporation of lululemon
athletica inc. as filed with the Secretary of State of the State
of Delaware on January 12, 2006
3
.3(1)
Certificate of Amendment to the
Amended and Restated Certificate of Incorporation of lululemon
athletica inc. as filed with the Secretary of State of the State
of Delaware on March 27, 2007
3
.4(3)
Certificate of Amendment to the
Amended and Restated Certificate of Incorporation of lululemon
athletica inc. as filed with the Secretary of State of the State
of Delaware on June 12, 2007
3
.5
Form of Amended and Restated
Certificate of Incorporation of lululemon athletica inc. (to
become effective immediately prior to the effectiveness of this
offering)
3
.6
Form of Amended and Restated
Certificate of Incorporation of lululemon athletica inc. (to
become effective immediately upon completion of this offering)
3
.7(1)
Bylaws of lululemon athletica inc.
3
.8(3)
Form of Amended and Restated
Bylaws of lululemon athletica inc. (to become effective
immediately upon completion of this offering)
4
.1
Form of Specimen Common Stock
Certificate of lululemon athletica inc.
5
.1
Opinion of Pepper Hamilton LLP
10
.1#
lululemon athletica inc. 2007
Equity Incentive Plan
10
.2#
Form of Non-Qualified Stock Option
Award Agreement under the 2007 Equity Incentive Plan
10
.3(1)#
Amended and Restated LIPO
Investments (USA), Inc. Option Plan and form of Award Agreement
10
.4(1)#
Employment and Restrictive
Covenant Agreement with Robert Meers dated as of
December 5, 2005
10
.5(1)#
Employment and Restrictive
Covenant Agreement with Dennis Wilson dated as of
December 5, 2005
10
.6(2)
Offer Letter with Mike
Tattersfield dated as of October 4, 2006, as amended on
April 25, 2007
10
.7(1)#
Offer Letter with John Currie
dated December 20, 2006
10
.8(1)
Stockholders Agreement dated
December 5, 2005 among lululemon athletica inc. and the
persons listed on Schedule A thereto
10
.9(1)
Registration Rights Agreement
dated December 5, 2005 by and among lululemon athletica
inc. and the Investors named therein
10
.10(1)
Form of Amended and Restated
Registration Rights Agreement between the parties named therein
10
.11(1)
Form of Exchange
Trust Agreement between lululemon athletica inc., Lulu
Canadian Holding, Inc. and Computershare Trust Company of Canada
10
.12(1)
Form of Exchangeable Share Support
Agreement between lululemon athletica inc., Lululemon Callco ULC
and Lulu Canadian Holding, Inc.
10
.13
Form of Amended and Restated
Declaration of Trust for Forfeitable Exchangeable Shares, by and
among the parties named therein
10
.14
Amended and Restated Arrangement
Agreement dated as of June 18, 2007, by and among the
parties named therein (including Plan of Arrangement and
Exchangeable Share Provisions)
10
.15(1)
Credit Facility between lululemon
canada inc. and Royal Bank of Canada dated as of April 11,
2007.
10
.16
Form of Indemnification Agreement
between lululemon athletica inc. and its directors and certain
officers
10
.17(1)
Lease for 2285 Clark Drive,
Vancouver, British Columbia, Canada dated as of January 25,
2006
10
.18(1)
Lease for 507 West Broadway,
Vancouver, British Columbia, Canada dated as of July 14,
2006
II-8
Table of Contents
Exhibit
10
.19(1)
Lease for 2955 Hebb Street,
Vancouver, British Columbia, Canada dated as of October 21,
2004
10
.20(1)
Lease Expansion and Amending
Agreement for 2955 Hebb Street, Vancouver, British Columbia,
Canada dated as of August 16, 2005
10
.21(1)
Lease for 5595 Trapp Avenue,
Burnaby, British Columbia, Canada dated as of December 15,
2006
10
.22(1)
Outside Director Compensation Plan
10
.23(2)
Stock Purchase Agreement dated as
of December 5, 2005 by and among lululemon athletica inc.,
Highland Funds, Advent
International GPE V-A
Limited Partnership, lululemon usa inc., Oyoyo Holdings, Inc.,
LIPO Investments (USA) Inc. and Dennis Wilson
10
.24(2)
Subscription Agreement dated as of
April 12, 2006 between Susanne Conrad and lululemon
athletica inc.
10
.25(2)
Subscription Agreement dated as of
April 12, 2006 between Rhoda Pitcher and lululemon
athletica inc.
10
.26(2)
Franchise Agreement dated
August 1, 2005 between lululemon canada inc. and Ryan Smith
and Kim Smith, on behalf of themselves and CB Ventures
10
.27(2)
Franchise Agreement dated
October 16, 2002 between lululemon canada inc. and Oqqo
Enterprises
10
.28(2)
Franchise Agreement Amendment
dated December 20, 2006 between lululemon canada inc. and
Oqqo Enterprises
10
.29(2)
Franchise Agreement Amendment
No. 2 dated January 2, 2007 between lululemon canada
inc. and Oqqo Enterprises
10
.30(2)
Franchise Agreement dated
October 15, 2004 between lululemon canada inc. and
Lululemon Athletica (Australia) Pty. Ltd.
10
.31(2)
Agreement dated January 31,
2007 by and among David Andrew Lawn, lululemon canada inc. and
Lululemon Athletica (Australia) Pty. Ltd. (including
certain amendments to the franchise agreement)
21
.1(3)
Subsidiaries of lululemon
athletica inc.
23
.1
Consent of PricewaterhouseCoopers
LLP
23
.2
Consent of Pepper Hamilton LLP
(included in Exhibit 5.1)
24
.1(1)
Powers of Attorney (included in
the signature page to the registration statement)
#
Indicates management contract or
compensatory plan
(1)
Previously filed as an exhibit to
the registrants Registration Statement on
Form S-1
(file
No. 333-142477)
filed with the Commission on May 1, 2007
(2)
Previously filed as an exhibit to
the registrants Amendment No. 1 to the Registration
Statement on
Form S-1
filed with the Commission on June 11, 2007
(3)
Previously filed as an exhibit to
the registrants Amendment No. 2 to the Registration
Statement on
Form S-1
filed with the Commission on June 19, 2007
II-9
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Very truly yours, | ||||
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lululemon athletica inc. | ||||
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By: | |||
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Name: | |||
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Title: | |||
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Dennis Wilson | ||||
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By: | |||
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Each of the Selling Stockholders | ||||
named in Schedule II hereto | ||||
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By: | |||
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Name: | |||
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Title: | |||
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As Attorney-in-Fact acting on behalf of each of the Selling Stockholders named in Schedule II to this Agreement |
By:
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(Goldman, Sachs & Co.) |
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Lululemon Corp.
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By: | ||||
Name: | Robert Meers | |||
Title: | Chief Executive Officer | |||
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Title: | Chief Executive Officer |
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Re: |
Registration Statement on Form S-1
Registration No.: 333-142477 |
Philadelphia | Boston | Washington, D.C. | Detroit | New York | Pittsburgh |
Berwyn | Harrisburg | Orange County | Princeton | Wilmington |
Very truly yours,
/s/ Pepper Hamilton LLP Pepper Hamilton LLP |
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lululemon athletica inc.
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By: | ||||
Title: | ||||
[OPTIONEE]
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Signature | ||||
Address | ||||
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(a) | the Trustee will hold legal title to the Forfeitable Shares as nominee, agent and trustee for the benefit and account of the respective Beneficial Holders thereof as principal and beneficial owner subject to and in accordance with this Article 3 and subject to the terms and conditions of any transfer, deed, shareholder agreement or other instrument, document or encumbrance pertaining to the Forfeitable Shares; | ||
(b) | subject to forfeiture pursuant to Section 3.4, any benefit, interest, profit or advantage arising out of or accruing from such Forfeitable Shares is and will continue to be a benefit, interest, profit or advantage of the Beneficial Holder and if received by the Trustee will be received and held by the Trustee for the use, benefit and advantage of the Beneficial Holder and the Trustee will account to the Beneficial Holder for any money or other consideration paid to or to the order of the Trustee in connection with the Trust Estate; | ||
(c) | the Trustee may at his discretion, whether on his own initiative or upon with the direction of such Beneficial Holder, act as the agent of the Beneficial Holder, as principal, in respect of any matter relating to such Forfeitable Shares or the performance or observance of any contract or Agreement relating to the Forfeitable Shares; and | ||
(d) | the Trustee will have the full right and power to execute and deliver, under seal and otherwise, any shareholder agreement or other instrument or document |
pertaining to the Forfeitable Shares without delivering proof to any person (including, without limitation, any other party to any such instrument or document) of its authority to do so and any person may act in reliance on any such instrument or document and for all purposes any such instrument or document will be binding on the Beneficial Holder. |
(a) | Upon the date on which a holder of Forfeitable Shares ceases to be an Eligible Person then the Trustee shall repurchase all Forfeitable Shares which it holds on behalf of such holder including any benefit, interest, profit or advantage which may have arisen or may in the future arise out of or accrue from such Forfeitable Shares, for cash in an amount equal to the price paid for the shares of LIPO Canada upon issuance thereof which were exchanged for such Forfeitable Shares pursuant to the Plan of Arrangement. | ||
(b) | Immediately following the payment of the purchase price referred to in Section 3.4(a) the Trustee shall distribute such funds to the Beneficial Holder and the Trustee shall be the sole registered and beneficial owner of such Forfeitable Shares and all such benefits, interest, profit or advantage. |
(a) | hold title to the Trust Estate; | ||
(b) | invest any moneys forming, from time to time, a part of the Trust Estate as provided in this Trust Declaration; | ||
(c) | accelerate the vesting provisions attached to some or all of the Forfeitable Shares; | ||
(d) | consent to the transfer of a beneficial interest in the Forfeitable Shares to an Eligible Person; | ||
(e) | exchange the Forfeitable Shares or any part of the Trust Estate for other property; and | ||
(f) | take such other actions and doing such other things as are specifically provided in this Trust Declaration. |
(a) | the rights of all adverse claimants with respect to the rights subject to such conflicting claims or demands have been adjudicated by a final judgment of a court of competent jurisdiction; or | ||
(b) | all differences with respect to the other rights subject to such conflicting claims or demands have been conclusively settled by a valid written agreement binding on |
all such adverse claimants, and the Trustee shall have been furnished with an executed copy of such agreement certified to be in full force and effect. |
(a) | adding to the covenants of any or all parties hereto for the protection of the Beneficial Holders hereunder if the Trustee is of the good faith opinion that such additions will not be prejudicial to the rights or interests of the Beneficial Holders; | ||
(b) | making such amendments or modifications not inconsistent with this Trust Declaration as may be necessary or desirable with respect to matters or questions which, in the good faith opinion of the Trustee, having in mind the best interests of the Beneficial Holders it may be expedient to make, provided that the Trustee, |
acting on the advice of counsel, is of the opinion that such amendments and modifications will not be prejudicial to the interests of the Beneficial Holders; or | |||
(c) | making such changes or corrections which, on the advice of counsel to the Trustee, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error, provided that the Trustee, acting on the advice of counsel is of the opinion that such changes or corrections will not be prejudicial to the rights and interests of the Beneficial Holders. |
(a) | making any additions to, deletions from or alterations of the provisions of this Trust Declaration, which, in the opinion of the Trustee, will not be prejudicial to the interests of the Beneficial Holders or are, in the opinion of counsel to the Trustee, necessary or advisable in order to incorporate, reflect or comply with any legislation the provisions of which apply to Lululemon, Exchangeco, the Trustee or this Trust Declaration; and | ||
(b) | for any other purposes not inconsistent with the provisions of this Trust Declaration, including without limitation, to make or evidence any amendment or modification to this Trust Declaration as contemplated hereby, provided that, in the opinion of the Trustee, the rights of the Trustee and Beneficial Holders will not be prejudiced thereby. |
(a) | no outstanding Forfeitable Shares are held by the Trustee; |
(b) | the Trustee elects in writing to terminate the Trust and such termination is approved by the Beneficial Holders in accordance with section 10.2 of the Exchangeable Share Provisions; and | ||
(c) | 21 years after the death of the last survivor of the descendants of His Majesty King George VI of Canada and the United Kingdom of Great Britain and Northern Ireland living on the date of the creation of the Trust. |
By :
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DENNIS WILSON , in his capacity as trustee |
determined by multiplying the appropriate number in the chart below by the Exchange Ratio (as
defined in the Plan of Arrangement).
Beneficial Holder
December 5, 2007
December 5, 2008
December 5, 2009
Total
238,312
111,122
27,662
377,096
158,875
74,082
18,439
251,396
48,525
48,525
27,661
124,711
105,917
49,388
12,292
167,597
59,702
43,214
10,756
113,672
52,084
52,084
13,829
117,997
45,128
45,128
13,832
104,088
73,513
61,735
15,364
150,612
76,346
76,346
27,661
180,353
50,147
33,954
8,452
92,553
30,695
27,781
6,916
65,392
22,546
22,546
9,989
55,081
10,372
10,372
10,373
31,117
35,730
27,781
6,914
70,425
20,219
20,219
11,525
51,963
27,578
27,578
8,453
63,609
17,692
17,692
14,137
49,521
27,049
24,694
6,147
57,890
7,171
7,171
7,172
21,514
935
935
935
2,805
51,458
43,214
10,757
105,429
24,303
24,303
6,915
55,521
11,525
11,525
11,525
34,575
1,195,822
861,389
287,706
2,344,917
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(a) | the words include, including or in particular, when following any general term or statement, shall not be construed as limiting the general term or statement to the specific items or matters set forth or to similar items or matters, but rather as permitting the general term or statement to refer to all other items or matters that could reasonably fall within the broadest possible scope of the general term or statement; | ||
(b) | a reference to a statute means that statute, as amended and in effect as of the date of this Agreement, and includes each and every regulation and rule made thereunder and in effect as of the date hereof; | ||
(c) | where a word, term or phrase is defined, its derivatives or other grammatical forms have a corresponding meaning; | ||
(d) | time is of the essence; and | ||
(e) | references to a party or parties are references to a party or parties to this Agreement. |
Exhibit A
|
¾ | Arrangement Resolutions | ||
|
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Exhibit B
|
¾ | Plan of Arrangement | ||
|
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Exhibit C
|
¾ | Forfeitable Trust Declaration |
- 6 -
(a) | subject to the terms of this Agreement, as soon as reasonably practicable, apply in a manner acceptable to the Lululemon Entities, acting reasonably, under Section 291(2) of the BCA for the Interim Order, and thereafter proceed with and diligently pursue the obtaining of the Interim Order; | ||
(b) | subject to the terms of this Agreement and in accordance with the Interim Order, convene and hold the Meetings as promptly as practicable for the purpose of considering and, if deemed advisable, approving the Arrangement and the transactions contemplated thereby by way of the Arrangement Resolutions (and for any other proper purpose as may be set out in the notice for such meetings); and | ||
(c) | subject to obtaining the approval(s) as are required by the Interim Order, proceed with and diligently pursue the application to the Court for the Final Order. |
(a) | Lululemon, Callco and Exchangeco shall execute and deliver the Support Agreement; and | ||
(b) | Lululemon and Exchangeco shall execute and deliver the Exchange Trust Agreement. |
(a) | for the class of persons to whom notice is to be provided in respect of the Arrangement and the Meetings and for the manner in which such notice is to be provided; | ||
(b) | that the requisite approval for the LIPO Canada Arrangement Resolutions shall be two-thirds of the votes cast on the LIPO Canada Arrangement Resolutions by the LIPO Canada Shareholders and the LIPO Canada Optionholders present in person or by proxy at the LIPO Canada Meeting, voting as separate classes, such that each holder of the LIPO Canada Shares is entitled to one vote for each LIPO Canada |
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|
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Share held and each holder of the LIPO Canada Options is entitled to one vote for each LIPO Canada Share such holder would have received on a valid exercise of such LIPO Canada Options, determined as if such options were fully vested and exercisable on such date; | |||
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(c) | that the requisite approval for the LIPO USA Arrangement Resolutions shall be two-thirds of the votes cast on the LIPO USA Arrangement Resolutions by the LIPO USA Shareholders and the LIPO USA Optionholders present in person or by proxy at the LIPO USA Meeting, voting as separate classes, such that each holder of the LIPO USA Shares is entitled to one vote for each LIPO USA Share held and each holder of the LIPO USA Options is entitled to one vote for each LIPO USA Share such holder would have received on a valid exercise of such LIPO USA Options, determined as if such options were fully vested and exercisable on such date; | ||
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(d) | that, in all other respects, the terms, restrictions and conditions of the articles of the respective LIPO Entities, including quorum requirements and all other matters, shall apply in respect of the Meetings; | ||
(e) | for the grant of the Dissent Rights; and | ||
(f) | for the notice requirements with respect to the presentation of the application to the Court for the Final Order. |
(a) | Each of the LIPO Entities is a corporation duly incorporated under the BCA, is validly subsisting, has full corporate and legal power and authority to own, lease and operate the properties currently owned, leased and operated by it and is in good standing with the office of the Registrar with respect to the filing of annual reports. | ||
(b) | Each of the LIPO Entities has all requisite corporate power and authority to enter into this Agreement and the documents required to be executed by the LIPO Entities in connection with the transactions contemplated herein, to perform its obligations hereunder and, subject to obtaining the requisite approvals contemplated by the Interim Order, to consummate the Arrangement and the other transactions contemplated by this Agreement. The execution and delivery of this Agreement and such other documents by each of the LIPO Entities and the consummation by each of the LIPO Entities of the transactions contemplated by this Agreement (including the transfer of the LIPO Canada Shares to Exchangeco) and such other documents have been duly authorized by the board of directors of the requisite LIPO Entities and no other corporate proceedings on the part of either of the LIPO Entities are necessary to authorize this Agreement or the transactions contemplated hereby or thereby, other than: | ||
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(i) | with respect to the Circular and other matters relating solely thereto, including the implementation of the Arrangement, the approval of the board of directors of each of the LIPO Entities; and | ||
|
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(ii) | with respect to the completion of the Arrangement, the approval of the requisite securityholders and such other corporate proceedings of the LIPO Entities as may be required by the Interim Order. |
(c) | This Agreement has been duly executed and delivered by each of the LIPO Entities and constitutes a legal, valid and binding obligation, enforceable against each of the LIPO Entities in accordance with its terms, subject to bankruptcy, insolvency and other similar laws affecting creditors rights generally, and to general principles of equity. | ||
(d) | No consent, approval, order or authorization of, or registration, declaration or filing with, any governmental entity or other person is required to be obtained by the LIPO Entities in connection with the execution and delivery of this Agreement or any of the other documents contemplated hereby, or the consummation by the LIPO Entities of the transactions contemplated hereby or thereby, other than: |
(i) | any approvals required by the Interim Order; and | ||
(ii) | the Final Order. |
(a) | Each of the Lululemon Entities has been duly incorporated or formed under the laws of its jurisdiction of incorporation, is validly subsisting, has full corporate or legal power and authority to own, lease and operate the properties currently owned, leased and operated by it and is in good standing with the appropriate governmental entity in its jurisdiction of incorporation with respect to the filing of annual returns or equivalent documents. | ||
(b) | Each of the Lululemon Entities has all requisite corporate power and authority to enter into this Agreement and each of the Ancillary Agreements, as applicable, to perform its obligations hereunder and thereunder, and to consummate the Arrangement and the other transactions contemplated by this Agreement. The execution and delivery of this Agreement and each of the Ancillary Agreements, as applicable, by each of the Lululemon Entities and the consummation by each of the Lululemon Entities of the transactions contemplated by this Agreement and each of the Ancillary Agreements, as applicable, have been duly authorized by its respective board of directors and no other corporate proceedings on its part are necessary to authorize this Agreement and each of the Ancillary Agreements, as applicable, or the transactions contemplated hereby or thereby other than the approval by its board of |
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directors of, in the case of Exchangeco, the amendment of its notice of articles and articles to create the Exchangeable Shares (which amendment must also be approved by the shareholders of Exchangeco) and, in the case of Lululemon, other matters (if any) relating solely to the implementation of the Arrangement. | |||
(c) | This Agreement has been duly executed and delivered by each of the Lululemon Entities and constitutes a legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency and other similar laws affecting creditors rights generally, and to general principles of equity. Each of the Ancillary Agreements, as applicable, will be duly executed and delivered by each of the Lululemon Entities, as applicable, and, when so executed and delivered, will constitute a legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency and other similar laws affecting creditors rights generally, and to general principles of equity. | ||
(d) | No consent, approval, order or authorization of, or registration, declaration or filing with, any governmental entity or other person is required to be obtained by any of the Lululemon Entities in connection with the execution and delivery of this Agreement or any of the Ancillary Agreements, as applicable, or the consummation by any of the Lululemon Entities of the transactions contemplated hereby or thereby other than: |
(i) | any approval required in connection with the amendment of the notice of articles or articles of Exchangeco to create the Exchangeable Shares; | ||
(ii) | the consent of the Toronto Stock Exchange and the Nasdaq Global Market to the listing thereon of the Lululemon Common Shares issuable in exchange for LIPO Canada Common Shares under the Plan of Arrangement or upon the exchange, from time to time, of Exchangeable Shares; and | ||
(iii) | any other consents, approvals, orders, authorizations, declarations or filings of or with a governmental entity which, if not obtained, would not in the aggregate have a material adverse effect on the Lululemon Entities as a whole. |
(e) | All of the outstanding shares of capital stock of each of Exchangeco and Callco are validly issued, fully paid and non-assessable and all such shares and other ownership interests are owned directly or indirectly by Lululemon, free and clear of all material liens, claims or encumbrances, and there are no outstanding options, rights, entitlements, understandings or commitments (pre-emptive, contingent or otherwise) regarding the right to acquire any such shares of capital stock or other ownership interests in Exchangeco or Callco. | ||
(f) | The Exchangeable Shares to be issued in connection with the Arrangement will be duly and validly issued by Exchangeco as fully paid and non-assessable shares on the Effective Date, and will not be issued in violation of the terms of any agreement or other understanding binding upon Exchangeco at the time that such shares are issued and will be issued in compliance with the notice of articles and articles of Exchangeco and all applicable laws. There are, and will at the Effective Time be, no preemptive or other rights relating to the allotment or issuance of Exchangeable Shares in connection with the Arrangement and the transactions contemplated herein. |
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(g) | The Lululemon Common Shares to be issued pursuant to the Arrangement or upon the exchange from time to time of the Exchangeable Shares will, when issued and delivered in accordance with the terms of this Agreement, be duly and validly issued by Lululemon on their respective dates of issue as fully paid and non-assessable shares and will not be issued in violation of the terms of any agreement or other understanding binding upon Lululemon at the time that such shares are issued and will be issued in compliance with the constating documents of Lululemon and all applicable laws. |
(a) | use all reasonable efforts to obtain the approvals of its respective shareholders and optionholders to the Arrangement at the appropriate Meeting, as provided for in Section 2.3 and in the Interim Order; | ||
(b) | apply for and use all reasonable efforts to obtain the Interim Order and the Final Order; and | ||
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(c) | carry out the terms of the Interim Order and Final Order applicable to it and use its reasonable efforts to comply promptly with all requirements which applicable laws may impose on such LIPO Entity with respect to the transactions contemplated hereby and by the Arrangement. | ||
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(a) | cause Lululemon to reserve a sufficient number of Lululemon Common Shares for issuance upon the completion of the Arrangement and the exchange from time to time of Exchangeable Shares; and | ||
(b) | carry out the terms of the Interim Order and Final Order applicable to it and use its reasonable efforts to comply promptly with all requirements which applicable laws may impose on Lululemon or its subsidiaries with respect to the transactions contemplated hereby and by the Arrangement. |
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(a) | the Arrangement shall have been approved at the Meetings in accordance with any conditions (including securityholder approval) which may be imposed by the BCA or the Interim Order; | ||
(b) | the Interim Order and the Final Order shall each have been obtained in form and terms satisfactory to each of the LIPO Entities and Lululemon, acting reasonably, and shall not have been set aside or modified in a manner unacceptable to such parties, acting reasonably, on appeal or otherwise; | ||
(c) | the steps contemplated in the Reorganization Agreement to be consummated prior to the consummation of the Arrangement shall have been consummated; | ||
(d) | holders of no more than 2.5% of the aggregate number of LIPO Canada Shares and LIPO USA Shares issued and outstanding as of the date hereof shall have exercised their Dissent Rights (and shall not have lost or withdrawn such rights) in respect of the Arrangement; | ||
(e) | there shall not be in force any order or decree restraining or enjoining the consummation of the transactions contemplated by this Agreement and there shall be no proceeding (other than an appeal made in connection with the Arrangement), of a judicial or administrative nature or otherwise, in progress or threatened that relates to or results from the transactions contemplated by this Agreement that would, if successful, result in an order or ruling that would preclude completion of the transactions contemplated by this Agreement in accordance with the terms hereof; | ||
(f) | this Agreement shall not have been terminated pursuant to Section 6.3; | ||
(g) | the Reorganization Agreement shall not have been terminated in accordance with its terms; and | ||
(h) | the Lululemon Common Shares issuable pursuant to the Arrangement and on exchange of the Exchangeable Shares from time to time shall have been authorized for listing on the Nasdaq Global Market and the Toronto Stock Exchange, subject to official notice of issuance. |
(a) | all covenants and agreements of each of the LIPO Entities under this Agreement and the Reorganization Agreement to be performed or observed on or before the Effective Date shall have been duly performed and observed by the applicable LIPO Entities in all material respects; and |
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(b) | the representations and warranties of the LIPO Entities contained in this Agreement and in the Reorganization Agreement shall be true and correct in all material respects as of the Effective Date as if made on and as of such date (except to the extent such representations and warranties speak as of a specified date which is earlier than the date of this Agreement, in which event such representations and warranties shall be true and correct in all material respects as of such earlier specified date, or except as affected by transactions contemplated or permitted by this Agreement or otherwise consented to by Lululemon). |
(a) | all covenants and agreements of each of the Lululemon Entities under this Agreement and the Reorganization Agreement to be performed on or before the Effective Date shall have been duly performed and observed by the applicable Lululemon Entities in all material respects; | ||
(b) | all representations and warranties of each of the Lululemon Entities contained in this Agreement and in the Reorganization Agreement shall be true and correct in all material respects as of the Effective Date as if made on and as of such date (except to the extent such representations and warranties speak as of a specified date which is earlier than the date of this Agreement, in which event such representations and warranties shall be true and correct in all material respects as of such earlier specified date, or except as affected by transactions contemplated or permitted by this Agreement or otherwise consented to by the LIPO Entities); and | ||
(c) | the board of directors of each of the Lululemon Entities shall have adopted all necessary resolutions, and all other necessary corporate action shall have been taken by the Lululemon Entities to permit the consummation of the Arrangement and the issue of the Lululemon Common Shares, Exchangeable Shares and other securities contemplated thereby and the issue of Lululemon upon the exchange from time to time of the Exchangeable Shares. |
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(a) | The parties will continue, from and after the date hereof and through and including the Effective Date, to use their respective reasonable efforts to maximize present and future financial and tax planning opportunities for the holders of LIPO Canada Securities and LIPO USA Securities and for Lululemon and for the LIPO Entities, as and to the extent that the same shall not prejudice any party or its security holders. The parties will ensure that such planning activities do not impede the progress or timing of the Arrangement in any material way. | ||
(b) | The parties agree that if the Lululemon Entities or LIPO Entities, as the case may be, propose any amendment or amendments to this Agreement or to the Plan of Arrangement, the other will act reasonably in considering such amendment and if the other and its security holders are not prejudiced by reason of any such amendment the other will co-operate in a reasonable fashion with the Lululemon Entities or LIPO Entities, as the case may be, so that such amendment can be effected subject to applicable laws and the rights of the security holders. |
(a) | If any condition contained in Sections 5.1 or 5.2 is not satisfied on or before the Effective Date, to the satisfaction of the Lululemon Entities, then Lululemon on behalf of the Lululemon Entities may by notice to the LIPO Entities terminate this Agreement and the obligations of the parties hereunder except as otherwise herein provided, but without detracting from the rights of the Lululemon Entities arising from any breach by the LIPO Entities but for which the condition would have been satisfied. | ||
(b) | If any condition contained in Sections 5.1 or 5.3 is not satisfied on or before the Effective Date to the satisfaction of the LIPO Entities, then the LIPO Entities may by notice to Lululemon on behalf of the Lululemon Entities terminate this Agreement |
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and the obligations of the parties hereunder except as otherwise herein provided, but without detracting from the rights of the LIPO Entities arising from any breach by the Lululemon Entities but for which the condition would have been satisfied. | |||
(c) | This Agreement will automatically terminate without further act or formality by any part in the event that the Reorganization Agreement is terminated. | ||
(d) | If this Agreement is terminated in accordance with the foregoing provisions of this Section 6.3, no party shall have any further liability to perform its obligations hereunder. |
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LULULEMON ATHLETICA INC | ||||||
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By: | /s/ John Currie | ||||
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LIPO INVESTMENTS (CANADA) INC. | ||||||
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By: | /s/ Dennis Wilson | ||||
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LIPO INVESTMENTS (USA) INC. | ||||||
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By: | /s/ Dennis Wilson | ||||
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LULULEMON CALLCO ULC | ||||||
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By: | /s/ Robert Meers | ||||
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LULULEMON CANADIAN HOLDING INC. | ||||||
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By: | /s/ Dennis Wilson | ||||
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Affiliate has the meaning set out in Section 2 of the BCA; | |||
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Ancillary Rights has the meaning set out in Section 2.3(j); | |||
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Arrangement means the arrangement under Division 5, Part 9 of the BCA on the terms and subject to the conditions set out in this Plan of Arrangement, subject to any amendments or variations thereto made in accordance with Article 6 of the Arrangement Agreement or Article 6 hereof or made at the direction of the Court in the Final Order; | |||
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Arrangement Agreement means the amended and restated arrangement agreement made as of June 18, 2007 among Lululemon, Exchangeco, Callco, LIPO Canada and LIPO USA, as amended, supplemented and/or restated in accordance therewith prior to the Effective Date, providing for, among other things, the Arrangement; | |||
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Arrangement Resolutions means the special resolutions passed by the holders of the LIPO Canada Shares and LIPO Canada Options at the LIPO Canada Meeting and the special resolutions passed by the holders of the LIPO USA Shares and LIPO USA Options at the LIPO USA Meeting; | |||
BCA means the Business Corporations Act (British Columbia) as amended; | |||
Business Day means any day on which commercial banks are open for business in Vancouver, British Columbia, other than a Saturday, a Sunday or a day observed as a holiday in Vancouver, British Columbia under the laws of the Province of British Columbia or the federal laws of Canada; | |||
Canadian Resident means a person who is not a non-resident of Canada for purposes of the ITA; | |||
Callco means Lululemon Callco ULC, an unlimited liability company existing under the laws of the Province of Alberta and a direct wholly owned subsidiary of Lululemon; | |||
Circular means the notice of the Meetings and accompanying circular to be sent to holders of LIPO Canada Securities and LIPO USA Securities in connection with the Meetings; |
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Court means the Supreme Court of British Columbia; | |||
Current Market Price has the meaning assigned in the Exchangeable Share Provisions; | |||
Dissent Procedures has the meaning assigned in Section 3.1; | |||
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Dissenting Shareholder means a registered holder of LIPO Canada Shares or LIPO USA Shares who dissents in respect of the Arrangement in strict compliance with the Dissent Procedures; | |||
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Dividend Amount has the meaning assigned in Section 5.1(a); | |||
Effective Date means the date following the grant of the Final Order on which the parties to the Arrangement Agreement agree that the conditions set forth in Article 5 of the Arrangement Agreement have been satisfied or waived (or on such other date as the parties may agree); | |||
Effective Time means the time on the Effective Date as specified in writing executed by each of the parties to the Arrangement Agreement; | |||
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Election Deadline means 5:00 p.m. (Pacific time) on the date which is one Business Day before the Meeting Date; | |||
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Exchangeco means Lulu Canadian Holding, Inc., a company existing under the laws of the Province of British Columbia, which is a wholly owned subsidiary of Lululemon; | |||
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Exchange Ratio means the number of Exchangeable Shares or Lululemon Common Shares issuable in exchange for one LIPO Canada Share, which number shall be equal to the LIPO Canada Amount divided by the number of LIPO Canada Shares issued and outstanding, after giving effect to the steps contemplated in Sections 2.3(a) to (c); | |||
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Exchange Trust Agreement means the Exchange Trust Agreement among Lululemon, Exchangeco and the Trustee, to be entered into in connection with this Plan of Arrangement, substantially in the form and content of Exhibit C annexed to the Reorganization Agreement, with such changes thereto as the parties, thereto acting reasonably, may agree, in accordance with the terms thereof; | |||
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Exchangeable Elected Share means any LIPO Canada Share that the holder shall have elected, by written notice to Exchangeco no later than the Election Deadline, to transfer to LIPO Canada under the Arrangement for Exchangeable Shares, or that is deemed to be an Exchangeable Elected Share pursuant to Section 2.3(k); | |||
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Exchangeable Share means a share in the class of non-voting exchangeable shares in the capital of Exchangeco; | |||
Exchangeable Share Provisions means the rights, privileges, restrictions and conditions attaching to the Exchangeable Shares, which rights, privileges, restrictions and conditions shall be substantially in the form and content of Appendix 1 hereto; |
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Fair Market Value (i) of a LIPO Canada Share, means the quotient obtained by dividing (A) an amount equal to the LIPO Canada Amount multiplied by the IPO Price and divided by the total number of LIPO Canada Shares issued and outstanding on the applicable date (without giving effect to the exercise of any LIPO Canada Options), and (ii) of a LIPO USA Share means an amount equal to the IPO Price multiplied by the number of Lululemon Common Shares to be received by LIPO USA pursuant to the Reorganization Agreement and divided by the total number of LIPO USA Shares issued and outstanding of the applicable date; | |||
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Final Order means the final order of the Court approving the Arrangement, granted pursuant to Section 291(4) of the BCA, as such order may be amended at any time prior to the Effective Date or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed; | |||
Forfeitable Shares means those LIPO Canada Shares which are designated as forfeitable in accordance with the terms of the LIPO Canada Option Plan and the terms of the options with respect to which such shares were initially issued; | |||
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Forfeitable Share Trust Declaration means the declaration of trust pursuant to which Dennis Wilson will hold the Exchangeable Shares issued in exchange for Forfeitable Shares, together with the associated Special Voting Shares as trustee on behalf of the beneficial holders thereof, substantially in the form and content of Exhibit C annexed to the Arrangement Agreement, with such changes thereto as may be made, from time to time, in accordance with its terms; | |||
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holder means, when used with reference to any LIPO Canada Securities or LIPO USA Securities, the holder of such securities shown from time to time on the applicable securities register maintained by or on behalf of LIPO Canada or LIPO USA, as the case may be in respect of such securities and, when used with reference to any Exchangeable Shares, means the holder of such Exchangeable Shares shown from time to time on the securities register maintained by or on behalf of Exchangeco in respect of such Exchangeable Shares; | |||
Interim Order means the interim order of the Court made in connection with the process for obtaining securityholder approval of the Arrangement and related matters; | |||
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IPO Price means the price per share at which Lululemon Common Shares are sold to the public pursuant to Lululemons initial public offering, provided that if such price is expressed in United States dollars, IPO Price shall mean the Canadian dollar equivalent of the price at which Lululemon Common Shares are sold to the public pursuant to Lululemons initial public offering, determined based on the noon spot exchange rate on the Effective Date for Canadian dollars as reported by the Federal Reserve Bank of New York; | |||
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ITA means the Income Tax Act (Canada); | |||
LIPO Canada means LIPO Investments (Canada) Inc., a company existing under the laws of the Province of British Columbia; | |||
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LIPO CANADA Amount means the aggregate number of Lululemon Common Shares and Exchangeable Shares issuable in exchange for the LIPO CANADA SHARES hereunder, determined in accordance with the Reorganization Agreement; | |||
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LIPO Canada Meeting means the extraordinary general meeting of the holders of LIPO Canada Shares and LIPO Canada Options (including any adjournment thereof) that is to be convened as provided by the Interim Order to consider and, if deemed advisable, approve the Arrangement; | |||
LIPO Canada Option means a Class B option to purchase LIPO Canada Shares granted under the LIPO Canada Option Plan and being outstanding and unexercised on the Effective Date; | |||
LIPO Canada Option Plan means the LIPO Canada stock option plan approved by the board of directors of LIPO Canada on December 1, 2005; |
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LIPO Canada Securities means the LIPO Canada Shares and the LIPO Canada Options, collectively; | |||
LIPO Canada Shares means the outstanding Common Shares without par value in the authorized share structure of LIPO Canada; | |||
LIPO USA means LIPO Investments (USA) Inc., a company existing under the laws of the Province of British Columbia; | |||
LIPO USA Meeting means the extraordinary general meeting of the holders of LIPO USA Shares and LIPO USA Options (including any adjournment thereof) that is to be convened as provided by the Interim Order to consider and, if deemed advisable, approve the Arrangement; | |||
LIPO USA Option means a Class B option to purchase LIPO USA Shares granted under the LIPO USA Option Plan and being outstanding and unexercised on the Effective Date; | |||
LIPO USA Option Plan means the LIPO USA stock option plan approved by the board of directors of LIPO USA on December 1, 2005; | |||
LIPO USA Securities means the LIPO USA Shares and the LIPO USA Options, collectively; | |||
LIPO USA Shares means the outstanding Common Shares without par value in the authorized share structure of LIPO USA; | |||
Liquidation Call Purchase Price has the meaning assigned in Section 5.1(a); | |||
Liquidation Call Right has the meaning assigned in Section 5.1(a); | |||
Liquidation Date has the meaning assigned in the Exchangeable Share Provisions; | |||
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Lululemon means lululemon athletica inc., a corporation existing under the laws of the State of Delaware; | |||
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Lululemon Common Share means a share of common stock, par value U.S. $0.01, in the capital of Lululemon and any other securities into which such share may be changed; | |||
Lululemon Control Transaction has the meaning assigned in the Exchangeable Share Provisions; | |||
Lululemon Elected Share means any LIPO Canada Share that the holder shall have elected, by written notice to Exchangeco no later than the Election Deadline, to transfer to Lululemon under the Arrangement for Lululemon Common Shares |
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Meeting Date means the date of the Meetings; | |||
Meetings means the LIPO Canada Meeting and the LIPO USA Meeting; | |||
Non-Forfeitable Shares means all LIPO Canada Shares not designated as Forfeitable Shares; | |||
Person includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate, corporation, company, unincorporated association or organization, government body, syndicate or other entity, whether or not having legal status; | |||
Redemption Call Purchase Price has the meaning assigned in Section 5.2(a); | |||
Redemption Call Right has the meaning assigned in Section 5.2(a); | |||
Redemption Date has the meaning assigned in the Exchangeable Share Provisions; | |||
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Reorganization Agreement means the Agreement and Plan of Reorganization dated April 26, 2007 by and among Lululemon, Exchangeco, LIPO Canada, LIPO USA and certain other parties, as amended, supplemented and/or restated in accordance there with prior to effective date; | |||
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Replacement Option has the meaning assigned in Section 2.3(b); | |||
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Special Voting Shares means the shares of special voting stock, with a par value of $0.00001, in the capital of Lululemon and other securities into which such shares may be changed; | |||
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Transfer Agent means Computershare Investor Services Inc. or such other Person as may from time to time be appointed by Exchangeco as the registrar and transfer agent for the Exchangeable Shares; | |||
Trustee means Computershare Trust Company of Canada, in its capacity as trustee under the Exchange Trust Agreement, and includes any successor trustee appointed thereunder; and | |||
Vested LIPO Canada Option means that part of a LIPO Canada Option which is exercisable, as of the Effective Date, in accordance with the terms of such option and the LIPO Canada Option Plan. |
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(a) | at the Effective Time, the terms of the LIPO Canada Option Plan and the LIPO USA Option Plan shall be amended to read as set forth in the respective amended and restated option plans attached as Appendices 2 and 3 hereto, respectively; | ||
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(b) | five minutes following the step contemplated in Section 2.3(a), each Vested LIPO Canada Option will be exchanged by the holder thereof for an option (a Replacement Option ) to purchase such number of LIPO Canada Shares as is equal to the quotient obtained by dividing (i) the difference of the aggregate Fair Market Value of the LIPO Canada Shares subject thereto, less the aggregate exercise price thereof, by (ii) the aggregate Fair Market Value of one LIPO Canada Share. Such Replacement Option will provide for an exercise price equal to $0.0001 per share, rounded up to the nearest whole $0.01. The term to expiry, conditions to and manner of exercise, vesting schedule and other terms and conditions of each of the Replacement Options shall be the same as the terms and conditions of the original LIPO Canada Option for which it is exchanged; | ||
(c) | at the time of the step contemplated in Section 2.3(b), each Replacement Option will be immediately exercised for the number of LIPO Canada Shares set out therein and the exercise price in respect thereof shall be released to LIPO Canada; | ||
(d) | at the time of the step contemplated in Section 2.3(b), each LIPO Canada Option or part thereof which is not a Vested LIPO Canada Option will be exchanged by the holder thereof with LIPO USA for an option to purchase such number of LIPO USA Shares as is equal to the |
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quotient obtained by dividing (i) the difference of the aggregate Fair Market Value of the LIPO Canada Shares subject thereto less the aggregate exercise price thereof, by (ii) the difference of the Fair Market Value of one LIPO USA Share less $0.01. Such option will provide for an exercise price per LIPO USA Share equal to $0.01 per share. The term to expiry, conditions to and manner of exercise, vesting schedule and other terms and conditions of each such option shall be the same as the terms and conditions of the LIPO Canada Option for which it is exchanged; | |||
(e) | five minutes following the step contemplated in Section 2.3(c), all LIPO Canada Options described in Section 2.3(d) will be cancelled for no consideration; | ||
(f) | five minutes following the step contemplated in Section 2.3(e), each Non-Forfeitable Share will be transferred from the registered owner thereof to the beneficial owner thereof as identified in the securities register of LIPO Canada, and the name of such registered holder will be removed from the register of holders of LIPO Canada and such beneficial holders will be recorded as the sole registered holders thereof; | ||
(g) | five minutes following the step contemplated in Section 2.3(f), the LIPO Canada Shares and the LIPO USA Shares held by Dissenting Shareholders in respect of which such Dissenting Shareholders have exercised rights of dissent pursuant to the Dissent Procedures and have not withdrawn their notice of dissent will be deemed to have been transferred to LIPO Canada or LIPO USA, as applicable, and such holders will cease to have any rights as shareholders other than the right to be paid the fair value of their LIPO Canada Shares and their LIPO USA Shares as set out in Section 3.1; | ||
(h) | five minutes following the step contemplated in Section 2.3(g), each Lululemon Elected Share will be transferred by the holder thereof to Lululemon in exchange for that number of fully paid and non-assessable Lululemon Common Shares equal to the Exchange Ratio and the name of each such holder will be removed from the register of holders of LIPO Canada Shares and added to the register of holders of Lululemon Common Shares, and Lululemon will be recorded as the registered holder of such LIPO Canada Shares so exchanged and will be deemed to be the legal and beneficial owner thereof; | ||
(i) | at the time contemplated in Section 2.3(h), each Exchangeable Elected Share will be transferred by the holder thereof to Exchangeco in exchange for (i) that number of fully paid and non-assessable Exchangeable Shares equal to the Exchange Ratio and the name of each such holder will be removed from the register of holders of LIPO Canada Shares and added to the register of holders of Exchangeable Shares and Exchangeco will be recorded as the registered holder of such LIPO Canada Shares so exchanged and will be deemed to be the legal and beneficial owner thereof and all such Exchangeable Shares issued in exchange for |
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Forfeitable Shares will be issued subject to, and will be governed by, the Forfeitable Share Trust Declaration; | |||
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(j) | at the time contemplated in Section 2.3(h), the rights under the Exchange Trust Agreement (the Ancillary Rights) corresponding to the Exchangeable Shares issued pursuant to Section 2.3(i) will be transferred to the holders described in Section 2.3(i) and the holders described in Section 2.3(i) will subscribe for and will be issued that number of fully paid and non-assessable Special Voting Shares as is equivalent to the number of Exchangeable Shares issued to such holders pursuant to Section 2.3(i), and the subscription price for such Special Voting Shares and the consideration for the Ancillary Rights will be released to Lululemon, and the name of each holder will be added to the register of holders of Special Voting Shares and all such Special Voting Shares issued to holders of Forfeitable Shares will be issued subject to, and will be governed by, the Forfeitable Share Trust Declaration; | ||
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(k) | at the time contemplated in Section 2.3(h), each LIPO Canada Share in respect of which no election has been made by the holder thereof, or in respect of which an effective election has not been made (other than LIPO Canada Shares held by Dissenting Shareholders who are ultimately entitled to be paid the fair value of the LIPO Canada Shares held by them) will be deemed to be an Exchangeable Elected Share and will be transferred by the holder thereof to Exchangeco in exchange for that number of fully paid and non-assessable Exchangeable Shares equal to the Exchange Ratio and the name of each such holder will be removed from the register of holders of LIPO Canada Shares and added to the register of holders of Exchangeable Shares, and Exchangeco will be recorded as the registered holder of such LIPO Canada Shares so exchanged and will be deemed to be the legal and beneficial owner thereof and all such Exchangeable Shares issued in exchange for Forfeitable Shares will be issued subject to, and will be governed by, the Forfeitable Share Trust Declaration; and | ||
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(l); | at the time contemplated in Section 2.3(h), the Ancillary Rights corresponding to the Exchangeable shares issued pursuant to Section 2.3(k) will be transferred to the holders described in Section 2.3(k) and the holders described in Section 2.3(k) will subscribe for and will be issued that number of fully paid and non-assessable Special Voting Shares as is equivalent to the number of Exchangeable Shares issued to such holders pursuant to Section 2.3(k), and the subscription price for such Special Voting Shares and the consideration for the Ancillary Rights will be released to Lululemon, and the name of each such holder will be added to the register of holders of Special Voting Shares and all such Special Voting Shares issued to holders of Forfeitable Shares will be issued subject to, and will be governed by, the Forfeitable Share Trust Declaration. | ||
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(a) | Each Person who, at or prior to the Election Deadline, is a holder of record of LIPO Canada Shares, will be entitled, with respect to all or a portion of such shares, to make an election at or prior to the Election Deadline to receive Exchangeable Shares or Lululemon Common Shares, or a combination thereof, in exchange for such holders LIPO Canada Shares, on the basis set forth herein . | ||
(b) | Holders of LIPO Canada Shares who are Canadian Residents, other than any such holder who is exempt from tax under the ITA, and who have elected to receive Exchangeable Shares shall be entitled to make an income tax election pursuant to subsection 85(1) of the ITA or, if the holder is a partnership, subsection 85(2) of the ITA (and in each case, where applicable, the analogous provisions of provincial income tax law) with respect to the transfer of their LIPO Canada Shares to Exchangeco by providing two signed copies of the necessary election forms to Exchangeco within 90 days following the Effective Date, duly completed with the details of the number of shares transferred and the applicable agreed amounts for the purposes of such elections. Thereafter, subject to the election forms complying with the provisions of the ITA (or applicable provincial income tax law), the forms will be signed by Exchangeco and returned to such former holders of LIPO Canada Shares within 30 days after the receipt thereof by Exchangeco for filing with the Canada Revenue Agency (or the applicable provincial taxing authority). Exchangeco will not be responsible for the proper completion of any election form and, except for Exchangecos obligation to sign and return duly completed election forms which are received by Exchangeco within 90 days of the Effective Date, within 30 days after the receipt thereof by Exchangeco, Exchangeco will not be responsible for any taxes, |
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interest or penalties resulting from the failure by a holder of LIPO Canada Shares to properly complete or file the election forms in the form and manner and within the time prescribed by the ITA (or any applicable provincial legislation). In its sole discretion, Exchangeco may choose to sign and return an election form received by Exchangeco more than 90 days following the Effective Date, but Exchangeco will have no obligation to do so. |
(a) | are ultimately entitled to be paid fair value for such shares in respect of which they have exercised rights of dissent shall be deemed to have irrevocably transferred such shares to LIPO Canada or LIPO USA, as applicable, pursuant to Section 2.3(g); or | ||
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(b) | are ultimately not entitled, for any reason, to be paid fair value for their LIPO Canada Shares or LIPO USA Shares shall be deemed to have participated in the Arrangement on the same basis as a non-dissenting holder of LIPO Canada Shares or LIPO USA Shares, as applicable and shall, in the case of a holder of LIPO Canada shares, receive Exchangeable Shares on the basis determined in accordance with Section 2.3(i), | ||
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(a) | Callco shall have the overriding right (the Liquidation Call Right ), in the event of and notwithstanding the proposed liquidation, dissolution or winding-up of Exchangeco pursuant to Article 5 of the Exchangeable Share Provisions, to purchase from all but not less than all of the holders of Exchangeable Shares (other than any holder of Exchangeable Shares which is an Affiliate of Lululemon) on the Liquidation Date all but not less than all of the Exchangeable Shares held by each such holder on payment by Callco of an amount per share (the Liquidation Call Purchase Price ) equal to the Current Market Price of a Lululemon Common Share on the last Business Day prior to the Liquidation Date, which, if such right is exercised, shall be satisfied in full by Callco causing to be delivered to such holder one Lululemon Common Share, plus, to the extent not paid by Exchangeco, an additional amount equivalent to the full amount of all declared and unpaid dividends |
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on each such Exchangeable Share held by such holder on any dividend record date which occurred prior to the date of purchase by Callco (the Dividend Amount ). | |||
(b) | To exercise the Liquidation Call Right, Callco must notify the Transfer Agent, as agent for the holders of Exchangeable Shares, and Exchangeco of Callcos intention to exercise such right at least 45 days before the Liquidation Date in the case of a voluntary liquidation, dissolution or winding-up of Exchangeco and at least five Business Days before the Liquidation Date in the case of an involuntary liquidation, dissolution or winding-up of Exchangeco. The Transfer Agent will notify the holders of Exchangeable Shares as to whether or not Callco has exercised the Liquidation Call Right forthwith after the expiry of the period during which the same may be exercised by Callco. If Callco exercises the Liquidation Call Right, then on the Liquidation Date Callco will purchase and the holders will sell all of the Exchangeable Shares then outstanding for a price per share equal to the Liquidation Call Purchase Price. | ||
(c) | For the purposes of completing the purchase of the Exchangeable Shares pursuant to the Liquidation Call Right, Callco shall deposit with the Transfer Agent, on or before the Liquidation Date, the aggregate number of Lululemon Common Shares deliverable by Callco (which delivery may be in the form of certificates or in book-entry form through the direct registration system) and a cheque or cheques of Callco payable upon presentation at any branch of the bankers of Callco representing the aggregate Dividend Amount in payment of the total Liquidation Call Purchase Price, less any amounts withheld pursuant to Section 4.7 hereof. Provided that Callco has complied with the immediately preceding sentence, on and after the Liquidation Date the rights of each holder of Exchangeable Shares will be limited to receiving the Liquidation Call Purchase Price in respect of each Exchangeable Share held by such holder, payable by Callco upon presentation and surrender by the holder of certificates representing the Exchangeable Shares held by such holder and the holder shall on and after the Liquidation Date be considered and deemed for all purposes to be the holder of the Lululemon Common Shares to which it is entitled. Upon surrender to the Transfer Agent of a certificate or certificates representing Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the BCA and the articles of Exchangeco and such additional documents and instruments as the Transfer Agent may reasonably require, the holder of such surrendered certificate or certificates shall be entitled to receive in exchange therefor, and the Transfer Agent on behalf of Callco shall deliver to such holder, the Lululemon Common Shares to which the holder is entitled (which delivery may be in the form of certificates or in book-entry form through the direct registration system) and a cheque or cheques of Callco payable at par at any branch of the bankers of Callco in payment of the remaining portion, if any, of the total Liquidation Call Purchase Price, less any amounts withheld pursuant to Section 4.7 hereof. If Callco does not exercise the Liquidation Call Right in the manner described above or if Callco exercises the Liquidation Call Right but fails to complete such transaction in accordance with the requirements set out in this Section 5.1, on the Liquidation Date the holders of the Exchangeable Shares will be entitled to receive in exchange therefor the liquidation price otherwise payable by Exchangeco in connection with the liquidation, dissolution or winding-up of Exchangeco pursuant to Article 5 of the Exchangeable Share Provisions. |
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(a) | Callco shall have the overriding right (the Redemption Call Right ), notwithstanding the proposed redemption of the Exchangeable Shares by Exchangeco pursuant to Article 7 of the Exchangeable Share Provisions, to purchase from all but not less than all of the holders of Exchangeable Shares (other than any holder of Exchangeable Shares which is an Affiliate of Lululemon) on the Redemption Date all but not less than all of the Exchangeable Shares held by each such holder on payment by Callco to each holder of an amount per Exchangeable Share (the Redemption Call Purchase Price ) equal to the Current Market Price of a Lululemon Common Share on the last Business Day prior to the Redemption Date, which shall be satisfied in full by Callco causing to be delivered to such holder one Lululemon Common Share, plus the Dividend Amount. In the event of the exercise of the Redemption Call Right by Callco, each holder shall be obligated to sell all the Exchangeable Shares held by the holder to Callco on the Redemption Date on payment by Callco to the holder of the Redemption Call Purchase Price for each such share, and Exchangeco shall have no obligation to redeem, or to pay any Dividend Amount in respect of, such shares so purchased by Callco. | ||
(b) | To exercise the Redemption Call Right, Callco must notify the Transfer Agent, as agent for the holders of Exchangeable Shares, and Exchangeco of Callcos intention to exercise such right at least 60 days before the Redemption Date, except in the case of a redemption occurring as a result of a Lululemon Control Transaction, an Exchangeable Share Voting Event or an Exempt Exchangeable Share Voting Event, in which case Callco shall so notify the Transfer Agent and Exchangeco on or before the Redemption Date. The Transfer Agent will notify the holders of the Exchangeable Shares as to whether or not Callco has exercised the Redemption Call Right forthwith after the expiry of the period during which the same may be exercised by Callco. If Callco exercises the Redemption Call Right, on the Redemption Date Callco will purchase and the holders will sell all of the Exchangeable Shares then outstanding for a price per share equal to the Redemption Call Purchase Price. | ||
(c) | For the purposes of completing the purchase of the Exchangeable Shares pursuant to the Redemption Call Right, Callco shall deposit with the Transfer Agent, on or before the Redemption Date, the aggregate number of Lululemon Common Shares deliverable by Callco (which delivery may be in the form of certificates or in book-entry form through the direct registration system) and a cheque or cheques of Callco payable upon presentation at any branch of the bankers of Callco representing the aggregate Dividend Amount in payment of the total Redemption Call Purchase Price, less any amounts withheld pursuant to Section 4.7 hereof. Provided that Callco has complied with the immediately preceding sentence, on and after the Redemption Date the rights of each holder of Exchangeable Shares will be limited to receiving the Redemption Call Purchase Price in respect of each Exchangeable Share held by such holder, payable by Callco upon presentation and surrender by the holder of |
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certificates representing the Exchangeable Shares held by such holder and the holder shall on and after the Redemption Date be considered and deemed for all purposes to be the holder of the Lululemon Common Shares to which it is entitled. Upon surrender to the Transfer Agent of a certificate or certificates representing Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the BCA and the articles of Exchangeco and such additional documents and instruments as the Transfer Agent may reasonably require, the holder of such surrendered certificate or certificates shall be entitled to receive in exchange therefor, and the Transfer Agent on behalf of Callco shall deliver to such holder, the Lululemon Common Shares to which the holder is entitled (which may be in the form of certificates or in book-entry form through the direct registration system) less any amounts withheld pursuant to Section 4.7 hereof. If Callco does not exercise the Redemption Call Right in the manner described above or if Callco exercises the Redemption Call Right but fails to complete such transaction in accordance with the requirements set out in this Section 5.2, on the Redemption Date the holders of the Exchangeable Shares will be entitled to receive in exchange therefor the redemption price otherwise payable by Exchangeco in connection with the redemption of the Exchangeable Shares pursuant to Article 7 of the Exchangeable Share Provisions. |
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2
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(a) | there are outstanding less than 10% of actual number of Exchangeable Shares to be issued pursuant to the Plan of Arrangement as determined at the Effective Date (other than Exchangeable Shares held by Lululemon and its subsidiaries) as such number of shares may be adjusted as deemed appropriate by the Board of Directors to give effect to any subdivision or consolidation of or stock dividend on the Exchangeable Shares, any issue or distribution of rights to acquire Exchangeable Shares or securities exchangeable for or convertible into Exchangeable Shares, any issue or distribution of other securities or rights or evidences of indebtedness or assets, or any other capital reorganization or other transaction affecting the Exchangeable Shares) in respect of the Exchangeable Shares pursuant to these provisions), in which case the Board of Directors may accelerate such redemption date to such date prior to the date 40 years after the Effective Date as it may determine, upon at least 60 days prior written notice to the registered holders of the Exchangeable Shares and the Trustee; | ||
(b) | a Lululemon Control Transaction or Lululemon Extraordinary distribution occurs, in which case, provided that the Board of Directors determines, in good faith and in its sole discretion, that it is not reasonably practicable to substantially replicate the terms and conditions of the Exchangeable Shares in connection with such Lululemon Control Transaction or Lululemon Extraordinary Distribution and that the redemption of all but not less than all of the outstanding Exchangeable Shares is necessary to enable the completion of such Lululemon Control Transaction or Lululemon Extraordinary Distribution in accordance with its terms, the Board of Directors may accelerate such redemption date to such date prior to the date 40 years after the Effective Date as it may determine, upon such number of days prior written notice to the registered holders of the Exchangeable Shares and the Trustee as the Board of Directors may determine to be reasonably practicable in such circumstances; | ||
(c) | an Exchangeable Share Voting Event is proposed, in which case, provided that the Board of Directors has determined, in good faith and in its sole discretion, that it is not reasonably practicable to accomplish the business purpose intended by the Exchangeable Share Voting Event, which business purpose must be bona fide and not for the primary purpose of causing the occurrence of a Redemption Date, in any other commercially reasonable manner that does not result in an Exchangeable Share Voting Event, the redemption date shall be the Business Day prior to the record date for any meeting or vote of the holders of the Exchangeable Shares to consider the Exchangeable Share Voting Event and the Board of Directors shall give such number of days prior written notice of such redemption to the registered holders of the Exchangeable Shares and the Trustee as the Board of Directors may determine to be reasonably practicable in such circumstances; or |
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(d) | an Exempt Exchangeable Share Voting Event is proposed and the holders of the Exchangeable Shares fail to take the necessary action at a meeting or other vote of holders of Exchangeable Shares, to approve or disapprove, as applicable, the Exempt Exchangeable Share Voting Event, in which case the redemption date shall be the Business Day following the day on which the holders of the Exchangeable Shares failed to take such action, |
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2.1 | The Exchangeable Shares shall be entitled to a preference over the Common Shares and any other shares ranking junior to the Exchangeable Shares, with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or any other distribution of the assets of the Company, among its shareholders for the purpose of winding up its affairs. |
3.1 | A holder of an Exchangeable Share shall be entitled to receive and the Board of Directors shall, subject to applicable law, on each Lululemon Dividend Declaration Date, declare a dividend on each Exchangeable Share: |
(a) | in the case of a cash dividend declared on the Lululemon Common Shares, in an amount in cash for each Exchangeable Share in U.S. dollars, or the Canadian Dollar Equivalent thereof on the Lululemon Dividend Declaration Date, in each case, corresponding to the cash dividend declared on each Lululemon Common Share; | ||
(b) | in the case of a stock dividend declared on the Lululemon Common Shares to be paid in Lululemon Common Shares by the issue or transfer by the Company of such number of Exchangeable Shares for each Exchangeable Share as is equal to the number of Lululemon Common Shares to be paid on each Lululemon Common Share; or | ||
(c) | in the case of a dividend declared on the Lululemon Common Shares in property other than cash or Lululemon Common Shares, in such type and amount of property for each Exchangeable Share as is the same as or economically equivalent to (to be determined by the Board of Directors as contemplated by Section 3.5 hereof) the type and amount of property declared as a dividend on each Lululemon Common Share. |
Such dividends shall be paid out of money, assets or property of the Company properly applicable to the payment of dividends, or out of authorized but unissued shares of the Company, as applicable. | ||
3.2 | In the case of a stock dividend declared on the Lululemon Common Shares to be paid in Lululemon Common Shares, in lieu of declaring the stock dividend contemplated by section 3.1(b) on the Exchangeable Shares, the Board of Directors may, in good faith and in its sole discretion and subject to applicable law and to obtaining all required regulatory approvals, subdivide, redivide or change (the Subdivision ) each issued and unissued |
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Exchangeable Share on the basis that each Exchangeable Share before the Subdivision becomes a number of Exchangeable Shares equal to the sum of (A) one Lululemon Common Share and (B) the number of Lululemon Common Shares to be paid as a share dividend on each Lululemon Common Share. In making such Subdivision, the Board of Directors shall consider the effect thereof upon the then outstanding Exchangeable Shares and the general taxation consequences of the Subdivision to the holders of the Exchangeable Shares. In such instance, and notwithstanding any other provision hereof, such Subdivision shall become effective on the effective date specified in Section 3.4 without any further act or formality on the part of Lululemon, the Board of Directors or of the holders of Exchangeable Shares. | ||
3.3 | Cheques of the Company payable at par at any branch of the bankers of the Company shall be issued in respect of any cash dividends contemplated by Section 3.1(a) hereof and the sending of such a cheque to each holder of an Exchangeable Share shall satisfy the cash dividend represented thereby unless the cheque is not paid on presentation. Certificates representing the Exchangeable Shares paid as a stock dividend pursuant to Section 3.1(b) or any Subdivision contemplated by Section 3.2 registered in the name of the registered holder of Exchangeable Shares may be issued or transferred in respect of any stock dividends contemplated by Section 3.1(b) or any Subdivision contemplated by Section 3.2 hereof and the delivery of such a certificate (or the delivery of such Exchangeable Shares in book-entry form through the direct registration system) to each holder of an Exchangeable Share shall satisfy the stock dividend represented thereby. Such other type and amount of property in respect of any dividends contemplated by Section 3.1(c) hereof shall be issued, distributed or transferred by the Company in such manner as it shall determine and the issuance, distribution or transfer thereof by the Company to each holder of an Exchangeable Share shall satisfy the dividend represented thereby. No holder of an Exchangeable Share shall be entitled to recover by action or other legal process against the Company any dividend that is represented by a cheque that has not been duly presented to the Companys bankers for payment or that otherwise remains unclaimed for a period of six years from the date on which such dividend was payable. | |
3.4 | The record date for the determination of the holders of Exchangeable Shares entitled to receive payment of, and the payment date for, any dividend declared on the Exchangeable Shares under Section 3.1 hereof shall be the same dates as the record date and payment date, respectively, for the corresponding dividend declared on the Lululemon Common Shares. The record date for the determination of the holders of Exchangeable Shares entitled to receive Exchangeable Shares in connection with any Subdivision of the Exchangeable Shares under Section 3.2 and the effective date of such Subdivision shall be the same dates as the record date and payment date, respectively, for the corresponding dividend declared on the Lululemon Common Shares. | |
3.5 | If on any payment date for any dividends declared on the Exchangeable Shares under Section 3.1 hereof the dividends are not paid in full on all of the Exchangeable Shares then outstanding, any such dividends that remain unpaid shall be paid on a subsequent date or dates determined by the Board of Directors on which the Company shall have |
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sufficient moneys, assets or property properly applicable to the payment of such dividends. | ||
3.6 | The Board of Directors shall determine, in good faith and in its sole discretion, economic equivalence for the purposes of Sections 3.1 and 3.2, and each such determination shall be conclusive and binding on the Company and its shareholders. In making each such determination, the following factors shall, without excluding other factors determined by the Board of Directors to be relevant, be considered by the Board of Directors: |
(a) | in the case of any stock dividend or distribution payable in Lululemon Common Shares, the number of such shares issued in proportion to the number of Lululemon Common Shares previously outstanding; | ||
(b) | in the case of the issuance or distribution of any rights, options or warrants to subscribe for or purchase Lululemon Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Lululemon Common Shares), the relationship between the exercise price of each such right, option or warrant and the Current Market Price; | ||
(c) | in the case of the issuance or distribution of any other form of property (including without limitation any shares or securities of Lululemon of any class other than Lululemon Common Shares, any rights, options or warrants other than those referred to in Section 3.6(b) above, any evidences of indebtedness of Lululemon or any assets of Lululemon), the relationship between the fair market value (as determined by the Board of Directors in the manner above contemplated) of such property to be issued or distributed with respect to each outstanding Lululemon Common Share and the Current Market Price; | ||
(d) | in the case of any subdivision, redivision or change of the then outstanding Lululemon Common Shares into a greater number of Lululemon Common Shares or the reduction, combination, consolidation or change of the then outstanding Lululemon Common Shares into a lesser number of Lululemon Common Shares or any amalgamation, merger, reorganization or other transaction affecting Lululemon Common Shares, the effect thereof upon the then outstanding Lululemon Common Shares; and | ||
(e) | in all such cases, the general taxation consequences of the relevant event to holders of Exchangeable Shares to the extent that such consequences may differ from the general taxation consequences to holders of Lululemon Common Shares as a result of differences between taxation laws of Canada and the United States (except for any differing consequences arising as a result of differing marginal taxation rates without regard to the individual circumstances of holders of Exchangeable Shares). |
3.7 | Except as provided in this Article 3, the holders of Exchangeable Shares shall not be entitled to receive dividends in respect thereof. Notwithstanding any provisions of this Article 3 to the contrary, if the Purchase Price is paid to a holder of Exchangeable Shares |
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by Callco pursuant to the Retraction Call Right, the Redemption Call Purchase Price is paid to a holder of Exchangeable Shares pursuant to the Redemption Call Right, the Liquidation Amount is paid to a holder of Exchangeable Shares pursuant to the Liquidation Call Right, or if the purchase price is paid to a holder of an Exchangeable Shares by Lululemon pursuant to the Automatic Exchange Rights or the Exchange Right, the holder of the Exchangeable Share shall cease to have any right to be paid any amount by the Company in respect of any unpaid dividends on such Exchangeable Shares. |
4.1 | So long as any of the Exchangeable Shares are outstanding, the Company shall not at any time without, but may at any time with, the approval of the holders of the Exchangeable Shares given as specified in Section 11.2 of these share provisions: |
(a) | pay any dividends on the Common Shares or any other shares ranking junior to the Exchangeable Shares, other than stock dividends payable in Common Shares or any such other shares ranking junior to the Exchangeable Shares, as the case may be; | ||
(b) | redeem or purchase or make any capital distribution in respect of Common Shares or any other shares ranking junior to the Exchangeable Shares; | ||
(c) | redeem or purchase any other shares of the Company ranking equally with the Exchangeable Shares with respect to the payment of dividends or on any liquidation distribution; or | ||
(d) | issue any Exchangeable Shares or any other shares of the Company ranking equally with, or superior to, the Exchangeable Shares other than by way of stock dividends to the holders of such Exchangeable Shares. |
The restrictions in Sections 4.1(a), (b), (c) and (d) above shall not apply if all dividends on the outstanding Exchangeable Shares corresponding to dividends declared and paid to date on the Lululemon Common Shares shall have been declared and paid on the Exchangeable Shares. |
5.1 | In the event of the liquidation, dissolution or winding-up of the Company or any other distribution of the assets of the Company among its shareholders for the purpose of winding up its affairs, a holder of Exchangeable Shares shall be entitled, subject to applicable law, to receive from the assets of the Company in respect of each Exchangeable Share held by such holder on the effective date (the Liquidation Date ) of such liquidation, dissolution or winding-up, before any distribution of any part of the assets of the Company among the holders of the Common Shares or any other shares ranking junior to the Exchangeable Shares, an amount per Exchangeable Share (the Liquidation Amount ) equal to the Current Market Price of a Lululemon Common |
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Share on the last Business Day prior to the Liquidation Date, which shall be satisfied in full by the Company causing to be delivered to such holder, for each such Exchangeable Share, one Lululemon Common Share plus an amount equal to all declared and unpaid dividends on each such Exchangeable Share held by such holder on any dividend record date which occurred prior to the Liquidation Date. | ||
5.2 | On or promptly after the Liquidation Date, and subject to the exercise by Callco of the Liquidation Call Right, the Company shall cause to be delivered to the holders of the Exchangeable Shares the Liquidation Amount for each such Exchangeable Share upon presentation and surrender of the certificates representing such Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of such Exchangeable Shares and such additional documents and instruments as the Transfer Agent and the Company may reasonably require, at the registered office of the Company or at any office of the Transfer Agent as may be specified by the Company by notice to the holders of the Exchangeable Shares. Payment of the total Liquidation Amount for such Exchangeable Shares shall be made by delivery to each holder, at the address of the holder recorded in the securities register of the Company for the Exchangeable Shares or by holding for pick-up by the holder at the registered office of the Company or at any office of the Transfer Agent as may be specified by the Company by notice to the holders of Exchangeable Shares, on behalf of the Company, of the Lululemon Common Shares to which the holder is entitled (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance), either in the form of certificates representing the Lululemon Common Shares or, in whole or in part, in book-entry form through the direct registration system and, if applicable, a cheque of the Company payable at par at any branch of the bankers of the Company in respect of the remaining portion, if any, of the total Liquidation Amount (in each case less any amounts withheld on account of tax required to be deducted and withheld therefrom). On and after the Liquidation Date, the holders of the Exchangeable Shares shall cease to be holders of such Exchangeable Shares and shall not be entitled to exercise any of the rights of holders in respect thereof, other than the right to receive their proportionate part of the total Liquidation Amount, unless payment of the total Liquidation Amount for such Exchangeable Shares shall not be made upon presentation and surrender of the documents and instruments required in accordance with the foregoing provisions, in which case the rights of the holders shall remain unaffected until the total Liquidation Amount has been paid in the manner hereinbefore provided. The Company shall have the right at any time after the Liquidation Date to deposit or cause to be deposited the total Liquidation Amount in a custodial account with any chartered bank or trust company in Canada. Upon such deposit being made, the rights of the holders of Exchangeable Shares after such deposit shall be limited to receiving their proportionate part of the total Liquidation Amount (in each case less any amounts withheld on account of tax required to be deducted and withheld therefrom) for such Exchangeable Shares so deposited, against presentation and surrender of the required documents and instruments in accordance with the foregoing provisions. Upon such payment or deposit of the total Liquidation Amount, the holders of the Exchangeable Shares shall thereafter be considered and deemed for all purposes to be holders of the Lululemon Common Shares delivered to them or the custodian on their behalf. |
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5.3 | After the Company has satisfied its obligations to pay the holders of the Exchangeable Shares the Liquidation Amount per Exchangeable Share pursuant to Section 5.1 of these share provisions, such holders shall not be entitled to share in any further distribution of the assets of the Company. |
6.1 | A holder of Exchangeable Shares shall be entitled at any time, subject to the exercise by Callco of the Retraction Call Right and otherwise upon compliance with the provisions of this Article 6, to require the Company to redeem any or all of the Exchangeable Shares registered in the name of such holder for an amount per Exchangeable Share equal to the Current Market Price of a Lululemon Common Share on the last Business Day prior to the Retraction Date (the Retraction Price ), which shall be satisfied in full by the Company causing to be delivered to such holder, for each Exchangeable Share presented and surrendered by the holder, one Lululemon Common Share and any Dividend Amount. To effect such redemption, the holder shall present and surrender at the registered office of the Company or at any office of the Transfer Agent as may be specified by the Company by notice to the holders of Exchangeable Shares the certificate or certificates representing the Exchangeable Shares which the holder desires to have the Company redeem, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares and such additional documents and instruments as the Transfer Agent and the Company may reasonably require, and together with a duly executed statement (the Retraction Request ) in the form of Schedule A hereto or in such other form as may be acceptable to the Company: |
(a) | specifying that the holder desires to have all or any number specified therein of the Exchangeable Shares represented by such certificate or certificates (the Retracted Shares ) redeemed by the Company; | ||
(b) | stating the Business Day on which the holder desires to have the Company redeem the Retracted Shares (the Retraction Date ), provided that the Retraction Date shall be not less than 5 Business Days nor more than 15 Business Days after the date on which the Retraction Request is received by the Company and further provided that, in the event that no such Business Day is specified by the holder in the Retraction Request, the Retraction Date shall be deemed to be the 5th Business Day after the date on which the Retraction Request is received by the Company; and | ||
(c) | acknowledging the overriding right (the Retraction Call Right ) of Callco to purchase all but not less than all the Retracted Shares directly from the holder and that the Retraction Request shall be deemed to be a revocable offer by the holder to sell the Retracted Shares to Callco in accordance with the Retraction Call Right on the terms and conditions set out in Section 6.3 below. |
6.2 | Subject to the exercise by Callco of the Retraction Call Right, upon receipt by the Company or the Transfer Agent in the manner specified in Section 6.1 of a certificate or |
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certificates, if any, representing the number of Retracted Shares, together with a Retraction Request and the other documents and instruments required in accordance with Section 6.1, and provided that the Retraction Request is not revoked by the holder in the manner specified in Section 6.7, the Company shall redeem the Retracted Shares effective at the close of business on the Retraction Date and shall cause to be delivered to such holder the total Retraction Price and any Dividend Amount thereon. If only a part of the Exchangeable Shares is redeemed (or purchased by Callco pursuant to the Retraction Call Right), the holder thereof shall receive at the expense of the Company (either in the form of a certificate, or in book-entry form through the direct registration system) the balance of such Exchangeable Shares. | ||
6.3 | Upon receipt by the Company of a Retraction Request, the Company shall immediately notify Callco thereof and shall provide to Callco a copy of the Retraction Request. In order to exercise the Retraction Call Right, Callco must notify the Company of its determination to do so (the Callco Call Notice ) within three Business Days of notification to Callco by the Company of the receipt by the Company of the Retraction Request. If Callco does not so notify the Company within such three Business Day period, the Company will notify the holder as soon as possible thereafter that Callco will not exercise the Retraction Call Right. If Callco delivers the Callco Call Notice within such three Business Day period, and provided that the Retraction Request is not revoked by the holder in the manner specified in Section 6.7, the Retraction Request shall thereupon be considered only to be an offer by the holder to sell the Retracted Shares to Callco in accordance with the Retraction Call Right. In such event, the Company shall not redeem the Retracted Shares and Callco shall purchase from such holder and such holder shall sell to Callco on the Retraction Date the Retracted Shares for a purchase price (the Purchase Price ) per share equal to the Retraction Price per share, plus on the designated payment date therefor, to the extent not paid by the Company on the designated payment date therefor, any Dividend Amount. To the extent that Callco pays the Dividend Amount in respect of the Retracted Shares, the Company shall no longer be obligated to pay any declared and unpaid dividends on such Retracted Shares. Provided that Callco has complied with Section 6.4, the closing of the purchase and sale of the Retracted Shares pursuant to the Retraction Call Right shall be deemed to have occurred as at the close of business on the Retraction Date and, for greater certainty, no redemption by the Company of such Retracted Shares shall take place on the Retraction Date. In the event that Callco does not deliver a Callco Call Notice within such three Business Day period, and provided that the Retraction Request is not revoked by the holder in the manner specified in Section 6.7), the Company shall redeem the Retracted Shares on the Retraction Date and in the manner otherwise contemplated in this Article 6. | |
6.4 | The Company or Callco, as the case may be, shall deliver or cause the Transfer Agent to deliver to the relevant holder, at the address of the holder recorded in the securities register of the Company for the Exchangeable Shares or at the address specified in the holders Retraction Request or by holding for pick-up by the holder at the registered office of the Company or at any office of the Transfer Agent as may be specified by the Company by notice to the holders of Exchangeable Shares, the Lululemon Common Shares to which the holder is entitled (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance), either in |
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the form of certificates representing the Lululemon Common Shares registered in the name of the holder or in such other name as the holder may request or, in whole or in part, in book-entry form through the direct registration system, and, if applicable and on or before the payment date therefor, a cheque payable at par at any branch of the bankers of the Company or Callco, as applicable, representing the aggregate Dividend Amount, in payment of the total Retraction Price or the total Purchase Price, as the case may be, in each case, less any amounts withheld on account of tax required to be deducted and withheld therefrom, and such delivery of such Lululemon Common Shares and cheques on behalf of the Company or by Callco, as the case may be, or by the Transfer Agent shall be deemed to be payment of and shall satisfy and discharge all liability for the total Retraction Price or total Purchase Price, as the case may be, to the extent that the same is represented by such Lululemon Common Shares and cheques (plus any tax deducted and withheld therefrom and remitted to the proper tax authority). | ||
6.5 | On and after the close of business on the Retraction Date, the holder of the Retracted Shares shall cease to be a holder of such Retracted Shares and shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive his proportionate part of the total Retraction Price or total Purchase Price, as the case may be, unless upon presentation and surrender of the documents and instruments in accordance with the foregoing provisions, payment of the total Retraction Price or the total Purchase Price, as the case may be, shall not be made as provided in Section 6.4, in which case the rights of such holder shall remain unaffected until the total Retraction Price or the total Purchase Price, as the case may be, has been paid in the manner hereinbefore provided. On and after the close of business on the Retraction Date, provided that presentation and surrender of the documents and instruments in accordance with the foregoing provisions and payment of the total Retraction Price or the total Purchase Price, as the case may be, has been made in accordance with the foregoing provisions, the holder of the Retracted Shares so redeemed by the Company or purchased by Callco shall thereafter be considered and deemed for all purposes to be a holder of the Lululemon Common Shares delivered to it. | |
6.6 | Notwithstanding any other provision of this Article 6, the Company shall not be obligated to redeem Retracted Shares specified by a holder in a Retraction Request to the extent that such redemption of Retracted Shares would be contrary to solvency requirements or other provisions of applicable law. If the Company believes that on any Retraction Date it would not be permitted by any of such provisions to redeem the Retracted Shares tendered for redemption on such date, and provided that Callco shall not have exercised the Retraction Call Right with respect to the Retracted Shares, the Company shall only be obligated to redeem Retracted Shares specified by a holder in a Retraction Request to the extent of the maximum number that may be so redeemed (rounded down to a whole number of shares) as would not be contrary to such provisions and shall notify the holder and the Trustee at least two Business Days prior to the Retraction Date as to the number of Retracted Shares which will not be redeemed by the Company. In any case in which the redemption by the Company of Retracted Shares would be contrary to solvency requirements or other provisions of applicable law, the Company shall redeem Retracted Shares in accordance with Section 6.2 of these share provisions on a pro rata basis and the holder of Retracted Shares shall receive at the Companys expense (either in the form |
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of a certificate or in book-entry form through the direct registration system) the Retracted Shares not redeemed by the Company pursuant to Section 6.2. Provided that the Retraction Request is not revoked by the holder in the manner specified in Section 6.7, the holder of any such Retracted Shares not redeemed by the Company pursuant to Section 6.2 of these share provisions as a result of solvency requirements or other provisions of applicable law shall be deemed by giving the Retraction Request to require Callco, to purchase such Retracted Shares from such holder on the Retraction Date or as soon as practicable thereafter on payment by Callco as the case may be, to such holder of the Purchase Price for each such Retracted Share, all as more specifically provided in the Exchange Trust Agreement. |
6.7 | A holder of Retracted Shares may, by notice in writing given by the holder to the Company before the close of business on the Business Day immediately preceding the Retraction Date, withdraw its Retraction Request, in which event such Retraction Request shall be null and void and, for greater certainty, the revocable offer constituted by the Retraction Request to sell the Retracted Shares to Callco shall be deemed to have been revoked. |
7.1 | Subject to applicable law, and provided Callco has not exercised the Redemption Call Right, the Company shall on the Redemption Date redeem all but not less than all of the then outstanding Exchangeable Shares for an amount per Exchangeable Share equal to the Current Market Price of a Lululemon Common Share on the last Business Day prior to the Redemption Date (the Redemption Price ), which shall be satisfied in full by the Company causing to be delivered to each holder of Exchangeable Shares, for each Exchangeable Share held by such holder, one Lululemon Common Share, together with the full amount of all declared and unpaid dividends on each such Exchangeable Share held by such holder on any dividend record date which occurred prior to the Redemption Date. |
7.2 | In any case of a redemption of Exchangeable Shares under this Article 7, the Company shall, at least 60 days before the Redemption Date (other than a Redemption Date established in connection with a Lululemon Control Transaction, a Lululemon Extraordinary Distribution, an Exchangeable Share Voting Event or an Exempt Exchangeable Share Voting Event), send or cause to be sent to each holder of Exchangeable Shares a notice in writing of the redemption by the Company or the purchase by Callco under the Redemption Call Right, as the case may be, of the Exchangeable Shares held by such holder. In the case of a Redemption Date established in connection with a Lululemon Control Transaction, an Exchangeable Share Voting Event or an Exempt Exchangeable Share Voting Event, the written notice of redemption by the Company or the purchase by Callco under the Redemption Call Right will be sent on or before the Redemption Date, on as many days prior written notice as may be determined by the Board of Directors of the Company to be reasonably practicable in the circumstances. In any such case, such notice shall set out the formula for determining the |
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Redemption Price or the Redemption Call Purchase Price, as the case may be, the Redemption Date and, if applicable, particulars of the Redemption Call Right. | ||
7.3 | On or after the Redemption Date and subject to the exercise by Callco of the Redemption Call Right, the Company shall cause to be delivered to the holders of the Exchangeable Shares to be redeemed the Redemption Price for each such Exchangeable Share, if any, together with the full amount of all declared and unpaid dividends on each such Exchangeable Share held by such holder on any dividend record date which occurred prior to the Redemption Date, upon presentation and surrender at the registered office of the Company or at any office of the Transfer Agent as may be specified by the Company in such notice of the certificates representing such Exchangeable Shares, if any, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares and such additional documents and instruments as the Transfer Agent and the Company may reasonably require. Payment of the total Redemption Price for such Exchangeable Shares, together with payment of such dividends, shall be made by delivery to each holder, at the address of the holder recorded in the securities register of the Company or by holding for pick-up by the holder at the registered office of the Company or at any office of the Transfer Agent as may be specified by the Company in such notice, on behalf of the Company, of the Lululemon Common Shares to which the holder is entitled (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance), either in the form of certificates representing the Lululemon Common Shares or, in whole or in part, in book-entry form through the direct registration system, and, if applicable, a cheque of the Company payable at par at any branch of the bankers of the Company in payment of any such dividends, in each case, less any amounts withheld on account of tax required to be deducted and withheld therefrom. On and after the Redemption Date, the holders of the Exchangeable Shares called for redemption shall cease to be holders of such Exchangeable Shares and shall not be entitled to exercise any of the rights of holders in respect thereof, other than the right to receive their proportionate part of the total Redemption Price and any such dividends, unless payment of the total Redemption Price and any such dividends for such Exchangeable Shares shall not be made upon presentation and surrender of the documents and instruments required in accordance with the foregoing provisions, in which case the rights of the holders shall remain unaffected until the total Redemption Price and any such dividends have been paid in the manner hereinbefore provided. The Company shall have the right at any time after the sending of notice of its intention to redeem the Exchangeable Shares as aforesaid to deposit or cause to be deposited the total Redemption Price for and the full amount of such dividends on (except as otherwise provided in this Section 7.3) the Exchangeable Shares so called for redemption, in a custodial account with any chartered bank or trust company in Canada named in such notice, less any amounts withheld on account of tax required to be deducted and withheld therefrom. Upon the later of such deposit being made and the Redemption Date, the Exchangeable Shares in respect whereof such deposit shall have been made shall be redeemed and the rights of the holders thereof after such deposit or Redemption Date, as the case may be, shall be limited to receiving their proportionate part of the total Redemption Price and such dividends for such Exchangeable Shares so called for redemption, against presentation and surrender of the documents and instruments required in accordance with the foregoing provisions. Upon such payment or |
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deposit of the total Redemption Price and the full amount of such dividends, the holders of the Exchangeable Shares shall thereafter be considered and deemed for all purposes to be holders of the Lululemon Common Shares delivered to them or the custodian on their behalf. |
8.1 | Subject to applicable law and notwithstanding Section 8.2, the Company may at any time and from time to time purchase for cancellation all or any part of the Exchangeable Shares by private agreement with any holder of Exchangeable Shares for consideration consisting of Lululemon Common Shares. |
8.2 | Subject to applicable law, the Company may at any time and from time to time purchase for cancellation all or any part of the outstanding Exchangeable Shares at any price by tender to all the holders of record of Exchangeable Shares then outstanding or through the facilities of any stock exchange on which the Exchangeable Shares are listed or quoted at any price per share. If in response to an invitation for tenders under the provisions of this Section 8.2 more Exchangeable Shares are tendered at a price or prices acceptable to the Company than the Company is prepared to purchase, the Exchangeable Shares to be purchased by the Company shall be purchased as nearly as may be pro rata according to the number of shares tendered by each holder who submits a tender to the Company, provided that when shares are tendered at different prices, the pro rating shall be effected (disregarding fractions) only with respect to the shares tendered at the price at which more shares were tendered than the Company is prepared to purchase after the Company has purchased all the shares tendered at lower prices. If part only of the Exchangeable Shares shall be purchased, the holder thereof shall receive at the expense of the Company (either in the form of a certificate or in book-entry form through the direct registration system) the balance of such shares. |
9.1 | A holder of Exchangeable Shares may transfer its Exchangeable Shares only if the holder transfers the same number of Special Voting Shares to the same transferee. The Company shall not recognize any transfer of Exchangeable Shares if the same number of Special Voting Shares is not transferred to the same transferee of the transferred Exchangeable Shares. |
10.1 | Except as required by applicable law and by Article 11 hereof, the holders of the Exchangeable Shares shall not be entitled as such to receive notice of or to attend any meeting of the shareholders of the Company or to vote at any such meeting. |
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11.1 | The rights, privileges, restrictions and conditions attaching to the Exchangeable Shares may be added to, changed or removed but only with the approval of the holders of the Exchangeable Shares given as hereinafter specified, provided that any adjustment to the number of Lululemon Common Shares into which an Exchangeable Share is exchangeable (which initially is one) made by the Board of Directors, acting in good faith, in accordance with section 2.7 of the Support Agreement to reflect the effect of any event in order to implement the required economic equivalent with respect to the Lululemon Common Shares and the Exchangeable Shares shall not require the approval of the holders of the Exchangeable Shares. |
11.2 | Any approval given by the holders of the Exchangeable Shares to add to, change or remove any right, privilege, restriction or condition attaching to the Exchangeable Shares or any other matter requiring the approval or consent of the holders of the Exchangeable Shares shall be deemed to have been sufficiently given if it shall have been given in accordance with applicable law subject to a minimum requirement that such approval be evidenced by a resolution consented to in writing by the holders of not less than two-thirds of the then outstanding Exchangeable Shares or passed by not less than two-thirds of the votes cast on such resolution at a meeting of holders of Exchangeable Shares duly called and held at which the holders of at least 25% of the outstanding Exchangeable Shares at that time are present or represented by proxy. |
12.1 | Each holder of an Exchangeable Share acknowledges that the Support Agreement provides, in part, that so long as any Exchangeable Shares not owned by Lululemon or its subsidiaries are outstanding, and other than as provided in the Support Agreement, Lululemon will not without the prior approval of the Company and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 12.2 of these share provisions: |
(a) | issue or distribute Lululemon Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Lululemon Common Shares) to the holders of all or substantially all of the then outstanding Lululemon Common Shares by way of stock dividend or other distribution, other than an issue of Lululemon Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Lululemon Common Shares) to holders of Lululemon Common Shares who (i) exercise an option to receive dividends in Lululemon Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Lululemon Common Shares) in lieu of receiving cash dividend, or (ii) pursuant to any dividend reinvestment plan; or |
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(b) | issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding Lululemon Common Shares entitling them to subscribe for or to purchase Lululemon Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Lululemon Common Shares); or | ||
(c) | issue or distribute to the holders of all or substantially all of the then outstanding Lululemon Common Shares: |
(i) | shares or securities of Lululemon of any class other than Lululemon Common Shares (other than shares convertible into or exchangeable for or carrying rights to acquire Lululemon Common Shares); | ||
(ii) | rights, options or warrants other than those referred to in Section 12.1(b) above; | ||
(iii) | evidences of indebtedness of Lululemon; or | ||
(iv) | assets of Lululemon, |
unless the same or the economic equivalent on a per share basis of such rights, options, securities, shares, evidences of indebtedness or other assets is issued or distributed simultaneously to holders of the Exchangeable Shares. |
12.2 | Each holder of an Exchangeable Share acknowledges that the Support Agreement further provides, in part, that Lululemon will not without the prior approval of the Company and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 11.2 of these share provisions: |
(a) | subdivide, redivide or change the then outstanding Lululemon Common Shares into a greater number of Lululemon Common Shares; | ||
(b) | reduce, combine, consolidate or change the then outstanding Lululemon Common Shares into a lesser number of Lululemon Common Shares; or | ||
(c) | reclassify or otherwise change the Lululemon Common Shares or effect an amalgamation, merger, reorganization or other transaction affecting the Lululemon Common Shares, |
unless the same or an economically equivalent change shall simultaneously be made to, or in, the rights of the holders of the Exchangeable Shares. The Support Agreement further provides, in part, that the aforesaid provisions of the Support Agreement shall not be changed without the approval of the holders of the Exchangeable Shares given in accordance with Section 11.2 of these share provisions. |
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13.1 | The Company will take all such actions and do all such things as shall be necessary or advisable to perform and comply with and to ensure performance and compliance by Lululemon, Callco and the Company with all provisions of the Support Agreement applicable to Lululemon, Callco and the Company, respectively, in accordance with the terms thereof including, without limitation, taking all such actions and doing all such things as shall be necessary or advisable to enforce to the fullest extent possible for the direct benefit of the Company all rights and benefits in favour of the Company under or pursuant to such agreement. |
13.2 | The Company shall not propose, agree to or otherwise give effect to any amendment to, or waiver or forgiveness of its rights or obligations under, the Support Agreement without the approval of the holders of the Exchangeable Shares given in accordance with Section 11.2 of these share provisions other than such amendments, waivers and/or forgiveness as may be necessary or advisable for the purposes of: |
(a) | adding to the covenants of any or all parties to such agreement provided that the Board of Directors shall be of the good faith opinion that such additions will not be prejudicial to the rights or interests of the holders of the Exchangeable Shares; | ||
(b) | making such amendments or modifications not inconsistent with such agreement as may be necessary or desirable with respect to matters or questions which, in the good faith opinion of the Board of Directors, it may be expedient to make, provided that the Board of Directors shall be of the good faith opinion that such amendments and modifications will not be prejudicial to the rights or interests of the holders of the Exchangeable Shares; or | ||
(c) | making such changes in or corrections to such agreement which, on the advice of counsel to the Company, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error contained therein, provided that the Board of Directors shall be of the good faith opinion, after consultation with counsel, that such changes or corrections will not be prejudicial to the interests of the holders of the Exchangeable Shares. |
14.1 | Any certificates evidencing the Exchangeable Shares shall contain or have affixed thereto a legend in form and on terms approved by the Board of Directors, with respect to the Support Agreement, the provisions of the Plan of Arrangement relating to the Liquidation Call Right and the Redemption Call Right, and the Exchange Trust Agreement (including the provisions with respect to the exchange right and automatic exchange thereunder). |
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14.2 | Each holder of an Exchangeable Share, whether of record or beneficial, by virtue of becoming and being such a holder shall be deemed to acknowledge each of the Liquidation Call Right, the Retraction Call Right and the Redemption Call Right, in each case, in favour of Callco, and the overriding nature thereof in connection with the liquidation, dissolution or winding-up of the Company or the retraction or redemption of Exchangeable Shares, as the case may be, and to be bound thereby in favour of Callco as therein provided. | |
14.3 | The Company and Callco shall be entitled, and may instruct the Transfer Agent, to deduct and withhold from any dividend or consideration otherwise payable to any holder of Exchangeable Shares such amounts as the Company or Callco is required or permitted to deduct and withhold with respect to such payments (i) under the Income Tax Act (Canada), the United States Internal Revenue Code of 1986 or any provision of provincial, state, local or foreign tax law, in each case, as amended or succeeded, or (ii) required or permitted in order to comply with Section 116 of the Income Tax Act (Canada) or any corresponding provisions of provincial law. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to the persons otherwise entitled thereto, provided that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required or permitted to be deducted or withheld from any payment to a holder exceeds the cash portion of the consideration otherwise payable to the holder, the Company, Callco and the Transfer Agent are hereby authorized to sell or otherwise dispose of such portion of the consideration as is necessary to provide sufficient funds to the Company, Callco or the Transfer Agent, as the case may be, to enable it to comply with such deduction or withholding requirement and the Company, Callco or the Transfer Agent shall notify the holder thereof and remit any unapplied balance of the net proceeds of such sale. |
15.1 | Any notice, request or other communication to be given to the Company by a holder of Exchangeable Shares shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by facsimile or by delivery to the registered office of the Company and addressed to the attention of the President of the Company. Any such notice, request or other communication, if given by mail, facsimile or delivery, shall only be deemed to have been given and received upon actual receipt thereof by the Company. |
15.2 | Any presentation and surrender by a holder of Exchangeable Shares to the Company or the Transfer Agent of certificates, if any, representing Exchangeable Shares and the other documents and instruments required to be delivered by a holder of Exchangeable Shares in accordance with these share provisions in connection with the liquidation, dissolution or winding-up of the Company or the retraction or redemption of Exchangeable Shares shall be made by registered mail (postage prepaid) or by delivery to the registered office of the Company or to such office of the Transfer Agent as may be specified by the Company, in each case, addressed to the attention of the President of the Company. Any such presentation and surrender of certificates, if any, and such other documents and |
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instruments shall only be deemed to have been made and to be effective upon actual receipt thereof by the Company or the Transfer Agent, as the case may be. Any such presentation and surrender of certificates, if any, and such other documents and instruments made by registered mail shall be at the sole risk of the holder mailing the same. |
15.3 | Any notice, request or other communication to be given to a holder of Exchangeable Shares by or on behalf of the Company shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by delivery to the address of the holder recorded in the securities register of the Company or, in the event of the address of any such holder not being so recorded, then at the last known address of such holder. Any such notice, request or other communication, if given by mail, shall be deemed to have been given and received on the third Business Day following the date of mailing and, if given by delivery, shall be deemed to have been given and received on the date of delivery. Accidental failure or omission to give any notice, request or other communication to one or more holders of Exchangeable Shares shall not invalidate or otherwise alter or affect any action or proceeding to be taken by the Company pursuant thereto. |
15.4 | If the Company determines that mail service is or is threatened to be interrupted at the time when the Company is required or elects to give any notice to the holders of Exchangeable Shares hereunder, the Company shall, notwithstanding the provisions hereof, give such notice by means of courier or electronic transmission to such holders. |
16.1 | As soon as practicable after any exchange of Exchangeable Shares pursuant to these share provisions, the Company shall direct the Transfer Agent (i) to determine the number of, if any, whole and fractional Lululemon Common Shares allocable to the holder of Exchangeable Shares exchanged hereunder, (ii) to aggregate all such fractional shares and sell the whole shares obtained thereby at the direction of the Company either in open market transactions or otherwise, in each case at then prevailing trading prices, and (iii) to cause to be distributed to such holder in lieu of any fractional share, such holders rateable share of the proceeds of such sale, after making appropriate deductions of the amount required to be withheld for tax purposes and after deducting an amount equal to all brokerage charges, commissions and transfer taxes attributed to such sale. |
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(a) | To the Indemnitee at the address set forth below the Indemnitee signature hereto. | ||
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2285 Clark Drive
Vancouver, British Columbia Canada, V5N 3G9 |
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