UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
-----------------------
THE LESLIE FAY COMPANY, INC.
(Name of Issuer)
Common Stock, par value $.01
(Title of Class of Securities)
527016109
(CUSIP Number)
-----------------------
Robert M. Hirsh, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Tel. No.: (212) 373-3000
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
-----------------------
May 12, 1999
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
statement because of Rule 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Exhibit Index at Page 18
Page 1 of 20 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 527016109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Three Cities Fund II, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO - Partner Contributions
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 801,880
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
801,880
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,158,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.7%
14 TYPE OF REPORTING PERSON
PN
Page 2 of 20 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 527016109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
TCR Associates, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 801,880
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
801,880
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,158,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.7%
14 TYPE OF REPORTING PERSON
PN
Page 3 of 20 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 527016109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Three Cities Research, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 2,158,000
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
2,158,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,158,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.7%
14 TYPE OF REPORTING PERSON
CO
Page 4 of 20 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 527016109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Three Cities Offshore II C.V.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO - Partner Contributions
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Netherlands Antilles
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 1,356,120
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,356,120
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,158,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.7%
14 TYPE OF REPORTING PERSON
PN
Page 5 of 20 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 527016109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
TCR Offshore Associates, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Netherlands Antilles
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 1,356,120
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,356,120
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,158,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.7%
14 TYPE OF REPORTING PERSON
PN
Page 6 of 20 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 527016109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Three Cities Associates, N.V.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Netherlands Antilles
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 1,356,120
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,356,120
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,158,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.7%
14 TYPE OF REPORTING PERSON
CO
Page 7 of 20 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 527016109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
J. William Uhrig
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 1,356,120
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,356,120
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,158,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.7%
14 TYPE OF REPORTING PERSON
IN
Page 8 of 20 Pages
<PAGE>
Item 1. Security and Issuer.
This statement on Schedule 13D relates to the common stock, par value
$.01 per share (the "Common Stock"), of The Leslie Fay Company, Inc., a Delaware
corporation (the "Company"), whose principal executive office is located at 1412
Broadway, New York, New York 10018.
Item 2. Identity and Background.
(a) - (c) The persons (the "Reporting Persons") filing this statement
are Three Cities Fund II, L.P., a Delaware limited partnership ("Fund II"), TCR
Associates, L.P., a Delaware limited partnership ("TCR Associates"), Three
Cities Research, Inc., a Delaware corporation ("Research"), Three Cities
Offshore II C.V., a Netherlands Antilles limited partnership ("Offshore II"),
TCR Offshore Associates, L.P., a Netherlands Antilles limited partnership ("TCR
Offshore"), Three Cities Associates, N.V., a Netherlands Antilles corporation
("TCA, N.V."), and J. William Uhrig ("Uhrig"). Fund II and Offshore II are
collectively referred to herein as the "Three Cities Funds."
FUND II
Fund II is a Delaware limited partnership, formed to invest in
securities to be selected by its investment committee. The principal business
address of Fund II, which also serves as its principal office, is c/o Three
Cities Research, Inc., 650 Madison Avenue, New York, New York 10022. The
information about TCR Associates, the sole general partner of Fund II, required
by Instruction C to Schedule 13D is set forth below.
TCR ASSOCIATES
TCR Associates is a Delaware limited partnership, the principal
business of which is serving as the sole general partner of Fund II. The
principal business address of TCR Associates, which also serves as its principal
office, is c/o Three Cities Research, Inc., 650 Madison Avenue, New York, New
York 10022. The information about Research, the sole general partner of TCR
Associates, required by Instruction C to Schedule 13D is set forth below.
RESEARCH
Research is a Delaware corporation which serves as the sole general
partner of TCR Associates. Research is also the advisor to the Three Cities
Funds and, pursuant to a management agreement with the general partner of each
of the Three Cities Funds, Research has voting and dispositive power over the
shares of Common Stock reported as beneficially owned by the Three Cities Funds
on this
Page 9 of 20 Pages
<PAGE>
Schedule 13D. The principal business address of Research is 650 Madison Avenue,
New York, NY 10022. The name, residence or business address, and present
principal occupation or employment of each executive officer and director of
Research is as follows:
<TABLE>
<CAPTION>
Residence or Principal Occupation
Name Business Address or Employment
---- ---------------- -------------
<S> <C> <C>
Willem F. P. de Vogel c/o Three Cities Research, Inc. President and a Managing Director of
650 Madison Avenue Three Cities Research, Inc.
New York, NY 10022
Thomas G. Weld c/o Three Cities Research, Inc. Treasurer and a Managing Director of
650 Madison Avenue Three Cities Research, Inc.
New York, NY 10022
</TABLE>
OFFSHORE II
Offshore II is a Netherlands Antilles partnership, formed to invest in
securities to be selected by its investment committee. The principal business
address of Offshore II, which also serves as its principal office, is
Caracasbaaiweg 201, P.O. Box 6085, Curacao, Netherlands Antilles. The
information about TCR Offshore, the sole general partner of Offshore II,
required by Instruction C to Schedule 13D is set forth below.
TCR OFFSHORE
TCR Offshore is a Netherlands Antilles limited partnership, the
principal business of which is serving as the general partner of Offshore II.
The principal business address of TCR Offshore, which also serves as its
principal office, is Caracasbaaiweg 201, P.O. Box 6085, Curacao, Netherlands
Antilles. The information about TCA, N.V., the sole general partner of TCR
Offshore, required by Instruction C to Schedule 13D is set forth below.
TCA, N.V.
TCA, N.V. is a Netherlands Antilles corporation, the principal business
of which is serving as the general partner of TCR Offshore. The principal
business address of TCA, N.V., which also serves as its principal office, is
Caracasbaaiweg 201, P.O. Box 6085, Caracas, Netherlands Antilles. The name,
residence or business address, and present principal occupation or employment of
each executive officer and director of TCA, N.V. is as follows:
Page 10 of 20 Pages
<PAGE>
<TABLE>
<CAPTION>
Residence or Principal Occupation
Name Business Address or Employment
---- ---------------- -------------
<S> <C> <C>
J. William Uhrig c/o Three Cities Research, Inc. a Managing Director of Three Cities
650 Madison Avenue Research, Inc.
New York, NY 10022
H. Whitney Wagner c/o Three Cities Research, Inc. a Managing Director of Three Cities
650 Madison Avenue Research, Inc.
New York, NY 10022
</TABLE>
The information about J. William Uhrig, the sole stockholder, President
and director of TCA, N.V., required by Instruction C to Schedule 13D is set
forth below.
UHRIG
J. William Uhrig is an individual who is the sole stockholder,
President and the sole director of TCA, N.V. The name, residence or business
address, and present principal occupation or employment of Mr. Uhrig is as
follows:
<TABLE>
<CAPTION>
Residence or Principal Occupation
Name Business Address or Employment
---- ---------------- -------------
<S> <C> <C>
J. William Uhrig c/o Three Cities Research, Inc. a Managing Director of Three Cities
650 Madison Avenue Research, Inc.
New York, NY 10022
</TABLE>
(d) None of the entities or persons identified in this Item 2 has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(e) None of the entities or persons identified in this Item 2 has,
during the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Page 11 of 20 Pages
<PAGE>
(f) Each individual named in this Item 2 is a citizen of the United
States of America, except that Willem F. P. de Vogel is a citizen of the Kingdom
of the Netherlands.
Item 3. Source and Amount of Funds or Other Consideration.
The aggregate purchase prices of the shares of Common Stock purchased
by the Three Cities Funds as reported in Item 4 of this Schedule 13D were as
follows:
Name of Reporting Person Aggregate Purchase Price
Fund II $5,573,066
Offshore II $9,425,034
Fund II and Offshore II used contributions from their respective
partners to fund the purchases of the shares of Common Stock reported herein as
beneficially owned by them.
Item 4. Purpose of Transaction.
On May 12, 1999, the Three Cities Funds entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement") with Dickstein & Co., L.P., Dickstein
International Limited, Dickstein Focus Fund L.P. and Mark B. Dickstein
(collectively, the "Dickstein Sellers") and acquired an aggregate of 2,158,000
shares of Common Stock from the Dickstein Sellers at a price of $6.95 per share.
The description of the Stock Purchase Agreement that follows is not, and does
not purport to be, complete and is qualified in its entirety by reference to the
Stock Purchase Agreement, a copy of which is attached hereto as Exhibit 1. In
connection with such transaction, Mark Dickstein and another person who may be
deemed to be a representative of the Dickstein Sellers on the Board of Directors
of the Company (the "Board") resigned as directors. The Board elected H. Whitney
Wagner and Thomas G. Weld, each of whom is a Managing Director of Research, to
the Board. Research performs investment advisory services for Fund II and
Offshore II and their respective portfolio companies and also is the general
partner of the general partner of Fund II.
Pursuant to the Stock Purchase Agreement, the Dickstein Sellers have
agreed to vote their remaining shares of Common Stock in favor of the Merger (as
defined below) and against any transaction that is inconsistent with the Merger.
Pursuant to the Stock Purchase Agreement, the Three Cities Funds have agreed to
vote their shares of Common Stock in favor of one nominee of the Dickstein
Sellers
Page 12 of 20 Pages
<PAGE>
for election as a director of the Company for so long as the Dickstein Sellers
own in the aggregate at least five percent of the outstanding shares of Common
Stock. In addition, the Three Cities Funds have agreed that, if before the
Merger any person enters into discussions or negotiations with the Company or
the Three Cities Funds, or makes an offer, with respect to the acquisition of
the Company, substantially all of the assets of the Company or at least a
majority of the outstanding voting shares of the Company (an "Alternative
Transaction"), and such third party consummates an Alternative Transaction
within 12 months of the date of the Stock Purchase Agreement, the Three Cities
Funds will make further payment to the Dickstein Sellers. The additional
consideration will equal, in the aggregate, the difference between the per share
price paid in the Alternative Transaction and $6.95 multiplied by 650,000, less
an imputed cost of capital of one percent per month, except that if the
Alternative Transaction is for less than all outstanding voting shares, the
additional consideration will be prorated according to the percentage of shares
purchased in the Alternative Transaction.
Concurrently with the execution and delivery of the Stock Purchase
Agreement, the Company and the Three Cities Funds entered into the Registration
Rights Agreement, dated as of May 12, 1999 (the "Registration Rights
Agreement"). The description of the Registration Rights Agreement that follows
is not, and does not purport to be, complete and is qualified in its entirety by
reference to the Registration Rights Agreement, a copy of which is attached
hereto as Exhibit 2. Pursuant to the Registration Rights Agreement, the Three
Cities Funds and their respective transferees to which shares of Common Stock
are transferred (other than shares that cease to be "Registrable Securities" as
defined in the Registration Rights Agreement) have the right, subject to certain
limitations set forth in the Registration Rights Agreement, to request the
Company at any time but not more than twice to register under the Securities
Act, at the Company's expense, all or a specified minimum number of shares of
Common Stock owned by the Three Cities Funds and their transferees (a "Demand
Registration"). The Three Cities Funds also have certain piggyback registration
rights in connection with registrations by the Company under the Securities Act.
Under the Registration Rights Agreement, the Company has informed the
Three Cities Funds that the nominees for the Board at the next annual meeting of
stockholders of the Company will be the directors of the Company who were
directors at the time of the public announcement of the Merger, and the Three
Cities Funds have agreed that they will not take any action inconsistent
therewith. Pursuant to the Registration Rights Agreement, the Three Cities Funds
have agreed that they will not request any change in the size of the Board with
respect to such meeting. At all subsequent annual meetings of stockholders of
the Company, the Three Cities Funds will have the right, pursuant to the
Registration Rights Agreement, to designate jointly a number of nominees to
serve as directors constituting at least a percentage of
Page 13 of 20 Pages
<PAGE>
the Board equal to the percentage of outstanding shares of Common Stock then
owned in the aggregate by the Three Cities Funds.
Following the consummation of the acquisition of shares of Common Stock
pursuant to the Stock Purchase Agreement, the Three Cities Funds, TCR
Acquisition Corp. ("Merger Sub") (whose sole stockholders are the Three Cities
Funds) and the Company entered into the Agreement and Plan of Merger dated as of
May 12, 1999 (the "Merger Agreement"), pursuant to which Merger Sub will merge
(the "Merger") with and into the Company. The description of the Merger
Agreement that follows is not, and does not purport to be, complete and is
qualified in its entirety by reference to the Merger Agreement, a copy of which
is attached hereto as Exhibit 3. In connection with the Merger, stockholders of
the Company will have the opportunity to elect to receive from the Company $7.00
in cash in exchange for up to 2,111,966 shares of Common Stock in the aggregate
and the Company's certificate of incorporation will be amended and restated to
modify certain provisions regarding the approval of business combination
transactions. Depending upon the number of shares whose holders elect to receive
cash, the cash election payment will be funded through financing to be obtained
by the Company and/or through the acquisition by the Three Cities Funds in the
Merger of shares of Common Stock at a price of $7.00 per share. If holders of
more than 2,111,966 shares elect to receive cash in the Merger, there will be a
pro rata reduction as a result of which all of the stockholders who elected to
receive cash will receive cash for a portion of their shares of Common Stock and
retain the remainder of their shares of Common Stock. Depending upon the number
of stockholders who elect to receive cash as part of the Merger, the Three
Cities Funds will beneficially own in the aggregate between 35.7% and 62.6% of
the outstanding shares of Common Stock immediately following the Merger.
The purpose of the acquisition of the shares of Common Stock by the
Three Cities Funds pursuant to the Stock Purchase Agreement was to acquire a
significant equity position in the Company. The Reporting Persons currently
intend to seek, through the Merger, to acquire control of the Company by owning
a majority of the shares of the Common Stock on a fully diluted basis. If the
Reporting Persons do not acquire a majority of such shares as a result of the
Merger, the Reporting Persons will evaluate their position at that time, taking
into account the percentage of shares of Common Stock that will be owned by the
Three Cities Funds upon consummation of the Merger. The Reporting Persons intend
to review continuously their position in the Company. Depending upon future
evaluations of the business prospects of the Company and upon other
developments, including, but not limited to, general economic and business
conditions and stock market conditions, each of the Reporting Persons may retain
or from time to time increase, or dispose of all or a portion of, its holdings,
subject to any applicable legal or other restrictions on its ability to do so.
Page 14 of 20 Pages
<PAGE>
Except as described above, the Reporting Persons have no plans or
proposals which relate to or would result in:
(a) The acquisition by any person of additional securities of the
Company, or the disposition of securities of the Company;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries;
(c) A sale or transfer of a material amount of assets of the Company or
any of its subsidiaries;
(d) Any change in the present board of directors or management of the
Company, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend
policy of the Company;
(f) Any other material change in the Company's business or corporate
structure;
(g) Changes in the Company's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Company by any person;
(h) Causing a class of securities of the Company to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) A class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); or
(j) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
(a) Fund II
Fund II may, pursuant to Rule 13d-5 under the Exchange Act, be deemed
to be the beneficial owner of 2,158,000 shares of Common Stock, which
Page 15 of 20 Pages
<PAGE>
constitute approximately 35.7% of the 6,041,138(1) shares of Common Stock that
are outstanding. The 2,158,000 shares of Common Stock include 801,880 shares
(13.3% of the outstanding shares of Common Stock) directly owned by Fund II and
1,356,120 shares (22.4% of the outstanding shares of Common Stock) directly
owned by Offshore II.
TCR Associates
In its capacity as the sole general partner of Fund II, TCR Associates
may, pursuant to Rules 13d-3 and 13d-5 under the Exchange Act, be deemed to be
the beneficial owner of 2,158,000 shares of Common Stock, which constitute
approximately 35.7% of the 6,041,138 shares of Common Stock that are
outstanding.
Research
As the investment advisor to Fund II and Offshore II, with the power to
direct voting by both Fund II and Offshore II and to direct the disposition of
assets by both Fund II and Offshore II, Research may, pursuant to Rule 13d-3
under the Exchange Act, be deemed to be the beneficial owner of 2,158,000 shares
of Common Stock, which constitute approximately 35.7% of the 6,041,138 shares of
Common Stock that are outstanding.
Offshore II
Offshore II may, pursuant to Rule 13d-5 under the Exchange Act, be
deemed to be the beneficial owner of 2,158,000 shares of Common Stock, which
constitute approximately 35.7% of the 6,041,138 shares of Common Stock that are
outstanding. The 2,158,000 shares of Common Stock include 1,356,120 shares of
Common Stock (22.4% of the outstanding shares of Common Stock) directly owned by
Offshore II and 801,880 shares of Common Stock (13.3% of the outstanding shares
of Common Stock) directly owned by Fund II.
TCR Offshore
In its capacity as the sole general partner of Offshore II, TCR
Offshore may, pursuant to Rules 13d-3 and 13d-5 under the Exchange Act, be
deemed to be the beneficial owner of 2,158,000 shares of Common Stock, which
constitute approximately 35.7% of the 6,041,138 shares of Common Stock that are
outstanding.
- --------
(1) Percentages and total number of shares of Common Stock are based upon
the total number of shares of Common Stock reported outstanding as of
May 1, 1999 in the Company's press release issued May 6, 1999.
Page 16 of 20 Pages
<PAGE>
TCA, N.V.
In its capacity as the sole general partner of TCR Offshore, TCA, N.V.
may, pursuant to Rules 13d-3 and 13d-5 under the Exchange Act, be deemed to be
the beneficial owner of 2,158,000 shares of Common Stock, which constitute
approximately 35.7% of the 6,041,138 shares of Common Stock that are
outstanding.
Uhrig
As the sole stockholder and the only director of TCA, N.V., which is
the sole general partner of TCR Offshore, which in turn is the sole general
partner of Offshore II, Uhrig may, pursuant to Rules 13d-3 and 13d-5 under the
Exchange Act, be deemed to be the beneficial owner of 2,158,000 shares of Common
Stock, which constitute approximately 35.7% of the 6,041,138 shares of Common
Stock that are outstanding.
(b) Fund II and TCR Associates may be deemed to share the power to vote
or direct the vote, and to dispose of or direct the disposition of, 801,880
shares of Common Stock.
Offshore II, TCR Offshore, TCA, N.V. and Uhrig may be deemed to share
the power to vote or direct the vote, and to dispose of or direct the
disposition of, 1,356,120 shares of Common Stock.
Research may be deemed to share the power to vote or direct the vote,
and to dispose of or direct the disposition of, 2,158,000 shares of Common
Stock.
(c) The only transactions in shares of Common Stock effected by the
Reporting Persons during the last 60 days were the purchases by the Three Cities
Funds of an aggregate of 2,158,000 shares of Common Stock reported in this
Schedule 13D. The purchase price per share was $6.95. The transactions were
effected on May 12, 1999 pursuant to the Stock Purchase Agreement as described
in Item 4.
(d) To the best of the Reporting Persons' knowledge, except as set
forth herein, no other person has the right to receive or the power to direct
the receipt of dividends from, or the proceeds from the sale of, any shares of
Common Stock that the Reporting Persons may be deemed to own beneficially.
(e) Not applicable.
Page 17 of 20 Pages
<PAGE>
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer.
Except as described under Items 4 and 5, there exist no contracts,
arrangements, understandings or relationships (legal or otherwise) between any
of the Reporting Persons and any other persons with respect to any securities of
the Issuer, including but not limited to transfer or voting of any such
securities, finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
Item 7. Material to be Filed as Exhibits.
Exhibit 1 Stock Purchase Agreement
Exhibit 2 Registration Rights Agreement
Exhibit 3 Merger Agreement
Page 18 of 20 Pages
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of the knowledge and belief of
the undersigned, the undersigned certifies that the information set forth in
this statement is true, complete and correct.
Dated: May 24, 1999
THREE CITIES FUND II, L.P.
By: TCR Associates, L.P.,
its General Partner
By: Three Cities Research, Inc.,
its General Partner
By: /s/ Thomas G. Weld
----------------------
Thomas G. Weld
Treasurer
TCR ASSOCIATES, L.P.
By: Three Cities Research, Inc.,
its General Partner
By: /s/ Thomas G. Weld
----------------------
Thomas G. Weld
Treasurer
THREE CITIES RESEARCH, INC.
By: /s/ Thomas G. Weld
----------------------
Thomas G. Weld
Treasurer
Page 19 of 20 Pages
<PAGE>
THREE CITIES OFFSHORE II C.V.
By: TCR Offshore Associates, L.P.,
its General Partner
By: Three Cities Associates, N.V.,
its General Partner
By: /s/ J. William Uhrig
------------------------
J. William Uhrig
President
TCR OFFSHORE ASSOCIATES, L.P.
By: Three Cities Associates, N.V.,
its General Partner
By: /s/ J. William Uhrig
------------------------
J. William Uhrig
President
THREE CITIES ASSOCIATES, N.V.
By: /s/ J. William Uhrig
------------------------
J. William Uhrig
President
/s/ J. William Uhrig
--------------------
J. William Uhrig
Page 20 of 20 Pages
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
by and among
THREE CITIES OFFSHORE II C.V.,
THREE CITIES FUND II, L.P.
and
DICKSTEIN & CO., L.P.,
DICKSTEIN FOCUS FUND L.P.,
DICKSTEIN INTERNATIONAL LIMITED,
MARK B. DICKSTEIN
--------------------------
Dated as of May 12, 1999
---------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
1. Sale and Purchase of Shares...........................................3
1.1 Sale and Purchase of Shares..................................3
1.2 Purchase Price...............................................3
2. The Closing...........................................................4
3. Representations and Warranties of Sellers.............................4
3.1 Title to the Shares..........................................4
3.2 Authority to Execute and Perform Agreement...................4
3.3 Governmental Approvals.......................................5
4. Representations and Warranties of the Buyers..........................5
4.1 Due Organization and Authority...............................5
4.2 Authority to Execute and Perform Agreements..................6
4.3 Government Approvals.........................................6
4.4 Private Placement............................................7
4.5 Share Ownership..............................................7
5. Covenants and Agreements..............................................8
5.1 Proxy Statement..............................................8
5.2 Sellers' Representative......................................8
5.3 Voting Agreement.............................................8
5.4 Price Protection............................................10
5.5 Notice of Negotiations......................................11
6. Survival of Representations and Warranties of the Buyers
and the Sellers After Closing........................................12
7. Miscellaneous........................................................12
7.1 Certain Definitions.........................................12
7.2 Publicity...................................................13
7.3 Notices.....................................................14
7.4 Entire Agreement............................................15
7.5 Waivers and Amendments......................................15
7.6 GOVERNING LAW...............................................16
7.7 Binding Effect; No Assignment...............................16
7.8 Variations in Pronouns......................................16
7.9 Counterparts................................................16
7.10 Headings....................................................16
7.11 Severability of Provisions..................................16
i
<PAGE>
Page
Exhibits
- --------
Exhibit A Share Ownership
Exhibit B Form of Merger Agreement
Exhibit C Form of Company Agreement
Exhibit D Book Entry Account
Exhibit E Wire Instructions
ii
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of May 12, 1999 (the
"Agreement"), is made by and among THREE CITIES OFFSHORE II C.V., a Netherlands
Antilles limited partnership ("TCO"), and THREE CITIES FUND II, L.P. ("TCF II"
and, together with TCO, the "Buyers") and Dickstein & Co., L.P., Dickstein Focus
Fund L.P., Dickstein International Limited and Mark B. Dickstein (each, a
"Seller," and collectively, the "Sellers"). Capitalized terms used herein but
not otherwise defined shall have the meanings given them in Section 7.1 of the
Agreement.
WHEREAS, the Sellers are the beneficial owners of an aggregate of
2,799,736 shares (the "Aggregate Shares") of common stock, par value $0.01 per
share ("Company Common Stock"), of The Leslie Fay Company, Inc., a Delaware
corporation (the "Company"), and the holders of options for an aggregate of
10,000 shares of Company Common Stock of which options to purchase 3,333 shares
of Company Common Stock are currently exercisable;
WHEREAS, each Seller agrees to sell the shares set forth on Exhibit A
hereto and the Buyers agree to purchase such shares, aggregating to 2,158,000
Shares (the "Shares"), upon the terms and subject to the conditions of this
Agreement;
WHEREAS, concurrently with the execution of this Agreement, the Buyers,
TCR Acquisition Sub Co., a Delaware corporation owned by the Buyers ("Merger
Sub"), and the Company are entering into an Agreement and Plan of Merger (the
"Merger Agreement") substantially in the form of Exhibit B, pursuant to
<PAGE>
2
which, subject to the terms and conditions contained therein, Merger Sub will
merge with and into the Company (the "Merger");
WHEREAS, concurrently with the execution of this Agreement, the Company
and the Buyers are entering into a registration rights agreement, pursuant to
which the Company is agreeing to provide to the Buyers certain registration
rights upon the terms and subject to the conditions set forth therein;
WHEREAS, concurrently with or prior to the execution hereof, each of
the Company and the Buyers have received copies of the resignation letters of
Mark B. Dickstein and Chaim Y. Edelstein resigning from their positions as
directors effective upon the Closing (as defined herein);
WHEREAS, concurrently with or prior to the execution hereof, the Buyers
have received a copy of the resolution by the Company's continuing directors to
appoint H. Whitney Wagner and Thomas G. Weld to fill the vacancies on the Board
created by the resignations referred to in the preceding paragraph, effective at
the Closing;
WHEREAS, concurrently with or prior to the execution hereof, the Buyers
have received a copy of the resolution of the Company's Board authorizing all
appropriate and necessary actions such that the restrictions on business
combinations in Section 203 of the Delaware General Corporation Law will not
have any effect on the purchase of Shares contemplated herein, the Merger or the
other transactions contemplated by the Merger Agreement; and
<PAGE>
3
WHEREAS, concurrently with or prior to the execution of this Agreement,
the Sellers and the Company are entering into an agreement substantially in the
form of Exhibit C.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants and for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Buyers and the Sellers
agree as follows:
1. Sale and Purchase of Shares.
1.1 Sale and Purchase of Shares. (i) The Sellers are hereby
selling, and the Buyers are hereby purchasing, all of the Shares, (ii) the
Sellers are either (A) delivering or causing to be delivered to the Buyers
certificates representing the Shares, accompanied by stock powers duly executed
in blank, in proper form for transfer, and with all appropriate stock transfer
tax stamps affixed or (B) causing to be made a book entry transfer with "free
delivery" of the Shares sold by such member to an account designated by the
Buyers maintained at the Depository Trust Company, as set forth on Exhibit D
(the "Book Entry Account") and (iii) upon delivery of the Shares as provided in
clause (ii) above, the Buyers shall deliver the Purchase Price (as hereinafter
defined) by wire transfer of immediately available funds to the accounts of the
Sellers set forth on Exhibit E.
1.2 Purchase Price. The purchase price for the Shares (the
"Purchase Price") is an amount equal to $6.95 per share.
<PAGE>
4
2. The Closing. The closing (the "Closing") of the sale and purchase of
the Shares is taking place simultaneously with the execution and delivery of
this Agreement at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285
Avenue of the Americas, New York, NY.
3. Representations and Warranties of Sellers. Each Seller, severally,
but not jointly, represents and warrants to the Buyers as follows:
3.1 Title to the Shares. The Sellers are the beneficial
holders of all of the Shares, free and clear of any Liens and, upon delivery of
and payment for the Shares as herein provided, the Sellers will convey to the
Buyers ownership of the Shares by book-entry transfer or certificates
representing Shares, accompanied by stock powers duly executed in blank, in each
case, free and clear of any Liens.
3.2 Authority to Execute and Perform Agreement. Each Seller
has, as applicable, all personal, limited partnership or company right, power
and authority required to enter into, execute and deliver this Agreement and to
perform fully their obligations hereunder. This Agreement has been duly executed
and delivered by the Sellers and (assuming the due authorization, execution and
delivery hereof by the Buyers) is a legal, valid and binding obligation of the
Sellers enforceable in accordance with its terms and conditions, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or other similar laws affecting creditors' rights and to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Assuming the accuracy of and in reliance upon
the representations and
<PAGE>
5
warranties of the Buyers set forth in Section 4.4, the execution and delivery of
this Agreement, the sale of the Shares contemplated hereby, and the performance
by the Sellers of this Agreement in accordance with its terms and conditions
will not: (i) conflict with or result in any breach or violation of any of the
terms and conditions of, or constitute (or with notice or lapse of time or both
constitute) a default under, any statute, regulation, order, judgment or decree
applicable to the Sellers or to their Shares, or any instrument, contract or
other agreement to which the Sellers are party or by or to which the Sellers are
or their Shares are bound or subject; or (ii) result in the creation of any Lien
on the Shares, other than as contemplated by this Agreement.
3.3 Governmental Approvals. Except for filings required to be
made in compliance with applicable provisions of the Exchange Act and the rules
and regulations thereunder, and in reliance upon the representations and
warranties of the Buyers made pursuant to Section 4.4, no authorization or
approval or other action by, and no notice to or filing with, any Governmental
or Regulatory Body or court of law or any other Person is required to be made or
obtained by the Sellers for (i) the consummation of the transactions
contemplated by this Agreement or (ii) the due execution, delivery and
performance by the Sellers of this Agreement.
4. Representations and Warranties of the Buyers. Each Buyer, severally
but not jointly, represents and warrants to the Sellers as follows:
4.1 Due Organization and Authority. Such Buyer is a limited
partnership duly organized, validly existing and in good standing in the
jurisdiction of its organization.
<PAGE>
6
4.2 Authority to Execute and Perform Agreements. Each Buyer
has all necessary limited partnership right, power and authority and approval
required to enter into, execute and deliver this Agreement and to perform fully
its obligations hereunder. This Agreement has been duly executed and delivered
by the Buyers and (assuming the due authorization, execution and delivery hereof
by the Sellers) is a legal, valid and binding obligation of the Buyers
enforceable in accordance with its terms and conditions, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or other similar laws affecting creditors' rights and to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). The execution and delivery of this Agreement,
the sale of the Shares contemplated hereby, and the performance by the Buyers of
this Agreement in accordance with its terms and conditions will not conflict
with or result in any breach or violation of any of the terms and conditions of,
or constitute (or with notice or lapse of time or both constitute) a default
under, any statute, regulation, order, judgment or decree applicable to the
Buyers, or any instrument, contract or other agreement to which the Buyers are a
party or by or to which the Buyers are bound or subject.
4.3 Government Approvals. Except for filings required to be
made in compliance with applicable provisions of the Exchange Act and the rules
and regulations thereunder, no authorization or approval or other action by, and
no notice to or filing with, any Governmental or Regulatory Body or court of law
or any other Person, is required to be made or obtained by the Buyers for (i)
the consummation of the transactions contemplated by this Agreement (other than
the Merger as to which
<PAGE>
7
no representation is made) or (ii) the due execution, delivery and performance
by the Buyers of this Agreement.
4.4 Private Placement. The Buyers acknowledge that, other than
as expressly set forth herein, no Seller or any Affiliate of a Seller has made
any representation or warranty, either express or implied, as to the accuracy or
completeness of any of the information provided or made available to the Buyers
or their agents or representatives. The Buyers, to the extent believed
necessary, have discussed the agreements which the Buyers make by signing this
Agreement, and the applicable limitations upon the Buyers' transfer or resale of
the Shares, with its legal advisors. The Buyers understand that no United States
federal or state agency has made any finding or determination regarding the
fairness of the sale of the Shares for investment or any recommendation or
endorsement of the sale of the Shares. The Buyers are not purchasing the Shares
with a view to a distribution or resale of any of such securities in violation
of any applicable securities laws. The Company or its agents has provided or
made available to the Buyers documentary information concerning the Company,
including the Company's filings under the Exchange Act and recent press releases
of the Company. The Buyers have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Shares. The Buyers are financially able to bear the economic
risk of this investment, including the ability to afford holding the Shares for
an indefinite period or to afford a complete loss of such investment.
4.5 Share Ownership. The Buyers do not own any shares of
Company Common Stock.
<PAGE>
8
5. Covenants and Agreements. The parties covenant and agree as follows:
5.1 Proxy Statement. The Buyers agree, after the public
announcement of the execution and delivery of the Merger Agreement, to use all
reasonable efforts to cooperate with the Company to file the Proxy Statement (as
defined in the Merger Agreement), subject to the terms and conditions of the
Merger Agreement, as soon as reasonably practicable after the date hereof.
5.2 Sellers' Representative. For as long as the Sellers
Beneficially Own in the aggregate more than five percent of the outstanding
shares of Company Common Stock, the Buyers agree to vote their shares of Company
Common Stock in favor of one nominee to the Board designated by the Sellers;
provided that such nominee is reasonably satisfactory to the Buyers. The Buyers
acknowledge and agree that Mark Kaufman is reasonably satisfactory to them.
5.3 Voting Agreement. From the date hereof until the date
following the earliest to occur of (a) the disapproval of the Merger Agreement
by the Company's stockholders, (b) the termination of the Merger Agreement in
accordance with its terms or (c) the consummation of the Merger, the Sellers
hereby agree as follows:
(a) to appear, or cause the holder of record (the
"Record Holder") of any of the Aggregate Shares then Beneficially Owned by the
Sellers (the "Remaining Shares") on any applicable record date to appear, for
the purpose of obtaining a quorum at any annual or special meeting of
stockholders of the
<PAGE>
9
Company and at any adjournment thereof, at which matters relating to the Merger,
the Merger Agreement or any transaction contemplated thereby are considered;
(b) at any meeting of the stockholders of the
Company, however called, and in any action by consent of the stockholders of the
Company, to vote, or cause to be voted by the Record Holder, the Remaining
Shares:
(A) in favor of the adoption of the Merger
Agreement; and (B) against any proposal for any extraordinary corporate
transaction, such as a recapitalization, dissolution, liquidation or sale of
assets of the Company, or any merger, consolidation or other business
combination (other than the Merger) between the Company and any Person or any
other action or agreement that is intended or which reasonably could be expected
to (x) result in a breach of any representation or warranty, covenant or any
other obligation or agreement of the Company under the Merger Agreement, (y)
result in any of the conditions to the Company's obligations under the Merger
Agreement not being fulfilled or (z) impede, interfere with, delay, postpone or
materially adversely affect the Merger and the transactions contemplated by the
Merger Agreement;
(c) not to sell, assign or otherwise transfer the
Remaining Shares, directly or indirectly, to any Person unless such Person has
previously agreed in writing, in a form reasonably satisfactory to the Buyers,
to be bound with respect to such Shares by the provisions of this Section 5.3;
and
(d) not to enter into any agreement inconsistent with
this Section 5.3.
<PAGE>
10
5.4 Price Protection. If at any time after the date hereof and
before the consummation of the Merger (x) a third party enters into negotiations
or discussions with the Company or either or both of the Buyers for, or makes an
offer with respect to the acquisition of, the Company, substantially all of the
assets of the Company or at least a majority of the outstanding voting shares of
the Company (an "Alternative Transaction"), in each case, at a higher price per
share than the Purchase Price and (y) within 12 months after the date hereof,
such third party consummates an Alternative Transaction at a higher price per
share than the Purchase Price, the Buyers shall pay by wire transfer of
immediately available funds to the Sellers, promptly after the consummation of
the Alternative Transaction, an aggregate amount equal to the product of (x) the
Protected Shares (as defined below); and (y) the Price Differential (as defined
below). All references herein to the price of shares or number of shares shall
be subject to appropriate adjustment for any stock split, subdivision of shares,
reverse stock split, combination of shares, stock dividend or similar
transaction.
"Protected Shares" means 650,000 or, if the Alternative Transaction is
an offer to acquire less than all of the outstanding voting shares of the
Company, the product of (i) the percentage of outstanding shares (expressed as a
decimal) offered to be acquired and (ii) 650,000.
"Price Differential" means the excess, if any, of (i) the price per
share payable in the Alternative Transaction (provided that if the consideration
payable in the Alternative Transaction is other than cash, the value of such
consideration shall be
<PAGE>
11
determined in good faith by the Company's Board of Directors); over (ii) the sum
of (x) the Purchase Price and (y) the Cost of Capital (as defined below).
The "Cost of Capital" means the product of (i) the Purchase Price, (ii)
12% and (iii) a fraction, the numerator of which is equal to the number of days
from (and including) the date hereof to (but excluding) the date of the
consummation of the Alternative Transaction, and the denominator of which is
360.
5.5 Notice of Negotiations. Each Buyer agrees that in the
event that during the period from the date hereof until the date following the
earliest to occur of (a) the disapproval of the Merger Agreement by the
Company's stockholders, (b) the termination of the Merger Agreement in
accordance with its terms or (c) the consummation of the Merger, it, any of its
subsidiaries, or its or their respective officers, directors, or representatives
engage in any negotiations or substantive discussions with any Person with
respect to any Alternative Transaction, it will, as promptly as reasonably
practicable, notify Mark Dickstein as representative of the Sellers of the
existence of such negotiations or discussions; provided, however, that the
failure to give such notice promptly shall not constitute a breach of this
Section 5.5 except to the extent that the Sellers are materially prejudiced
thereby. Each Seller acknowledges that it is aware, and that it will advise its
representatives who become aware of the information referred to in the prior
sentence, that the United States securities laws prohibit any Person who has
material, non-public information concerning an issuer such as the Company from
purchasing or selling securities of such issuer or from communicating such
information to any other Person under circumstances in which it is reasonably
foreseeable that such Person may
<PAGE>
12
purchase or sell such securities. Each Seller agrees to keep such information
confidential and not to use, or allow the use by any of its representatives and
agents of, any portion of such information for any purpose other than monitoring
a possible Alternative Transaction for the applicability of the price protection
covenant contained herein.
6. Survival of Representations and Warranties of the Buyers and the
Sellers After Closing. Notwithstanding any right of the Buyers, on the one hand,
or the Sellers, on the other, to investigate and notwithstanding any knowledge
of facts determined or determinable by the Buyers or the Sellers pursuant to
such investigation or right of investigation, the Buyers and the Sellers have
the right to rely fully upon the representations of the other party contained in
this Agreement. The rights and remedies at law or equity of the Buyers and the
Sellers shall not be diminished or otherwise affected by the knowledge of such
party at any time of any facts relating to the matters represented or warranted
by the other party in this Agreement.
7. Miscellaneous.
7.1 Certain Definitions. (a) As used in this Agreement, the
following terms have the following meanings:
(i) "Affiliate" means, with respect to any Person,
any other Person controlling, controlled by or under common control with, or the
spouse or lineal descendants or beneficiaries of, such Person.
(ii) "Beneficial Ownership." For purposes of this
Agreement, "Beneficially Own" or "Beneficial Ownership" with respect to any
<PAGE>
13
securities shall mean "beneficial ownership" of such securities (as determined
pursuant to Rule 13d-3 under the Exchange Act).
(iii) "Exchange Act" means the Securities Exchange
Act of 1934, as amended.
(iv) "Governmental or Regulatory Body" means any
government or political subdivision thereof, whether federal, state, local or
foreign, or any agency or instrumentality of any such government or political
subdivision.
(v) "Lien" means any lien, pledge, mortgage, security
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any shareholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever, other than
restrictions arising under federal or state securities laws.
(vi) "Order" means any order, judgment, injunction,
award, decision, determination, decree or writ.
(vii) "Person" means any individual, corporation,
limited liability company, partnership, firm, joint venture, association,
joint-stock company, trust, unincorporated organization, Governmental Body or
other entity.
7.2 Publicity. The Buyers and the Sellers shall not issue any
press release or public announcement concerning this Agreement, the Merger or
the transactions contemplated hereby or thereby without the prior written
consent of the other party, which consent shall not be unreasonably withheld or
delayed, except where such release or announcement is required by applicable
law, including without limitation, any filing obligations under any state or
federal securities laws, in which
<PAGE>
14
case the party will use its reasonable best efforts to provide a copy to the
other party prior to any release or public announcement.
7.3 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally, sent
by facsimile transmission or sent by certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered
personally or sent by facsimile transmission or, if mailed, five days after the
date of deposit in the United States mails, as follows:
(i) if to the Buyers, to:
Three Cities Research, Inc.
650 Madison Avenue
24th Floor
New York, NY 10022
Attention: Willem F. P. de Vogel
Telephone: (212) 838-9660
Facsimile: (212) 980-1142
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Judith R. Thoyer, Esq.
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
<PAGE>
15
(ii) if to the Sellers, to:
Dickstein Partners Inc.
660 Madison Avenue, 16th Floor
New York, New York 10021
Attention: Alan S. Cooper
Telephone: (212) 754-5424
Facsimile: (212) 980-7132
with a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: Abbe L. Dienstag, Esq.
Telephone: (212) 715-9100
Facsimile: (212) 715-8000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
7.4 Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the purchase of the Shares and
supersedes all prior agreements, written or oral, with respect thereto.
7.5 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the Buyers and the Sellers or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, nor any single or partial exercise of any such right, power
or privilege,
<PAGE>
16
preclude any further exercise thereof or the exercise of any other such right,
power or privilege.
7.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
7.7 Binding Effect; No Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This Agreement is not assignable, except
that the Buyers may assign their rights hereunder to any of their Affiliates.
7.8 Variations in Pronouns. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
7.9 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument.
7.10 Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
7.11 Severability of Provisions. If any provision or any
portion of any provision of this Agreement, or the application of any such
provision or any portion thereof to any Person or circumstance, shall be held
invalid or unenforceable, the remaining portion of such provision and the
remaining provisions
<PAGE>
17
of this Agreement, and the application of such provision or portion of such
provision as is held invalid or unenforceable to Persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby so long as the economic or legal substance of the transaction
contemplated hereby is not affected in any manner adverse to any party. Upon a
determination that any term or other provision is invalid or unenforceable, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
<PAGE>
18
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
THREE CITIES OFFSHORE II C.V.
By: THREE CITIES ASSOCIATES N.V.,
its general partner
By: /s/ J. William Uhrig
------------------------
J. William Uhrig
Managing Director
THREE CITIES FUND II, L.P.
By: TCR ASSOCIATES, L.P.,
its general partner
By: /s/ Willem F. P. de Vogel
-----------------------------
Willem F. P. de Vogel
General Partner
<PAGE>
19
DICKSTEIN & CO., L.P.
By: DICKSTEIN PARTNERS L.P.,
its general partner
By: DICKSTEIN PARTNERS INC.,
its general partner
By: /s/ Alan Cooper
-------------------
Name: Alan Cooper
Title: Vice President
DICKSTEIN FOCUS FUND L.P.
By: DICKSTEIN PARTNERS L.P.,
its general partner
By: DICKSTEIN PARTNERS INC.,
its general partner
By: /s/ Alan Cooper
-------------------
Name: Alan Cooper
Title: Vice President
DICKSTEIN INTERNATIONAL LIMITED
By: DICKSTEIN PARTNERS INC.,
its advisor
By: /s/ Alan Cooper
-------------------
Name: Alan Cooper
Title: Vice President
/s/ Mark B. Dickstein
---------------------
Mark B. Dickstein
<PAGE>
20
EXHIBIT A
[Intentionally Omitted]
<PAGE>
21
EXHIBIT B
[Intentionally Omitted]
<PAGE>
22
EXHIBIT C
[Intentionally Omitted]
<PAGE>
23
EXHIBIT D
[Intentionally Omitted]
<PAGE>
24
EXHIBIT E
[Intentionally Omitted]
================================================================================
REGISTRATION RIGHTS AGREEMENT
among
THE LESLIE FAY COMPANY, INC.
and
THREE CITIES FUND II, L.P.,
THREE CITIES OFFSHORE II C.V.
-----------------------------------
Dated as of May 12, 1999
----------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Definitions...........................................................1
2. Securities Subject to this Agreement..................................3
3. Demand Registration...................................................3
(a) Request for Demand Registration..............................3
(b) Effective Demand Registration................................4
(c) Expenses.....................................................4
(d) Underwriting Procedures......................................4
(e) Selection of Underwriters....................................5
4. Piggy-Back Registration...............................................5
(a) Piggy-Back Rights............................................5
(b) Priority of Registrations....................................6
(c) Expenses.....................................................6
5. Rights of Other Stockholders..........................................6
6. Holdback Agreements...................................................6
(a) Restrictions on Public Sale by Holders.......................6
(b) Restrictions on Public Sale by the Company...................6
7. Registration Procedures...............................................7
(a) Obligations of the Company...................................7
(b) Seller Information..........................................10
(c) Notice to Discontinue.......................................10
8. Registration Expenses................................................10
9. Indemnification; Contribution........................................11
(a) Indemnification by the Company..............................11
(b) Indemnification by Holders..................................11
(c) Conduct of Indemnification Proceedings......................11
(d) Contribution................................................12
10. Rule 144; Other Exemptions...........................................13
11. Board of Directors...................................................13
12. Miscellaneous........................................................13
(a) Recapitalizations, Exchanges, etc...........................13
(b) No Inconsistent Agreements..................................14
i
<PAGE>
Page
----
(c) Remedies....................................................14
(d) Amendments and Waivers......................................14
(e) Notices.....................................................14
(f) Successors and Assigns......................................15
(g) Counterparts................................................15
(h) Headings....................................................15
(i) GOVERNING LAW...............................................15
(j) Jurisdiction................................................15
(k) Severability................................................16
(l) Entire Agreement............................................16
(m) Further Assurances..........................................16
ii
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of May 12, 1999, among
THE LESLIE FAY COMPANY, INC., a Delaware corporation (the "Company"), and THREE
CITIES FUND II, L.P., a Delaware limited partnership ("TCF II"), and THREE
CITIES OFFSHORE II C.V., a Netherlands Antilles limited partnership ("TCO" and,
together with TCF II, the "Buyers").
As of the date hereof, the Buyers are entering into a Stock
Purchase Agreement among the Buyers, Dickstein & Co., L.P., Dickstein Focus Fund
L.P., Dickstein International Limited and Mark B. Dickstein, pursuant to which,
among other things, the Buyers are purchasing in the aggregate 2,158,000 shares
(the "Shares") of common stock, par value $.01 per share, ("Common Stock") of
the Company. Upon consummation of the purchase, the Shares will be "restricted
securities" within the meaning of the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder (the "Act").
As of the date hereof, the Buyers are entering into an
Agreement and Plan of Merger (the "Merger Agreement") with the Company pursuant
to which a company owned by the Buyers will merge (the "Merger") with and into
the Company subject to the terms and conditions of the Merger Agreement.
The Company has agreed to provide certain registration rights
with respect to the Registrable Securities (as hereinafter defined) as set forth
in this Agreement.
In consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
1. Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Act" has the meaning set forth in the recitals.
"Approved Underwriter" has the meaning assigned such
term in Section 3(e).
"Approved Underwriter Amount" has the meaning
assigned such term in Section 3(d).
<PAGE>
2
"Business Day" means any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
"Buyers" has the meaning set forth in the recitals.
"Common Stock" has the meaning assigned such term in
the recitals.
"Company" has the meaning set forth in the recitals.
"Company Underwriter" has the meaning assigned such
term in Section 4(a).
"Demand Registration" has the meaning assigned such
term in Section 3(a).
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations of the SEC thereunder.
"Holder" means the Buyers, their
successors-in-interest and affiliates and any other Person to whom the Buyers or
their successors-in-interest transfer Registrable Securities, which affiliate or
Person is registered on the books of the Company for so long as such Holder
holds Registrable Securities.
"Holders' Counsel" means (a) with respect to any
Demand Registration that has been requested pursuant to Section 3, counsel
selected by the Initiating Holders, and (b) with respect to a request for
registration of Registrable Securities pursuant to Section 4, counsel selected
by the Holders holding a majority of the Registrable Securities being registered
in such registration.
"Indemnified Party" has the meaning assigned such
term in Section 9(c).
"Indemnifying Party" has the meaning assigned such
term in Section 9(c).
"Initiating Holders" has the meaning assigned to such
term in Section 3(a).
"Inspector" has the meaning assigned such term in
Section 7(a)(viii).
"Merger" has the meaning assigned such term in the
recitals.
"NASD" has the meaning assigned such term in Section
7(a)(xv).
<PAGE>
3
"Person" means any individual, firm, corporation,
partnership, limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind, and shall include
any successor (by merger or otherwise) of any such entity.
"Records" has the meaning assigned such term in
Section 7(a)(viii).
"Registrable Securities" has the meaning assigned
such term in Section 2.
"Registration Expenses" has the meaning assigned such
term in Section 8.
"SEC" means the Securities and Exchange Commission.
"Total Securities" has the meaning assigned such term
in Section 4(a).
2. Securities Subject to this Agreement. The securities
entitled to the benefits of this Agreement are the Shares, any additional shares
of Common Stock acquired by the Buyers after the date hereof and any other
securities issued by the Company in exchange for any of the Shares or such
additional shares (collectively, the "Registrable Securities"), but, with
respect to any particular Registrable Security, only so long as it continues to
be a Registrable Security. Registrable Securities shall include any securities
issued as a dividend or distribution on account of Registrable Securities or
resulting from a subdivision of the outstanding shares of Registrable Securities
into a greater number of shares (by reclassification, stock split or otherwise)
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. For the purposes of this
Agreement, a security that was at one time a Registrable Security shall cease to
be a Registrable Security when (i) a Registration Statement covering such
Registrable Security has been declared effective under the Securities Act by the
SEC and such Registrable Security has been disposed of pursuant to such
effective Registration Statement; (ii) such Registrable Security is sold
pursuant to Rule 144 (or any similar provision then in force) under the Act;
(iii) such Registrable Security, when aggregated with all other Registrable
Securities then held by a Holder, may be sold pursuant to Rule 144(k) (or any
similar provision then in force) under the Act; or (iv) such Registrable
Security ceases to be outstanding.
3. Demand Registration.
(a) Request for Demand Registration. At any time from
the date hereof, the Buyers, their successors-in-interest or their affiliates
may, or if such Persons no longer hold Registrable Securities, Holders holding
at least 25% of the Registrable Securities held by all of the Holders (such
Person or Persons, the "Initiating Holders") may, request the registration under
the Act, and registration or qualification under the securities or blue sky laws
of any jurisdiction designated by such Holder or Holders (each such registration
<PAGE>
4
under this Section 3(a) that satisfies the requirements set forth in Section
3(b) is referred to herein as a "Demand Registration") of a number of
Registrable Securities that together with the number of Registrable Securities
requested by other Holders to be included pursuant to this Section 3(a) either
(a) represent at least 25% of the Registrable Securities held by the Holders
(whether or not a Holder as of the date hereof) as of the date hereof or, if the
Merger is consummated, as of the Closing Date (as defined in the Merger
Agreement) or (b) have an estimated market value at the time of such request
(based upon the then market price of a share of Common Stock) of at least
$2,000,000. Notwithstanding the foregoing, (i) the Company will not be required
to effect a Demand Registration within the period beginning on the effective
date of a registration statement filed by the Company on its behalf and ending
on the expiration of any lock-up period reasonably required by the underwriters,
if any, in connection therewith, and (ii) in no event shall the Company be
required to effect more than two Demand Registrations. For purposes of clause
(ii) of the preceding sentence, two or more registrations filed in response to
one demand shall be counted as one registration statement. Each such request for
a Demand Registration by the Initiating Holders in respect thereof shall specify
the amount of the Registrable Securities proposed to be sold, the intended
method of disposition thereof and the jurisdictions in which registration or
qualification is desired. Upon a request for a Demand Registration, the Company
shall promptly take such steps as are necessary or appropriate to prepare for
the registration of the Registrable Securities to be registered. Within 15 days
after the receipt of such request, the Company shall give written notice thereof
to all other Holders and include in such registration all Registrable
Securities held by a Holder from whom the Company has received a written request
for inclusion therein at least 10 days prior to the filing of the registration
statement. Each such request shall also specify the number of Registrable
Securities to be registered, the intended method of disposition thereof and the
jurisdictions in which registration or qualification is desired. Subject to
Section 3(d), the Company shall be entitled to include in any registration
statement and offering made pursuant to a Demand Registration, authorized but
unissued shares of Common Stock, shares of Common Stock held by the Company as
treasury shares or shares of Common Stock held by stockholders others than the
Holders; provided, that such inclusion shall be permitted only to the extent
that it is pursuant to and subject to the terms of the underwriting agreement or
arrangements, if any, entered into by the Initiating Holders exercising the
Demand Registration rights.
(b) Effective Demand Registration. The Company shall
use its best efforts to cause any such Demand Registration to become effective
not later than 90 days after it receives a request under Section 3(a). A
registration requested pursuant to Section 3(a) shall not count as one of the
two demands to which the Holders are entitled thereunder unless Registrable
Securities are sold pursuant to such demand.
(c) Expenses. In any registration initiated as a
Demand Registration, the Company shall pay all Registration Expenses in
connection therewith, whether or not such requested Demand Registration becomes
effective.
(d) Underwriting Procedures. If the Initiating
Holders holding a majority of the Registrable Securities held by all Initiating
Holders to which the requested
<PAGE>
5
Demand Registration relates so elect, the offering of such Registrable
Securities pursuant to such requested Demand Registration shall be in the form
of a firm commitment underwritten offering and the managing underwriter or
underwriters selected for such offering shall be the Approved Underwriter
selected in accordance with Section 3(e). In such event, if the Approved
Underwriter advises the Company in writing that, in its opinion, the aggregate
amount of such Registrable Securities requested to be included in such offering
is sufficiently large to have a material adverse effect on the success of such
offering, the Company shall include in such registration only the aggregate
amount of Registrable Securities that in the opinion of the Approved Underwriter
may be sold without any such effect on the success of such offering (the
"Approved Underwriter Amount"), and (i) each Holder shall be entitled to have
included in such registration Registrable Securities equal to its pro rata
portion of the Approved Underwriter Amount, as based on the amounts of
Registrable Securities sought to be registered by the Holders in their requests
for participation in the requested Demand Registration and (ii) to the extent
that the number of Registrable Securities to be included by the Holders is less
than the Approved Underwriter Amount, securities that are proposed to be
registered in accordance with the last sentence of Section 3(a).
(e) Selection of Underwriters. If any requested
Demand Registration is in the form of an underwritten offering, the Initiating
Holders holding a majority of the Registrable Securities held by all Initiating
Holders to be included in the requested Demand Registration shall select and
obtain an investment banking firm of national reputation reasonably satisfactory
to the Company to act as the managing underwriter of the offering (the "Approved
Underwriter").
4. Piggy-Back Registration.
(a) Piggy-Back Rights. If the Company proposes to
file a registration statement under the Act with respect to an offering by the
Company for its own or any stockholder's account of any class of security (other
than a registration statement on Form S-4 or S-8 (or any successor form
thereto)) under the Act, the Company shall give written notice of such proposed
filing to each of the Holders at least 30 days before the anticipated filing
date, and such notice shall describe in detail the proposed registration and
distribution (including those jurisdictions where registration under the
securities or blue sky laws is intended) and offer such Holders the opportunity
to register the number of Registrable Securities as each such Holder may
request. The Company shall use its best efforts (within 10 days of the notice
provided for in the preceding sentence) to cause the managing underwriter or
underwriters of an underwritten offering (the "Company Underwriter") to permit
the Holders who have requested to participate in the registration for such
offering to include such Registrable Securities in such offering on the same
terms and conditions as the securities of the Company or, if such offering is
for the account of other stockholders, any similar securities of such
stockholders included therein. Notwithstanding the foregoing, if the Company
Underwriter delivers a written opinion to the Holders of Registrable Securities
that the total amount of securities that are proposed to be included in such
offering (the "Total Securities") is sufficiently large so as to have a material
adverse effect on the distribution of the Total Securities, the Company shall
include in such
<PAGE>
6
registration, to the extent of the number of Registrable Securities that the
Company is so advised can be sold in (or during the time of) such offering, (I)
in the case of an underwritten offering for the account of the Company, first,
all Common Stock or securities convertible into, or exchangeable or exercisable
for, Common Stock that the Company proposed to register for its own account, and
second, all other securities proposed to be registered, including all securities
proposed to be registered by all Holders, and (II) in the case of an
underwritten offering in response to the exercise of demand registration rights
by stockholders (other than the Holders) of the Company permitted pursuant to
Section 5, first, all Common Stock or securities convertible into or
exchangeable or exercisable for, Common Stock that the Company proposed to
register for the benefit of stockholders exercising demand registration rights,
and second, all other securities proposed to be registered, including all
securities proposed to be registered by all Holders hereunder.
(b) Priority of Registrations. If the Company
proposes to register securities for its own account pursuant to Section 4(a) on
the same day that the Holders request a registration pursuant to Section 3(a),
the registration requested pursuant to Section 4(a) shall be given priority.
(c) Expenses. The Company shall bear all Registration
Expenses in connection with any registration pursuant to this Section 4.
5. Rights of Other Stockholders. The Buyers acknowledge that,
pursuant to the Agreement, dated as of the date hereof, among the Company and
Dickstein & Co., L.P., Dickstein Focus Fund L.P., Dickstein International
Limited and Mark B. Dickstein (collectively, the "Dickstein Entities"), the
Company has granted certain registration rights to the Dickstein Entities. The
Company shall not grant any of its other current or future stockholders, for so
long as the holders of Registrable Securities have rights pursuant to Sections 2
and 3, any rights to have their securities included in any registration
statement to be filed by the Company that are equal to or greater than the
rights granted hereunder.
6. Holdback Agreements.
(a) Restrictions on Public Sale by Holders. To the
extent not inconsistent with applicable law, each Holder agrees not to effect
any public sale or distribution of any Registrable Securities being registered
or of any securities convertible into or exchangeable or exercisable for such
Registrable Securities, including a sale pursuant to Rule 144 under the Act,
during the 90-day period beginning on the effective date of such Demand
Registration or Piggy-Back Registration or other underwritten offering (except
as part of such registration), if and to the extent requested by any other
Holder, in the case of a non-underwritten public offering, or if and to the
extent requested by the Company Underwriter or Approved Underwriter, in the case
of an underwritten public offering.
(b) Restrictions on Public Sale by the Company. The
Company agrees not to effect any public sale or distribution of any of its
securities for its own account (except pursuant to registrations on Form S-4 or
S-8 (or any successor form thereto)) under
<PAGE>
7
the Act) during the 90-day period beginning on the later of (i) the effective
date of any registration statement in which the Holders are participating and
(ii) the commencement of a public distribution of Registrable Securities
pursuant to such registration statement.
7. Registration Procedures.
(a) Obligations of the Company. Whenever registration
of Registrable Securities has been requested pursuant to Section 3 or 4, the
Company shall use its best efforts to effect the registration and sale of such
Registrable Securities in accordance with the intended method of distribution
thereof as quickly as practicable, and in connection with any such request, the
Company shall, as expeditiously as possible:
(i) in connection with a Demand
Registration, prepare and file with the SEC (in any event not later than 30
Business Days after receipt of a request to file a registration statement with
respect to Registrable Securities) a registration statement on any form on which
registration is requested for which the Company then qualifies, which counsel
for the Company and Holders' Counsel shall deem appropriate and which shall be
available for the sale of such Registrable Securities in accordance with the
intended method of distribution thereof, and use its best efforts to cause such
registration statement to become effective; provided, however, that before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company shall (A) provide Holders' Counsel and any other Inspector
with an adequate and appropriate opportunity to participate in the preparation
of such registration statement and each prospectus included therein (and each
amendment or supplement thereto) to be filed with the SEC, which documents shall
be subject to the review and comment of Holders' Counsel, and (B) notify
Holders' Counsel and each seller of Registrable Securities pursuant to such
registration statement of any stop order issued or threatened by the SEC and
take all reasonable action required to prevent the entry of such stop order or
to remove it if entered;
(ii) in connection with a Demand
Registration, prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for a period of
12 months or such shorter period that will terminate when all Registrable
Securities covered by such registration statement have been sold (but not before
the expiration of the 90-day period referred to in Section 4(3) of the Act and
Rule 174 thereunder, if applicable), and comply with the provisions of the Act
applicable to it with respect to the disposition of all Registrable Securities
covered by such registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement;
(iii) furnish to each seller of Registrable
Securities, prior to filing a registration statement, copies of such
registration statement as it is proposed to be filed, and thereafter such number
of copies of such registration statement, each amendment and supplement thereto
(in each case including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) and such other
<PAGE>
8
documents as each such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(iv) use its best efforts to register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions as any seller of Registrable Securities or underwriter may
request if such registration or qualification is required in such jurisdictions
to effect offers or sales therein, and to continue such qualification in effect
in each such jurisdiction for as long as is permissible pursuant to the laws of
such jurisdiction, or for as long as any such seller requests or until all of
such Registrable Securities are sold, whichever is shortest, and do any and all
other acts and things that may be reasonably necessary or advisable to enable
any such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller; provided, however, that the Company
shall not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 7(a)(iv), (B) subject itself to taxation in any such jurisdiction or (C)
consent to general service of process in any such jurisdiction;
(v) use its best efforts to obtain all other
approvals, covenants, exemptions or authorizations from such governmental
agencies or authorities as may be necessary to enable the sellers of such
Registrable Securities or the underwriters, if any, to consummate the
disposition of such Registrable Securities;
(vi) notify each seller of Registrable
Securities and the Holders' Counsel at any time when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in such
registration statement contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances under which
they were made, and the Company shall promptly prepare and file, subject to
review by the Holders' Counsel, with the SEC a supplement or amendment to such
prospectus and furnish to each such seller a reasonable number of copies of a
supplement to or amendment of such prospectus as may be necessary so that, after
delivery to the purchasers of such Registrable Securities, such prospectus shall
not contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made;
(vii) enter into and perform customary
agreements (including an underwriting agreement in customary form with the
Approved Underwriter or Company Underwriter, if any, selected as provided in
Section 3 or 4) and take in good faith such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities, including making presentations to brokers, analysts and potential
purchasers, in each case as if the Company were the seller of the Registrable
Securities;
(viii) make available for inspection by any
seller of Registrable Securities, any underwriter participating in any
disposition pursuant to such registration
<PAGE>
9
statement, Holders' Counsel and any attorney, accountant or other agent retained
by any such seller or any underwriter (each, an "Inspector" and, collectively,
the "Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company and any subsidiaries thereof as may be
in existence at such time (collectively, the "Records") and provide reasonable
access during normal business hours to Inspectors to ask questions, in each case
as shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's and any subsidiaries' officers,
directors and employees, and the independent public accountants of the Company,
to supply all information and answer all questions reasonably requested by any
such Inspector in connection with such registration statement;
(ix) obtain a "cold comfort" letter and
updates thereof from the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by "cold comfort"
letters, as Holders' Counsel or the managing underwriter reasonably request;
(x) furnish, at the request of any seller of
Registrable Securities on the date such securities are delivered to the
underwriters for sale pursuant to such registration or, if such securities are
not being sold through underwriters, on the date the registration statement with
respect to such securities becomes effective, an opinion, dated such date, of
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the seller making such request,
covering such legal matters with respect to the registration in respect of which
such opinion is being given as such underwriters and seller may reasonably
request and as are customarily included in such opinions;
(xi) otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC, and make available
to its security holders, as soon as reasonably practicable but no later than 15
months after the effective date of the registration statement, an earnings
statement covering a period of 12 months beginning after the effective date of
the registration statement, in a manner that satisfies the provisions of Section
11(a) of the Act;
(xii) cause all such Registrable Securities
to be listed on each securities exchange, if any, on which similar securities
issued by the Company are then listed, subject to the satisfaction of the
applicable listing requirements of each such exchange;
(xiii) keep each seller of Registrable
Securities advised in writing as to the initiation and progress of any
registration under Section 3 or 4;
(xiv) provide officers' certificates and
other customary closing documents;
(xv) cooperate with each seller of
Registrable Securities and each underwriter participating in the disposition of
such Registrable Securities and their
<PAGE>
10
respective counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD"); and
(xvi) use its best efforts to take all other
steps necessary to effect the registration of the Registrable Securities
contemplated hereby.
(b) Seller Information. The Company may require each
seller of Registrable Securities as to which any registration is being effected
to furnish to the Company such information regarding the distribution of such
securities as the Company may from time to time reasonably request in writing.
(c) Notice to Discontinue. Each Holder agrees that,
upon receipt of any notice from the Company of the happening of any event of the
kind described in Section 7(a)(vi), such Holder shall forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 7(a)(vi) and,
if so directed by the Company, such Holder shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Securities that
is current at the time of receipt of such notice. If the Company shall give any
such notice, the Company shall extend the period during which such registration
statement shall be maintained effective pursuant to this Agreement (including,
without limitation, the period referred to in Section 7(a)(ii)) by the number of
days during the period from and including the date of the giving of such notice
pursuant to Section 7(a)(vi) to and including the date when the Holder shall
have received the copies of the supplemented or amended prospectus contemplated
by and meeting the requirements of Section 7(a)(vi).
8. Registration Expenses. The Company shall pay all expenses
(other than underwriting discounts and commissions) arising from or incident to
the performance of, or compliance with, this Agreement, including, without
limitation, (a) all SEC, stock exchange and NASD registration and filing fees,
(b) all fees and expenses incurred in complying with securities or blue sky laws
(including, without limitation, reasonable fees, charges and disbursements of
counsel in connection with blue sky qualifications of the Registrable
Securities), (c) all printing, messenger and delivery expenses, (d) the fees,
charges and disbursements of counsel to the Company and of its independent
public accountants and any other accounting and legal fees, charges and expenses
incurred by the Company (including, without limitation, any expenses arising
from any special audits incident to or required by any registration or
qualification), (e) any liability insurance or other premiums for insurance
obtained (which insurance the Company agrees to use its best efforts to obtain
upon the reasonable request of any seller of Registrable Securities) and (f) the
reasonable fees, charges and expenses of any special experts retained in
connection with any requested Demand Registration or piggy-back registration
pursuant to the terms of this Agreement, regardless of whether the registration
statement filed in connection with such registration is declared effective. In
connection with each registration hereunder, the Company shall reimburse the
Holders of Registrable Securities being registered in such
<PAGE>
11
registration for the reasonable fees, charges and disbursements of not more than
one Holders' Counsel but not the fees, charges or disbursements of any other
Inspector retained by any Holder. All of the expenses described in this Section
8 are referred to in this Agreement as "Registration Expenses."
9. Indemnification; Contribution.
(a) Indemnification by the Company. The Company
agrees to indemnify and hold harmless each Holder, its directors, officers,
partners, employees, advisors and agents, and each Person who controls (within
the meaning of the Act) such Holder, to the full extent permitted by law, from
and against any and all losses, claims, damages, expenses (including, without
limitation, reasonable costs of investigation and fees, disbursements and other
charges of counsel) or other liabilities resulting from or arising out of or
based upon any untrue, or alleged untrue, statement of a material fact contained
in any registration statement, prospectus or preliminary prospectus or
notification or offering circular (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information with respect to such Holder or its affiliates furnished in writing
to the Company by such Holder or its affiliates expressly for use therein. The
Company shall also indemnify any underwriters of the Registrable Securities,
their officers, directors and employees, and each Person who controls any such
underwriter (within the meaning of the Act) to the same extent as provided above
with respect to the indemnification of the Holders of Registrable Securities.
(b) Indemnification by Holders. In connection with
any registration in which a Holder is participating pursuant to Section 3 or 4,
each such Holder shall furnish to the Company in writing such information with
respect to such Holder as the Company may reasonably request or as may be
required by law for use in connection with any registration statement or
prospectus to be used in connection with such registration and each Holder
agrees to indemnify and hold harmless the Company, any underwriter retained by
the Company and their respective directors, officers, employees and each Person
who controls (within the meaning of the Act) the Company or such underwriter to
the same extent as the foregoing indemnity from the Company to the Holders
(subject to the proviso to this sentence and applicable law), but only with
respect to any such information furnished in writing by such Holder expressly
for use therein; provided, however, that the liability of any Holder under this
Section 9(b) shall be limited to the amount of the net proceeds received by such
Holder in the offering giving rise to such liability.
(c) Conduct of Indemnification Proceedings. Any
Person entitled to indemnification hereunder (the "Indemnified Party") agrees to
give prompt written notice to the indemnifying party (the "Indemnifying Party")
after the receipt by the Indemnified Party of any written notice of the
commencement of any action, suit, proceeding or investigation or threat thereof
made in writing for which the Indemnified Party intends to claim
<PAGE>
12
indemnification or contribution pursuant to this Agreement; provided, that, the
failure so to notify the Indemnifying Party shall not relieve the Indemnifying
Party of any liability that it may have to the Indemnified Party hereunder
except to the extent that it is materially prejudiced thereby. If notice of
commencement of any such action is given to the Indemnifying Party as above
provided, the Indemnifying Party shall be entitled to participate in and, to the
extent it may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and satisfactory to such Indemnified Party. The Indemnified Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
(other than reasonable costs of investigation) shall be paid by the Indemnified
Party unless (i) the Indemnifying Party agrees to pay the same, (ii) the
Indemnifying Party fails to assume the defense of such action with counsel
satisfactory to the Indemnified Party in its reasonable judgment or within a
reasonable time after receiving notice of the commencement of any such action,
suit, proceeding, investigation or threat, (iii) the named parties to any such
action (including any impleaded parties) have been advised by such counsel that
either (A) representation of such Indemnified Party and the Indemnifying Party
by the same counsel would be inappropriate under applicable standards of
professional conduct or (B) there may be one or more legal defenses available to
it that are different from or additional to those available to the Indemnifying
Party. In either of such cases, the Indemnifying Party shall not have the right
to assume the defense of such action on behalf of such Indemnified Party. No
Indemnifying Party shall be liable for any settlement entered into without its
written consent, which consent shall not be unreasonably withheld. The rights
accorded to any Indemnified Party hereunder shall be in addition to any rights
that such Indemnified Party may have at common law, by separate agreement or
otherwise.
(d) Contribution. If the indemnification provided for
in Section 9(a) from the Indemnifying Party is unavailable to an Indemnified
Party in respect of any losses, claims, damages, expenses or other liabilities
referred to therein, the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, expenses or other
liabilities in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party and Indemnified Party in connection with the actions
that resulted in such losses, claims, damages, expenses or other liabilities, as
well as any other relevant equitable considerations. The relative faults of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, was made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the Indemnifying Party's and
Indemnified Party's relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, expenses or other liabilities
referred to above shall be deemed to include, subject to the limitations set
forth in Sections 9(a), 9(b) and 9(c), any legal or other fees, charges or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
<PAGE>
13
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9(d) were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution pursuant to this
Section 9(d).
If indemnification is available under this Section 9, the
Indemnifying Party shall indemnify each Indemnified Party to the full extent
provided in Sections 9(a) and 9(b) without regard to the relative fault of the
Indemnifying Party or Indemnified Party or any other equitable consideration
provided for in this Section 9(d).
10. Rule 144; Other Exemptions. The Company covenants that it
shall file any reports required to be filed by it under the Exchange Act, and
that it shall take such further action as each Holder may reasonably request
(including, but not limited to, providing any information necessary to comply
with Rules 144 and 144A under the Act), all to the extent required from time to
time to enable such Holder to sell Registrable Securities without registration
under the Act within the limitation of the exemptions provided by (a) Rule 144
or Rule 144A under the Act, as such rules may be amended from time to time, or
(b) any other rules or regulations now existing or hereafter adopted by the SEC.
The Company shall, upon the request of any Holder, deliver to such Holder a
written statement as to whether the Company has complied with such requirements.
11. Board of Directors. The Company has informed the Buyers
that the nominees for the Board of Directors at the next annual meeting of
stockholders of the Company will be the directors of the Company who are
directors at the time of the public announcement of the Merger, and the Buyers
agree they will not request any change in the size of the Board of Directors
with respect to such meeting or take any actions inconsistent with the
foregoing. At any annual meeting of stockholders of the Company following such
meeting referred to in the previous sentence ("Subsequent Annual Meetings"), the
Buyers, acting jointly, shall have the right to designate a number of nominees
to serve as directors constituting at least a percentage of the Board of
Directors equal to the percentage of outstanding shares of Company Common Stock
then owned in the aggregate by the Buyers ("Proportionate Percentage").
12. Miscellaneous.
(a) Recapitalizations, Exchanges, etc. The provisions
of this Agreement shall apply, to the full extent set forth herein with respect
to the Common Stock, to any and all shares of capital stock of the Company or
any successor or assign of the Company (whether by merger, consolidation, sale
of assets or otherwise) that may be issued in respect of, in exchange for or in
substitution of, the Common Stock and shall be appropriately adjusted for any
stock dividends, splits, reverse splits, combinations, recapitalizations and the
like occurring after the date hereof.
<PAGE>
14
(b) No Inconsistent Agreements. The Company shall not
enter into any agreement with respect to its securities that is inconsistent
with or adversely affects the rights granted to the Holders in this Agreement.
(c) Remedies. The Holders, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
shall be entitled to specific performance of their rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive in any action for specific performance the
defense that a remedy at law would be adequate.
(d) Amendments and Waivers. Except as otherwise
provided herein, the provisions of this Agreement may not be amended, modified
or supplemented, and waivers or consents to departures from the provisions of
such section may not be given unless the Company has obtained the prior written
consent of (i) the Buyers for so long as the Buyers hold any Registrable
Securities and (ii) the Holders holding at least 66 2/3% of the Registrable
Securities.
(e) Notices. Any notice or other communication
required or permitted hereunder shall be in writing and shall be delivered
personally, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally or sent by facsimile transmission or, if mailed, five days
after the date of deposit in the United States mails, as follows:
(i) if to the Buyers:
Three Cities Research, Inc.
650 Madison Avenue
New York, New York 10022
Attention: Willem F. P. de Vogel
Telephone: (212) 838-9660
Facsimile: (212) 980-1142
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Judith R. Thoyer, Esq.
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
<PAGE>
15
(ii) if to the Company:
The Leslie Fay Company, Inc.
1412 Broadway
New York, New York 10018
Attention: John J. Pomerantz
Telephone: (212) 221-4141
Facsimile: (212) 221-4287
with a copy to:
Parker, Chapin, Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: Michael J. Shef, Esq.
Telephone: (212) 704-6140
Facsimile: (212) 704-6288
(iii) if to any Holder, to such Holder's address
as it appears on the record books of the
Company.
Either party may by notice given in accordance with this
Section 12(e) to the other party designate another address or person for receipt
of notices hereunder.
(f) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of the
parties hereto; provided, however, that the registration rights and the other
obligations of the Company contained in this Agreement shall, with respect to
any Registrable Security, be automatically transferred from a Holder to any
subsequent holder of such Registrable Security (including any pledgee).
Notwithstanding any transfer of such rights, all of the obligations of the
Company hereunder shall survive any such transfer and shall continue to inure to
the benefit of all transferees.
(g) Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE.
(j) Jurisdiction. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any
<PAGE>
16
agreements or transactions contemplated hereby may be brought in the courts of
the State of New York or of the United States of America for the Southern
District of New York and hereby expressly submits to the personal jurisdiction
and venue of such courts for the purposes thereof and expressly waives any claim
of improper venue and any claim that such courts are an inconvenient forum. Each
party hereby irrevocably consents to the service of process of any of the
aforementioned courts in any such suit, action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the address
set forth in Section 11(e), such service to become effective 10 days after such
mailing.
(k) Severability. If any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
it being intended that all of the rights and privileges of the Holders shall be
enforceable to the fullest extent permitted by law.
(l) Entire Agreement. This Agreement is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings in respect of the subject
matter contained herein, other than those set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
(m) Further Assurances. Each of the parties shall
execute such documents and perform such further acts as may be reasonably
required or desirable to carry out or to perform the provisions of this
Agreement.
<PAGE>
17
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be executed and delivered by their respective officers hereunto duly
authorized as of the date first above written.
THE LESLIE FAY COMPANY, INC.
By: /s/ Warren Wishart
--------------------------------
Name: Warren Wishart
Title: Chief Financial Officer
THREE CITIES OFFSHORE II C.V.
By: THREE CITIES ASSOCIATES N.V.,
its general partner
By: /s/ J. William Uhrig
-----------------------------
J. William Uhrig
Managing Director
THREE CITIES FUND II, L.P.
By: TCR ASSOCIATES, L.P.,
its general partner
By: /s/ Willem F. P. de Vogel
-----------------------------
Willem F. P. de Vogel
General Partner
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
THREE CITIES FUND II, L.P.,
THREE CITIES OFFSHORE II C. V.,
TCR ACQUISITION SUB CO.
and
THE LESLIE FAY COMPANY, INC.
-----------------------------------------------------
Dated as of May 12, 1999
-----------------------------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER..............................................2
Section 1.1 The Merger..............................................2
Section 1.2 Closing.................................................2
Section 1.3 Effective Time..........................................2
Section 1.4 Effects of the Merger...................................2
Section 1.5 Certificate of Incorporation and By-laws
of the Surviving Corporation............................2
Section 1.6 Officers and Directors of the Surviving Corporation.....3
ARTICLE II EFFECT OF MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS...................3
Section 2.1 Company Common Stock....................................3
Section 2.2 Merger Sub Shares.......................................3
Section 2.3 Common Share Elections..................................4
Section 2.4 Proration...............................................5
Section 2.5 Surrender and Payment...................................6
Section 2.7 Stock Options...........................................7
Section 2.8 Lost, Stolen or Destroyed Certificates..................7
Section 2.9 Adjustments to Prevent Dilution.........................8
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY..........................................8
Section 3.1 Organization and Qualification; Subsidiaries............8
Section 3.2 Certificate of Incorporation and By-Laws................9
Section 3.3 Capitalization..........................................9
Section 3.4 Authority..............................................10
Section 3.5 No Conflict............................................10
Section 3.6 Required Filings and Consents..........................11
Section 3.7 Permits; Compliance with Law...........................11
Section 3.8 SEC Filings; Financial Statements......................12
Section 3.9 Absence of Certain Changes or Events...................13
Section 3.10 Employee Benefit Plans; Labor Matters..................13
Section 3.11 Contracts; Debt Instruments............................15
Section 3.12 Litigation.............................................16
Section 3.13 Environmental Matters..................................16
Section 3.14 Intellectual Property..................................17
Section 3.15 Taxes..................................................17
Section 3.16 Title to Properties....................................17
Section 3.17 Agreements with Regulatory Agencies....................18
Section 3.18 Suppliers and Customers................................18
Section 3.19 Insurance..............................................18
Section 3.20 Officers, Directors and Employees......................18
i
<PAGE>
Section 3.21 Brokers................................................19
Section 3.22 Certain Statutes.......................................19
Section 3.23 Information............................................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF BUYERS AND MERGER SUB...............................20
Section 4.1 Organization...........................................20
Section 4.2 Certificate of Incorporation and By-Laws...............20
Section 4.3 Capitalization of Merger Sub...........................20
Section 4.4 Authority..............................................20
Section 4.5 No Conflict............................................21
Section 4.6 Required Filings and Consents..........................21
Section 4.7 Brokers................................................21
Section 4.8 Information............................................22
Section 4.9 Interim Operations of Merger Sub.......................22
Section 4.10 Financing..............................................22
ARTICLE V COVENANTS..............................................22
Section 5.1 Conduct of Business of the Company.....................22
Section 5.2 Certain Interim Operations of Merger Sub...............24
Section 5.3 Other Actions..........................................25
Section 5.4 Notification of Certain Matters........................25
Section 5.5 Proxy Statement........................................25
Section 5.6 Stockholders' Meetings; Action by Written Consent......27
Section 5.7 Access to Information..................................27
Section 5.8 No Solicitation........................................28
Section 5.9 Directors' and Officers' Indemnification...............29
Section 5.10 Consents; Filings; Further Action......................30
Section 5.11 Public Announcements...................................30
Section 5.12 Expenses...............................................31
Section 5.13 Takeover Statutes......................................31
Section 5.14 Control of the Company's Operations....................31
Section 5.15 Tax Reporting..........................................31
ARTICLE VI CONDITIONS.............................................31
Section 6.1 Conditions to Each Party's Obligation to Effect
the Merger.............................................31
Section 6.2 Conditions to Obligation of Buyers and the Merger Sub..32
Section 6.3 Conditions to Obligation of the Company................32
ARTICLE VII TERMINATION............................................33
Section 7.1 Termination............................................33
Section 7.2 Effect of Termination..................................34
Section 7.3 Fees and Expenses......................................34
ii
<PAGE>
ARTICLE VIII MISCELLANEOUS..........................................35
Section 8.1 Defined Terms..........................................35
Section 8.2 Non-Survival of Representations and Warranties.........38
Section 8.3 VENUE; WAIVER OF JURY TRIAL............................38
Section 8.4 Notices................................................39
Section 8.5 Entire Agreement.......................................40
Section 8.6 No Third-Party Beneficiaries...........................40
Section 8.7 Obligations of Buyers and of the Company...............40
Section 8.8 Counterparts...........................................40
Section 8.9 Interpretation.........................................40
Section 8.10 Assignment.............................................40
Section 8.11 Specific Performance...................................41
Section 8.12 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies...............................41
Section 8.13 Usage..................................................41
Section 8.14 Headings...............................................41
Section 8.15 Further Assurances.....................................41
Annexes
- -------
Annex A Share Conversion
Exhibits
- --------
Exhibit A Amended and Restated Certificate of Incorporation
iii
<PAGE>
INDEX OF DEFINED TERMS
Page
----
Acquisition Agreement.........................................................35
affiliate.....................................................................35
Agreement......................................................................1
Benefit Plans.................................................................14
Blue Sky Laws.................................................................11
business day..................................................................35
Buyer Material Adverse Effect.................................................35
Buyers' Consent...............................................................20
Cash Election..................................................................4
Cash Election Number...........................................................5
Certificate of Merger..........................................................2
CIT...........................................................................33
CIT Agreement.................................................................33
Claims........................................................................35
Closing........................................................................2
Closing Date...................................................................2
Code...........................................................................6
Common Shares..................................................................1
Company........................................................................1
Company Charter Documents......................................................9
Company Disclosure Letter......................................................8
Company Financial Advisor.....................................................19
Company Material Adverse Effect...............................................35
Company Option Plans...........................................................7
Company Permits...............................................................11
Company Preferred Stock........................................................9
Company SEC Reports...........................................................12
Company Stock Option...........................................................7
Company Stockholders Meeting..................................................25
Company Subsidiaries...........................................................8
Contract......................................................................36
D&O Insurance.................................................................29
Delaware State Secretary.......................................................2
DGCL........................................................................1, 2
Dissenting Shares..............................................................7
Dissenting Stockholder.........................................................7
Effective Time.................................................................2
Electing Cash Shares...........................................................3
Election Date..................................................................4
Eligible Institution...........................................................4
Environment...................................................................36
Environmental Claims..........................................................36
ERISA.........................................................................14
Excess Proration Factor........................................................5
iv
<PAGE>
Exchange Act...................................................................4
Exchange Agent.................................................................6
Fee...........................................................................34
Form 10-K......................................................................9
Form of Election...............................................................4
GAAP..........................................................................36
Governmental Entity...........................................................36
HSR Act.......................................................................11
including.....................................................................36
Indebtedness..................................................................36
Indemnified Parties...........................................................29
Intellectual Property.........................................................17
knowledge.....................................................................36
Law...........................................................................37
Liens.........................................................................37
Merger.........................................................................1
Merger Consideration...........................................................3
Merger Sub.....................................................................1
Merger Sub Charter Documents.................................................20
Merger Sub Common Stock........................................................3
NASDAQ........................................................................37
Non-Cash Election Share........................................................3
Person........................................................................37
Proxy Materials...............................................................26
Proxy Statement...............................................................25
Registration Statement........................................................25
Regulatory Agreement..........................................................18
Representatives...............................................................27
Requisite Company Vote........................................................10
Safety and Environmental Laws.................................................37
SEC............................................................................4
Securities Act................................................................11
Stock Purchase Agreement......................................................37
subsidiaries..................................................................37
subsidiary....................................................................37
Superior Proposal.............................................................37
Surviving Corporation..........................................................1
Surviving Corporation Common Shares............................................1
Surviving Corporation Shares...................................................3
Systems.......................................................................17
Takeover Proposal.............................................................28
Takeover Statute..............................................................37
Taxes.........................................................................38
Teamsters Agreement...........................................................14
Title IV Plan.................................................................14
v
<PAGE>
UNITE Agreement...............................................................14
Year 2000 Compliant...........................................................17
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, is made and entered into as
of this 12th day of May, 1999 (the "Agreement"), by and among THREE CITIES FUND
II, L.P., a Delaware limited partnership ("TCF II"), THREE CITIES OFFSHORE II
C.V., a Netherlands Antilles limited partnership ("TCO" and, together with TCF
II, "Buyers"), TCR ACQUISITION SUB CO., a Delaware corporation owned by Buyers
("Merger Sub"), and THE LESLIE FAY COMPANY, INC., a Delaware corporation (the
"Company").
WHEREAS, Buyers and the Company desire that Merger Sub merge
with and into the Company (the "Merger"), upon the terms and conditions set
forth herein and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL") with the result that the Company shall continue as the
surviving corporation (the "Surviving Corporation") and the separate existence
of Merger Sub shall cease;
WHEREAS, Buyers and the Company desire that upon the Merger,
at the Effective Time (as hereinafter defined), all issued and outstanding
shares of common stock, par value $.01 per share, of the Company (collectively,
the "Common Shares"), other than Electing Cash Shares and Dissenting Shares
(each as hereinafter defined, (a) be converted into the right to receive cash or
(b) remain outstanding as Surviving Corporation Common Shares (as defined
below);
WHEREAS, Buyers and the Company desire that upon the Merger,
at the Effective Time, all issued and outstanding shares of capital stock of
Merger Sub be converted into newly issued shares of common stock, par value $.01
per share of the Surviving Corporation ("Surviving Corporation Common Shares");
WHEREAS, the respective Boards of Directors of the Company and
Merger Sub have each approved this Agreement and declared it to be advisable;
and
WHEREAS, Buyers own 2,158,000 Common Shares in the aggregate.
NOW, THEREFORE, in consideration of the premises and
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, agree as follows:
<PAGE>
2
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL at the
Effective Time (as defined herein), Merger Sub shall be merged with and into the
Company, whereupon the separate existence of Merger Sub shall cease, and the
Company shall continue as the Surviving Corporation.
Section 1.2 Closing. Upon the terms and subject to the
conditions of this Agreement, the closing of the Merger (the "Closing") shall
take place as soon as practicable, but in no event later than the second
business day (the "Closing Date") following satisfaction or waiver of all of the
conditions set forth in Article VI, at the offices of Paul, Weiss, Rifkind,
Wharton & Garrison, 1285 Avenue of the Americas, New York, New York or at such
other place and time and/or other date as agreed to in writing by the parties
hereto.
Section 1.3 Effective Time. At the Closing Date (or on such
other date as the parties hereto agree may agree), the Company will cause a
Certificate of Merger (the "Certificate of Merger") and all other filings
required by Delaware law in connection with the Merger to be executed in
accordance with the relevant provisions of the DGCL, and delivered for filing
with the Secretary of State of the State of Delaware (the "Delaware State
Secretary"). The Merger shall become effective upon the filing of the
Certificate of Merger with the Delaware State Secretary or at such later time as
Buyers and the Company shall agree and as is specified in the Certificate of
Merger (the "Effective Time").
Section 1.4 Effects of the Merger. The Merger shall have the
effects set forth in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all
property of the Company and Merger Sub shall vest in the Surviving Corporation,
and all liabilities and obligations of the Company and Merger Sub shall become
liabilities and obligations of the Surviving Corporation.
Section 1.5 Certificate of Incorporation and By-laws of the
Surviving Corporation. The Amended and Restated Certificate of Incorporation, as
amended, of the Company, which shall be amended as of the Effective Time
substantially in the form set forth on Exhibit A, shall become from and after
the Effective Time the Certificate of Incorporation of the Surviving
Corporation, until thereafter changed or amended as provided therein or by
applicable law. The By-laws of the Company, as in effect immediately prior to
the Effective Time, shall become from and after the Effective Time the By-laws
of the Surviving Corporation, until thereafter changed or amended as provided
therein or by applicable law.
<PAGE>
3
Section 1.6 Officers and Directors of the Surviving
Corporation.
(a) The directors of the Company immediately prior to
the Effective Time will be the directors of the Surviving Corporation, and they
shall hold office until their respective successors are duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and By-laws as in effect from
time to time of the Surviving Corporation.
(b) The officers of the Company immediately prior to
the Effective Time will be the officers of the Surviving Corporation, and they
shall hold office until their respective successors are duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and By-laws as in effect from
time to time of the Surviving Corporation.
ARTICLE II
EFFECT OF MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
Section 2.1 Company Common Stock. Except as otherwise provided
in Section 2.6 with respect to Common Shares as to which appraisal rights have
been exercised, at the Effective Time, each Common Share issued and outstanding
immediately prior to the Effective Time:
(a) in the case of Common Shares (other than Electing
Cash Shares and Dissenting Shares (each as defined below)), shall remain
outstanding as one fully paid and nonassessable Surviving Corporation Common
Share (a "Non-Cash Election Share"); and
(b) in the case of Common Shares with respect to
which an election to receive cash has been effectively made and not revoked or
forfeited pursuant to Section 2.3 (the "Electing Cash Shares"), subject to
proration pursuant to Section 2.4, shall be converted into the right to receive
a cash payment of $7.00 (the "Merger Consideration").
Section 2.2 Merger Sub Shares. At the Effective Time, all of
the shares of common stock, par value $0.01 per share, of Merger Sub ("Merger
Sub Common Stock") issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, automatically be converted into either (a) 1,111,966 Surviving
Corporation Common Shares or (b) if the Electing Cash Shares are less than
2,111,966 shares, that number of Surviving Corporation Common Shares as shall be
set forth on Annex A hereto. Upon such conversion, each Buyer shall own a pro
rata portion of such
<PAGE>
4
Surviving Corporation Common Shares based on its ownership percentage of Merger
Sub Common Stock immediately prior to such conversion.
Section 2.3 Common Share Elections.
(a) Each Person who, on the Election Date (as defined
in Section 2.3(b)), is a record holder of Common Shares shall be entitled, with
respect to all or any portion of such Common Shares, to make an unconditional
election to receive the Merger Consideration for each such Share on the basis
hereinafter set forth ("Cash Election").
(b) The Company shall prepare a form of election,
which form shall also be a letter of transmittal and shall be subject to the
reasonable approval of Buyers (as the same may be amended or supplemented, the
"Form of Election"), to be mailed by the Company with the Proxy Statement (as
hereinafter defined) to the record holders of Common Shares as of the record
date for the Company Stockholders Meeting (as hereinafter defined) and otherwise
distributed in accordance with the requirements of the Securities and Exchange
Commission ("SEC"), which Form of Election shall be used by each record holder
of Common Shares who wishes to elect, subject to the provisions of Sections 2.3
and 2.4, to receive the Merger Consideration for any or all Common Shares as to
which it is the record holder. The Company shall use its reasonable best efforts
to make the Form of Election and the Proxy Statement available to all Persons
who become holders of Common Shares during the period between the date hereof
(or such record date) and the Election Date. Any such holder's election to
receive the Merger Consideration shall have been properly made only if the
Exchange Agent (as hereinafter defined) shall have received at its designated
office, by 5:00 p.m., local time for the Exchange Agent, on the fifth business
day (or such other business day as agreed upon by the Company and Buyers and
publicly announced) prior to the date of the Company Stockholders Meeting (the
"Election Date"), pursuant to (i) a Form of Election properly completed and
signed and accompanied by certificates representing the Common Shares to which
such Form of Election relates, duly endorsed in blank or otherwise in form
acceptable for transfer on the books of the Company (or by an appropriate
guarantee of delivery of such certificates as set forth in such Form of Election
from a firm that is an "eligible guarantor institution" (as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (an "Eligible Institution"), provided such certificates are in fact
delivered to the Exchange Agent by the date set forth in the guarantee of
delivery) or (ii) such other procedures as may be set forth in the Proxy
Statement.
(c) Any Form of Election may be revoked by the holder
submitting it to the Exchange Agent (as hereinafter defined) only by notice
received by the Exchange Agent prior to 5:00 p.m., local time for the Exchange
Agent, on the Election Date in accordance with the procedures set forth in the
Proxy Statement (unless Buyers and the Company determine not less than two
business days prior to the Election Date that the Closing Date is not likely to
occur within five business days
<PAGE>
5
following the Election Date, in which case any Form of Election will remain
revocable until a subsequent date that shall be a date prior to the Closing Date
determined by Buyers and the Company and publicly announced). In addition, all
Forms of Election shall automatically be revoked if the Exchange Agent is
notified in writing by Buyers and the Company that this Agreement has been
terminated. If a Form of Election is properly revoked, the certificate or
certificates (or guarantees of delivery, as appropriate) for the Common Shares
to which such Form of Election relates shall be promptly returned by the
Exchange Agent to the stockholder submitting the same, or pursuant to such other
procedures as are set forth in the Proxy Statement.
(d) The determination of the Exchange Agent (or the
Company if the Exchange Agent declines to make such determination) shall be
binding as to whether elections to receive the Merger Consideration have been
properly made or revoked pursuant to this Section 2.3 and as to when elections
and revocations were received by it. If the Exchange Agent reasonably determines
in good faith that any election to receive the Merger Consideration was not
properly made with respect to Common Shares, such Common Shares shall be treated
by the Exchange Agent as Non-Cash Election Shares. The Exchange Agent (or the
Company if the Exchange Agent declines to make such determination) shall also
make all computations as to the allocation and the proration contemplated by
Section 2.4 and shall promptly notify Buyers and the Company of such
computation, which shall be conclusive and binding on Buyers and the Company
absent manifest error, and any such computation shall be conclusive and binding
on the holders of Common Shares. The Exchange Agent may, with the mutual written
agreement of Buyers and the Company, establish procedures as are consistent with
this Section 2.3 for the implementation of the elections provided for herein as
shall be necessary or desirable fully to effect such elections.
Section 2.4 Proration.
(a) Notwithstanding anything in this Agreement to the
contrary, the maximum number of Common Shares that may receive the Merger
Consideration at the Effective Time (the "Cash Election Number") shall be equal
to 2,111,966.
(b) If the number of Electing Cash Shares exceeds the
Cash Election Number, each Electing Cash Share shall (a) be converted into the
right to receive the Merger Consideration or (b) remain outstanding as a
Surviving Corporation Common Share, in the following manner:
(i) a proration factor (the "Excess
Proration Factor") shall be determined by dividing the Cash Election
Number by the total number of Electing Cash Shares;
<PAGE>
6
(ii) the number of Electing Cash Shares
entitled to receive the Merger Consideration shall be determined by
multiplying the Excess Proration Factor by the total number of Electing
Cash Shares (subject to rounding down to the next lowest whole number);
and
(iii) all Electing Cash Shares, other than
those shares entitled to receive the Merger Consideration in accordance
with Section 2.4(b)(ii), shall remain outstanding as Surviving
Corporation Common Shares in accordance with Section 2.1(a).
Section 2.5 Surrender and Payment.
(a) Prior to the Election Date, the Company shall
authorize an exchange agent satisfactory to Buyers to act as Exchange Agent
hereunder (the "Exchange Agent") for the purpose of receiving Forms of Election
and exchanging certificates representing Common Shares for the Merger
Consideration. Assuming the receipt of funds held by the Merger Sub as set forth
in Section 4.10, the Company shall make available to the Exchange Agent prior to
the Effective Time the aggregate Merger Consideration to be paid in respect of
the Electing Cash Shares. For purposes of determining the Merger Consideration
to be made available, the Company shall assume that no holder of Common Shares
will perfect its right to appraisal of its Common Shares.
(b) Each holder of Common Shares that have been
converted into a right to receive the Merger Consideration in accordance with
Section 2.3 shall be entitled promptly following the Effective Time to receive
the Merger Consideration payable in respect of such Common Shares.
(c) The Company shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of Common Shares such amounts as the Company is required
to deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
the Company, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Common Shares in respect of
which such deduction and withholding was made by the Company.
(d) In the event of a transfer of ownership of a
Common Share that is not registered in the transfer records of the Company, a
certificate representing the proper number of Common Shares may be issued or
paid to such a transferee if the certificate formerly representing such Common
Shares is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect the transfer and to evidence that any applicable stock
transfer taxes have been paid. If any portion of the Merger Consideration is to
be paid to a Person other than the registered holder of the Common Shares
represented by the certificate or certificates
<PAGE>
7
surrendered in exchange therefor, it shall be a condition to such payment that
the certificate or certificates so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting such
payment shall pay to the Exchange Agent any transfer or other taxes required as
a result of such payment to a Person other than the registered holder of such
Common Shares or establish to the satisfaction of Buyers, the Company or
Exchange Agent that such tax has been paid or is not payable.
Section 2.6 Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, Common Shares issued and outstanding immediately
prior to the Effective Time held by any Person who has the right to demand, and
who properly demands ( a "Dissenting Stockholder"), an appraisal of such shares
("Dissenting Shares"), in accordance with Section 262 of the DGCL (or any
successor provision) shall not be converted into a right to receive the Merger
Consideration or remain outstanding as Surviving Corporation Common Shares,
unless such holder fails to perfect, withdraws or otherwise loses such holder's
right to such appraisal, if any. If, after the Effective Time, such holder fails
to perfect, withdraws or otherwise loses any such right to appraisal and payment
under the DGCL, each such share of such holder shall be treated as a Common
Share that has remained outstanding as a Surviving Corporation Common Share,
without interest or dividends thereon, in accordance with Section 2.1(a). At the
Effective Time, any Dissenting Stockholder shall cease to have any rights with
respect thereto, except the rights provided in Section 262 of the DGCL (or any
successor provision) and as provided in the immediately preceding sentence.
Section 2.7 Stock Options. Immediately following the Effective
Time, each option to purchase Common Shares (a "Company Stock Option"), which is
outstanding and exercisable (whether or not then vested) at such time for Common
Shares under any of the Company's stock option plans (the "Company Option
Plans") shall remain outstanding and all terms and conditions of the Company
Stock Options, including vesting provisions, shall remain in effect as they
exist as of the Effective Time, except that not more than 105,254 Company Stock
Options will, in accordance with the terms thereof, vest as a result of the
transactions contemplated hereby but will otherwise remain subject to the same
terms and conditions to which they are subject as of the date hereof. Prior to
the Effective Time, the Company shall make such amendments and take such other
actions, if necessary, with respect to the Company Option Plans as shall be
necessary to comply with this Section 2.7.
Section 2.8 Lost, Stolen or Destroyed Certificates. In the
event any certificate shall have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the Person claiming such certificate to be lost,
stolen or destroyed and the posting by such Person of a bond in the form
customarily required by the Company as indemnity against any claim that may be
made against it with respect to such certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed certificate the shares of
Surviving Corporation Common Shares and any unpaid dividends or other
distributions in respect of that certificate issuable or payable
<PAGE>
8
under this Article 2 upon due surrender of and deliverable in respect of the
Common Shares represented by such certificate under this Agreement, in each
case, without interest; provided, however, that the Proxy Statement (as defined
in Section 5.5) will set forth a procedure to permit Cash Election for the
Common Shares represented by such lost, stolen or destroyed certificates.
Section 2.9 Adjustments to Prevent Dilution. In the event that
prior to the Effective Time there is a change in the number of Common Shares or
securities convertible or exchangeable into or exercisable for Common Shares
issued and outstanding as a result of a distribution, reclassification, stock
split (including a reverse stock split), stock dividend or distribution or other
similar transaction, the numbers of Common Shares set forth herein, and the
Merger Consideration, shall be equitably adjusted to eliminate the effects of
that event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyers and Merger Sub
that, except as set forth in the Company SEC Reports (as defined in Section 3.8)
that are publicly available prior to the date of this Agreement:
Section 3.1 Organization and Qualification; Subsidiaries.
(a) Each of the Company and each subsidiary of the
Company (collectively, the "Company Subsidiaries") has been duly organized and
is validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization, as the case may be, and has the requisite
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted. Each of the Company and each Company Subsidiary is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary.
(b) Schedule 3.1(b) of the letter from the Company,
dated the date hereof, addressed to Buyers and Merger Sub (the "Company
Disclosure Letter") sets forth a complete and correct list of all of the Company
Subsidiaries and the jurisdiction in which the Company and Company Subsidiaries
are duly qualified or authorized to do business. Neither the Company nor any
Company Subsidiary holds any interest in any Person other than (i) the Company
Subsidiaries so listed and (ii) securities owned, solely as an investment, of
any Person traded on any national securities exchange or through the Nasdaq
National Market System that do not exceed more than 1% off any class of
securities of such Person.
<PAGE>
9
Section 3.2 Certificate of Incorporation and By-Laws. Copies
of the Company's Amended and Restated Certificate of Incorporation and By-laws,
each as amended through the date of this Agreement (collectively, the "Company
Charter Documents") that are exhibits to the Company's Report on Form 8-K, dated
June 20, 1997 and Annual Report on Form 10-K for the fiscal year ended January
2, 1999 ("Form 10-K") are complete and correct copies of those documents. The
Company Charter Documents and all comparable corporate organizational documents
of the Company Subsidiaries are in full force and effect. The Company is not in
violation of any of the provisions of the Company Charter Documents.
Section 3.3 Capitalization.
(a) The authorized capital stock of the Company
consists of (i) 20,000,000 Common Shares and (ii) 500,000 shares of preferred
stock, par value $0.01 per share ("Company Preferred Stock"), of the Company. As
of the date hereof, (i) 6,041,138 Common Shares are issued and outstanding, all
of which were duly authorized and validly issued and are fully paid,
nonassessable and not subject to preemptive rights, (ii) 817,100 Common Shares
are held in the treasury of the Company and (iii) no shares of Company Preferred
Stock are issued and outstanding. The Common Shares to be issued to Buyers in
connection with the Merger upon such issuance will be duly authorized, validly
issued, fully paid and nonassessable and will not be subject to any preemptive
rights.
(b) Other than in connection with this Agreement,
there are no outstanding contractual obligations of the Company or any Company
Subsidiary to repurchase, redeem or otherwise acquire any Common Shares or any
capital stock of any Company Subsidiary.
(c) As of the date hereof, an aggregate of 1,356,874
Company Stock Options are outstanding under the Company Option Plans. Except (i)
for such Company Stock Options and (ii) under agreements or arrangements set
forth in Schedule 3.3(c) of the Company Disclosure Letter, there are no options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights or other rights, agreements, arrangements or commitments of
any character to which the Company is a party or by which the Company is bound
relating to the issued or unissued capital stock of the Company or any Company
Subsidiary or obligating the Company or any Company Subsidiary to issue or sell
any shares of capital stock of, or other equity interests in, the Company or any
Company Subsidiary. Schedule 3.3(c) of the Company Disclosure Letter sets forth,
as of the date of this Agreement, (x) the Persons to whom Company Stock Options
have been granted, (y) the exercise price for the Company Stock Options held by
each such Person and (z) whether such Company Stock Options are subject to
vesting and, if subject to vesting, the dates on which each of those Company
Stock Options vest. The Company has obtained the consents of option holders with
respect to waivers of any acceleration of vesting provisions as a result of the
transactions contemplated hereby other than the
<PAGE>
10
consent of option holders holding in the aggregate not more than 105,254 Company
Stock Options.
Section 3.4 Authority.
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its obligations
under this Agreement and to consummate the Merger and the other transactions
contemplated by this Agreement to be consummated by the Company. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of such transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate such
transactions, other than the adoption of this Agreement by a vote of at least
662/3 of the outstanding Common Shares (the "Requisite Company Vote"). This
Agreement (assuming receipt of the Requisite Company Vote) has been duly
authorized and validly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
(b) The Board of Directors (i) has unanimously
adopted the plan of merger set forth in this Agreement and approved this
Agreement and the other transactions contemplated by this Agreement, (ii) has
declared that the Merger is advisable and will recommend that the stockholders
vote in favor of this Agreement and (iii) contains at least five "Continuing
Directors" (as defined in the Company's Amended and Restated Certificate of
Incorporation, as amended).
Section 3.5 No Conflict.
(a) The execution and delivery of this Agreement by
the Company do not, and the performance of this Agreement by the Company will
not:
(i) conflict with or violate any provision
of any Company Charter Document or any equivalent organizational
documents of any Company Subsidiary;
(ii) assuming that all consents, approvals,
authorizations and other actions described in Section 3.5(b) have been
obtained and all filings and obligations described in Section 3.5(b)
have been made, conflict with or violate any Law applicable to the
Company or any Company Subsidiary or by which any property or asset of
the Company or any Company Subsidiary is or may be bound or affected;
or
(iii) result in any breach of or constitute
a default (or an event which with or without notice or lapse of time or
both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien on any
<PAGE>
11
property or asset of the Company or any Company Subsidiary under any
Contract to which the Company or any Company Subsidiary is a party or
by which any of them or their assets or properties is or may be bound
or affected, except for such breaches, defaults or other occurrences
which, individually or in the aggregate, have not resulted and could
not reasonably be expected to result in a Company Material Adverse
Effect.
(b) Schedule 3.5(b) of the Company Disclosure Letter
sets forth a correct and complete list of material Contracts to which the
Company or any Company Subsidiaries are a party or by which they or their assets
or properties is or may be bound or affected under which consents or waivers are
or may be required prior to consummation of the transactions contemplated by
this Agreement.
Section 3.6 Required Filings and Consents. The execution and
delivery of this Agreement by the Company do not, and the performance of this
Agreement by the Company will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Entity, except
for (i) applicable filings required pursuant to the Exchange Act, Securities Act
of 1933, as amended (the "Securities Act"), and applicable state securities or
"blue sky" laws ("Blue Sky Laws"), if any, (ii) applicable filings required
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act"),
(iii) the filing of the Certificate of Merger as required by the DGCL and (iv)
where failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, individually or in the aggregate, have
not resulted and could not reasonably be expected to result in a Company
Material Adverse Effect.
Section 3.7 Permits; Compliance with Law. Each of the Company
and the Company Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for the
Company or any Company Subsidiary to own, lease and operate its properties or to
carry on its business as it is now being conducted (collectively, the "Company
Permits") (but not including, however, Company Permits relating to compliance
with Safety and Environmental Laws (as defined herein), which are addressed in
Section 3.14), except where the failure to have, or the suspension or
cancellation of, any of the Company Permits, individually or in the aggregate,
has not resulted and could not reasonably be expected to result in a Company
Material Adverse Effect, and, as of the date of this Agreement, no suspension or
cancellation of any of the Company Permits is pending or, to the knowledge of
the Company, threatened, except where the failure to have, or the suspension or
cancellation of, any of the Company Permits, individually or in the aggregate,
has not resulted and could not reasonably be expected to result in a Company
Material Adverse Effect. Neither the Company nor any Company Subsidiary is in
conflict with, or in default or violation of, (i) any Law (but not including,
however, any Safety and Environmental Laws, which is addressed in Section 3.14)
applicable to the Company or any Company
<PAGE>
12
Subsidiary or by which any property or asset of the Company or any Company
Subsidiary is or may be bound or affected or (ii) any Company Permits, except
for any such conflicts, defaults or violations that, individually or in the
aggregate, have not resulted and could not reasonably be expected to result in a
Company Material Adverse Effect.
Section 3.8 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports,
statements and other documents (including all exhibits, annexes, supplements and
amendments to such documents) required to be filed by it under the Exchange Act
and the Securities Act since June 4, 1997 (collectively, including any such
documents filed subsequent to the date of this Agreement, the "Company SEC
Reports") and the Company has made available to Buyers and Merger Sub all of the
Company SEC Reports filed with the SEC. The Company SEC Reports, including any
financial statements or schedules included or incorporated by reference, (i)
comply in all material respects with the requirements of the Exchange Act or the
Securities Act or both, as the case may be, applicable to those Company SEC
Reports and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated or necessary in order to make the statements made in those Company SEC
Reports, in the light of the circumstances under which they were made, not
misleading. No Company Subsidiary is subject to the periodic reporting
requirements of the Exchange Act or is otherwise required to file any documents
with the SEC or any national securities exchange or quotation service or
comparable Governmental Entity.
(b) Each of the consolidated balance sheets included
in or incorporated by reference into the Company SEC Reports (including the
related notes and schedules) fairly presented, in all material respects, the
consolidated financial position of the Company as of the dates set forth in
those consolidated balance sheets. Each of the consolidated statements of income
and of cash flows included in or incorporated by reference into the Company SEC
Reports (including any related notes and schedules), fairly presented, in all
material respects, the consolidated results of operations and cash flows, as the
case may be, of the Company and the consolidated Company Subsidiaries for the
periods set forth in those consolidated statements of income and of cash flows
(subject, in the case of unaudited quarterly statements, to notes and normal
year-end audit adjustments that will not be material in amount or effect), in
each case in conformity with GAAP (except, in the case of unaudited quarterly or
other interim statements, as permitted by Form 10-Q of the SEC) consistently
applied throughout the periods indicated.
(c) Except as disclosed in the Company SEC Reports or
specified in Schedule 3.8(c) of the Company Disclosure Letter, since the date of
the most recent audited financial statements included in the Company SEC
Reports, neither the Company nor any Company Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that would be
<PAGE>
13
required to be reflected on a balance sheet or in the related notes prepared in
accordance with GAAP, except for liabilities or obligations incurred in the
ordinary course of business since January 2, 1999 that, individually or in the
aggregate, have not resulted and could not reasonably be expected to result in a
Company Material Adverse Effect.
Section 3.9 Absence of Certain Changes or Events. Since
January 2, 1999, the Company and the Company Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been:
(a) any Company Material Adverse Effect;
(b) any damage, destruction or other casualty loss
with respect to any asset or property owned, leased or otherwise used by it or
any Company Subsidiaries, whether or not covered by insurance, which damage,
destruction or loss, individually or in the aggregate, has resulted or could
reasonably be expected to result in a Company Material Adverse Effect;
(c) any material change by the Company in its or any
Company Subsidiary's accounting methods, principles or practices;
(d) any declaration, setting aside or payment of any
dividend or distribution in respect of Company Common Stock or any redemption,
purchase or other acquisition of any of the Company's securities;
(e) any increase in the compensation or benefits or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, the granting of
stock options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any executive officers of the
Company or any Company Subsidiary.
Section 3.10 Employee Benefit Plans; Labor Matters.
(a) Section 3.10(a) of the Company Disclosure Letter
identifies each material employment, severance or similar contract or
arrangement and each plan, policy, fund, program or contract or arrangement
(whether or not written) providing for compensation, bonus, profit-sharing,
stock option, or other stock related rights or other forms of incentive or
deferred compensation, vacation benefits, insurance coverage (including any
self-insured arrangements), health or medical benefits, disability benefits,
worker's compensation, supplemental unemployment benefits, severance benefits
and post-employment or retirement benefits (including compensation, pension,
health, medical or life insurance or other benefits) under which the Company or
any Company Subsidiary has or in the future could have any
<PAGE>
14
liability, including any liability as a result of being a single employer under
Section 414 of the Code ("Benefit Plans"). There is no Benefit Plan which (i) is
a multiemployer plan (within the meaning of Section 3(37) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) other than the
pension plans to which the Company contributes pursuant to (x) the UNITE
Agreement, which has a term from June 2, 1997 to May 31, 2001 (the "UNITE
Agreement") and (y) the Teamsters Agreement, which has a term from June 20, 1998
to June 19, 2001 (the "Teamsters Agreement"), or (ii) is a plan, other than a
multiemployer plan, subject to Title IV of ERISA (a "Title IV Plan").
(b) The Company has furnished to Buyers copies of the
Benefit Plans (and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof together with the most recent annual
report (Form 5500 including, if applicable, Schedule B thereto), the most recent
actuarial valuation report prepared in connection with any Benefit Plan, and the
most recent Internal Revenue Service determination letter received with respect
to any Benefit Plan.
(c) Each Benefit Plan that is intended to be
qualified under Section 401(a) of the Code is so qualified and has been so
qualified during the period since its adoption; each trust created under any
such Plan is exempt from tax under Section 501(a) of the Code and has been so
exempt since its creation and nothing has occurred with respect to the operation
of any Benefit Plan which would cause the loss of such qualification or
exemption. Each Benefit Plan has been maintained in substantial compliance with
its terms and with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code and no transaction prohibited by Section 406 of ERISA or Section 4975
of the Code, has occurred with respect to any Benefit Plan.
(d) Neither the Company nor any Company Subsidiary
has any current or projected liability in respect of post-employment or
post-retirement health or medical or life insurance benefits for retired, former
or current employees of the Company or any Company Subsidiary, except as
required under applicable law.
(e) Other than the pension plan to which the Company
contributes pursuant to each of the UNITE Agreement and the Teamsters Agreement,
there are no unfunded obligations under any Benefit Plan which are not fully
reflected on the most recent financial statements of the Company.
(f) Neither the Company nor any Company Subsidiary is
party to any collective bargaining agreements other than the UNITE Agreement and
the Teamsters Agreement. There are no unfair labor practices complaint or other
proceeding pending and there is no strike pending or, to the knowledge of the
Company or the Company Subsidiaries, threatened against the Company or any
Company Subsidiary.
<PAGE>
15
(g) With respect to any multiemployer plan (within
the meaning of ERISA section 4001(a)(3)) to which the Company, any Company
Subsidiary or any member of their Controlled Group (within the meaning of
Section 414 of the Code) has any liability or contributes (or has at any time
contributed or had an obligation to contribute): (i) none of the Company, the
Company Subsidiaries or any member of their Controlled Group has incurred any
withdrawal liability under Title IV of ERISA or would be subject to such
liability if, as of the Closing Date, the Company, the Company Subsidiaries or
any member of their Controlled Group were to engage in a complete withdrawal (as
defined in ERISA section 4203) or partial withdrawal (as defined in ERISA
section 4205) from any such multiemployer plan; and (ii) no such multiemployer
plan is in reorganization or insolvent (as those terms are defined in ERISA
section 4241 and 4245, respectively).
(h) No Benefit Plan exists that could result in the
payment to any present or former employee of the Company or any Company
Subsidiaries of any money or other property or accelerate or provide any other
rights or benefits to any present or former employee of the Company or any
Company Subsidiaries as a result of the transactions contemplated by this
Agreement, whether or not such payment would constitute a parachute payment
within the meaning of Code section 280G.
Section 3.11 Contracts; Debt Instruments.
(a) Except as set forth in Schedule 3.10 of the
Company Disclosure Letter, Schedule 3.11(a) of the Company Disclosure Letter
sets forth all of the following Contracts to which either of the Company or
Company Subsidiaries is a party or by or to which any of them or any of its
properties may be bound or subject (other than those specifically set forth on
any other Schedule): (i) Contracts with any current or former officer, director,
shareholder, employee, consultant, agent or other representative or with an
entity in which any of the foregoing is a controlling Person; (ii) Contracts
with any Person to manufacture, sell, distribute or otherwise market any of the
Company Products providing for payments by either of the Company or Company
Subsidiaries in the aggregate of $1,000,000 or more; (iii) Contracts for the
purchase of materials, supplies, goods, services, equipment or other assets
providing for payments by either of the Company or Company Subsidiaries either
of the Company or Company Subsidiaries made payments, in the aggregate of
$1,000,000 or more; (iv) Contracts for the sale of any properties other than in
the ordinary course of business or for aggregate consideration in excess of
$100,000 or for the grant to any Person of any option or preferential rights to
purchase any properties; (v) partnership or joint venture agreements; (vi)
Contracts under which either of the Company or Company Subsidiaries agrees to
indemnify any party or to share Tax liability of any party; (vii) material
Contracts which can be canceled without liability, premium or penalty only on 90
days' or more notice; (viii) Contracts containing covenants of either of the
Company or Company Subsidiaries not to engage in any line of business or with
any Person in any geographical area or covenants of any other Person not to
compete with either of the Company or Company Subsidiaries in any line of
business or in any geographical area; (ix) Contracts containing obligations or
liabilities of any
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16
kind to holders of the capital stock of either of the Company or Company
Subsidiaries as such; (x) Contracts for the payment of fees or other
consideration to any officer or director of either of the Company or Company
Subsidiaries or to any other entity in which any of the foregoing has an
interest; (xi) management Contracts and other similar agreements with any
Person; and (xii) any other Contracts pursuant to the terms of which there is
either a current or future obligation or right of either of the Company or
Company Subsidiaries to make payments in excess of $100,000 or receive payments
in excess of $100,000.
(b) All of the Contracts referred to in Section
3.11(a) are valid and binding upon each of the Company or Company Subsidiaries
as the case may be, in accordance with their terms. Neither the Company nor any
of the Company Subsidiaries is in default in any material respect under any of
such Contracts, nor does any condition exist that with notice or lapse of time
or both would constitute such a material default thereunder. No other party to
any such Contract is in default thereunder in any material respect nor does any
condition exist that with notice or lapse of time or both would constitute such
a material default thereunder, except for violations or defaults that,
individually or in the aggregate, have not resulted and could not reasonably be
expected to result in a Company Material Adverse Effect.
(c) Except for any of the following expressly
identified in the Company SEC Reports, Schedule 3.11(c) of the Company
Disclosure Letter sets forth a list of each loan or credit agreement, note,
bond, mortgage, indenture and any other agreement and instrument pursuant to
which any Indebtedness in excess of $100,000 payable by the Company or a Company
Subsidiary is outstanding or may be incurred. Schedule 3.11(c) of the Company
Disclosure Letter sets forth a description of any material changes to the amount
and terms of the Indebtedness of the Company and the consolidated Company
Subsidiaries as described in the notes to the financial statements set forth as
incorporated by reference in the Form 10-K.
Section 3.12 Litigation. There are no claims pending or, to
the knowledge of the Company, threatened against the Company or any Company
Subsidiary before any Governmental Entity, which if adversely determined,
individually or in the aggregate, has resulted or could reasonably be expected
to result in a Company Material Adverse Effect. Neither the Company nor any
Company Subsidiary is subject to any outstanding order, writ, injunction or
decree, which, individually or in the aggregate, has resulted or could
reasonably be expected to result in a Company Material Adverse Effect.
Section 3.13 Environmental Matters. Except as disclosed in
Schedule 3.13 of the Company Disclosure Letter, (i) each of the Company and
Company Subsidiaries is and has been in material compliance with all applicable
Safety and Environmental Laws and (ii) there is no Environmental Claim (as
defined herein) pending or threatened against either of the Company or Company
Subsidiaries and there is no civil, criminal or administrative judgment or
notice of violation against
<PAGE>
17
either of the Company and Company Subsidiaries pursuant to Safety and
Environmental Laws or principles of common law relating to pollution, protection
of the Environment (as defined herein) or health and safety.
Section 3.14 Intellectual Property.
(a) Except as set forth on Schedule 3.14 of the
Company Disclosure Letter, each of the Company and each of the Company
Subsidiaries owns, possesses or has the legal right to use all the patents,
trademarks, service marks, trade names, brand names, Internet domain names,
designs, logos, technology, copyrights, computer software, software licenses and
licenses (collectively, the "Intellectual Property") necessary for the present
conduct of its business without any known conflict with the rights of others.
(b) The Company has a proper plan in place so that
all software, hardware, databases, and embedded control systems (collectively,
the "Systems") used by the Company and the Company Subsidiaries will be Year
2000 Compliant, except for failures to be Year 2000 Compliant that, individually
or in the aggregate, have not resulted and could not reasonably be expected to
result in a Company Material Adverse Effect. For purposes of this Agreement,
"Year 2000 Compliant" means that the Systems (i) accurately process date and
time data (including calculating, comparing, and sequencing) from, into, and
between the twentieth and twenty-first centuries, the years 1999 and 2000, and
leap year calculations and (ii) operate accurately with other software and
hardware that use standard date format (four digits) for representation of the
year.
(c) Neither the Company nor any Company Subsidiary
is, or, as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, will be, in violation of
any agreement relating to any Intellectual Property, except for violations that,
individually or in the aggregate, have not resulted and could not reasonably be
expected to result in a Company Material Adverse Effect.
Section 3.15 Taxes. Except to the extent that failure to do
so, individually or in the aggregate, has not resulted and could not reasonably
be expected to result in a Company Material Adverse Effect, the Company and the
Company Subsidiaries have filed all Tax returns and reports to be filed by them
and have paid, or established adequate reserves for, all Taxes required to be
paid by them. Except as, individually or in the aggregate, has not resulted and
could not reasonably be expected to result in a Company Material Adverse Effect,
no deficiencies for any Taxes have been proposed, asserted or assessed against
the Company or any Company Subsidiaries, and no requests for waivers of the time
to assess any such Taxes are pending.
Section 3.16 Title to Properties. Each of the Company and
Company Subsidiaries has good title to its real property, free and clear of any
Liens, except for
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18
(a) Liens specifically described in the notes to the Company's audited financial
statements; (b) properties disposed of, or subject to purchase or sales orders,
in the ordinary course of business since January 2, 1999; and (c) Liens securing
Company Taxes, assessments, governmental charges or levies, or the claims of
materialmen, carriers, landlords and like Persons, all of which are not yet due
and payable or are being contested in good faith, so long as such contest does
not involve any substantial danger of the sale, forfeiture or loss of any
assets.
Section 3.17 Agreements with Regulatory Agencies. Neither the
Company nor any Company Subsidiaries is subject to any cease-and-desist or other
order issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any board
resolutions at the request of (each, whether or not listed in Section 3.17 of
the Company Disclosure Letter, a "Regulatory Agreement"), any Governmental
Entity that restricts the conduct of its business or that in any manner relates
to its management or its business, following consummation of the Merger, to
impair Buyers' ability to conduct their business or the business of any of their
subsidiaries, as presently conducted. Neither the Company nor any Company
Subsidiary has been advised by any Governmental Entity that such Governmental
Entity is considering issuing or requesting any Regulatory Agreement.
Section 3.18 Suppliers and Customers. The relationships of
each of the Company and Company Subsidiaries with its suppliers and customers
are good commercial working relationships and, except as set forth on Schedule
3.18 of the Company Disclosure Letter, (a) none of the ten largest suppliers or
ten largest customers within the last 12 months, to the knowledge of the Company
or Company Subsidiaries, intends to cancel or otherwise terminate, the
relationship of such Person with each of the Company or Company Subsidiaries,
and (b) none of such suppliers or customers has during the last 12 months
decreased materially or, to the knowledge of the Company or Company
Subsidiaries, intends to modify materially its relationship with each of the
Company or Company Subsidiaries or intends to decrease or limit materially its
services or supplies to each of the Company or Company Subsidiaries or its usage
or purchase of either of the services or products of each of the Company or
Company Subsidiaries.
Section 3.19 Insurance. The Company has policies or binders of
fire, liability, product liability, workers' compensation, vehicular and other
insurance of the type and in the amounts that is customary for similarly
situated companies in the same industry as the Company.
Section 3.20 Officers, Directors and Employees.
(a) The Form 10-K sets forth the name, title and
total compensation of each officer, director and significant employee of the
Company and
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19
the Company Subsidiaries. Schedule 3.20(a) of the Company Disclosure Letter sets
forth (i) all wage and salary increases, bonuses and increases in any other
direct or indirect compensation received by such Persons since the January 2,
1999; (ii) any payments or commitments to pay any severance or termination pay
to any such Persons; and (iii) any accrual for, or any commitment or agreement
by each of the Company or Company Subsidiaries to pay, such increases, bonuses
or pay, except pursuant to the shared bonus pool described in the Form 10-K.
None of such Persons has indicated to the Company that he or she will cancel or
otherwise terminate such Person's relationship with either of the Company or
Company Subsidiaries.
(b) Except as set forth on Schedule 3.20(b) of the
Company Disclosure Letter, no employee or former employee of the Company or any
Company Subsidiary will become entitled to any bonus, retirement, severance, job
security or similar benefit or enhanced such benefit (including acceleration of
vesting or exercise of an incentive award) as a result of the transactions
contemplated hereby.
(c) There is no Contract, plan or arrangement
(written or otherwise) covering any employee or former employee of the Company
or any Company Subsidiary that, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to the terms of
Section 280G or Section 162(m) of the Code, except for the employment contracts
of John J. Pomerantz and John A. Ward.
Section 3.21 Brokers. Except for Conway Del Genio Gries & Co.,
LLC (the "Company Financial Advisor"), no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the other transactions contemplated by this Agreement based
upon arrangements made by or on behalf of the Company. Prior to the date of this
Agreement, the Company has made available to Buyers and Merger Sub a complete
and correct copy of all agreements between the Company and the Company Financial
Advisor under which the Company Financial Advisor would be entitled to any
payment relating to the Merger and any other transactions contemplated hereby.
Section 3.22 Certain Statutes. The Board of Directors of the
Company has taken all appropriate and necessary actions to ensure that the
restrictions on "business combinations" in Section 203 of the DGCL will not
apply to this Agreement, the Merger or the other transactions contemplated by
this Agreement.
Section 3.23 Information. None of the information to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement or Registration Statement, if any, will, in the case of any such
Registration Statement, at the time it becomes effective and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated in any such Registration Statement or
necessary to make the statements in any such Registration Statement not
misleading, or, in the case of the Proxy Statement or any amendments or
supplements of the Proxy Statement, at the time of the mailing of the Proxy
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20
Statement and any amendments or supplements of the Proxy Statement and at the
time of the Company Stockholders Meeting (as defined in Section 5.5), contain
any untrue statement of a material fact or omit to state any material fact
required to be stated in that Proxy Statement or necessary in order to make the
statements in that Proxy Statement, in light of the circumstances under which
they are made, not misleading. The Registration Statement, if any, and the Proxy
Statement will comply as to form in all material respects with all applicable
provisions of the Securities Act and the Exchange Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BUYERS AND MERGER SUB
Each of Buyers and Merger Sub, as the case may be, represents
and warrants to the Company that:
Section 4.1 Organization. Each of Buyers and Merger Sub has
been duly organized and is validly existing and in good standing under the laws
of its jurisdiction of organization, and has the requisite power and authority
and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted.
Section 4.2 Certificate of Incorporation and By-Laws. Complete
copies of the certificate of incorporation and by-laws of Merger Sub have been
made available to the Company (collectively, the "Merger Sub Charter
Documents"). The Merger Sub is not in violation of any of the provisions of the
Merger Sub Charter Documents.
Section 4.3 Capitalization of Merger Sub. Buyers own, directly
or indirectly, all of the outstanding capital stock of Merger Sub. Other than
the shares of Merger Sub Common Stock outstanding on the date hereof, Merger Sub
has no capital stock, options, warrants or other securities of any type
outstanding on the date hereof.
Section 4.4 Authority. Each of Buyers and Merger Sub has all
necessary partnership and corporate power, as the case may be, and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby to be consummated by it. The
execution and delivery of this Agreement by each of Buyers and Merger Sub and
the consummation by each of Buyers and Merger Sub of such transactions have been
duly and validly authorized by all necessary partnership and corporate action,
as the case may be, and no other company proceedings on the part of Buyers or
Merger Sub are necessary to authorize this Agreement or to consummate such
transactions, other than the adoption of this Agreement by the written consent
of Buyers ("Buyers' Consent").
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21
This Agreement (assuming Buyers' Consent) has been duly authorized and validly
executed and delivered by each of Buyers and Merger Sub and constitutes a legal,
valid and binding obligation of each of Buyers and Merger Sub enforceable
against each of Buyers and Merger Sub in accordance with its terms. Following
the execution hereof, Buyers will execute the Buyers' Consent.
Section 4.5 No Conflict. The execution and delivery of this
Agreement by Buyers and Merger Sub do not, and the performance of this Agreement
by each of Buyers and Merger Sub will not:
(a) conflict with or violate any provision of any
Merger Sub Charter Document or the partnership agreements of Buyers;
(b) assuming that all consents, approvals,
authorizations and other actions described in Section 4.6 have been obtained and
all filings and obligations described in Section 4.6 have been made, conflict
with or violate any Law applicable to Buyers or Merger Sub or by which any
property or asset of Buyers or Merger Sub is or may be bound or affected; or
(c) result in any breach of or constitute a default
(or an event which with or without notice or lapse of time or both would become
a default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any
property or asset of Buyers or Merger Sub under any Contract to which Buyers or
Merger Sub is a party or by which any of them or their assets or properties is
or may be bound or affected except for such breaches, defaults or other
occurrences which, individually or in the aggregate, have not resulted and could
not reasonably be expected to result in a Buyer Material Adverse Effect.
Section 4.6 Required Filings and Consents. The execution and
delivery of this Agreement by Buyers and Merger Sub do not, and the performance
of this Agreement by Buyers and Merger Sub will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Government Entity except (i) for applicable filings required pursuant to the
Exchange Act, Securities Act, and applicable state securities or Blue Sky Laws,
if any, (ii) applicable filings required pursuant to the HSR Act, (iii) the
filing of the Certificate of Merger as required by the DGCL and (iv) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, individually or in the aggregate, have not
resulted and could not reasonably be expected to result in a Buyer Material
Adverse Effect.
Section 4.7 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger and the other transactions contemplated hereby based upon
arrangements made by or on behalf of Buyers or Merger Sub.
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22
Section 4.8 Information. None of the information to be
supplied by Buyers or Merger Sub for inclusion or incorporation by reference in
the Registration Statement, if any, or the Proxy Statement will, in the case of
any such Registration Statement, at the time it becomes effective and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated in any such Registration Statement or
necessary to make the statements in any such Registration Statement not
misleading, or, in the case of the Proxy Statement or any or amendments thereof
or supplements thereto, at the time of the mailing of the Proxy Statement and
any amendments or supplements thereto and at the time of the Company
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated in that Proxy Statement or
necessary in order to make the statements in that Proxy Statement, in light of
the circumstances under which they are made, not misleading.
Section 4.9 Interim Operations of Merger Sub. Merger Sub was
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement, has not engaged in any business activities or conducted any
operations, and Merger Sub does not have any liabilities, other than in
connection with the transactions contemplated by this Agreement.
Section 4.10 Financing. Buyers have, or will have as of the
Closing Date, funded Merger Sub with cash in the form of a contribution to
capital in an amount equal to the product of (a) the Merger Consideration and
(b) the number of Surviving Corporation Common Shares into which the Merger Sub
Common Shares is converted in accordance with Section 2.2.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business of the Company. Except as
contemplated by this Agreement or with the prior written consent of Buyers,
during the period from the date of this Agreement to the Effective Time, the
Company will, and will cause each of the Company Subsidiaries to, conduct its
operations only in the ordinary course of business consistent with past practice
and will use its reasonable best efforts to, and to cause each Company
Subsidiary to, preserve intact the business organization of the Company and each
of the Company Subsidiaries, to keep available the services of the present
officers and key employees of the Company and the Company Subsidiaries, and to
preserve the goodwill of customers, suppliers and all other Persons having
business relationships with the Company and the Company Subsidiaries. Without
limiting the generality of the foregoing, and except as otherwise contemplated
by this Agreement, prior to the Effective Time, the Company will not, and will
not permit any Company Subsidiary to, without the prior written consent of
Buyers:
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23
(a) adopt any amendment to the Company Charter
Documents or the comparable organizational documents of any Company Subsidiary;
(b) except for issuances of capital stock of Company
Subsidiaries to the Company or a wholly owned Company Subsidiary, issue, reissue
or sell, or authorize the issuance, reissuance or sale of (i) additional shares
of capital stock of any class, or securities convertible into capital stock of
any class, or any rights, warrants or options to acquire any convertible
securities or capital stock, other than the issue of Common Shares, in
accordance with the terms of the instruments governing such issuance on the date
hereof, pursuant to the exercise of Company Stock Options outstanding on the
date hereof, or (ii) any other securities in respect of, in lieu of, or in
substitution for, Common Shares outstanding on the date hereof;
(c) declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its capital stock other than
between the Company and any Company Subsidiary;
(d) split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase or otherwise
acquire, any shares of its capital stock, or any of its other securities;
(e) increase the compensation or fringe benefits
payable or to become payable to its directors, officers or significant employees
(whether from the Company or any Company Subsidiaries), or pay any benefit not
required by any existing plan or arrangement (including the granting of stock
options, stock appreciation rights, shares of restricted stock or performance
units) or grant any severance or termination pay to (except pursuant to existing
agreements, plans or policies other than payments to be made solely as a result
of the transactions contemplated hereby), or enter into any employment or
severance agreement with, any director, officer or other significant employee of
the Company or any Company Subsidiaries or establish, adopt, enter into, or
amend any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, savings, welfare, deferred
compensation, employment, termination, severance or other employee benefit plan,
agreement, trust, fund, policy or arrangement for the benefit or welfare of any
directors, officers or current or former employees, except in each case to the
extent required by applicable Law; provided, however, that nothing in this
Agreement will be deemed to prohibit the payment of benefits as they become
payable;
(f) acquire, sell, lease, license, transfer, pledge,
encumber, grant or dispose of (whether by merger, consolidation, purchase, sale
or otherwise), any assets, including capital stock of the Company Subsidiaries
(other than the acquisition and sale of inventory or the disposition of used or
excess equipment and the purchase of raw materials, supplies and equipment, in
either case in the ordinary course of business consistent with past practice),
that in the aggregate is in excess of
<PAGE>
24
$100,000, or enter into any material commitment or transaction outside the
ordinary course of business, other than transactions between a wholly owned
Company Subsidiary and the Company or another wholly owned Company Subsidiary
that in the aggregate is in excess of $100,000;
(g) (i) incur, assume or prepay any long-term
Indebtedness or incur or assume any short-term Indebtedness (including, in
either case, by issuance of debt securities), which in the aggregate is in
excess of $100,000, except that the Company and the Company Subsidiaries may
incur, assume or prepay Indebtedness in the ordinary course of business
consistent with past practice under existing lines of credit, (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person except in the
ordinary course of business, or (iii) make any loans, advances or capital
contributions to, or investments in, any other Person, which in the aggregate is
in excess of $100,000, except (x) in the ordinary course of business, (y) loans,
advances, capital contributions or investments between any wholly owned Company
Subsidiary and (z) Indebtedness described on Schedule 6.1(g) of the Company
Disclosure Letter; or
(h) terminate, cancel or request any material change
in, or agree to any material change in any Contract which is material to the
Company and the Company Subsidiaries taken as a whole, or enter into any
Contract which would be material to the Company and the Company Subsidiaries
taken as a whole, in either case other than in the ordinary course of business
consistent with past practice; or make or authorize any capital expenditure,
other than capital expenditures that are provided for in the Company's budget
for the Company and the Company Subsidiaries taken as a whole for the current
fiscal year;
(i) take any action with respect to accounting
policies or procedures, other than actions in the ordinary course of business
and consistent with past practice or as required pursuant to applicable Law or
GAAP;
(j) waive, release, assign, settle or compromise any
material rights, claims or litigation;
(k) make any Tax election or settle or compromise any
material federal, state, local or foreign income Tax liability; or
(l) authorize or enter into any formal or informal
written or other agreement or otherwise make any commitment to do any of the
foregoing.
Section 5.2 Certain Interim Operations of Merger Sub. Buyers
and Merger Sub covenant and agree that, except as contemplated by this
Agreement, prior to the Effective Time, without the prior written consent of the
Company, Buyers will cause Merger Sub not to do any business other than with
respect to, or in connection with, this Agreement and the transactions
contemplated hereby.
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25
Section 5.3 Other Actions. During the period from the date
hereof to the Effective Time, the Company and Buyers shall not, and Buyers shall
not permit the Merger Sub to, take any action that would, or that could
reasonably be expected to, result in any of the conditions to the Merger set
forth in Article 6 hereof not being satisfied.
Section 5.4 Notification of Certain Matters. Buyers and Merger
Sub and the Company shall promptly notify each other of (a) the occurrence or
non-occurrence of any fact or event which could reasonably be expected (i) to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time, (ii) to cause any material covenant, condition or agreement
hereunder not to be complied with or satisfied in all material respects or (iii)
to result in, in the case of Buyers or Merger Sub, a Buyer Material Adverse
Effect; and, in the case of the Company, a Company Material Adverse Effect, (b)
any failure of the Company or Buyers or Merger Sub, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder in any material respect, (c) any notice or other
material communications from any Governmental Entity in connection with the
transactions contemplated by this Agreement and (d) the commencement of any
suit, action or proceeding that seeks to prevent or seek damages in respect of,
or otherwise relates to, the consummation of the transactions contemplated by
this Agreement; provided, however, that in the case of (a) or (b), no such
notification shall affect the representations or warranties of any party or the
conditions to the obligations of any party hereunder.
Section 5.5 Proxy Statement.
(a) As promptly as practicable after the execution of
this Agreement, the Company shall prepare a proxy statement or information
statement, as appropriate, of the Company relating to the meeting of the
Company's stockholders (the "Company Stockholders Meeting") to be held to
consider adoption of this Agreement (together with any amendments thereto, the
"Proxy Statement"). Such meeting may be a special meeting or combined with the
Company's annual meeting with respect to the Company's fiscal year ended January
2, 1999. The Company shall cause the Proxy Statement to comply as to form and
substance in all material respects with the applicable requirements of (i) the
Exchange Act, (ii) the Securities Act, (iii) the rules and regulations of NASDAQ
and (iv) the DGCL. Substantially contemporaneously with the filing of the Proxy
Statement with the SEC, copies of the Proxy Statement shall be provided to
NASDAQ. Buyers shall furnish all information concerning Buyers as the Company
may reasonably request in connection with such actions and the preparation of
the Proxy Statement. If Buyers and the Company determine that a Registration
Statement on Form S-4 in connection with the registration under the Securities
Act of Surviving Corporation Common Shares (the "Registration Statement") is
necessary or appropriate in connection with the transactions contemplated
hereby, the Company shall prepare and file the Registration Statement, which
shall include the Proxy Statement as the prospectus. The Company
<PAGE>
26
shall use its reasonable best efforts to have the Registration Statement, if
any, declared effective by the SEC as promptly as practicable. As promptly as
practicable after the Registration Statement, if any, is declared effective or,
if Buyers and the Company determine that a Registration Statement will not be
filed, as promptly or practicable after the date hereof, the proxy statements
and prospectus, if any, included in the Proxy Statement (collectively, the
"Proxy Materials") will be mailed to the stockholders of the Company; provided,
however, that the Proxy Statement shall not be distributed, and no amendment or
supplement thereto shall be made by the Company, without the prior consent of
Buyers and their counsel.
(b) The Proxy Statement shall include the unanimous
and unconditional recommendation of the Board of Directors of the Company to the
stockholders of the Company that they vote in favor of the adoption of this
Agreement; provided, however, that the Board of Directors of the Company may, at
any time prior to the Closing Date, to the extent permitted by Section 5.8,
withdraw, modify or change any such recommendation if the Board of Directors of
the Company determines in good faith that failure to so withdraw, modify or
change its recommendation would cause the Board of Directors of the Company to
breach its fiduciary duties to the Company's stockholders under applicable Laws
after receipt of advice to such effect from independent legal counsel (who may
be the Company's regularly engaged independent legal counsel).
(c) No amendment or supplement to the Proxy Statement
will be made without the approval of Buyers and the Company, which approval
shall not be unreasonably withheld or delayed. Each of Buyers and the Company
will advise the other, promptly after it receives notice thereof, of the time
when the Registration Statement, if any, has become effective or any supplement
or amendment has been filed, of the issuance of any stop order or of any request
by the SEC or NASDAQ for amendment of the Proxy Statement or comments thereon
and responses thereto or requests by the SEC for additional information.
(d) The information supplied by the Company for
inclusion in the Proxy Statement shall not, at (i) the time the Registration
Statement, if any, is declared effective, (ii) the time the Proxy Materials (or
any amendment thereof or supplement thereto) are first mailed to the
stockholders of the Company, (iii) the time of the Company Stockholders Meeting,
and (iv) the Effective Time, contain any untrue statement of a material fact or
fails to state any material fact required to be stated in the Proxy Statement or
necessary in order to make the statements in the Proxy Statement not misleading.
If at any time prior to the Effective Time any event or circumstance relating to
the Company or any Company Subsidiary, or their respective officers or
directors, should be discovered by the Company that should be set forth in an
amendment or a supplement to the Proxy Statement, the Company shall promptly
inform Buyers.
(e) The information supplied by Buyers for inclusion
in the Proxy Statement shall not, at (i) the time the Registration Statement, if
any, is
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declared effective, (ii) the time the Proxy Materials (or any amendment of or
supplement to the Proxy Materials) are first mailed to the stockholders of the
Company, (iii) the time of the Company Stockholders Meeting and (iv) the
Effective Time, contain any untrue statement of a material fact or fail to state
any material fact required to be stated in the Proxy Statement or necessary in
order to make the statements in the Proxy Statement not misleading. If, at any
time prior to the Effective Time, any event or circumstance relating to Buyers
or Merger Sub, or their respective officers or directors, should be discovered
by Buyers that should be set forth in an amendment or a supplement to the Proxy
Statement, Buyers shall promptly inform the Company.
Section 5.6 Stockholders' Meetings; Action by Written Consent.
(a) The Company shall call and hold the Company
Stockholders Meeting as promptly as practicable after the date hereof for the
purpose of voting upon the adoption of this Agreement. The Company shall use its
reasonable best efforts (through its agents or otherwise) to solicit from its
stockholders, proxies in favor of the adoption of this Agreement and shall take
all other action necessary or advisable to secure Requisite Company Vote, except
to the extent that the Board of Directors of the Company determines in good
faith that doing so would cause the Board of Directors of the Company to breach
its fiduciary duties to the Company's stockholders under applicable Law after
receipt of advice to such effect from independent legal counsel (who may be the
Company's regularly engaged independent legal counsel).
(b) Buyers and the Company may determine that in lieu
of holding the Company Stockholders Meeting, this Agreement may be approved by
the Company's stockholders by written consent, as permitted by the DGCL. In such
case, all references to the Proxy Statement herein shall be deemed to be
references to the consent solicitation or information statement used in
connection with the obtaining of stockholder consents.
Section 5.7 Access to Information. Except as required under
and subject to the provisions of any confidentiality agreement or similar
agreement or arrangement to which Buyers or the Company or any of their
respective subsidiaries is a party or under applicable Law or the regulations or
requirements of any securities exchange or quotation service or other
self-regulatory organization with whose rules the parties are required to
comply, from the date of this Agreement to the Effective Time, the Company and
Buyers shall (and shall cause their respective subsidiaries to): (i) provide to
the other (and its officers, directors, employees, accountants, consultants,
legal counsel, financial advisors, investment bankers, agents and other
representatives (collectively, "Representatives")) access at reasonable times
upon prior notice to the officers, employees, agents, properties, offices and
other facilities of the other and its subsidiaries and to the books and records
thereof and (ii) furnish promptly such information concerning the business,
properties, Contracts, assets, liabilities, personnel and other aspects of the
other party and its subsidiaries as the
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28
other party or its Representatives may reasonably request. No investigation
conducted under this Section 5.7 shall affect or be deemed to modify any
representation or warranty made in this Agreement.
Section 5.8 No Solicitation.
(a) The Company agrees that, prior to the Effective
Time, it shall not, and shall not authorize or permit any Company Subsidiaries
or any of their Representatives, directly or indirectly, to solicit, initiate or
encourage any discussions or inquiries or the making of any proposal with
respect to any merger, consolidation or other business combination involving the
Company or the Company Subsidiaries or acquisition of 10% or more of the assets
or capital stock of the Company and the Company Subsidiaries taken as a whole (a
"Takeover Proposal") or negotiate, explore or otherwise engage in substantive
discussions with any Person (other than Buyers) with respect to any Takeover
Proposal (it being understood that the passive receipt of communications from
third parties shall not be deemed participation in discussions or negotiations)
or enter into any agreement, arrangement or understanding requiring it to
abandon, terminate or fail to consummate the Merger; provided, however, that if
the Board of Directors of the Company determines in good faith, after
consultation with independent outside legal counsel (who may be the Company's
regularly engaged independent legal counsel), that prior to obtaining the
Requisite Company Vote, it is necessary to do so in order to act in a manner
consistent with its fiduciary duties to the Company's stockholders under
applicable law, the Company may, prior to obtaining the Requisite Company Vote,
in response to a Takeover Proposal, which proposal was not solicited by it and
which did not otherwise result from a breach of this Section 5.8, and subject to
providing prior written notice of its decision to take such action to Buyers and
compliance with the other requirements of this Section 5.8, (i) furnish
information with respect to the Company and the Company Subsidiaries to any
Person making such Takeover Proposal pursuant to a customary confidentiality
agreement (as determined in good faith by the Company based on the advice of its
independent outside legal counsel) and (ii) participate in discussions or
negotiations regarding such Takeover Proposal.
(b) Except in connection with a Superior Proposal,
provided that there has been no violation of this Section 5.8, neither the Board
of Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to
Buyers, the approval or recommendation by the Board of Directors of the Company
or such committee of this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any Takeover Proposal, or (iii) cause the
Company to enter into any Acquisition Agreement.
(c) The Company shall promptly advise Buyers orally
and in writing of any request for information of the type referred to in Section
5.8(a) or of any Takeover Proposal, the material terms and conditions of such
request or Takeover Proposal and the identity of the Person making such request
or Takeover Proposal.
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29
The Company will keep Buyers informed of the status and details (including
amendments or proposed amendments) of any such request or Takeover Proposal.
(d) Nothing contained in this Section 5.8 shall
prohibit the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to the Company's stockholders if, in the good faith judgment of
the Board of Directors of the Company, after consultation with independent
outside legal counsel and based as to legal matters on the written advice of the
Company's independent outside legal consent, failure so to disclose would be
inconsistent with its obligations under applicable law; provided, however, that,
except as contemplated by Section 5.8(b), neither the Company nor the Board of
Directors of the Company nor any committee thereof shall withdraw or modify, or
propose publicly to withdraw or modify, its position with respect to this
Agreement, the Offer or Merger, or approve or recommend, or propose publicly to
approve or recommend, a Takeover Proposal.
Section 5.9 Directors' and Officers' Indemnification.
(a) The Surviving Corporation shall, to the fullest
extent permitted under applicable law or under the Surviving Corporation's
Certificate of Incorporation or Bylaws, indemnify and hold harmless, each
present and former director, officer or employee of the Company or any of its
subsidiaries (collectively, the "Indemnified Parties") against any costs or
expenses (including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of such individuals' services as directors, officers
or employees of the Company or any of its subsidiaries (x) arising out of or
pertaining to the transactions contemplated by this Agreement, the Stock
Purchase Agreement, the Agreement, dated as of the date hereof, among the
Company and Dickstein & Co., L.P., Dickstein Focus Fund L.P., Dickstein
International Limited and Mark B. Dickstein, and the Registration Rights
Agreement, dated as of the date hereof, among the Company and Buyers or (y)
otherwise with respect to any acts or omissions occurring at or prior to the
Effective Time, to the same extent as provided in the Company Charter Documents
or any applicable Contract as in effect on the date hereof.
(b) The Surviving Corporation will maintain, for a
period of not less than six years after the Effective Time, the current policies
of directors' and officers' liability insurance maintained by the Company for
the Company's directors and officers as of the date prior to the date of this
Agreement and as of the date hereof directors and officers for events occurring
at or prior to the Effective Time (the "D&O Insurance"); provided that the
Surviving Corporation may substitute therefor policies that are no less
favorable than the existing policy or, if substantially equivalent insurance
coverage is unavailable, the best available coverage; provided, however, that
the Surviving Corporation shall not be required to pay an annual premium for the
D&O Insurance in excess of 150% of the annual premium currently
<PAGE>
30
paid by the Company for such insurance, but in such case shall purchase as much
such coverage as possible for such amount.
(c) This Section shall survive the consummation of
the Merger at the Effective Time, is intended to benefit the Company, the
Surviving Corporation and the Indemnified Parties, shall be binding on all
successors and assigns of the Surviving Corporation and shall be enforceable by
the Indemnified Parties.
Section 5.10 Consents; Filings; Further Action. Upon the terms
and subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to (i) take, or cause to be taken, all appropriate
action, and do, or cause to be done, all things necessary, proper or advisable
under applicable Law or otherwise to consummate and make effective as promptly
as practicable the Merger and the other transactions contemplated hereby, (ii)
obtain from Governmental Entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by the
Company or Buyers or any of their respective subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the Merger and the other transactions contemplated hereby, (iii) obtain all
consents, amendments to or waivers under the terms of any Contracts required by
the transactions contemplated by this Agreement, and (iv) make all necessary
filings, and thereafter make any other submissions either required or deemed
appropriate by each of the parties, with respect to this Agreement and the
Merger and the other transactions contemplated hereby required under (A) the
Securities Act, the Exchange Act and any applicable state securities laws or
Blue Sky Laws, (B) the HSR Act, (C) the DGCL, (D) any other applicable Law and
(E) the rules and regulations of NASDAQ. The parties hereto shall cooperate and
consult with each other in connection with the making of all such filings,
including by providing copies of all such documents to the nonfiling party and
its advisors prior to filing, and none of the parties will file any such
document if any of the other parties shall have reasonably objected to the
filing of such document. No party to this Agreement shall consent to any
voluntary extension of any statutory deadline or waiting party or to any
voluntary delay of the consummation of the Merger and the other transactions
contemplated hereby at the behest of any Governmental Entity without the consent
and agreement of the other parties to this Agreement, which consent shall not be
unreasonably withheld or delayed.
Section 5.11 Public Announcements. The initial press release
concerning the Merger shall be a joint press release and, thereafter, the
Company and Buyers shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or any of the transactions contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation,
except to the extent required by applicable Law or the requirements of NASDAQ,
in which case the issuing party shall use its reasonable best efforts to consult
with the other parties before issuing any such release or making any such public
statement.
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31
Section 5.12 Expenses. All expenses incurred by the parties
hereto in connection with this Agreement and the Merger and the other
transactions contemplated hereby, whether or not the Merger or any of such other
transactions are consummated, shall be paid by the Company; provided, however,
that, with respect to the expenses of Buyers, the Company shall pay only the
reasonable aggregate expenses of Buyers but in no event any expenses of Buyers
in excess of $500,000; provided, further, that the Company shall not pay any
expenses of the Buyers if the Merger is not consummated solely as a result of a
breach of this Agreement by either Buyer.
Section 5.13 Takeover Statutes. If any Takeover Statute is or
may become applicable to the Merger or the other transactions contemplated
hereby, each of the Company and Buyers and its respective board of directors or
similar body shall grant such approvals and take such actions as are necessary
so that such transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement and otherwise act to eliminate or minimize
the effects of such statute or regulation on such transactions.
Section 5.14 Control of the Company's Operations. Nothing
contained in this Agreement shall give the Company or Buyers, directly or
indirectly, rights to control or direct the other party's operations prior to
the Effective Time.
Section 5.15 Tax Reporting. The parties hereto intend that the
Merger be treated as a purchase by Buyers of the Common Shares into which the
Merger Sub Common Stock shall convert pursuant to Section 2.2 on the one hand,
and a redemption by the Company of the Common Shares on the other hand, and each
of the parties agrees to report the Merger on its respective Tax returns in a
manner consistent with this position and will not take any position inconsistent
with this position.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver at or prior to the Effective Time of each
of the following conditions:
(a) The Company shall have received the vote of the
holders of any class or series of the Company's capital stock necessary (under
the Company Charter Documents, the DGCL, other applicable Law or otherwise) to
approve this Agreement, the Merger and the other transactions contemplated by
this Agreement;
(b) The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated;
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32
(c) No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law, order, injunction or decree (whether temporary, preliminary or permanent)
that is in effect and restrains, enjoins or otherwise prohibits consummation of
the Merger;
(d) The Registration Statement, if any, shall have
become effective under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement, if any, shall have been issued, and
no proceedings for that purpose shall have been initiated or be threatened by
the SEC; and
(e) The number of Dissenting Shares shall not be more
than 300,000.
Section 6.2 Conditions to Obligation of Buyers and the Merger
Sub. The obligation of Buyers and the Merger Sub to effect the Merger shall be
subject to the fulfillment or waiver at the Effective Time of the following
additional conditions:
(a) The Company shall have performed in all material
respects the covenants and obligations required to be performed by it under this
Agreement on or prior to the Effective Time;
(b) The representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
on and as of the Effective Time as if made on and as of such date (except to the
extent that any such representation or warranty had by its terms been made as of
a specific date in which case such representation or warranty shall have been
true and correct as of such specific date);
(c) Buyers shall have received a certificate signed
by an executive officer of the Company to the effect of Sections 6.2(a) and (b);
and
(d) None of the claims pending as set forth in the
Company SEC Reports, individually or in the aggregate, has resulted or could
reasonably be expected to be likely result in a Company Material Adverse Effect.
Section 6.3 Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment or waiver at the Effective Time of the following additional
conditions:
(a) Buyers and the Merger Sub shall have performed in
all material respects the covenants and obligations required to be performed by
them under this Agreement on or prior to the Effective Time;
(b) The representations and warranties of Buyers and
the Merger Sub contained in this Agreement shall be true and correct in all
material respects on and as of the Effective Time as if made on and as of such
date (except to
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33
the extent that any such representation or warranty had by its terms been made
as of a specific date in which case such representation or warranty shall have
been true and correct as of such specific date);
(c) The Company shall have received a certificate
signed by the general partner of each Buyer to the effect of Sections 6.3(a) and
(b); and
(d) The Company shall have obtained financing from
The CIT Group/Commercial Services, Inc. ("CIT") on the terms contemplated by the
letter agreement, dated May 10, 1999 (the "CIT Agreement"), between CIT and
Leslie Fay Marketing, Inc. or, if such financing is not available, financing
from a third party in such amounts and on terms comparable to the terms set
forth in the CIT Agreement, or, if such financing is not available, financing
from Three Cities Research, Inc. or one of its affiliates (if offered by such
Persons at their option) on terms reasonably satisfactory to the Company and in
such amount as is necessary to fund the aggregate Merger Consideration.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time,
notwithstanding the Requisite Company Vote, as follows:
(a) by mutual written consent of Buyers and the
Company;
(b) by either Buyers or the Company if:
(i) the Merger has not been consummated on
or before September 30, 1999; provided, however, that the right to
terminate this Agreement pursuant to this Section 7.1(b)(i) shall not
be available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of
the Effective Time to occur on or before such date;
(ii) a statute, rule, regulation or
executive order shall have been enacted, entered or promulgated
prohibiting the consummation of the Merger substantially on the terms
contemplated hereby; or
(iii) an order, decree, ruling or injunction
shall have been entered permanently restraining, enjoining or otherwise
prohibiting the consummation of the Merger substantially on the terms
contemplated hereby and such order, decree, ruling or injunction shall
have become final and non-appealable;
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34
(c) by Buyers, if the Board of Directors of the
Company or any committee thereof shall have (i) withdrawn or modified, or
proposed publicly to withdraw or modify, in a manner adverse to Buyers, its
approval of this Agreement or recommendation to the Company's stockholders, (ii)
approved or recommended, or proposed publicly to approve or recommend, any
Takeover Proposal, (iii) caused the Company to enter into any agreement with
respect to any Superior Proposal, in each case in accordance with Section 5.8 of
this Agreement, or (iv) the Board or any committee thereof shall have resolved
to take any of the foregoing actions;
(d) by Buyers or Merger Sub, if the Company shall
have breached in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement and such breach has
not been cured within 30 days after the giving of written notice to the Company;
(e) by the Company, if Buyers or Merger Sub shall
have breached in any material respect any of their respective representations,
warranties, covenants or other agreements contained in this Agreements, and such
breach has not been cured within 30 days after the giving of written notice to
Buyers or Merger Sub;
(f) by the Company, if the Company receives a
Superior Proposal and the Board of Directors of the Company, based on the advice
of independent outside legal counsel (who may be the Company's regularly engaged
independent legal counsel), determines in good faith that such action is
necessary for the Board of Directors to avoid breaching its fiduciary duties to
the Company's stockholders under applicable law; or
(g) by Buyers or the Company, if the Requisite
Company Vote has not been obtained at the relevant stockholders' meeting or
completion of the consent solicitation process, as applicable.
Section 7.2 Effect of Termination. In the event of termination
of this Agreement pursuant to Section 7.1, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall terminate
and be of no further force and effect (except for the provisions of Sections
5.11, 5.12 and 7.3 and Article VIII), and there shall be no other liability on
the part of Buyers, Merger Sub or the Company, except liability, if any, for a
breach of this Agreement.
Section 7.3 Fees and Expenses.
(a) If this Agreement is terminated by (x) Buyers
pursuant to Section 7.1(c) or (y) by the Company pursuant to Section 7.1(f), the
Company shall pay Buyers an aggregate fee (the "Fee") of $350,000; provided,
however, that if the Superior Proposal, as a result of which the Agreement is
terminated in accordance with Section 7.1, is for less than all shares of the
Company's capital stock then outstanding, the Fee shall be an aggregate of
$1,000,000.
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35
(b) The Company shall pay the Fee payable pursuant to
Section 7.3(a) and the expenses of the Buyers payable pursuant to Section 5.12,
if any, promptly (but not later than five days) after the date of the
termination of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Defined Terms.
"Acquisition Agreement" shall mean any letter of intent,
agreement in principle, acquisition agreement or other similar agreement,
contract or commitment related to any Takeover Proposal.
"affiliate," as applied to any Person, shall mean any other
Person directly or indirectly controlling, controlled by, or under common
control with, that Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise.
"business day" shall mean any day, other than Saturday, Sunday
or a federal holiday, and shall consist of the time period from 12:01 a.m.
through 12:00 midnight Eastern Standard or Eastern Daylight time, as
appropriate. In computing any time period under this Agreement, the date of the
event which begins the running of such time period shall be included except that
if such event occurs on other than a business day such period shall begin to run
on and shall include the first business day thereafter.
"Buyer Material Adverse Effect" shall mean any change in or
effect on the business, assets, properties, results of operations or financial
condition, prospects or condition (financial or otherwise) of Buyers or Merger
Sub that is or could reasonably be expected to be materially adverse to the
Buyers and Merger Sub, taken as a whole, or that could reasonably be expected to
materially impair the ability of Buyers to perform its obligations under this
Agreement or consummate the Merger and the other transactions contemplated
hereby.
"Claims" shall mean any suit, claim, action, proceeding or
investigation.
"Company Material Adverse Effect" shall mean any change in or
effect on the business, assets, properties, results of operations or financial
condition, prospects or condition (financial or otherwise) of the Company or any
Company
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36
Subsidiaries that is or could reasonably be expected to be materially adverse to
the Company and the Company Subsidiaries, taken as a whole, or that could
reasonably be expected to materially impair the ability of the Company to
perform its obligations under this Agreement or consummate the Merger and the
other transactions contemplated hereby.
"Contract" shall mean any note, bond, mortgage, indenture,
contract, agreement, commitment, lease, license, permit, franchise or other
instrument or obligation.
"Environment" means navigable waters, waters of the contiguous
zone, ocean waters, natural resources, surface waters, ground water, drinking
water supply, land surface, subsurface strata, ambient air, both inside and
outside of buildings and structures, man-made buildings and structures, and
plant and animal life on earth.
"Environmental Claims" means any notification, whether direct
or indirect, formal or informal, written or oral, pursuant to Safety and
Environmental Laws or principles of common law relating to pollution, protection
of the Environment or health and safety, that any of the current or past
operations of the Company or any Company Subsidiary, as the case may be, or any
by-product thereof, or any of the property currently or formerly owned, leased
or operated by the Company or any Company Subsidiary, or the operations or
property of any predecessor of the Company or any Company Subsidiary is or may
be implicated in or subject to any proceeding, action, investigation, claim,
lawsuit, order, agreement or evaluation by any Governmental Entity or any other
person.
"GAAP" shall mean United States generally accepted accounting
principles, as currently in effect.
"Governmental Entity" shall mean any domestic or foreign
national, federal, state, provincial or local governmental, regulatory or
administrative authority, agency, commission, court, tribunal or arbitral body
or self-regulated entity.
"including" shall mean, unless the context clearly requires
otherwise, including but not limited to the things or matters named or listed
after that term.
"Indebtedness" shall mean (i) indebtedness of or any
obligation of the Company and Company Subsidiaries for borrowed money, whether
current, short-term, or long-term, secured or unsecured, (ii) all lease
obligations of the Company and Company Subsidiaries, (iii) any payment
obligations of the Company or Company Subsidiaries in respect of banker's
acceptances or letters of credit and (iv) any present, future or contingent
obligations of the Company or Company Subsidiaries.
"knowledge," shall mean, as applied to the Company, the actual
knowledge of the directors and executive officers of the Company.
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37
"Law" shall mean foreign or domestic law, statute, ordinance,
rule, regulation, order, judgment or decree.
"Liens" shall mean any mortgage, security interest, lien,
encumbrance, claim, pledge, option, right of first refusal, agreement or
limitation of any kind on the Company's or Company Subsidiary's voting rights,
charges and other encumbrances or any nature whatsoever.
"NASDAQ" shall mean either the Nasdaq National Market System
or Nasdaq Small Cap Market.
"Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
"Safety and Environmental Laws" means all federal, state and
local laws and orders relating to pollution, protection of the Environment,
public or worker health and safety, or the emission, discharge, release or
threatened release of pollutants, contaminants or industrial, toxic or hazardous
substances or wastes into the Environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or industrial, toxic or
hazardous substances or wastes.
"Stock Purchase Agreement" shall mean the Stock Purchase
Agreement dated as of the date hereof among Buyers and Dickstein & Co., L.P.,
Dickstein Focus Fund L.P., Dickstein International Limited and Mark B.
Dickstein.
"subsidiary" or "subsidiaries" shall mean, with respect to
Buyers, the Company or any other Person, any entity of which any of Buyers, the
Company or such other Person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or indirectly, stock or
other equity interests constituting more than 50% of the voting or economic
interest in such entity.
"Superior Proposal" shall mean any proposal made by a third
party to acquire, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, business combination, recapitalization,
reorganization, liquidation, dissolution or similar transaction, for
consideration to the Company's stockholders consisting of cash and/or
securities, a majority of the shares of the Company's capital stock then
outstanding or all or substantially all the assets of the Company, on terms
which the Board of Directors of the Company determines in its good faith
judgment to be more favorable to the Company's stockholders than the Merger and
for which financing, to the extent required, is then committed.
"Takeover Statute" shall mean a "fair price," "moratorium,"
"control share acquisition" or other similar state or federal anti-takeover
statute or regulation.
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"Taxes" shall mean all federal, state, local and foreign
income, property, sales, excise and other taxes, tariffs, assessments, or
governmental charges of any nature whatsoever.
Section 8.2 Non-Survival of Representations and Warranties.
The representations and warranties in this Agreement shall not survive the
Closing. Each party agrees that, except for the representations and warranties
contained in this Agreement and the Company Disclosure Letter, no party to this
Agreement has made any other representations and warranties, and each party
disclaims any other representations and warranties, made by itself or any of its
Representatives with respect to the execution and delivery of this Agreement or
the transactions contemplated by this Agreement, notwithstanding the delivery of
disclosure to any other party or any party's Representatives of any
documentation or other information with respect to any one or more of the
foregoing.
Section 8.3 VENUE; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND
IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT
OF LAW PRINCIPLES, EXCEPT THAT DELAWARE LAW SHALL APPLY TO THE EXTENT REQUIRED
IN CONNECTION WITH THE EFFECTUATION OF THE MERGER. The parties irrevocably
submit to the jurisdiction of the federal courts of the United States of America
located in the State of New York solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated by this
Agreement and by those documents, and hereby waive, and agree not to assert, as
a defense in any action, suit or proceeding for the interpretation or
enforcement of this Agreement or of any such document, that it is not subject to
this Agreement or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be appropriate
or that this Agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a federal court.
The parties hereby consent to and grant any such court jurisdiction over the
Person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 8.4 or in such other manner as may
be permitted by Law, shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY
<PAGE>
39
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF
THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH
SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.3.
Section 8.4 Notices. Any notice or other communication
required or permitted hereunder shall be in writing and shall be delivered
personally, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally or sent by facsimile transmission or, if mailed, five days
after the date of deposit in the United States mails, as follows:
If to Buyers or Merger Sub:
Three Cities Research, Inc.
650 Madison Avenue
New York, New York 10022
Attention: Willem F. P. de Vogel
Telephone: (212) 838-9660
Facsimile: (212) 980-1142
with copies to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Judith R. Thoyer, Esq.
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
If to the Company:
The Leslie Fay Company, Inc.
1412 Broadway
New York, New York 10018
Attention: John J. Pomerantz
Telephone: (212) 221-4141
Facsimile: (212) 221-4287
<PAGE>
40
with copies to:
Parker, Chapin, Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: Michael J. Shef, Esq.
Telephone: (212) 704-6140
Facsimile: (212) 704-6288
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
Section 8.5 Entire Agreement. This Agreement (including any
exhibits and annexes to this Agreement) and the Company Disclosure Letter
constitute the entire agreement and supersede all other prior agreements,
understandings, representations and warranties, both written and oral, among the
parties, with respect to the subject matter of this Agreement.
Section 8.6 No Third-Party Beneficiaries. Except as provided
in Section 5.9, this Agreement is not intended to confer upon any Person other
than the parties to this Agreement any rights or remedies under this Agreement.
Section 8.7 Obligations of Buyers and of the Company. Whenever
this Agreement requires Merger Sub to take any action, that requirement shall be
deemed to include an undertaking on the part of Buyers to cause Merger Sub to
take that action. Whenever this Agreement requires a Company Subsidiary to take
any action, that requirement shall be deemed to include an undertaking on the
part of the Company to cause that Company Subsidiary to take that action.
Section 8.8 Counterparts. This Agreement may be executed in
any number of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
Section 8.9 Interpretation. The table of contents and headings
in this Agreement are for convenience of reference only, do not constitute part
of this Agreement and shall not be deemed to limit or otherwise affect any of
the provisions of this Agreement. Where a reference in this Agreement is made to
a section, exhibit or annex, that reference shall be to a section of or exhibit
or annex to this Agreement unless otherwise indicated.
Section 8.10 Assignment. This Agreement shall not be
assignable by operation of law or otherwise, except that Buyers or Merger Sub
may designate, by written notice to the Company, another subsidiary that is
wholly owned directly or indirectly by either Buyer or that is owned directly or
indirectly jointly by Buyers to be merged with and into the Company in lieu of
Merger Sub, in which event all references in this Agreement to Merger Sub shall
be deemed references to such other
<PAGE>
41
subsidiary, and in that case, all representations and warranties made in this
Agreement with respect to Merger Sub as of the date of this Agreement shall be
deemed representations and warranties made with respect to such other subsidiary
as of the date of such designation.
Section 8.11 Specific Performance. The parties to this
Agreement agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise reached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States or any state having jurisdiction,
this being in addition to any other remedy to which they are entitled at Law or
in equity.
Section 8.12 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. At any time prior to the Effective Time and subject to
applicable Law, this Agreement may be amended, superseded, canceled, modified,
renewed or extended, and the terms hereof may be waived, only by a written
agreement signed by each of the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any such right, power or privilege, nor
any single or partial exercise of any such right, power or privilege, preclude
any further exercise thereof or the exercise of any other such right, power or
privilege. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies that any party may otherwise have at Law or
in equity.
Section 8.13 Usage. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require. All terms defined in this Agreement in their singular or plural
forms have correlative meanings when used herein in their plural or singular
forms, respectively.
Section 8.14 Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
Section 8.15 Further Assurances. Each of the parties agree to
execute any and all documents and take any and actions as may be reasonably
required or necessary to carry out the provisions of this Agreement.
<PAGE>
42
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
THE LESLIE FAY COMPANY, INC.
By: /s/ Warren Wishart
--------------------------------
Name: Warren Wishart
Title: Chief Financial Officer
THREE CITIES FUND II, L.P.,
By: TCR Associates, L.P.,
its general partner
By: /s/ Willem F. P. de Vogel
-----------------------------
Willem F. P. de Vogel
General Partner
THREE CITIES OFFSHORE II C.V.,
By: Three Cities Associates, N.V.,
its general partner
By: /s/ J. William Uhrig
-----------------------------
J. William Uhrig
Managing Director
TCR ACQUISITION SUB CO.
By: /s/ J. William Uhrig
--------------------------------
J. William Uhrig
President
<PAGE>
Annex A
SHARE CONVERSION
----------------
1. If the number of Electing Cash Shares is less than 825,000, the shares
of Merger Sub Common Stock shall convert, in accordance with Section
2.2, into one Surviving Corporation Common Share.
2. If the number of Electing Cash Shares is at least 825,000 but less than
1,625,000, the shares of Merger Sub Common Stock shall convert, in
accordance with Section 2.2, into the number of Surviving Corporation
Common Shares equal to the number of Electing Cash Shares.
3. If the number of Electing Cash Shares is at least 1,625,000 but less
than 2,111,966, the shares of Merger Sub Common Stock shall convert, in
accordance with Section 2.2, into the number of Surviving Corporation
Common Shares equal to the excess of (A) 3,295,890.04(1) over (B) the
product of (x) 1.04(2) and (y) the number of Electing Cash Shares;
provided, however, that such number shall be rounded up to the nearest
whole number if it is not a whole number.
- ----------
(1) (Total Diluted Shares * 0.51 less 2,158,000)/0.49
(2) 51/49
<PAGE>
EXHIBIT A
[Intentionally Omitted]
