FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: June 7, 1996
(Date of earliest event reported)
ANNTAYLOR STORES CORPORATION ANNTAYLOR, INC.
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
DELAWARE 1-10738 13-3499319 DELAWARE 1-11980 51-0297083
(State or (Commis- (IRS Em- (State (Com- (IRS Employer
other sion File ployer or other mission Identification
jurisdic- Number) Identifi- juris- File No.)
tion of cation diction Number)
incorpo- No.) of
ration) incorpo-
ration)
142 WEST 57TH STREET
NEW YORK, NEW YORK 10019
(212) 541-3300
(Address including zip code, and telephone number including area
code of registrants' principal executive offices)
Item 5. Other Events.
On June 7, 1996, AnnTaylor Stores Corporation, a
Delaware corporation (the "Company"), and its wholly owned
subsidiary, AnnTaylor, Inc., a Delaware corporation ("Ann
Taylor"), announced that they had entered into a definitive
agreement (the "Agreement") with Cygne Designs, Inc., a
Delaware corporation ("Cygne"), and its wholly owned sub-
sidiary, Cygne Group (F.E.) Limited, a Hong Kong corpora-
tion ("CGFE"), regarding the acquisition (the "Acquisi-
tion") of (i) Cygne's entire interest in Ann Taylor's
direct sourcing joint venture with Cygne, known as CAT US,
Inc. and C.A.T. (Far East) Limited, and (ii) the assets
(the "Assets") of Cygne's AnnTaylor Woven Division that are
used for sourcing merchandise for Ann Taylor.
As consideration for the Acquisition, the Company
will issue to Cygne and CGFE shares of common stock, par
value $.0068 per share, of the Company (the "Common Stock")
having an aggregate market value of $36,000,000 (based on
the market price during the ten trading days prior to
closing, but in no event more than 2.5 million shares).
Ann Taylor will pay to Cygne cash in an amount equal to the
tangible net book value of the fixed assets (but not to
exceed $2,646,000) plus the tangible net book value of the
inventory included in the Assets, less certain assumed
liabilities. In addition, as part of the transaction, Ann
Taylor will assume the obligation to make payment to the
President of CAT of certain amounts due under his existing
employment agreement with CAT as a result of the Acquisi-
tion.
Consummation of the Acquisition is subject to the
satisfaction of various conditions. It is currently antic-
ipated that the Acquisition will close in August 1996,
although there can be no assurance that the transaction
will be consummated or that it will be consummated within
the anticipated time frame.
The information set forth above is qualified in
its entirety by reference to (i) a press release issued by
the Company on June 7, 1996, a copy of which is attached
hereto as Exhibit 1 and is incorporated herein by reference
and (ii) the Agreement, a copy of which is attached hereto
as Exhibit 2 and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
1. Press release issued by the Company and Ann
Taylor on June 7, 1996.
2. Stock and Asset Purchase Agreement, dated as
of June 7, 1996, by and between the Company,
Ann Taylor, Cygne and CGFE.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, the Registrant has duly
caused this report to be signed on its behalf by the under-
signed hereunto duly authorized.
ANNTAYLOR STORES CORPORATION
By:/s/ WALTER J. PARKS
Walter J. Parks
Senior Vice President - Finance
and Principal Accounting Officer
Date: June 10, 1996
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, the Registrant has duly
caused this report to be signed on its behalf by the under-
signed hereunto duly authorized.
ANNTAYLOR, INC.
By:/s/ WALTER J. PARKS
Walter J. Parks
Senior Vice President - Finance
and Principal Accounting Officer
Date: June 10, 1996
EXHIBIT INDEX
Exhibit Description
Number
1 Press release issued by the Company
on June 7, 1996.
2 Stock and Asset Purchase Agreement,
dated as of June 7, 1996, by and be-
tween the Company, Ann Taylor, Cygne
and Cygne Group (F.E.) Limited.
FOR IMMEDIATE RELEASE
ANN TAYLOR ANNOUNCES DEFINITIVE AGREEMENT TO ACQUIRE
CYGNE DESIGNS' INTEREST IN CAT SOURCING JOINT VENTURE
AND CYGNE'S ANN TAYLOR DIVISION
New York, New York, June 10, 1996 -- AnnTaylor
Stores Corporation (NYSE: ANN) and its wholly owned
subsidiary, AnnTaylor, Inc., announced today that they
have entered into a definitive agreement with Cygne
Designs, Inc. ("Cygne") and its wholly owned subsidiary,
Cygne Group (F.E.) Limited, regarding the Company's
previously announced acquisition of Cygne's entire inter-
est in the Company's direct sourcing joint venture with
Cygne and the assets of what is known as the Ann Taylor
Woven Division of Cygne, which is the division of Cygne
that is responsible for sourcing merchandise for Ann
Taylor. The joint venture, which is known as CAT U.S.,
Inc. and C.A.T. (Far East) Limited (together, "CAT"),
currently is 60% owned by Cygne and 40% owned by Ann
Taylor. In fiscal 1995, Ann Taylor purchased approxi-
mately 38% of its merchandise through CAT and an addi-
tional 16% of its merchandise directly from Cygne.
The purchase price for Cygne's interest in CAT and
the Ann Taylor Woven Division assets will consist of
shares of Ann Taylor common stock having a market value
of $36 million at the time of closing (provided that in
no event will Ann Taylor be required to issue more than
2.5 million shares), a cash payment in an amount equal to
the tangible net book value of the fixed assets (but not
to exceed $2,646,000) plus the tangible net book value of
the inventory of the Ann Taylor Woven Division, less the
amount of certain liabilities of the Division to be
assumed by Ann Taylor. The Company will also pay cash in
respect of an obligation under an existing employment
agreement with CAT.
Ann Taylor has received the consent of its lenders
to the CAT/Cygne transaction and CAT has received a
written commitment of HongKong and Shanghai Banking
Corporation to the continuation of CAT's existing $40
million credit facility. The closing of the CAT/Cygne
transaction is subject to various other conditions,
including (i) the approval of the transaction by Cygne's
stockholders and (ii) the consent and release of liens by
each of HongKong and Shanghai Banking Corporation and
certain other lenders to Cygne. It is currently antici-
pated that the transaction will close in August 1996
following approval by Cygne's stockholders. There can be
no assurance, however, that the conditions referred to
above will be satisfied, that the transaction will be
consummated or, if consummated, that it will be consum-
mated within the currently anticipated time frame.
As previously announced, Ann Taylor has agreed to
register the shares to be issued to Cygne for resale,
although Cygne will be subject to certain restrictions on
the timing of sales and the amount of shares which can be
sold at any one time.
Ann Taylor is one of the country's leading women's
specialty apparel retailers, operating 308 stores in 40
states and the District of Columbia.
* * *
Contact: Jocelyn Barandiaran Gina Iaderosa
Investor Relations Marketing/Public
212-541-3226 Relations
212-541-3347
STOCK AND ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CYGNE DESIGNS, INC.,
CYGNE GROUP (F.E.) LIMITED,
ANNTAYLOR STORES CORPORATION
AND
ANNTAYLOR, INC.
DATED AS OF JUNE 7, 1996
TABLE OF CONTENTS
PAGE
I. TRANSFER OF ASSETS AND LIABILITIES . . . . . . . 2
1.1 Assets to be Sold . . . . . . . . . . 2
1.2 Consideration . . . . . . . . . . . . 8
1.3 Closing . . . . . . . . . . . . . . . 10
1.4 Deliveries by Seller . . . . . . . . . 10
1.5 Deliveries by Buyer . . . . . . . . . 12
1.6 Post-Closing Adjustments . . . . . . . 14
1.7 Allocation of Purchase Price . . . . . 19
1.8 Assumed Liabilities . . . . . . . . . 20
II. RELATED MATTERS . . . . . . . . . . . . . . . . 20
2.1 Ancillary Agreements . . . . . . . . . 20
2.2 Receivables Settlement . . . . . . . . 22
2.3 Finished Goods . . . . . . . . . . . . 22
2.4 Joint Venture Agreement . . . . . . . 23
2.5 Leases . . . . . . . . . . . . . . . . 23
2.6 Meyer Employment Agreement . . . . . . 23
2.7 Mail Received After Closing . . . . . 24
2.8 Employees, Benefit Plans . . . . . . . 24
III. REPRESENTATIONS AND WARRANTIES OF SELLER . . . 30
3.1 Organization of Seller and CAT;
Authority . . . . . . . . . . . . . . 30
3.2 No Violation; Consents and Approvals . 32
3.3 Seller Financial Statements . . . . . 36
3.4 CAT Financial Statements. . . . . . . 37
3.5 Combined Entity Financial Statements . 39
3.6 Absence of Seller Undisclosed
Liabilities . . . . . . . . . . . . . 42
3.7 Absence of CAT Undisclosed Liabilities 42
3.8 Absence of Division Undisclosed
Liabilities . . . . . . . . . . . . . 42
3.9 Absence of Certain Changes or Events . 43
3.10 Title to CAT Shares . . . . . . . . . 43
3.11 Title to Assets; Leased Property . . 45
3.12 Litigation/Claims . . . . . . . . . . 50
3.13 Employee Benefit Plans . . . . . . . 51
3.14 Certain Contracts and Arrangements . 52
3.15 Compliance with Laws; Licenses . . . 55
3.16 Insurance . . . . . . . . . . . . . . 56
3.17 Labor Matters . . . . . . . . . . . . 57
3.18 Assets of the Division Business . . . 59
3.19 Disclosure . . . . . . . . . . . . . 59
3.20 Environmental Matters . . . . . . . . 60
3.21 Opinion of Financial Advisor . . . . 62
3.22 Brokers . . . . . . . . . . . . . . . 62
3.23 Intellectual Property . . . . . . . . 63
3.24 Absence of Violations of Quotas and
Visas . . . . . . . . . . . . . . . . 63
3.25 No Tariffs or Duties . . . . . . . . 63
3.26 Compliance with U.S. Customs and
Trade Laws . . . . . . . . . . . . . 64
3.27 SEC Documents . . . . . . . . . . . . 64
3.28 Compliance with Laws by CAT; Licenses 65
3.29 CAT Taxes . . . . . . . . . . . . . . 66
3.30 Acquisition of the ATSC Common
Stock for Investment; Securities Act 68
3.31 Suppliers . . . . . . . . . . . . . . 69
3.32 Disclaimer of Other Representations
and Warranties . . . . . . . . . . . 69
IV. REPRESENTATIONS AND WARRANTIES OF ATSC AND BUYER 70
4.1 Organization of ATSC and Buyer;
Authority . . . . . . . . . . . . . . 70
4.2 No Violation; Consents and Approvals . 72
4.3 Litigation/Claims . . . . . . . . . . 75
4.4 SEC Documents and Other Reports . . . 76
4.5 Capital Stock . . . . . . . . . . . . 77
4.6 Absence of Certain Changes or Events . 78
4.7 Information Supplied . . . . . . . . . 78
4.8 Brokers . . . . . . . . . . . . . . . 78
4.9 Disclaimer of Other Representations
and Warranties . . . . . . . . . . . . 79
V. COVENANTS OF THE PARTIES . . . . . . . . . . . . 79
5.1 Conduct of the Division Business . . . 79
5.2 Access to Information; Confidentiality 83
5.3 Financial Statements . . . . . . . . . 84
5.4 Reasonable Best Efforts . . . . . . . 87
5.5 Consents . . . . . . . . . . . . . . . 87
5.6 Antitrust Notification . . . . . . . . 88
5.7 Public Announcements . . . . . . . . . 88
5.8 Access to Books and Records Following
the Closing . . . . . . . . . . . . . 89
5.9 Other Transactions . . . . . . . . . . 89
5.10 Discharge of Liens . . . . . . . . . 90
5.11 Resignations . . . . . . . . . . . . 90
5.12 Insurance . . . . . . . . . . . . . . 90
5.13 Supplementary Disclosure . . . . . . 91
5.14 Brazil Sourcing . . . . . . . . . . . 91
5.15 Letters of Credit . . . . . . . . . . 92
5.16 Amendment . . . . . . . . . . . . . . 92
5.17 Proxy Statement; Stockholder Approval 93
5.18 Occupancy . . . . . . . . . . . . . . 95
5.19 Transfer Taxes . . . . . . . . . . . 96
5.20 Conduct of ATSC Business . . . . . . 96
VI. CONDITIONS TO OBLIGATIONS OF BOTH PARTIES . . . 97
6.1 Conditions . . . . . . . . . . . . . . 97
VII. CONDITIONS TO OBLIGATIONS OF SELLER . . . . . . 98
7.1 Conditions . . . . . . . . . . . . . . 98
VIII. CONDITIONS TO OBLIGATIONS OF BUYER . . . . . . 100
8.1 Conditions . . . . . . . . . . . . . . 100
IX. TERMINATION, AMENDMENT AND WAIVER . . . . . . . 102
9.1 Termination . . . . . . . . . . . . . 102
9.2 Procedure and Effect of Termination . 103
9.3 Other Remedies . . . . . . . . . . . . 104
X. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION . . 104
10.1 Survival of Representations . . . . . 104
10.2 Seller's Agreement to Indemnify . . . 104
10.3 Seller's Limitation of Liability . . 106
10.4 Buyer's Agreement to Indemnify . . . 108
10.5 Buyer's Limitation of Liability . . . 109
10.6 Conditions of Indemnification . . . . 110
10.7 Exclusive Remedies . . . . . . . . . 112
10.8 Transfer Pricing . . . . . . . . . . 113
10.9 Claims Against CAT Directors and
Officers . . . . . . . . . . . . . . 113
XI. MISCELLANEOUS . . . . . . . . . . . . . . . . . 113
11.1 Fees and Expenses . . . . . . . . . . 113
11.2 Further Assurances . . . . . . . . . 114
11.3 Notices . . . . . . . . . . . . . . . 114
11.4 Entire Agreement . . . . . . . . . . 116
11.5 Severability . . . . . . . . . . . . 116
11.6 Binding Effect; Assignment . . . . . 116
11.7 Amendment, Modification and Waiver . 117
11.8 Third-Party Beneficiaries . . . . . . 117
11.9 Counterparts . . . . . . . . . . . . 118
11.10 Bulk Sales . . . . . . . . . . . . . 118
11.11 Interpretation . . . . . . . . . . . 118
11.12 Governing Law . . . . . . . . . . . 119
Annexes and Exhibits
Annex I . . . . . . . . . . . . . . Division Fabric and Trim
Annex II . . . . . . . . . . . . . . . . Assumed Contracts
Annex III . . . . . . . . . . . . . . . . . Net Fixed Assets
Annex IV . . . . . . . . . . . . . . . . . . Lease Deposits
Exhibit A . . . . . . . . . . . . . . . . . . Bill of Sale
Exhibit B . . . . . . . Assignment and Assumption Agreement
Exhibit C . . . . . . . . . . . . . . . . . . . Undertaking
Exhibit D . . . . . . . . . . . . . . . . Advance Instrument
Exhibit E . . . . . . . . . . . . . . . . . Pledge Agreement
Exhibit F . . . . . . . . . NY Transition Services Agreement
Exhibit G . . . . . . . Miami Transition Services Agreement
Exhibit H . . . . . . . . . . . Manuel Consulting Agreement
Exhibit I . . . . . . . . . . . Benson Consulting Agreement
Exhibit J . . . . . . . . . . . . . . Stockholders Agreement
Exhibit K . . . . . . . . . . . . . . . . . . Florence Lease
Exhibit L . . . . . . . . . Legal Opinion of Buyer's Counsel
Exhibit M . . . . . . . . Legal Opinion of Seller's Counsel
GLOSSARY
PAGE
Agreement . . . . . . . . . . . . . . . . . . . . . . . 1
Seller . . . . . . . . . . . . . . . . . . . . . . . . 1
CGFE . . . . . . . . . . . . . . . . . . . . . . . . . 1
ATSC . . . . . . . . . . . . . . . . . . . . . . . . . 1
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . 1
Joint Venture Agreement . . . . . . . . . . . . . . . . 1
CAT-US . . . . . . . . . . . . . . . . . . . . . . . . 1
CAT-Far East . . . . . . . . . . . . . . . . . . . . . 1
CAT . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Division . . . . . . . . . . . . . . . . . . . . . . . 1
Division Business . . . . . . . . . . . . . . . . . . . 1
CAT US Shares . . . . . . . . . . . . . . . . . . . . . 2
CAT Far East Shares . . . . . . . . . . . . . . . . . . 2
CAT Shares . . . . . . . . . . . . . . . . . . . . . . 2
Closing . . . . . . . . . . . . . . . . . . . . . . . . 2
Liens . . . . . . . . . . . . . . . . . . . . . . . . . 3
Inventory . . . . . . . . . . . . . . . . . . . . . . . 3
Division Fabric and Trim . . . . . . . . . . . . . . . 3
Capital Leases . . . . . . . . . . . . . . . . . . . . 3
Contracts . . . . . . . . . . . . . . . . . . . . . . . 3
NY Facility . . . . . . . . . . . . . . . . . . . . . . 4
NY Lease . . . . . . . . . . . . . . . . . . . . . . . 4
FWM Lease . . . . . . . . . . . . . . . . . . . . . . . 4
CAT Sublease . . . . . . . . . . . . . . . . . . . . . 4
Net Fixed Assets . . . . . . . . . . . . . . . . . . . 4
Intellectual Property . . . . . . . . . . . . . . . . . 6
Books and Records . . . . . . . . . . . . . . . . . . . 6
Assets . . . . . . . . . . . . . . . . . . . . . . . . 6
Bill of Sale . . . . . . . . . . . . . . . . . . . . . 7
Subleases . . . . . . . . . . . . . . . . . . . . . . . 7
Assignment and Assumption Agreements . . . . . . . . . 7
Other Instruments . . . . . . . . . . . . . . . . . . . 7
ATSC Common Stock . . . . . . . . . . . . . . . . . . . 8
Stock Consideration . . . . . . . . . . . . . . . . . . 9
Average Trading Price . . . . . . . . . . . . . . . . . 9
Inventory Consideration . . . . . . . . . . . . . . . . 9
Fixed Asset Consideration . . . . . . . . . . . . . . . 9
Purchase Price . . . . . . . . . . . . . . . . . . . . 9
Undertaking . . . . . . . . . . . . . . . . . . . . . . 9
Accounts Payable . . . . . . . . . . . . . . . . . . . 10
Advance Instrument . . . . . . . . . . . . . . . . . . 10
Advances . . . . . . . . . . . . . . . . . . . . . . . 10
Liabilities . . . . . . . . . . . . . . . . . . . . . . 10
Closing Date . . . . . . . . . . . . . . . . . . . . . 10
Bank Account . . . . . . . . . . . . . . . . . . . . . 13
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . 14
Estimated Amount . . . . . . . . . . . . . . . . . . . 14
Net Fixed Asset Value . . . . . . . . . . . . . . . . . 14
Initial Payment Amount . . . . . . . . . . . . . . . . 14
Pledged Amount . . . . . . . . . . . . . . . . . . . . 15
Seller Statement . . . . . . . . . . . . . . . . . . . 15
Statement of Objection . . . . . . . . . . . . . . . . 15
Closing Date Statement . . . . . . . . . . . . . . . . 15
Reviewing Accountants . . . . . . . . . . . . . . . . . 16
Accountant Statement . . . . . . . . . . . . . . . . . 16
Adjusted Net Book Value . . . . . . . . . . . . . . . . 17
Pledge Agreement . . . . . . . . . . . . . . . . . . . 18
Code . . . . . . . . . . . . . . . . . . . . . . . . . 19
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Stockholders Agreement . . . . . . . . . . . . . . . . 21
Florence Facility . . . . . . . . . . . . . . . . . . . 21
Florence Lease . . . . . . . . . . . . . . . . . . . . 21
Ancillary Agreements . . . . . . . . . . . . . . . . . 21
Accounts Receivable Estimate . . . . . . . . . . . . . 22
Receivables Payment Amount . . . . . . . . . . . . . . 22
Employment Agreements . . . . . . . . . . . . . . . . . 24
Affected Employees . . . . . . . . . . . . . . . . . . 24
CAT Employees . . . . . . . . . . . . . . . . . . . . . 24
Hired Employees . . . . . . . . . . . . . . . . . . . . 25
Continued Employees . . . . . . . . . . . . . . . . . . 25
Prior Welfare Plans . . . . . . . . . . . . . . . . . . 26
Replacement Welfare Plans . . . . . . . . . . . . . . . 26
COBRA . . . . . . . . . . . . . . . . . . . . . . . . . 26
Material Adverse Effect . . . . . . . . . . . . . . . . 31
Seller Disclosure Schedule . . . . . . . . . . . . . . 31
Seller Related Instruments . . . . . . . . . . . . . . 31
Governmental Entities . . . . . . . . . . . . . . . . . 34
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . 34
Exchange Act . . . . . . . . . . . . . . . . . . . . . 34
1996 Balance Sheet . . . . . . . . . . . . . . . . . . 36
Audited Financial Statements . . . . . . . . . . . . . 36
Financial Statements . . . . . . . . . . . . . . . . . 36
CAT 1996 Balance Sheet . . . . . . . . . . . . . . . . 37
CAT Audited Financial Statements . . . . . . . . . . . 38
CAT Financial Statements . . . . . . . . . . . . . . . 38
Combined Entity . . . . . . . . . . . . . . . . . . . . 39
Combined Entity 1996 Balance Sheet . . . . . . . . . . 39
Combined Entity Audited Financial Statements . . . . . 39
Combined Entity Unaudited Financial Statements . . . . 40
Combined Entity Financial Statements . . . . . . . . . 40
Permitted Liens . . . . . . . . . . . . . . . . . . . . 46
Miami Lease . . . . . . . . . . . . . . . . . . . . . . 47
Leases . . . . . . . . . . . . . . . . . . . . . . . . 47
Miami Facility . . . . . . . . . . . . . . . . . . . . 47
Leased Properties . . . . . . . . . . . . . . . . . . . 47
Plans . . . . . . . . . . . . . . . . . . . . . . . . . 51
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . 51
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 51
Division Contracts . . . . . . . . . . . . . . . . . . 53
Permits . . . . . . . . . . . . . . . . . . . . . . . . 56
Environmental Laws . . . . . . . . . . . . . . . . . . 60
Environmental Claim . . . . . . . . . . . . . . . . . . 60
Hazardous Materials . . . . . . . . . . . . . . . . . . 61
PCBs . . . . . . . . . . . . . . . . . . . . . . . . . 62
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Seller SEC Documents . . . . . . . . . . . . . . . . . 64
Securities Act . . . . . . . . . . . . . . . . . . . . 64
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 67
Tax Return . . . . . . . . . . . . . . . . . . . . . . 68
Buyer Related Instruments . . . . . . . . . . . . . . . 71
Buyer Disclosure Schedule . . . . . . . . . . . . . . . 75
ATSC SEC Documents . . . . . . . . . . . . . . . . . . 76
Confidentiality Agreements . . . . . . . . . . . . . . 84
Combined Entity 1994 Audited Financial Statements . . . 85
Subsequent Monthly Financial Statements . . . . . . . . 85
CAT Subsequent Monthly Financial Statements . . . . . . 85
Combined Entity Subsequent Monthly Financial
Statements . . . . . . . . . . . . . . . . . . . . 85
Subsequent Quarterly Financial Statements . . . . . . . 85
CAT Subsequent Quarterly Financial Statements . . . . . 85
Combined Entity Subsequent Quarterly Financial
Statements . . . . . . . . . . . . . . . . . . . . 85
Subsequent Financial Statements . . . . . . . . . . . . 85
CAT Subsequent Financial Statements . . . . . . . . . . 86
Combined Entity Subsequent Financial Statements . . . . 86
Exclusivity Period . . . . . . . . . . . . . . . . . . 89
Existing Gordon Agreement . . . . . . . . . . . . . . . 92
Commission . . . . . . . . . . . . . . . . . . . . . . 93
Preliminary Proxy Materials . . . . . . . . . . . . . . 93
Annual Meeting . . . . . . . . . . . . . . . . . . . . 93
Proposal . . . . . . . . . . . . . . . . . . . . . . . 93
Proxy Statement . . . . . . . . . . . . . . . . . . . . 94
Transfer Taxes . . . . . . . . . . . . . . . . . . . . 96
Buyer Group . . . . . . . . . . . . . . . . . . . . . . 104
Damages . . . . . . . . . . . . . . . . . . . . . . . . 105
Seller Claims . . . . . . . . . . . . . . . . . . . . . 106
Buyer's Deductible . . . . . . . . . . . . . . . . . . 107
Seller Group . . . . . . . . . . . . . . . . . . . . . 108
Buyer Claims . . . . . . . . . . . . . . . . . . . . . 109
Claims . . . . . . . . . . . . . . . . . . . . . . . . 109
Seller's Deductible . . . . . . . . . . . . . . . . . . 110
Failure of Condition . . . . . . . . . . . . . . . . . 112
Waiving Party . . . . . . . . . . . . . . . . . . . . . 112
person . . . . . . . . . . . . . . . . . . . . . . . . 118
affiliate . . . . . . . . . . . . . . . . . . . . . . . 119
STOCK AND ASSET PURCHASE AGREEMENT
STOCK AND ASSET PURCHASE AGREEMENT, dated as of
June 7, 1996 (the "Agreement"), by and between CYGNE DE-
SIGNS, INC., a Delaware corporation ("Seller"), CYGNE GROUP
(F.E.) LIMITED, a Hong Kong corporation and a wholly owned
subsidiary of Seller ("CGFE"), ANNTAYLOR STORES CORPORATION,
a Delaware corporation ("ATSC"), and ANNTAYLOR, INC., a
Delaware corporation and a wholly owned subsidiary of ATSC
("Buyer").
W I T N E S S E T H
WHEREAS, pursuant to that certain Agreement, dated
July 13, 1993 (the "Joint Venture Agreement"), by and among
Seller, CGFE, CAT US, Inc., a Delaware corporation ("CAT-
US"), C.A.T. (Far East) Limited, a Hong Kong corporation
("CAT-Far East" and, together with CAT-US, "CAT"), and
Buyer, Seller and Buyer own 60% and 40%, respectively, of
the outstanding capital stock of CAT, which serves as a
fully dedicated direct sourcing capability for Buyer;
WHEREAS, Seller, through its AnnTaylor Woven
Division (the "Division"), serves as a private label design-
er, merchandiser and manufacturer of women's apparel for Ann
Taylor (the "Division Business");
WHEREAS, Seller desires to sell to Buyer and Buyer
desires to acquire from Seller (i) all of the shares of
common stock, par value $.01 per share, of CAT-US owned by
Seller (the "CAT US Shares"); and (ii) certain of the assets
of the Division as more fully described herein; and
WHEREAS, CGFE desires to sell to Buyer and Buyer
desires to acquire from CGFE all the shares of common stock,
par value $1 HK per share, of CAT-Far East owned by CGFE
(the "CAT Far East Shares" and, together with the CAT US
Shares, the "CAT Shares").
NOW, THEREFORE, in consideration of the foregoing
and of the representations, warranties, covenants, agree-
ments and conditions contained herein, and intending to be
legally bound hereby, the parties agree as follows:
I. TRANSFER OF ASSETS AND LIABILITIES.
1.1 Assets to be Sold.
(a) Upon the terms and subject to the condi-
tions of this Agreement, at the closing provided for in
Section 1.3 hereof (the "Closing"), Seller shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer
shall purchase, acquire and accept from Seller, the follow-
ing:
(i) all right, title and interest in
and to the CAT US Shares, free and clear of all liens,
encumbrances, security interests, mortgages, pledges,
claims, options or restrictions of any kind, other than
restrictions on transfer imposed under federal and state
securities laws (collectively, "Liens");
(ii) the following items of inventory
(the "Inventory"): (x) fabric and trim owned by Seller for
use by the Division in the production of merchandise for
Buyer ("Division Fabric and Trim") as of February 3, 1996
and identified on Annex I hereto to the extent not used as
of the Closing Date in the production of merchandise for
Buyer; (y) Division Fabric and Trim purchased since February
3, 1996 pursuant to written commitments or purchase orders
issued by Buyer to the extent not used as of the Closing
Date in the production of merchandise for Buyer and (z)
work-in-progress owned by Seller for use by the Division in
the production of merchandise for Buyer pursuant to purchase
orders issued by Buyer;
(iii) the capital leases and other agree-
ments relating to equipment located on the fifth, sixth and
nineteenth floors of Seller's facility located at 1372
Broadway, New York City, New York (the "NY Facility") and at
the Florence Facility (as hereinafter defined), to the
extent they relate to the Division Business and are listed
on and marked with an asterisk on Annex II hereto (collec-
tively, the "Capital Leases") and other contracts, personal
property leases and other commitments to which Seller is a
party to the extent they relate to the Division Business and
are listed on Annex II hereto (collectively with the Capital
Leases, the "Contracts");
(iv) Seller's or its affiliate's rights
as tenant in accordance with Section 1.1(b) hereof (A) with
respect to the sixth floor of the NY Facility under the
Agreement of Lease, dated August 7, 1991, between Seller, as
tenant, and Nineteen New York Properties Limited Partner-
ship, as landlord, as amended (as it relates to the sixth
floor only, the "NY Lease"), and (B) with respect to the
fifth and nineteenth floors of the NY Facility under the
Agreement of Lease, dated June 24, 1994, between Fenn,
Wright and Manson, Incorporated, as tenant, and Nineteen New
York Properties Limited Partnership, as landlord (as it
relates to the fifth and nineteenth floors only, the "FWM
Lease"), as amended by that certain sublease, dated February
28, 1995, between Fenn, Wright and Manson Incorporated, as
sublessor, and CAT US, Inc., as sublessee (the "CAT Sub-
lease");
(v) all leasehold improvements, furni-
ture, fixtures and equipment that meet all of the following
conditions: (x) are owned by Seller or subject to a Capital
Lease, (y) relate to and are used exclusively or primarily
in the Division Business and (z) are located on the fifth,
sixth or nineteenth floor of the NY Facility or at the
Florence Facility on the Closing Date (the "Net Fixed As-
sets"), including those listed on Annex III hereto;
(vi) all licenses, permits, registra-
tions, renewals thereof and applications therefor, varianc-
es, exemptions, orders, approvals and authorizations issued
by any governmental, regulatory or administrative agency or
authority (domestic or foreign), held by Seller or any
affiliate of Seller of or relating to the Division Business,
including all quota allocations for the export of goods to
the United States and elsewhere, necessary or desirable for
the lawful conduct of the Division Business, to the extent
transferable under applicable law;
(vii) all purchase orders, bills of
lading, trust receipts, warehouse receipts and other docu-
ments of title of whatever kind and description relating to
the Inventory;
(viii) all rights under insurance policies
covering Inventory in transit and all rights and claims
under insurance policies for damage to any Assets to the
extent not repaired or replaced prior to the Closing;
(ix) all goodwill, intellectual property
rights, patents, trademarks, service marks, copyrights
(including all copyrights in computer software and databas-
es), licenses and applications therefor (if any), know-how,
processes, methods, techniques, formulae, designs, drawings,
patterns, trade secrets, proprietary information, sketches,
technical information, computer software, databases and
other proprietary or confidential information of or relating
to the Division Business and all rights in any licenses to
or from any third party of or for the foregoing (collective-
ly, the "Intellectual Property"), it being understood,
however, that the rights to the Intellectual Property shall
be non-exclusive unless such Intellectual Property relates
solely to the Division Business and Seller's rights therein
are exclusive;
(x) all intangible assets of or relat-
ing to the Division Business, including claims against third
parties; and
(xi) all books and records (including
all computerized records and storage media and associated
software) of CAT, and those relating solely to the Division
Business and, to the extent practicable, those portions of
Seller's other books and records that relate to the Division
Business (collectively, "Books and Records"), including,
without limitation, (a) all Books and Records relating to
the employees of, and the purchase of materials, supplies
and services for, the Division Business or CAT, but not
including the tax returns, general ledger or corporate
minute books and capital stock books of Seller, and (b) the
tax returns, general ledger and corporate minute books and
capital stock books of CAT-US and CAT-Far East (together
with the items listed in clauses (ii)-(x) above, the "As-
sets").
(b) Such sale, conveyance, assignment,
transfer and delivery shall be effected by delivery by
Seller to Buyer or its designees of (i) stock certificates
representing the CAT US Shares, duly endorsed or accompanied
by stock powers duly executed in blank with appropriate
transfer stamps, if any, affixed, and any other documents
that are necessary to transfer title to the CAT US Shares to
Buyer, (ii) a duly executed bill of sale in substantially
the form of Exhibit A hereto (the "Bill of Sale"), (iii) a
mutually satisfactory sublease agreement with respect to
each of the NY Lease and the FWM Lease (the "Subleases") or,
alternatively, newly negotiated leases between Buyer and the
landlord of the NY Facility relating to the premises subject
to the NY Lease and the FWM Lease, respectively, (iv) duly
executed assignment and assumption agreements in substan-
tially the form of Exhibit B hereto (the "Assignment and
Assumption Agreements") with respect to each of the Con-
tracts, and (v) such other good and sufficient instruments
of conveyance and transfer (collectively, the "Other Instru-
ments") as shall be reasonably necessary to vest in Buyer
good and valid title to the CAT US Shares and the Assets,
free and clear of all Liens, other than the Permitted Liens
(as hereinafter defined).
(c) Upon the terms and subject to the condi-
tions of this Agreement, at the Closing, CGFE shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer
shall purchase, acquire and accept from CGFE, all right,
title and interest in and to the CAT Far East Shares, free
and clear of all Liens. Such sale, conveyance, assignment,
transfer and delivery shall be effected by delivery by CGFE
to Buyer or its designees of stock certificates representing
the CAT Far East Shares, duly endorsed or accompanied by
stock powers duly executed in blank with appropriate trans-
fer stamps, if any, affixed, and any other documents that
are necessary to transfer title to the CAT Far East Shares
to Buyer.
1.2 Consideration.
(a) Upon the terms and subject to the condi-
tions of this Agreement, in consideration of the aforesaid
sale, conveyance, assignment, transfer and delivery of the
CAT Shares and the Assets, Buyer shall, in accordance with
the terms of this Agreement, deliver or cause to be deliv-
ered to Seller, on its own behalf and on behalf of CGFE, as
their respective interests may appear, in full payment for
the aforesaid sale, conveyance, assignment, transfer and
delivery of the CAT Shares and the Assets:
(i) the number of validly issued, fully
paid and nonassessable shares of common stock, par value
$.0068 per share, of ATSC ("ATSC Common Stock"), rounded to
the nearest whole share, equal to the quotient obtained by
dividing (a) $36.0 million by (b) the Average Trading Price
of the ATSC Common Stock (the "Stock Consideration"); pro-
vided, however, that the number of shares of ATSC Common
Stock to be issued shall in no event exceed 2.5 million
shares. As used in this Agreement, the "Average Trading
Price" shall mean the average of the high and low sale
prices of the ATSC Common Stock on the New York Stock Ex-
change Composite Tape (or as reported on any other exchange
on which the ATSC Common Stock is then listed) on each of
the 10 consecutive trading days ending on the trading day
immediately prior to the Closing Date;
(ii) a dollar amount in cash equal to
the Adjusted Net Book Value (as hereinafter defined) of the
Inventory determined in accordance with Section 1.6 hereof
(the "Inventory Consideration");
(iii) a dollar amount in cash equal to
the lesser of (x) the Net Fixed Asset Value (as hereinafter
defined) and (y) $2,646,000 (the "Fixed Asset Consideration"
and, together with the Inventory Consideration and the Stock
Consideration, the "Purchase Price");
(iv) the Subleases, if applicable;
(v) the Assignment and Assumption
Agreements;
(vi) an undertaking substantially in the
form of Exhibit C hereto (the "Undertaking") evidencing the
assumption by Buyer of accounts payable associated with the
Inventory (the "Accounts Payable"); and
(vii) an instrument, substantially in the
form of Exhibit D hereto (the "Advance Instrument"), evi-
dencing the forgiveness by Buyer of $7,985,000 of outstand-
ing advances (the "Advances" and, collectively with the
Capital Leases and the Accounts Payable, the "Liabilities")
made to Seller by Buyer.
1.3 Closing. The Closing of the transactions
contemplated by this Agreement shall take place at the
offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third
Avenue, New York, New York, at 10:00 a.m., Eastern time, on
the first business day following the Annual Meeting (as
hereinafter defined) or, if the conditions to Closing set
forth in Articles VI, VII and VIII hereof shall not have
been satisfied or waived by such date, as soon as practica-
ble after such conditions shall have been satisfied or
waived, or such other place, date and time as shall be
agreed upon in writing by the parties hereto. The date on
which the Closing actually occurs is referred to herein as
the "Closing Date".
1.4 Deliveries by Seller. At the Closing, Seller
and CGFE, as applicable, shall deliver or cause to be deliv-
ered to Buyer (unless delivered previously) the following:
(a) the stock certificates representing the
CAT Shares, duly endorsed or accompanied by stock powers
duly executed in blank with appropriate transfer stamps, if
any, affixed, and any other documents that are reasonably
necessary to transfer title to the CAT Shares to Buyer;
(b) the Bill of Sale;
(c) the Subleases, if applicable;
(d) the Assignment and Assumption Agreements;
(e) the Pledge Agreement (as hereinafter defined);
(f) the resignations of certain officers and
directors of CAT referred to in Section 5.11 hereof;
(g) the compliance certificate referred to
in Subsection 8.1(c) hereof;
(h) the opinion of counsel to Seller re-
ferred to in Subsection 8.1(d) hereof;
(i) duly executed counterparts of any con-
sent or approval referred to in Subsection 8.1(g) hereof;
(j) the Ancillary Agreements (as hereinafter
defined); and
(k) all other documents, certificates,
instruments or writings required to be delivered by Seller
at or prior to the Closing pursuant to this Agreement or
otherwise reasonably required in connection herewith.
1.5 Deliveries by Buyer. At the Closing, Buyer
shall deliver or cause to be delivered to Seller (unless
delivered previously) the following:
(a) a stock certificate or stock certifi-
cates representing the shares of ATSC Common Stock to be
delivered to Seller in payment of the Stock Consideration,
free and clear of all Liens other than as set forth in, and
bearing the legend set forth in, the Stockholder's Agreement
(as hereinafter defined);
(b) a wire transfer of Federal or other
immediately available funds in an amount equal to the Ini-
tial Payment Amount (as hereinafter defined);
(c) a wire transfer of Federal or other
immediately available funds in amount equal to the Fixed
Asset Consideration;
(d) a wire transfer of Federal or other
immediately available funds in an amount equal to the Re-
ceivables Payment Amount (as hereinafter defined);
(e) a wire transfer of Federal or other
immediately available funds in an amount equal to the depos-
its under the Leases (as hereinafter defined) listed on
Annex IV hereto;
(f) a wire transfer of Federal or other
immediately available funds in an amount equal to the
Pledged Amount (as hereinafter defined) to a bank account in
the name of Buyer (the "Bank Account");
(g) the Pledge Agreement;
(h) the Subleases, if applicable;
(i) the Assignment and Assumption Agreements;
(j) the Undertaking;
(k) the Advance Instrument;
(l) the officer's certificate referred to in
Subsection 7.1(c) hereof;
(m) the opinion of counsel to Buyer referred
to in Subsection 7.1(d) hereof;
(n) the Ancillary Agreements;
(o) evidence that Buyer has substituted
letters of credit or provided an alternative form of finan-
cial support for the letters of credit listed on the sched-
ule delivered pursuant to Section 5.15 hereof; and
(p) all other documents, certificates,
instruments or writings reasonably required to be delivered
by Buyer at or prior to the Closing pursuant to this Agree-
ment or otherwise required in connection herewith.
The wire transfers pursuant to subparagraphs (b)
(c) (d) and (e) above shall be made by a single wire trans-
fer to an account designated in writing at least two (2)
business days prior to the Closing Date by Seller.
1.6 Post-Closing Adjustments.
(a) At least five (5) business days prior to
the Closing Date, Seller shall prepare and deliver to Buyer
(i) a good faith estimate, prepared in accordance with
United States generally accepted accounting principles
("GAAP"), applied in a manner consistent with the prepara-
tion of the financial statements referred to in Section 3.5
hereof, except as otherwise expressly provided below, and
accompanied by a certificate of the chief financial officer
of Seller to that effect, of the aggregate amount of the
Adjusted Net Book Value of the Inventory determined in
accordance with clause (f) below (the "Estimated Amount") as
of the Closing Date, (ii) a statement, prepared in good
faith in a manner consistent with the preparation of the
Company's books and records during the periods reflected in
the financial statements referred to in Section 3.5 hereof
and accompanied by a certificate of the chief financial
officer of Seller to that effect, of the aggregate amount of
the net book value of the Net Fixed Assets as of the Closing
Date (the "Net Fixed Asset Value"), and (iii) a schedule of
all open purchase orders of Seller relating to the Division.
(b) At Closing, Buyer shall (i) deliver to
Seller an amount equal to 80% of the Estimated Amount (the
"Initial Payment Amount") and (ii) cause the Bank Account to
be credited with an amount equal to 20% of the Estimated
Amount (the "Pledged Amount").
(c) Beginning two (2) days prior to the
Closing Date, Seller and Buyer shall jointly conduct, or
shall cause to be jointly conducted by their respective
independent public accountants, a physical count of all
Inventory as of the Closing Date. The physical count of the
Inventory shall be conducted in accordance with procedures
to be mutually agreed upon by the parties' respective inde-
pendent public accountants. As promptly as practicable
thereafter, but in no event more than thirty (30) days
following the Closing Date, Seller shall prepare or cause to
be prepared and shall deliver to Buyer a reasonably detailed
statement setting forth the Adjusted Net Book Value of the
Inventory, determined in accordance with clause (f) below
(the "Seller Statement"). Unless within thirty (30) days
after its receipt of the Seller Statement Buyer shall deliv-
er to Seller a reasonably detailed statement describing its
objections to the Seller Statement (a "Statement of Objec-
tion"), the amount of the Adjusted Net Book Value of the
Inventory determined in accordance with this clause (c)
shall be final and binding on the parties hereto and the
Seller Statement shall be the final statement hereunder (the
"Closing Date Statement"). Buyer may include in its State-
ment of Objection one or more objections to items included
by Seller in the Inventory that, in Buyer's good faith
determination, were not properly included as Inventory
pursuant to Section 1.1(a)(ii) hereof;
(d) If Buyer shall deliver to Seller a
timely Statement of Objection, Buyer and Seller and their
respective independent accountants shall negotiate in good
faith and use reasonable best efforts to resolve any dis-
putes. If a resolution is reached, such resolution shall be
final and binding on the parties and Buyer and Seller shall
set forth the Adjusted Net Book Value of the Inventory on a
mutually acceptable statement and such statement shall be
the Closing Date Statement. If a final resolution is not
reached within fifteen (15) days after Buyer has submitted
its Statement of Objection, any remaining disputes shall be
resolved by a third firm of independent accountants (the
"Reviewing Accountants") selected jointly by the parties'
independent accounting firms. The Reviewing Accountants
shall be instructed to resolve any matters in dispute as
promptly as practicable, but in no event more than thirty
(30) days, and set forth their resolution in a statement
setting forth the Net Book Value of the Inventory (the
"Accountant Statement"). In such event, the determination
of the Reviewing Accountants shall be final and binding on
the parties hereto and the Accountant Statement shall be the
Closing Date Statement.
(e) Seller and Buyer each shall pay one-half
of the fees and expenses of the Reviewing Accountants.
Seller and the Buyer shall cooperate with each other and the
Reviewing Accountants in connection with the matters contem-
plated by this Section 1.6, including Seller's preparation
of and Buyer's review of the Closing Date Statement, includ-
ing by furnishing such information and access to books,
records (including accountants' work papers), personnel and
properties as may be reasonably requested.
(f) The "Adjusted Net Book Value" shall be
equal to the tangible net book value of the Inventory, less
the amount of the Liabilities, as set forth on the Closing
Date Statement. The Closing Date Statement shall be pre-
pared in accordance with GAAP applied in a manner consistent
with the financial statements referred to in Section 3.5
hereof, except as otherwise expressly set forth in this
Section 1.6, and except that Inventory shall be valued at
cost, not the lower of cost or market. For purposes of this
Section 1.6, the Inventory, regardless of condition, shall
be valued as follows: (i) raw materials shall be valued at
cost, including, without limitation, to the extent actually
incurred: FOB or CF purchase price, as the case may be;
inspection costs; re-dyeing and/or refinishing charges;
duty; freight and brokerage charges; fabric commission;
insurance; and storage charges; provided, however, that such
valuation applies only to raw materials available to Buyer
(i.e., excludes shrinkage); and (ii) work-in-progress shall
include (A) raw material costs as determined above; and (B)
making charges to the extent such charges have been paid by
Seller. Notwithstanding the foregoing, finished goods
rejected or canceled by Buyer prior to the Closing Date
shall not be included in the Assets and such finished goods
shall remain in Seller's possession.
(g) At the Closing, Buyer shall pledge the
Bank Account to Seller as security for its interest under
this Section 1.6 pursuant to a Pledge Agreement in substan-
tially the form of Exhibit E hereto (the "Pledge Agree-
ment"). Upon delivery of the Closing Date Statement, Seller
hereby releases its right and security interest in the Bank
Account (but not in the proceeds thereof, to the extent such
proceeds are due to Seller pursuant to this Section 1.6)
automatically and without any further action required on the
part of Seller.
(h) If the Adjusted Net Book Value set forth
in the Closing Date Statement exceeds the Initial Payment
Amount, Buyer shall distribute to Seller in cash out of the
Pledged Amount the amount of such excess. Buyer shall
retain the remainder, if any, of the Pledged Amount. Buyer
shall distribute interest earned on the Pledged Amount in
the Bank Account to Seller, or shall retain such interest,
in proportion to the amount of the Pledged Amount distribut-
ed or retained, as the case may be, by each.
(i) If the Adjusted Net Book Value set forth
in the Closing Date Statement is less than the Initial
Payment Amount, Seller shall pay the difference to Buyer in
immediately available funds, plus interest on such amount
from the Closing Date to the date of payment at the rate of
8% per annum. In such event, Buyer shall retain the Pledged
Amount and all interest earned thereon.
(j) If the Adjusted Net Book Value set forth
in the Closing Date Statement exceeds the Estimated Amount,
then, in addition to distribution of the Pledged Amount
pursuant to clause (h) above, Buyer shall pay the difference
to Seller in immediately available funds, plus interest on
such amount from the Closing Date to the date of payment at
the rate of 8% per annum.
1.7 Allocation of Purchase Price. Prior to the
Closing, the parties shall agree to the appropriate alloca-
tion of the Purchase Price and the Liabilities among the CAT
Shares and Assets, which allocation shall comply with Sec-
tion 1060 of the Internal Revenue Code of 1986, as amended
(the "Code"). The parties hereby agree that such allocation
shall be conclusive and binding on each of them for purposes
of federal and, where applicable, state and local tax re-
turns and that they will not voluntarily take any position
inconsistent therewith. The parties hereby agree to prepare
and timely file all applicable Internal Revenue Service
("IRS") and other governmental authority forms, to cooperate
with each other in the preparation of such forms, and to
furnish each other with a copy of such forms prepared in
draft, within a reasonable period prior to the filing due
date thereof.
1.8 Assumed Liabilities. Except for liabilities
and obligations expressly assumed in this Agreement, Buyer
has not agreed to pay, shall not be required to assume and
shall have no liability or obligation with respect to, and
Seller shall indemnify and hold Buyer harmless from and
against, any liability or obligation, direct or indirect,
absolute or contingent, of Seller, the Division or any of
their affiliates.
II. RELATED MATTERS.
2.1 Ancillary Agreements.
(a) At the Closing, Seller and Buyer shall
enter into (i) a mutually satisfactory transition services
agreement relating to the CAD-CAM work stations located at
the NY Facility with substantially the terms set forth on
Exhibit F hereto and (ii) a mutually acceptable transition
services agreement relating to the Miami Facility (as here-
inafter defined) with substantially the terms set forth on
Exhibit G hereto.
(b) At the Closing, Seller and Buyer shall
enter into a consulting agreement in substantially the form
of Exhibit H hereto, relating to the services of Mr. Bernard
M. Manuel.
(c) At the Closing, Seller and Buyer shall
enter into a consulting agreement in substantially the form
of Exhibit I hereto, relating to the services of Mr. Irving
Benson.
(d) At the Closing, Seller and Buyer shall
enter into a stockholders agreement (the "Stockholders
Agreement") relating to the shares of ATSC Common Stock
issued to Seller pursuant to Subsection 1.2(a)(i) hereof in
substantially the form of Exhibit J hereto.
(e) At the Closing, Seller or an affiliate
of Seller and Buyer shall enter into a mutually satisfactory
lease whereby Buyer shall lease certain real property in
Florence, Italy (the "Florence Facility") from Seller or
such affiliate with substantially the terms set forth on
Exhibit K hereto (the "Florence Lease" and, collectively
with the agreements listed in paragraphs (a)-(d) above, the
"Ancillary Agreements").
2.2 Receivables Settlement. At least five (5)
business days prior to the Closing Date, Seller shall deliv-
er to Buyer a detailed schedule setting forth Seller's good
faith estimate (the "Accounts Receivable Estimate"), accom-
panied by a certificate of the chief financial officer of
Seller to that effect, of the dollar amount of the accounts
receivable of Seller from Buyer and CAT for finished goods
that have been received, quality checked and accepted. At
the Closing, Buyer shall deliver to Seller (a) a detailed
statement describing its disputes, if any, to the Accounts
Receivable Estimate, and (b) a wire transfer of immediately
available funds in an amount equal to the Accounts Receiv-
able Estimate not so disputed (the "Receivables Payment
Amount"). Buyer and Seller agree to negotiate in good faith
to resolve any dispute of the Accounts Receivable Estimate.
If any such dispute is not resolved by the parties and their
respective independent accountants within ten (10) business
days after the Closing, such dispute shall be resolved by
the Reviewing Accountants as promptly as practicable, and
such resolution shall be final and binding on the parties.
The expenses of the Reviewing Accountants shall be paid one
half by each of Seller and Buyer.
2.3 Finished Goods. All finished goods other
than those referred to in Section 2.2 hereof shall be
shipped and paid for in the ordinary course of business in
accordance with the relevant purchase orders; provided,
however, that Seller shall pay all costs incurred or to be
incurred in delivering finished goods to Buyer.
2.4 Joint Venture Agreement. The execution and
delivery of this Agreement by each of Seller, CGFE, ATSC and
Buyer shall not be construed to defeat, impair or limit in
any way the rights, obligations, claims or remedies of
Seller, CGFE or Buyer under the Joint Venture Agreement,
including, without limitation, under Section 5 thereof.
Upon consummation of the Closing, the Joint Venture Agree-
ment shall terminate automatically and be of no further
force or effect.
2.5 Leases. In the event Buyer enters into the
Subleases at the time of Closing, (i) at Seller's election
at any time within two (2) years after the Closing Date,
Buyer shall assume those obligations of Seller under the
NY Lease or the FWM Lease, as the case may be, that relate
to the subleased premises, and (ii) the Subleases shall
contain the consents of the respective landlords to the
assignment described in clause (i) above.
2.6 Meyer Employment Agreement. Buyer shall (i)
pay to Mr. Dwight Meyer any amount payable to him as a
result of the consummation of transactions contemplated by
this Agreement under his existing employment agreement with
CAT-US and (ii) use reasonable best efforts to cause Mr.
Meyer to execute and deliver a full release of all of
Seller's, Buyer's and CAT's obligations to Mr. Meyer in
respect of his employment by CAT prior to the Closing Date.
2.7 Mail Received After Closing. On and after
the Closing, Buyer may receive and open all mail addressed
to former employees of Seller who are Continuing Employees
and deal with the contents thereof in its discretion to the
extent that such mail and the contents thereof relate to the
Division, the Division Business, CAT, the Assets or any of
the Liabilities. Buyer agrees to deliver, or to cause to be
delivered, promptly to Seller all other mail received.
2.8 Employees, Benefit Plans.
(a) Hiring of Employees. Buyer shall not
have any obligation to assume or honor any employment agree-
ment ("Employment Agreements") between Seller and any cur-
rent or former employee of Seller. As of the Closing Date,
Seller shall terminate the employment of, and Buyer shall
offer employment to, employees of Seller or its affiliates
who are actively employed immediately prior to the Closing
Date, whose primary employment is with the Division and who
have been identified to Seller in writing by Buyer as em-
ployees to whom Buyer shall offer employment ("Affected
Employees"). CAT employees who are employed by CAT immedi-
ately prior to the Closing Date shall remain employees of
CAT following the Closing Date ("CAT Employees"). All
Affected Employees who accept employment with Buyer ("Hired
Employees") and CAT Employees who continue employment by CAT
immediately following the Closing Date, shall be referred
to, collectively, as "Continued Employees".
(b) Wages. Buyer shall pay or cause to be
paid when due to the Hired Employees the amount of all
wages, salary, bonuses, commissions, incentive payments and
other compensation (including, without limitation, any
vacation and sick pay) or any other benefit, perquisite,
cost, expense, liability or obligation attributable to
services provided on and after the Closing Date. Seller
shall pay or cause to be paid all amounts due to employees
of Seller engaged in the Division Business, including Hired
Employees, for wages, salary, bonuses, commissions, incen-
tive payments and other compensation (including, without
limitation, any vacation and sick pay) or any other benefit,
perquisite, cost, expense, liability or obligation attribut-
able to services provided prior to the Closing Date. Prior
to the Closing Date, Seller shall allow (and Seller repre-
sents and warrants to Buyer that it has allowed) the Hired
Employees the opportunity to use all accrued or earned
vacation; provided, however, that if any vacation time
remains owed to the Hired Employees as of the Closing Date,
Seller shall pay any and all such amounts to the Hired
Employees.
(c) Welfare Plans. As of the Closing Date,
Continued Employees shall cease to participate in the em-
ployee welfare benefit plans (as such term is defined in
ERISA) maintained or sponsored by Seller or its affiliates
(the "Prior Welfare Plans") and shall commence to partici-
pate in welfare benefit plans of Buyer or its affiliates
(the "Replacement Welfare Plans"), in accordance with the
terms of such plans. Seller shall be responsible for any
claims by Continued Employees for benefits relating to
claims incurred prior to the Closing Date (regardless of
when reported) and Buyer or CAT shall be responsible for any
claims incurred by Continued Employees on or after the
Closing Date.
(d) Workmen's Compensation Liability. Any
payments to be made on or after the Closing Date relating to
workmen's compensation claims of Continued Employees pending
at the time of Closing or arising from services provided
prior to Closing shall be made by Seller or its insurance
carrier.
(e) COBRA Coverage. To the extent required
by law, Seller shall give the Affected Employees and their
spouses notice of their rights to continuation coverage
under Section 4980B of the Code ("COBRA") in accordance with
applicable law. Seller shall continue to be responsible at
all times after the Closing Date for continuation coverage
under COBRA with respect to all Affected Employees, former
CAT Employees and their present or former dependents.
Seller hereby agrees to indemnify and hold harmless Buyer
against any and all losses which the Buyer may incur in
respect of any of the foregoing.
(f) Employment Law Liabilities.
(i) Seller hereby agrees to indemnify
Buyer and its affiliates against, and agrees to hold them
harmless from, any and all claims, losses, damages and
expenses (including, without limitation, reasonable
attorneys' fees) and other liabilities and obligations
incurred or suffered as a result of any claim by any employ-
ee of Seller, including any Hired Employee, that arises
under federal, state or local statute (including, without
limitation, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1991, the Age Discrimination in Employ-
ment Act of 1990, the Equal Pay Act, the Americans with
Disabilities Act of 1990, the Employee Retirement Income
Security Act of 1974 and all other statutes regulating the
terms and conditions of employment), regulation or ordi-
nance, under the common law or in equity (including any
claims for wrongful discharge or otherwise), or under any
policy, agreement, understanding or promise, written or
oral, formal or informal, between Seller and the employee,
arising out of actions, events or omissions that occurred
(or, in the case of omissions, failed to occur) on or prior
to the Closing Date; and
(ii) Buyer hereby agrees to indemnify
Seller and its affiliates against, and agrees to hold them
harmless from, any and all claims, losses, damages and
expenses (including, without limitation, reasonable
attorneys' fees) and other liabilities and obligations
incurred or suffered as a result of any claim by any Hired
Employee that arises under federal, state or local statute
(including, without limitation, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Age
Discrimination in Employment Act of 1990, the Equal Pay Act,
the Americans with Disabilities Act of 1990, the Employee
Retirement Income Security Act of 1974 and all other stat-
utes regulating the terms and conditions of employment),
regulation or ordinance, under the common law or in equity
(including any claims for wrongful discharge or otherwise),
or under any policy, agreement, understanding or promise,
written or oral, formal or informal, between Buyer and such
Hired Employee, arising out of actions, events or omissions
that occurred (or, in the case of omissions, failed to
occur) subsequent to the Closing Date.
(g) WARN Act Liabilities. Seller shall
bear, and indemnifies and holds harmless Buyer and its
affiliates from and against, all direct and indirect costs,
claims, losses, damages, expenses and other liabilities and
obligations arising from or relating to claims made by or on
behalf of the Affected Employees relating to the termination
of any such person's employment by Seller or its affiliates
prior to or on the Closing Date, including, but not limited
to, claims in respect of the Worker Adjustment and Retrain-
ing Notification Act of 1988, severance pay, salary continu-
ation and similar obligations. Buyer agrees to bear, and
indemnify and hold harmless Seller from and against, all
direct and indirect costs, claims, losses, damages, expenses
and other liabilities and obligations arising from or relat-
ing to claims made by or on behalf of the Continued Employ-
ees relating to the termination of any such person's employ-
ment by Buyer or CAT after the Closing Date, except for
claims in respect of the Worker Adjustment and Retraining
Notification Act of 1988 which would not have arisen but for
aggregation with terminations by Seller prior to the Closing
Date.
(h) No Third-Party Beneficiaries. Nothing
in this Section 2.8 is intended, or shall be construed, to
confer upon any person, other than the parties hereto and
their successors and permitted assigns, any rights or reme-
dies by reason of this Section 2.8.
III. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer as fol-
lows:
3.1 Organization of Seller and CAT; Authority.
(a) Each of Seller, CAT-US and CAT-Far East
is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of organi-
zation and has all requisite corporate power and authority
to own, lease and operate its properties and assets and to
conduct its business as it is now being conducted, includ-
ing, without limitation, in the case of Seller, the Divi-
sion. Each of Seller, CAT-US and CAT-Far East is duly
qualified or licensed to do business as a foreign corpora-
tion and is in good standing in each jurisdiction in which
the property or assets owned, leased or operated by it or
the nature of the business conducted by it makes such quali-
fication necessary, except in those jurisdictions where the
failure to have such power and authority or to be so duly
qualified or licensed and in good standing would not, indi-
vidually or in the aggregate, reasonably be expected to have
a material adverse effect on the business, properties,
assets, results of operations or financial condition (a
"Material Adverse Effect") of the Division, CAT-US or CAT-
Far East. Except as set forth in Section 3.1 of the Disclo-
sure Schedule being delivered by Seller to Buyer concurrent-
ly herewith (the "Seller Disclosure Schedule"), Seller does
not have any subsidiaries or equity interests in any busi-
ness entity engaged in the Division Business.
(b) Each of Seller and CGFE has all requi-
site corporate power and authority to enter into this Agree-
ment and any instruments and agreements contemplated herein
required to be executed and delivered by it pursuant to this
Agreement (including, without limitation, as applicable, the
Ancillary Agreements, the Bill of Sale, the Assignment and
Assumption Agreements, and any Other Instruments, which are
referred to collectively herein as the "Seller Related
Instruments") and to consummate the transactions contemplat-
ed hereby and thereby. The execution, delivery and perfor-
mance of this Agreement and the Seller Related Instruments
and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary
corporate action on the part of each of Seller and CGFE,
other than approval of Seller's stockholders. This Agree-
ment has been, and each of the Seller Related Instruments
when executed and delivered will be, duly executed and
delivered by Seller and CGFE, as applicable, and this Agree-
ment constitutes, and each of the Seller Related Instruments
to which it is a party will, when executed and delivered,
constitute a valid and binding obligation of Seller or CGFE,
as applicable, enforceable against Seller or CGFE, as appli-
cable, in accordance with its terms, except that (i) such
enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, or other laws, now or hereafter
in effect, relating to or limiting creditors' rights gener-
ally and (ii) the remedy of specific performance and injunc-
tive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. Each of
Seller and CGFE shall deliver to Buyer true, correct and
complete copies of resolutions duly and validly adopted by
its board of directors, evidencing the authorization of the
execution and delivery of this Agreement and the Seller
Related Instruments, as applicable, and the consummation of
the transactions contemplated hereby and thereby.
3.2 No Violation; Consents and Approvals.
(a) Except as set forth in Section 3.2(a) of
the Seller Disclosure Schedule, the execution and delivery
of this Agreement and the Seller Related Instruments do not,
and the consummation of the transactions contemplated hereby
or thereby and compliance with the terms hereof or thereof
will not, (i) conflict with, or result in any violation of
or default under, (A) any provision of the charter or by-
laws of Seller or CGFE, or (B) any judgment, order or de-
cree, or statute, law, ordinance, rule or regulation of any
Governmental Entity (as hereinafter defined) applicable to
Seller, CGFE, CAT, the Division or the Assets; or (ii)
conflict with, or result in any breach or violation of or
constitute a default (or an event or condition which, with
notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the
performance required by, or cause the acceleration of any
maturity of any liability or obligation pursuant to, or
result in the creation or imposition of any Lien under, any
note, bond, mortgage, indenture, license, contract, agree-
ment, lease or other instrument or obligation to which
Seller, CGFE or CAT is a party or by which Seller, CGFE or
CAT may be bound or affected or to which any of the Assets
may be subject, except where the conflict, violation, de-
fault, breach, termination, acceleration, creation or impo-
sition would not reasonably be expected to have a Material
Adverse Effect on the Division or CAT, would not prevent or
delay Seller's ability, or, to the best knowledge of Seller,
Buyer's ability, to consummate the transactions contemplated
hereby, would not impair in any material respect Buyer's
ability to operate CAT or the Division Business as currently
operated or would not result in any liability, cost or
expense of Seller (other than the Liabilities or other
liabilities and obligations not in excess of $50,000 in the
aggregate) being incurred by Buyer.
(b) Except as set forth in Section 3.2(b) of
the Seller Disclosure Schedule, no consent, approval, order
or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or
other governmental entity, authority or instrumentality,
domestic or foreign (collectively, "Governmental Entities"),
is required to be obtained or made by or with respect to
Seller, CGFE or CAT in connection with the execution and
delivery by Seller or CGFE of this Agreement or any Seller
Related Instrument or the consummation by Seller or CGFE of
the transactions contemplated hereby or thereby, or compli-
ance by Seller or CGFE with the terms hereof or thereof,
other than (i) compliance with and filings under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), (ii) compliance with and filings under
Sections 13(a) and (d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and (iii) those the
failure of which to obtain would not reasonably be expected
to have a Material Adverse Effect on the Division or CAT,
would not prevent or delay Seller's ability, or, to the best
knowledge of Seller, Buyer's ability, to consummate the
transactions contemplated hereby, would not impair in any
material respect Buyer's ability to operate CAT or the
Division Business as currently operated or would not result
in any liability, cost or expense of Seller (other than the
Liabilities or other liabilities and obligations not in
excess of $50,000 in the aggregate) being incurred by Buyer.
(c) Except for the approval of Seller's
stockholders, and as set forth in Section 3.2(c) of the
Seller Disclosure Schedule, no consent, approval, order or
authorization of, notice to, or registration, declaration or
filing with, any third party is required to be obtained or
made by Seller, CGFE or CAT in connection with the execution
and delivery by Seller or CGFE of this Agreement or any
Seller Related Instrument, or the consummation by Seller or
CGFE of the transactions contemplated hereby or thereby or
compliance by Seller or CGFE with the terms hereof or there-
of, except where the failure to obtain any consent, approv-
al, order or authorization, or to give notice, or to make
any registration, declaration or filing would not reasonably
be expected to have a Material Adverse Effect on the Divi-
sion or CAT, would not prevent or delay Seller's ability,
or, to the best knowledge of Seller, Buyer's ability, to
consummate the transactions contemplated hereby, would not
impair in any material respect Buyer's ability to operate
CAT or the Division Business as currently operated or would
not result in any liability, cost or expense of Seller
(other than the Liabilities or other liabilities and obliga-
tions not in excess of $50,000 in the aggregate) being
incurred by Buyer.
3.3 Seller Financial Statements.
(a) Seller has delivered to Buyer true,
correct and complete copies of the audited, consolidated
balance sheets of Seller as of January 29, 1994, January 28,
1995, and February 3, 1996 (the "1996 Balance Sheet") and
the audited, consolidated income statements and statements
of cash flows of Seller for the fiscal years ended Janu-
ary 29, 1994, January 28, 1995 and February 3, 1996, accom-
panied, in each case, by an unqualified report of Seller's
independent public accountants, Ernst & Young, LLP (collec-
tively, the "Audited Financial Statements").
(b) As used in this Agreement, the term
"Financial Statements" means, collectively, the Audited
Financial Statements and the Subsequent Financial Statements
(as hereinafter defined).
(c) The balance sheets included in the
Audited Financial Statements present, and the balance sheets
included in the Subsequent Financial Statements will pres-
ent, fairly the financial position of Seller as of the
respective dates thereof; provided, however, that the Subse-
quent Financial Statements will be subject to normal year-
end adjustments and will lack footnotes. The statements of
income and statements of cash flows included in the Audited
Financial Statements present, and the statements of income
and statements of cash flows included in the Subsequent
Financial Statements will present, fairly the results of
operations and cash flows of Seller for the respective
periods indicated; provided, however, that the Subsequent
Financial Statements will be subject to normal year-end
adjustments and will lack footnotes.
(d) The Audited Financial Statements were
and the Subsequent Financial Statements will have been,
based on the accounting books and records of Seller and have
been prepared or will be prepared in accordance with GAAP
applied on a consistent basis throughout the periods pre-
sented in the Financial Statements; provided, however, that
the Subsequent Financial Statements will be subject to
normal year-end adjustments and will lack footnotes.
3.4 CAT Financial Statements.
(a) Seller has delivered to Buyer true,
correct and complete copies of the audited, combined balance
sheets of CAT as of January 29, 1994, January 28, 1995 and
February 3, 1996 (the "CAT 1996 Balance Sheet") and the
audited, combined income statements and statements of cash
flows of CAT for the fiscal years ended January 29, 1994,
January 28, 1995 and February 3, 1996, accompanied, in each
case, by an unqualified report of CAT's independent public
accountants, Ernst & Young, LLP (collectively, the "CAT
Audited Financial Statements").
(b) As used in this Agreement, the term "CAT
Financial Statements" means, collectively, the CAT Audited
Financial Statements and the CAT Subsequent Financial State-
ments (as hereinafter defined).
(c) The balance sheets included in the CAT
Audited Financial Statements present, and the balance sheets
included in the CAT Subsequent Financial Statements will
present, fairly the financial position of CAT as of the
respective dates thereof; provided, however, that the CAT
Subsequent Financial Statements will be subject to normal
year-end adjustments and will lack footnotes. The state-
ments of income and statements of cash flows included in the
CAT Audited Financial Statements present, and the statements
of income and statements of cash flows included in the CAT
Subsequent Financial Statements will present, fairly the
results of operations and cash flows of CAT for the respec-
tive periods indicated; provided, however, that the CAT
Subsequent Financial Statements will be subject to normal
year-end adjustments and will lack footnotes.
(d) The CAT Audited Financial Statements
were, and the CAT Subsequent Financial Statements will have
been, based on the accounting books and records of CAT and
have been prepared or will have been prepared in accordance
with GAAP applied on a consistent basis throughout the
periods presented in the CAT Financial Statements; provided,
however, that the CAT Subsequent Financial Statements will
be subject to normal year-end adjustments and will lack
footnotes.
3.5 Combined Entity Financial Statements.
(a) Seller has delivered to Buyer true,
correct and complete copies of the following:
(i) the audited combined balance sheets of CAT
and the Division (the "Combined Entity") as
of February 3, 1996 (the "Combined Entity
1996 Balance Sheet") and the audited combined
income statements and statements of cash
flows of the Combined Entity for the fiscal
year ended February 3, 1996, accompanied, in
each case, by an unqualified report of
Seller's independent public accountants,
Ernst & Young, LLP (collectively, the "Com-
bined Entity Audited Financial Statements");
and
(ii) the unaudited combined balance sheets of the
Combined Entity as of January 28, 1995 and
the unaudited combined income statements and
statements of cash flows of the Combined
Entity for the fiscal year ended January 28,
1995 (collectively, the "Combined Entity
Unaudited Financial Statements").
(b) As used in this Agreement, the term
"Combined Entity Financial Statements" means, collectively,
the Combined Entity Audited Financial Statements, the Com-
bined Entity Unaudited Financial Statements and the Combined
Entity Subsequent Financial Statements (as hereinafter
defined).
(c) The balance sheets included in the
Combined Entity Audited Financial Statements and the Com-
bined Entity Unaudited Financial Statements present, and the
balance sheets included in the Combined Entity Subsequent
Financial Statements will present, fairly the pro forma
financial position of the Combined Entity as of the respec-
tive dates thereof, based upon the assumption set forth
therein and the notes thereto; provided, however, that the
Combined Entity Unaudited Financial Statements are, and the
Combined Entity Subsequent Financial Statements (other than
the Combined Entity 1994 Audited Financial Statements) will
be, subject to normal year-end adjustments and will lack
footnotes. The statements of income and statements of cash
flows included in the Combined Entity Audited Financial
Statements and the Combined Entity Unaudited Financial
Statements present, and the statements of income and state-
ments of cash flows included in the Combined Entity Subse-
quent Financial Statements will present, fairly the pro
forma results of operations and cash flows of the Combined
Entity for the respective periods indicated, based on the
assumptions set forth therein and the notes thereto; provid-
ed, however, that the Combined Entity Unaudited Financial
Statements are, and the Combined Entity Subsequent Financial
Statements (other than the Combined Entity 1994 Audited
Financial Statements) will be, subject to normal year-end
adjustments and will lack footnotes.
(d) The Combined Entity Audited Financial
Statements and the Combined Entity Unaudited Financial
Statements were, and the Combined Entity Subsequent Finan-
cial Statements will have been, based on the accounting
books and records of the Combined Entity, subject to the
assumptions set forth in such financial statements and the
notes thereto, and have been prepared or will be prepared in
accordance with GAAP applied on a consistent basis through-
out the periods presented in the Combined Entity Financial
Statements, subject to the assumptions set forth in such
financial statements and the notes thereto; provided, howev-
er, that the Combined Entity Unaudited Financial Statements
are, and the Combined Entity Subsequent Financial Statements
(other than the Combined Entity 1994 Audited Financial
Statements) will be, subject to normal year-end adjustments
and will lack footnotes.
3.6 Absence of Seller Undisclosed Liabilities.
Except for (a) liabilities and obligations set forth in
Section 3.6 of the Seller Disclosure Schedule or reflected
on the 1996 Balance Sheet or (b) liabilities and obligations
incurred in the ordinary course of business consistent with
past practice since the date of the 1996 Balance Sheet,
Seller has incurred no liabilities or obligations relating
to the Division in excess of $50,000 in the aggregate
(whether absolute, accrued, contingent or otherwise, and
whether due or to become due).
3.7 Absence of CAT Undisclosed Liabilities. To
the best knowledge of Seller, except for (a) liabilities and
obligations set forth in Section 3.7 of the Seller Disclo-
sure Schedule or reflected on the CAT 1996 Balance Sheet or
(b) liabilities and obligations incurred in the ordinary
course of business consistent with past practice since the
date of the CAT 1996 Balance Sheet, CAT has incurred no
liabilities or obligations in excess of $50,000 in the
aggregate (whether absolute, accrued, contingent or other-
wise, and whether due or to become due).
3.8 Absence of Division Undisclosed Liabilities.
Except for (a) liabilities and obligations set forth in
Section 3.8 of the Seller Disclosure Schedule or reflected
on the Division 1996 Balance Sheet or (b) liabilities and
obligations incurred in the ordinary course of business
consistent with past practice since the date of the Division
1996 Balance Sheet, the Division has incurred no liabilities
or obligations in excess of $50,000 in the aggregate (wheth-
er absolute, accrued, contingent or otherwise, and whether
due or to become due).
3.9 Absence of Certain Changes or Events. Except
as set forth in Section 3.9 of the Seller Disclosure Sched-
ule, since February 3, 1996, (a) there has not been
any Material Adverse Effect on the Division Business; and
(b) neither Seller nor CAT has taken any action, no event
has occurred and no condition exists that is identified in
Section 5.1 hereof.
3.10 Title to CAT Shares.
(a) Seller has good and valid title to the
CAT US Shares, free and clear of all Liens, other than (i)
Liens arising under the Joint Venture Agreement and (ii)
Liens in favor of The HongKong and Shanghai Banking Corpora-
tion. Upon delivery to Buyer at the Closing of certificates
representing the CAT US Shares, duly endorsed by Seller for
transfer to Buyer or accompanied by stock powers duly exe-
cuted in blank, and upon delivery by Buyer in accordance
with the terms hereof of the consideration provided for in
Section 1.2 hereof, assuming Buyer has purchased the CAT US
Shares in good faith without notice of an adverse claim (as
such term is defined in Section 8-302 of the Uniform Commer-
cial Code as currently in effect in the State of New York)
and has not been a party to any fraud or illegality affect-
ing such shares, good and valid title to the CAT US Shares
will pass to Buyer, free and clear of any Liens. Other than
under this Agreement, the Joint Venture Agreement and
Seller's agreements with The HongKong and Shanghai Banking
Corporation, the CAT US Shares are not subject to any voting
trust agreement or other contract, agreement, arrangement,
commitment or understanding, including any such agreement,
arrangement, commitment or understanding restricting or
otherwise relating to the voting, dividend rights or dispo-
sition of the CAT US Shares.
(b) CGFE has good and valid title to the CAT
Far East Shares, free and clear of all Liens, other than (i)
Liens arising under the Joint Venture Agreement and (ii)
Liens in favor of The HongKong and Shanghai Banking Corpora-
tion. Upon delivery to Buyer at the Closing of certificates
representing the CAT Far East Shares, duly endorsed by CGFE
for transfer to Buyer or accompanied by stock powers duly
executed in blank, and upon delivery by Buyer in accordance
with the terms hereof of the consideration provided for in
Section 1.2 hereof, assuming Buyer has purchased the CAT Far
East Shares in good faith without notice of an adverse claim
(as such term is defined in Section 8-302 of the Uniform
Commercial Code as currently in effect in the state of New
York) and has not been a party to any fraud or illegality
affecting such shares, good and valid title to the CAT Far
East Shares will pass to Buyer, free and clear of any Liens.
Other than under this Agreement, the Joint Venture Agreement
and Seller's agreements with The HongKong and Shanghai
Banking Corporation, the CAT Far East Shares are not subject
to any voting trust agreement or other contract, agreement,
arrangement, commitment or understanding, including any such
agreement, arrangement, commitment or understanding re-
stricting or otherwise relating to the voting, dividend
rights or disposition of the CAT Far East Shares.
3.11 Title to Assets; Leased Property.
(a) Except as set forth in Section 3.11(a)
of the Seller Disclosure Schedule, Seller has (i) good and
valid title to all of the Assets which are owned by Seller
as of the date hereof and valid leasehold interests in, or
other rights to use, all of the Assets which are not owned
by Seller, free and clear of all Liens other than Permitted
Liens and (ii) Seller will have good and valid title to all
of the Assets which will be owned by Seller as of the Clos-
ing Date and will have valid leasehold interests in, or
other rights to use, all of the Assets which will not be
owned by Seller as of the Closing Date, excluding Assets
sold or otherwise disposed of in the ordinary course of
business and including Assets purchased, leased or licensed,
as the case may be, between the date hereof and the Closing
Date. As used in this Agreement, the term "Permitted Liens"
means (i) mechanics', carriers', workmen's, repairmen's or
other like liens arising or incurred in the ordinary course
of business, (ii) liens for taxes, assessments and other
governmental charges which are not due and payable or which
may hereafter be paid without penalty or which are being
contested in good faith by appropriate proceedings (for
which adequate reserves have been made in the Combined
Entity Financial Statements in accordance with GAAP) and
(iii) other imperfections of title or encumbrances, if any,
which imperfections of title or other encumbrances, individ-
ually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on the Division Business,
would not prevent or delay Seller's ability, or, to the best
knowledge of Seller, Buyer's ability, to consummate the
transactions contemplated hereby, would not impair in any
material respect Buyer's ability to operate the Division
Business as currently operated or would not result in any
liability, cost or expense (other than liabilities and
obligations not in excess of $50,000 in the aggregate) to
Buyer or any of its affiliates, CAT or the Division.
(b) Set forth on Annex IV hereto is a true
and correct listing of the portions of the deposits under
the NY Lease and the FWM Lease relating to premises to be
occupied by Buyer after the Closing Date. Seller has deliv-
ered to Buyer true, correct and complete copies of the NY
Lease and all amendments thereto, the FWM Lease and all
amendments thereto, including the CAT Sublease, and the
Business Lease, dated January 21, 1992, among Seller, as
tenant, and David Schaecter and Marvis Schaecter, as land-
lord (the "Miami Lease" and, collectively with the NY Lease
and the FWM Lease, the "Leases"), relating to Seller's
facility located at 4915 NW 159th Street, Miami Lakes,
Florida (the "Miami Facility") and all amendments thereto.
For purposes of this Section 3.11, the term Seller shall
include Seller's wholly owned subsidiary Fenn, Wright and
Manson, Incorporated, as applicable. Seller or CAT, as the
case may be, has a valid and subsisting leasehold estate
with respect to each of the properties subject to a Lease
(the "Leased Properties"). Except as set forth in Section
3.11(b) of the Seller Disclosure Schedule, to the best
knowledge of Seller, (i) each of the Leases is in full force
and effect and (ii) none of the Leases has been modified or
amended. Neither Seller nor CAT, as the case may be, has
given or received a written notice of default under any of
the Leases which remains uncured, and, to the best knowledge
of Seller, there exists no event of default, event, occur-
rence or act which, with the giving of notice, the lapse of
time, or both, or the happening of a further event or condi-
tion, would result in a default under any of the Leases by
Seller or CAT, as the case may be, or, to the best knowledge
of Seller, the applicable landlord under any such Leases.
There are no pending unresolved material disputes with any
landlord under any of the Leases. All security deposits
required under the Leases have been paid to the applicable
landlord under the Leases in compliance with the applicable
Lease. Except as set forth in Section 3.11(b) of the Seller
Disclosure Schedule, there are no subtenants occupying any
portion of the Leased Properties other than CAT and, except
for Seller, to the best knowledge of Seller, no other person
or entity has any right to occupy or possess any portion of
the Leased Properties other than affiliates of Seller claim-
ing by, through or under Seller who shall (except for CAT)
vacate their respective premises on or prior to the Closing
Date. Except as set forth in Section 3.11(b) of the Seller
Disclosure Schedule, as to the Leases, (i) none of Seller's
or CAT's interests in any of the Leases has been assigned,
pledged, hypothecated or otherwise encumbered in any manner;
(ii) no written waiver, indulgence or postponement of the
applicable landlord's obligations under any of the Leases
has been granted by Seller or CAT; (iii) neither Seller nor
CAT has any right or option to purchase or otherwise acquire
any of the Leased Properties or any portion thereof; and
(iv) neither Seller nor CAT has given any notices to any
landlord indicating that Seller or CAT either will or will
not (A) be exercising any extension or renewal options, or
any right or option to purchase any of the Leased Properties
or any portion thereof, (B) abandon any of the Leased Prop-
erties or any portion thereof, or (C) terminate any of the
Leases.
(c) Except as set forth in Section 3.11(c)
of the Seller Disclosure Schedule, (i) to the best knowledge
of Seller, the building and structure at the Florence Facil-
ity are structurally sound and are free from defects (ordi-
nary wear and tear excepted) and are adequate for the uses
to which they are being put, and (ii) all machinery and
equipment owned, leased or used by Seller in the conduct of
the Division Business are free from defects (ordinary wear
and tear excepted) and are in good and normal operating
condition and repair (ordinary wear and tear excepted), and
are adequate for the uses to which they are being put, in
each case, except for defects which, individually or in the
aggregate, would not reasonably be expected to have a Mate-
rial Adverse Effect on the Division Business, would not
impair in any material respect Buyer's ability to operate
the Division Business as currently operated or would not
result in any liability, cost or expense to Buyer or any of
its affiliates (other than the Liabilities or other liabili-
ties and obligations not in excess of $50,000 in the aggre-
gate).
(d) Except as set forth in Section 3.11(d)
of the Seller Disclosure Schedule, upon Closing in accor-
dance with the terms of this Agreement, Buyer shall receive
from Seller good and valid title to all of the Assets, free
and clear of all Liens, other than Permitted Liens.
3.12 Litigation/Claims.
(a) Section 3.12(a) of the Seller Disclosure
Schedule sets forth a true, complete and correct list of any
and all claims, actions, suits and proceedings pending or,
to the best knowledge of Seller, threatened, and, to the
best knowledge of Seller, any investigations or inquiries
pending or threatened, against Seller which relate to the
Division or CAT.
(b) Except as set forth in Section 3.12(b)
of the Seller Disclosure Schedule, there is (i) no claim,
action, suit or proceeding pending or, to the best knowledge
of Seller, threatened, and (ii) to the best knowledge of
Seller, no investigation or inquiry pending or threatened,
by or before any Governmental Entity, or by or on behalf of
any third party, which challenges the validity of this
Agreement or any Seller Related Instrument or which, if
adversely determined, would, individually or in the aggre-
gate, reasonably be expected to have a Material Adverse
Effect on the Division Business, prevent or delay Seller's
ability, or, to the best knowledge of Seller, Buyer's abili-
ty, to consummate the transactions contemplated hereby,
impair in any material respect Buyer's ability to operate
the Division Business as currently operated, or result in
any liability, cost or expense to Buyer or any of its affil-
iates (other than the Liabilities or other liabilities and
obligations not in excess of $50,000 in the aggregate).
3.13 Employee Benefit Plans. (a) With respect
to each employee benefit plan, arrangement or agreement that
is maintained, or was maintained at any time during the five
(5) calendar years preceding the date of this Agreement (the
"Plans"), by either Seller or CAT or by any trade or busi-
ness, whether or not incorporated (an "ERISA Affiliate"),
which together with either Seller or CAT would be deemed a
"single employer" within the meaning of Section 4001 of the
Employment Retirement Income Security Act of 1974, as amend-
ed ("ERISA"):
(i) each of the Plans that is subject
to ERISA has been maintained and administered in all materi-
al respects in compliance with ERISA and each of the Plans
intended to be "qualified" within the meaning of Section
401(a) of the Code is so qualified;
(ii) no Plan has an accumulated or
waived funding deficiency within the meaning of Section 412
of the Code;
(iii) no Plan is a multiemployer plan
(within the meaning of Section 4001(a)(3) of ERISA) and no
Plan is a multiple employer plan as defined in Section 413
of the Code; and
(iv) no Plan that is or was maintained
by CAT is subject to Article IV of ERISA.
(b) Neither Seller nor CAT has any obliga-
tions with respect to medical benefits for retired employees
of the Division or CAT.
(c) Neither Seller nor CAT has any obliga-
tions to the Affected Employees with respect to any 401(k)
plan or pension plan.
3.14 Certain Contracts and Arrangements.
(a) Except as set forth in Section 3.14(a) of
the Seller Disclosure Schedule, there are no binding oral
agreements to which Seller is a party relating to the Divi-
sion or the Assets or to which the Division or any of the
Assets is subject. Section 3.14(b) of the Seller Disclosure
Schedule sets forth a true, correct and complete list of all
written agreements, contracts and commitments to which
Seller is a party and to which the Division or any of the
Assets is subject (the "Division Contracts"), including,
without limitation:
(i) employment agreements or severance
agreements;
(ii) covenants not to compete;
(iii) agreements or contracts with any
affiliate of Seller;
(iv) agreements or contracts under which
Seller has borrowed or loaned money, or any note, bond,
indenture or other evidence of indebtedness or any guarantee
of indebtedness, agreements with factors or trade credit
agreements;
(v) "open purchase orders", "take-or-
pay" agreements or any other agreements with suppliers, but
excluding purchase orders which relate to specific goods
made for Buyer in the ordinary course of business;
(vi) agreements or contracts with any
cutting room operator;
(vii) agreements or contracts with con-
tract manufacturers or factory operators;
(viii) all real property leases to which
Seller is a party and which relate to the Division Business;
or
(ix) other agreements, contracts, leas-
es, licenses, commitments or instruments to which the Seller
is a party, which relate, directly or indirectly, to the
Division or any Asset; provided, however, that (x) purchase
orders and written fabric commitments accepted from Buyer
and the fabric commitments related to the fabric listed on
Annex I hereto and (y) such agreements, contracts or commit-
ments as may be terminated by Buyer at any time after the
Closing without liability, penalty or premium upon notice of
three months or less or which will not result in future
annual expenditures or receipts by the Division at any time
of $50,000 or more need not be and are not listed in Section
3.14 of the Seller Disclosure Schedule. Seller and, to the
best knowledge of Seller, no other party to any Division
Contract is in breach thereof or in default thereunder,
which breach or default would, individually or in the aggre-
gate, reasonably be expected to have a Material Adverse
Effect on the Division Business, prevent or delay Seller's
ability, or, to the best knowledge of Seller, Buyer's abili-
ty, to consummate the transactions contemplated hereby,
impair in any material respect Buyer's ability to operate
the Division Business as currently operated or result in any
liability, cost or expense to Buyer or any of its affiliates
(other than the Liabilities or other liabilities and obliga-
tions not in excess of $50,000 in the aggregate). Subject
to obtaining any requisite consents of third parties, the
enforceability of the Division Contracts will not be affect-
ed in any material respect by the execution and delivery of
this Agreement or the consummation of the transactions
contemplated hereby. To the best knowledge of Seller, there
have been no threatened cancellations of, or any dispute
under, any Division Contract.
(b) All amounts due and payable by Seller or
an affiliate of Seller under the Contracts as of the date
hereof have been paid in full by Seller or such affiliate,
and all amounts due and payable by Seller or an affiliate of
Seller under the Contracts as of the Closing Date shall have
been paid in full by Seller or such affiliate.
3.15 Compliance with Laws; Licenses. Except as
set forth in Section 3.15(a) of the Seller Disclosure Sched-
ule, the Division has been, and is being, operated in com-
pliance with all applicable laws, statutes, ordinances,
rules, regulations and orders of all Governmental Entities,
except for laws the violation of which, individually or in
the aggregate, would not reasonably be expected to have a
Material Adverse Effect on the Division Business, would not
prevent or delay Seller's ability, or, to the best knowledge
of Seller, Buyer's ability, to consummate the transactions
contemplated hereby, would not impair in any material re-
spect Buyer's ability to operate the Division Business as
currently operated or would not result in any liability,
cost or expense to Buyer or any of its affiliates (other
than the Liabilities or other liabilities and obligations
not in excess of $50,000 in the aggregate). Section 3.15(b)
of the Seller Disclosure Schedule sets forth a true, correct
and complete list of all permits, certificates, licenses,
approvals and other authorizations of Governmental Entities
("Permits") possessed by Seller or any affiliate of Seller
in connection with the operation of the Division as current-
ly operated and ownership of the Assets, which are all the
Permits required in connection with the operation of the
Division as currently operated and ownership of the Assets
under applicable laws, statutes, ordinances, rules, regula-
tions and orders, except where the failure to possess such
Permits, individually or in the aggregate, would not reason-
ably be expected to have a Material Adverse Effect on the
Division Business, would not prevent or delay Seller's
ability, or, to the best knowledge of Seller, Buyer's abili-
ty, to consummate the transactions contemplated hereby,
would not impair in any material respect Buyer's ability to
operate the Division Business as currently operated or would
not result in any liability, cost or expense to Buyer or any
of its affiliates (other than the Liabilities or other
liabilities and obligations not in excess of $50,000 in the
aggregate).
3.16 Insurance. Section 3.16 of the Seller
Disclosure Schedule sets forth a true, correct and complete
list of all policies of fire, medical, life, liability,
product liability, workmen's compensation, libel, health and
other forms of insurance presently in effect with respect to
the Division or CAT. All such policies are in full force
and effect, all premiums due and payable with respect there-
to have been paid, and no notice of cancellation or termina-
tion has been received with respect to any such policy. All
such policies are sufficient for compliance in all material
respects with all requirements of law and the terms of the
Leases and are valid, outstanding and enforceable and will
remain in full force and effect through the Closing Date.
Except as set forth in Section 3.16 of the Seller Disclosure
Schedule, no risks with respect to the Division or CAT have
been designated by Seller as being self-insured. Except as
set forth in Section 3.16 of the Seller Disclosure Schedule,
Seller has not been refused any insurance in connection with
the Division or CAT, nor has any coverage been limited by
any insurance carrier to which Seller has applied for such
insurance or with which Seller has carried such insurance in
the last three years.
3.17 Labor Matters. Except as set forth in
Section 3.17 of the Seller Disclosure Schedule, with respect
to the Division, (a) Seller is in compliance in all material
respects with all applicable laws regarding employment and
employment practices, terms and conditions of employment,
wages, hours of work and occupational safety and health, (b)
Seller is not a party to or bound by any collective bargain-
ing agreement or similar agreement with any labor organiza-
tion, and, to the best knowledge of Seller, no union claims
to represent Division employees, (c) there is no unfair
labor practice charge or complaint against Seller pending
or, to the best knowledge of Seller, threatened before the
National Labor Relations Board or any similar state or
foreign agency, nor is there any grievance or any arbitra-
tion proceeding arising out of or under any collective
bargaining agreement pending or, to the best knowledge of
Seller, threatened against Seller, (d) there is no labor
strike, slowdown, work stoppage or lockout pending or, to
the best knowledge of Seller, threatened against Seller and
(e) there is no charge or complaint pending or, to the best
knowledge of Seller, threatened against Seller before the
Equal Employment Opportunity Commission or any state, local
or foreign agency responsible for the prevention of unlawful
employment practices. Except as set forth in Section 3.17
of the Seller Disclosure Schedule, Seller has not received
written notice of the intent of any federal, state, local or
foreign agency responsible for the enforcement of labor or
employment laws to conduct an investigation of or relating
to Seller with respect to the Division, and, to the best
knowledge of Seller, no such investigation is in progress or
threatened.
3.18 Assets of the Division Business. All of the
Assets are used exclusively or primarily in the conduct of
the Division Business other than the CAT Shares and certain
Intellectual Property.
3.19 Disclosure. No representation or warranty
by Seller contained in this Agreement, and no statement
contained in any document (including, without limitation,
the Seller Related Instruments, the Financial Statements,
the CAT Financial Statements, the Division Financial State-
ments and the Seller Disclosure Schedule), list, certificate
or other writing furnished or to be furnished by or on
behalf of Seller to Buyer or any of its representatives
pursuant to this Agreement, contains or will contain any
untrue statement of a material fact, or omits or will omit
to state any material fact necessary, in the light of the
circumstances under which it was or will be made, in order
to make the statements herein or therein not misleading, or
necessary in order to fully and fairly provide the informa-
tion required to be provided in any such document, list,
certificate or other writing.
3.20 Environmental Matters.
(a) Except as set forth in Section 3.20(a)
of the Seller Disclosure Schedule, Seller is in compliance
in all material respects with all applicable federal, state,
local and foreign laws and regulations relating to pollution
or protection of human health or the environment ("Environ-
mental Laws") with respect to the Division (which compliance
includes, but is not limited to, the possession by Seller of
all permits and other governmental authorizations required
under applicable Environmental Laws with respect to the
Division, and compliance with the terms and conditions
thereof).
(b) Except as set forth in Section 3.20(b)
of the Seller Disclosure Schedule, there is no Environmental
Claim pending or, to the best knowledge of Seller, threat-
ened against Seller relating to the Division or, to the best
knowledge of Seller, against any person or entity whose
liability for any Environmental Claim the Division has or
may have retained or assumed either contractually or by
operation of law which would reasonably be expected to
result in a Material Adverse Effect on the Division Business
or would result in any liability, cost or expense to Buyer
or any of its affiliates (other than the Liabilities or
other liabilities and obligations not in excess of $50,000
in the aggregate). As used herein, "Environmental Claim"
means any claim, action, cause of action, investigation or
notice (written or oral) by any person or entity alleging
potential liability arising out of, based on or resulting
from (i) the presence, or release, spill, discharge, emis-
sion, leaching or migration into the indoor or outdoor
environment, of any Hazardous Materials at any location,
whether or not owned or operated by Seller, or (ii) circum-
stances forming the basis of any violation, or alleged
violation, of any Environmental Law.
(c) Except as set forth in Section 3.20(c)
of the Seller Disclosure Schedule, the Seller has not and,
to the best knowledge of Seller, no other person has placed,
stored, deposited, discharged, buried, dumped or disposed of
substances defined as Hazardous Substances, Oils, Pollutants
or Contaminants in the National Oil and Hazardous Substances
Pollution Contingency Plan, 40 C.F.R. SECTION 300.5, or defined as
such by, or regulated as such under, any Environmental Law
("Hazardous Materials") or any other wastes produced by, or
resulting from, any business, commercial or industrial
activities, operations or processes, on, beneath or adjacent
to any property currently or formerly owned, operated or
leased by the Seller for use in the Division, except for
inventories of such substances to be used, and wastes gener-
ated therefrom, in the ordinary course of business of Seller
(which inventories and wastes, if any, were and are stored
or disposed of in accordance in all material respects with
applicable Environmental Laws and in a manner such that
there has been no Release of any such substances into the
indoor or outdoor environment in violation of Environmental
Laws).
(d) Without limiting the generality of the
foregoing, except as set forth in Section 3.20(d) of the
Seller Disclosure Schedule, to the best knowledge of Seller,
none of the properties owned, operated or leased by Seller
and used by the Division contain any: underground storage
tanks; asbestos; polychlorinated biphenyls ("PCBs"); or
septic tanks or waste disposal pits in which process
wastewater or any Hazardous Materials have been discharged
or disposed.
3.21 Opinion of Financial Advisor. Seller has
received an opinion from Ladenburg, Thalmann & Co., Inc. to
the effect that the consideration to be received by Seller
represents reasonable equivalent value and fair consider-
ation for the CAT Shares and the Assets and a copy of such
opinion has been provided to ATSC.
3.22 Brokers. No broker, finder or financial
advisor or other person is entitled to any brokerage fees,
commissions, finders' fees or financial advisory fees in
connection with the transactions contemplated hereby by
reason of any action taken by Seller or any of its affili-
ates, employees, representatives or agents.
3.23 Intellectual Property. Seller has no regis-
tered patents, trademarks, copyrights, service marks, or
applications therefor relating to the Division Business.
Except as set forth in Section 3.23 of the Seller Disclosure
Schedule, Seller (a) owns or licenses the Intellectual
Property related to or used in the conduct of the Division
Business free and clear of all Liens, (b) Seller has the
right to transfer its interest in the Intellectual Property
to Buyer, (c) no claims have been asserted or, to the best
knowledge of Seller, threatened against Seller with respect
to the ownership, use or transfer by Seller of the Intellec-
tual Property, and (d) to the best knowledge of Seller, no
third party is in violation of any of Seller's rights in the
Intellectual Property.
3.24 Absence of Violations of Quotas and Visas.
Except as set forth in Section 3.24 of the Seller Disclosure
Schedule, Seller, with respect to the Division Business, is
not in violation in any material respect of any visa or
quota restrictions under any trade agreements, including,
without limitation, the Multifiber Arrangement or other
arrangements under the General Agreement on Tariffs and
Trade.
3.25 No Tariffs or Duties. With respect to the
Division Business, Seller's payment of all tariffs and
duties are current in all jurisdictions, and Seller does not
owe any tariffs or duties other than those incurred in the
ordinary course of business (a) under any trade agreements,
including, without limitation, The North American Free Trade
Agreement, Caribbean Basin Economic Recovery or the Jackson-
Vanik Amendment to the Trade Act of 1974; and (b) to the
U.S. Customs Service.
3.26 Compliance with U.S. Customs and Trade Laws.
Seller, with respect to the Division Business, is not in
violation in any material respect of any U.S. Customs or
trade laws, including, without limitation, laws pertaining
to country-of-origin, marking or labeling.
3.27 SEC Documents. Seller has filed all docu-
ments required to be filed by it with the Securities and
Exchange Commission (the "SEC") since January 1995 (the
"Seller SEC Documents"). As of their respective dates, the
Seller SEC Documents complied in all material respects with
the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), or the Exchange Act, as the case may
be, and none of Seller's SEC Documents contained any untrue
statement of a material fact or omitted to state any materi-
al fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated
financial statements of Seller included in the Seller SEC
Documents complied as to form in all material respects with
the applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto.
Since January 28, 1995, Seller has not made any change in
the accounting practices or policies applied in the prepara-
tion of its financial statements.
3.28 Compliance with Laws by CAT; Licenses.
Except as set forth in Section 3.28(a) of the Seller Disclo-
sure Schedule, CAT has been, and is being, operated in
compliance with all applicable laws, statutes, ordinances,
rules, regulations and orders of all Governmental Entities,
except for laws the violation of which, individually or in
the aggregate, would not reasonably be expected to have a
Material Adverse Effect on CAT, would not prevent or delay
Seller's ability, or, to the best knowledge of Seller,
Buyer's ability, to consummate the transactions contemplated
hereby, would not impair in any material respect Buyer's
ability to operate CAT as currently operated, or would not
result in any liability, cost or expense of CAT being in-
curred by Buyer or any of its affiliates, or the Division.
Section 3.28(b) of the Seller Disclosure Schedule sets forth
a true, correct and complete list of all Permits possessed
by Seller or CAT in connection with the operation of CAT as
currently operated, which are all the Permits required in
connection with the operation of CAT as currently operated
under applicable laws, statutes, ordinances, rules, regula-
tions and orders, except where the failure to possess such
Permits, individually or in the aggregate, would not reason-
ably be expected to have a Material Adverse Effect on CAT,
would not prevent or delay Seller's ability, or, to the best
knowledge of Seller, Buyer's ability, to consummate the
transactions contemplated hereby, would not impair in any
material respect Buyer's ability to operate CAT as currently
operated or would not result in any liability, cost or
expense (other than liabilities and obligations not in
excess of $50,000 in the aggregate) of CAT being incurred by
Buyer.
3.29 CAT Taxes.
(a) CAT and any affiliated group, within the
meaning of Section 1504 of the Code (or similar provision of
state law), of which CAT is or has been a member, have,
except as set forth in Section 3.29 of the Seller Disclosure
Schedule, (i) duly filed with the appropriate federal,
state, local and foreign taxing authorities all Tax Returns
(as hereinafter defined) required to be filed by or with
respect to CAT and such Tax Returns are true, correct and
complete in all material respects; (ii) paid in full or have
made adequate provision on their balance sheets (in accor-
dance with GAAP) for all Taxes (as hereinafter defined)
shown to be due on such tax returns; and (iii) satisfied in
full all withholding tax requirements. There are no Liens
for Taxes upon the assets of CAT except for statutory liens
for current taxes not yet due and payable or which may
hereafter be paid without penalty or which are being con-
tested in good faith by appropriate proceedings. Except as
set forth in Section 3.29 of the Seller Disclosure Schedule,
there is not in force any extension of time with respect to
the due date for the filing of any Tax Return of, or with
respect to, CAT or any waiver or agreement for any extension
of time for the assessment or payment of any Tax of, or with
respect to, CAT, and CAT has not received any notice of
deficiency or assessment from any federal, state, local or
foreign taxing authority with respect to liabilities for
Taxes of CAT which has not been fully paid or finally set-
tled.
(b) For purposes of this Agreement, "Tax" or
"Taxes" shall mean (i) any tax of any kind, including,
without limitation, all income, property, sales, use, occu-
pation, franchise, excise, value added, employees' income
withholding and social security taxes, and related to such
taxes, charges, fees, levies, penalties or other assess-
ments, imposed by the United States or by any foreign coun-
try or by any state, municipality, subdivision or instrumen-
tality of the United States or of any foreign country, or by
any other taxing authority and (ii) any interest thereon.
(c) For purposes of this Agreement, "Tax
Return" shall mean any return, report, information return or
other document (including any related or supporting informa-
tion) with respect to Taxes.
3.30 Acquisition of the ATSC Common Stock for
Investment; Securities Act. Seller is acquiring the shares
of ATSC Common Stock to be issued pursuant to Section 1.2(a)
hereof for investment purposes only and not with a view
toward, or for sale in connection with, any distribution
thereof, nor with any present intention of distributing or
selling such shares in violation of federal, state or other
securities laws. Seller agrees that it will not sell,
transfer, offer for sale, pledge, hypothecate or otherwise
dispose of such shares of ATSC Common Stock in violation of
any federal, state or other securities laws. Seller ac-
knowledges that the ATSC Common Stock is subject to market
and other conditions beyond the control of ATSC and agrees
that neither ATSC nor any of its agents, representatives,
employees or affiliates has or shall have any liability or
responsibility whatsoever to Seller on any basis (including,
without limitation, in contract or tort, under federal or
state securities laws, or otherwise), except as and to the
extent expressly set forth herein and subject to the limita-
tions and restrictions contained herein. The foregoing
shall not be deemed a waiver of or a limitation on Seller's
rights as a stockholder of ATSC with regard to circumstances
or events occurring after the Closing Date and bearing no
relation to the acquisition by Seller of shares of ATSC
Common Stock pursuant to this Agreement.
3.31 Suppliers. Section 3.31 of the Seller
Disclosure Schedule sets forth (i) a list of all suppliers
of each of CAT and the Division to whom CAT or Seller made
payments in excess of $250,000 during the fiscal year ended
February 3, 1996 and (ii) the dollar amount of payments made
to each such supplier in such fiscal year. No supplier
required to be listed in Section 3.31 of the Seller Disclo-
sure Schedule has (i) given notice to either CAT or Seller
that it intends to terminate its relationship with CAT or
Seller, as the case may be, or (ii) threatened in writing to
terminate its relationship with CAT or Seller, as the case
may be. To the best knowledge of Seller, no supplier re-
quired to be listed in Section 3.31 of the Seller Disclosure
Schedule is likely to pursue a course of action having
either the purpose or effect of terminating its relationship
with either CAT or the Division if the transactions contem-
plated by this Agreement are consummated.
3.32 Disclaimer of Other Representations and
Warranties. Except as expressly set forth in this Article
III, Seller makes no representation or warranty, express or
implied, at law or in equity, in respect of CAT, the Assets,
the Division or the Division Business, including, without
limitation, with respect to merchantability or fitness for
any particular purpose or the future performance of CAT or
the Division Business, and any such other representations or
warranties are hereby expressly disclaimed.
IV. REPRESENTATIONS AND WARRANTIES OF ATSC AND BUYER.
ATSC and Buyer hereby represent and warrant to
Seller as follows:
4.1 Organization of ATSC and Buyer; Authority.
(a) Each of ATSC and Buyer is a corporation
duly organized, validly existing and in good standing under
the laws of the State of Delaware. Each of ATSC and Buyer
has all requisite corporate power and authority to own,
lease and operate its properties and assets and to conduct
its business as it is now being conducted. Each of ATSC and
Buyer is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each juris-
diction in which the property or assets owned, leased or
operated by it or the nature of the business conducted by it
makes such qualifications necessary, except in those juris-
dictions where the failure to have such power and authority
or to be so duly qualified or licensed and in good standing
would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on ATSC or Buyer,
respectively.
(b) Each of ATSC and Buyer has all requisite
corporate power and authority to enter into this Agreement
and any instruments and agreements contemplated herein
required to be executed and delivered by it pursuant to this
Agreement (including, without limitation, as applicable, the
Ancillary Agreements, the Assignment and Assumption Agree-
ments, the Undertaking and the Advance Instrument) (collec-
tively, the "Buyer Related Instruments") and to consummate
the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement and
the Buyer Related Instruments to which it is a party and the
consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corpo-
rate action on the part of each of ATSC and Buyer. This
Agreement has been, and each of the Buyer Related Instru-
ments to which it is a party, when executed and delivered
will be, duly executed and delivered by each of ATSC and
Buyer and this Agreement constitutes, and each of the Buyer
Related Instruments to which it is a party will, when exe-
cuted and delivered, constitute, a valid and binding obliga-
tion of each of ATSC and Buyer, enforceable against each of
ATSC and Buyer in accordance with its terms, except that (a)
such enforcement may be subject to any bankruptcy, insolven-
cy, reorganization, moratorium, or other laws, now or here-
after in effect, relating to or limiting creditors' rights
generally and (b) the remedy of specific performance and
injunctive and other forms of equitable relief may be sub-
ject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
Each of ATSC and Buyer shall deliver to Seller true, correct
and complete copies of resolutions duly and validly adopted
by their respective board of directors, evidencing the
authorization of the execution and delivery of this Agree-
ment and the Buyer Related Instruments, as applicable, to
which it is a party and the consummation of the transactions
contemplated hereby and thereby.
4.2 No Violation; Consents and Approvals.
(a) Subject to the consents, approvals or
filings referred to in Section 4.2(b) and Section 4.2(c)
hereof, the execution and delivery of this Agreement by each
of ATSC and Buyer and the Buyer Related Instruments to which
it is a party do not, and the consummation of the transac-
tions contemplated hereby or thereby and compliance with the
terms hereof or thereof will not, (i) conflict with, or
result in any violation of or default under, (A) any provi-
sion of the charter or by-laws of either ATSC or Buyer or
(B) any judgment, order or decree, or statute, law, ordi-
nance, rule or regulation of any Governmental Entity appli-
cable to either ATSC or Buyer, or the assets of either ATSC
or Buyer; or (ii) conflict with, or result in any breach or
violation of or constitute a default (or an event or condi-
tion which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination
of, or accelerate the performance required by, or cause the
acceleration of any maturity of any liability or obligation
pursuant to, or result in the creation or imposition of any
Lien under, any note, bond, mortgage, indenture, license,
contract, agreement, lease or other instrument or obligation
to which either ATSC or Buyer is a party or by which either
may be bound or affected, except where the conflict, viola-
tion, default, breach, termination, acceleration, creation
or imposition would not reasonably be expected to have a
Material Adverse Effect on ATSC or Buyer, would not prevent
or delay ATSC's or Buyer's ability, or, to the best knowl-
edge of ATSC and Buyer, Seller's ability, to consummate the
transactions contemplated hereby or would not result in any
liability, cost or expense to Seller or any of its affili-
ates (other than liabilities and obligations not in excess
of $50,000 in the aggregate).
(b) No consent, approval, order or authori-
zation of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made in
connection with the execution and delivery by ATSC or Buyer
of this Agreement or the Buyer Related Instruments to which
each is a party, or the consummation by ATSC or Buyer of the
transactions contemplated hereby or thereby or compliance by
ATSC and Buyer with the terms hereof or thereof, other than
(i) compliance with and filings under the HSR Act, (ii)
compliance with and filings under Section 13(a) of the
Exchange Act and (iii) those the failure of which to obtain
would not reasonably be expected to have a Material Adverse
Effect on ATSC or Buyer, would not prevent or delay ATSC's
or Buyer's ability, or, to the best knowledge of ATSC and
Buyer, Seller's ability, to consummate the transactions
contemplated hereby or would not result in any liability,
cost or expense to Seller or any of its affiliates (other
than liabilities and obligations not in excess of $50,000 in
the aggregate).
(c) Except for the consent of the lenders
under Buyer's existing credit facility, no consent, approv-
al, order or authorization of, notice to or registration,
declaration or filing with, any third party is required to
be obtained or made by or with respect to Buyer or ATSC in
connection with the execution and delivery by either ATSC or
Buyer of this Agreement or any Buyer Related Instrument, or
the consummation of the transactions contemplated hereby or
thereby or compliance by ATSC or Buyer of the terms hereof
or thereof, except where the failure to obtain any consent,
approval, order or authorization, or to give notice, or to
make any registration, declaration or filing would not
reasonably be expected to have a Material Adverse Effect on
ATSC or Buyer, would not prevent or delay ATSC's or Buyer's
ability, or, to the best knowledge of ATSC and Buyer,
Seller's ability, to consummate the transactions contemplat-
ed hereby or would not result in any liability, cost or
expense to Seller (other than liabilities and obligations
not in excess of $50,000 in the aggregate).
4.3 Litigation/Claims. Except as set forth in
Section 4.3 of the Disclosure Schedule being delivered by
Buyer to Seller concurrently herewith (the "Buyer Disclosure
Schedule"), there is (i) no claim, action, suit or proceed-
ing pending or, to the best knowledge of ATSC or Buyer,
threatened and (ii) to the best knowledge of ATSC and Buyer,
no investigations or inquiries pending or threatened by or
before any Governmental Entity, or by or on behalf of any
third party, in either case, which challenges the validity
of this Agreement or any Buyer Related Instrument or which,
if adversely determined, would, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect on ATSC or Buyer, or would adversely affect the
ability of ATSC or Buyer to consummate the transactions
contemplated by this Agreement and the Buyer Related Instru-
ments or comply with the terms hereof or thereof.
4.4 SEC Documents and Other Reports. ATSC has
filed all documents required to be filed by it with the SEC
since January 1995 (the "ATSC SEC Documents"). As of their
respective dates, the ATSC SEC Documents complied in all
material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and none of the
ATSC SEC Documents contained any untrue statement of a
material fact or omitted to state any material fact required
to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements
of ATSC included in the ATSC SEC Documents complied as to
form in all material respects with the applicable accounting
requirements and the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance
with GAAP (except, in the case of the unaudited statements,
as permitted by Form 10-Q of the SEC) applied on a consis-
tent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly pres-
ent the consolidated financial position of ATSC and its
consolidated subsidiaries as at the respective dates thereof
and the consolidated results of their operations and their
consolidated cash flows for the respective periods then
ended (subject, in the case of the unaudited statements, to
normal year-end audit adjustments and to any other adjust-
ments described therein and the absence of footnotes).
Since January 28, 1995, ATSC has not made any change in the
accounting practices or policies applied in the preparation
of its financial statements.
4.5 Capital Stock.
(a) ATSC's authorized capitalization is as
set forth in the ATSC SEC Documents. All of ATSC's issued
and outstanding capital stock has been duly authorized,
validly issued and is fully paid and nonassessable.
(b) The ATSC Common Stock to be issued to
Seller has been duly and validly authorized for issuance by
ATSC and ATSC has the corporate power and authority to
issue, sell and deliver the ATSC Common Stock to be sold by
it hereunder; and, when the ATSC Common Stock is issued and
delivered to Seller against payment therefor as provided by
this Agreement, the shares of ATSC Common Stock issued to
Seller hereunder will have been validly issued, fully paid
and nonassessable, and the issuance of such shares will not
be subject to any preemptive or similar rights.
(c) The shares of ATSC Common Stock to be
issued to Seller at the Closing will be duly approved for
listing on the New York Stock Exchange or such other securi-
ties exchange on which the ATSC Common Stock is then listed,
subject to official notice of issuance.
4.6 Absence of Certain Changes or Events. Since
February 3, 1996, (a) there has not been any Material Ad-
verse Effect on ATSC or Buyer and (b) neither ATSC nor Buyer
has taken any action, no event has occurred and no condition
exists that would violate Section 5.20 hereof.
4.7 Information Supplied. None of the informa-
tion supplied or to be supplied by ATSC or Buyer in writing
for inclusion in the Proxy Statement (as hereinafter de-
fined) relating to the Annual Meeting will, at the time of
mailing of the Proxy Statement to stockholders of Seller and
at the time of the Annual Meeting to be held in accordance
with Section 5.17, contain any untrue statement of a materi-
al fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading.
4.8 Brokers. No broker, finder or financial
advisor or other person is entitled to any brokerage fees,
commissions, finders' fees or financial advisory fees in
connection with the transactions contemplated hereby by
reason of any action taken by Buyer or any of its directors,
officers, employees, representatives or agents.
4.9 Disclaimer of Other Representations and
Warranties. Except as expressly set forth in this Article
IV, neither ATSC nor Buyer makes any representation or
warranty, express or implied, at law or in equity, in re-
spect of ATSC or Buyer, including, without limitation, with
respect to the future market value of the ATSC Common Stock
issued to Seller pursuant to Section 1.2(a)(i) hereof.
V. COVENANTS OF THE PARTIES
5.1 Conduct of the Division Business. Except as
expressly permitted by this Agreement, during the period
from the date of this Agreement to the Closing Date, Seller
shall conduct the Division Business, and shall cause CAT to
conduct the business of CAT, in the ordinary course consis-
tent with past practice and use its reasonable best efforts
to preserve their respective current relationships with
suppliers, contract manufacturers, factors and others having
business dealings with them. Without limiting the generali-
ty of the foregoing, except as set forth in Section 5.1 of
the Seller Disclosure Schedule, during the period from the
date of this Agreement to the Closing Date, without the
prior written consent of Buyer, Seller, with respect to the
Division, shall not, and shall cause CAT not to:
(a) cause CAT or the Division, as the case
may be, to incur any liabilities, obligations or indebted-
ness of any nature (whether absolute, accrued, contingent or
otherwise and whether due or to become due), except items
incurred in the ordinary course of business and consistent
with past practice, none of which shall exceed, except in
connection with the manufacture of women's apparel for Buyer
pursuant to purchase orders and/or written fabric commit-
ments provided by Buyer (as to which there shall not be any
such dollar limitation), $50,000 (counting liabilities or
obligations arising from one transaction or a series of
related transactions, and all periodic installments or
payments under any lease or other agreement providing for
periodic installments or payments, as a single obligation or
liability);
(b) permit, allow or suffer any of the
Assets or any assets of CAT, as the case may be, to be
subjected to any Lien, restriction or charge of any kind,
other than Permitted Liens and Liens in favor of The
HongKong and Shanghai Banking Corporation, Mitsubishi Corpo-
ration and Mitsubishi International Corporation existing on
the date hereof;
(c) fail to maintain the properties, machin-
ery and equipment of CAT or the Division, as the case may
be, in good operating condition and repair (ordinary wear
and tear excepted);
(d) fail to maintain all policies of insur-
ance listed in Section 3.16 of the Seller Disclosure Sched-
ule and all policies of insurance relating to CAT, as the
case may be, in full force and effect, at least at such
levels as are in effect on the date hereof, through and
including the Closing Date; or take, or fail to take, any
action that would enable the insurers under such policies to
avoid liability for claims arising out of occurrences prior
to the Closing;
(e) revise, amend or enter into any employ-
ment agreement or arrangement or pay any bonus or increase
the rate of compensation of, or pay or agree to pay any
benefit to, including, without limitation, severance bene-
fits, any CAT Employee or any Affected Employee, as the case
may be, except as may be required by any Plan or by applica-
ble law; provided, however, that Seller may implement
planned annual increases in the rates of compensation in the
ordinary course of business consistent with past practice,
provided that such increases are disclosed to Buyer prior to
becoming effective;
(f) enter into, adopt or amend any Plan,
except as may be required by applicable law;
(g) sell any inventory other than to Buyer
in the ordinary course of business or inventory rejected by
Buyer in the ordinary course of business, or sell, lease,
transfer or otherwise dispose of any other Asset or any
asset of CAT, as the case may be, other than in the ordinary
course of business;
(h) acquire or agree to acquire on behalf of
CAT or the Division, as the case may be, any assets which
are material, individually or in the aggregate, to CAT or
the Division, as the case may be, other than fabric and
other apparel components necessary to manufacture women's
apparel pursuant to purchase orders issued by Buyer;
(i) modify, amend or terminate any Lease or
any Contract required to be listed in Section 3.14 of the
Seller Disclosure Schedule or to which CAT is a party, as
the case may be, or enter into any other contract, agreement
or commitment by which CAT or the Division, as the case may
be, or any Asset or any asset of CAT, as the case may be,
may be bound, and, in the case of the Division, which would
have been required to be listed in Section 3.14 of the
Seller Disclosure Schedule had such agreement been entered
into prior to the date of this Agreement, other than pur-
chase and sale orders entered into in connection with the
manufacture of women's apparel for Buyer pursuant to pur-
chase orders issued by Buyer;
(j) fail to maintain (i) the accounts and
Books and Records of the Division and (ii) the accounts and
books and records of CAT, as the case may be, in the usual,
regular and ordinary manner on a basis consistently applied;
(k) terminate, discontinue, close or dispose
of any facility or business operation of CAT or the Divi-
sion, as the case may be;
(l) make any capital expenditure or any
commitment for capital expenditures with respect to CAT or
the Division, as the case may be, for additions to property,
plant, equipment or intangible capital assets, which indi-
vidually exceeds $50,000 or, in the aggregate, exceeds
$250,000;
(m) cancel any debt or waive any claim or
right of substantial value with respect to CAT or the Divi-
sion, as the case may be;
(n) pay, loan or advance any amount to, or
sell, transfer or lease any property or asset (real, person-
al or mixed, tangible or intangible) to, any affiliate of
Seller; or enter into any contract, agreement or commitment
with any affiliate of Seller; or
(o) agree, whether in writing or otherwise,
to do any of the foregoing.
5.2 Access to Information; Confidentiality.
(a) During the period from the date of this
Agreement through the Closing Date, the parties hereto shall
afford each other and their respective authorized represen-
tatives such access during regular business hours to all
plants, offices, warehouses, facilities and books and re-
cords as each party and their respective representatives may
reasonably request; provided, however, each party shall
schedule their access and visits through a designated repre-
sentative of the other party and in such a way as to avoid
disrupting the normal business of the other party.
(b) Each of ATSC, Buyer, Seller and CGFE
shall hold, and shall cause its controlled affiliates,
consultants and advisors to hold, any information which it
receives in connection with the transactions contemplated by
this Agreement in confidence in accordance with and subject
to the terms of (i) the letter of confidentiality between
Seller and ATSC, dated March 15, 1996, and (ii) the letter
of confidentiality between Seller and ATSC, dated April 18,
1996 (collectively, the "Confidentiality Agreements").
5.3 Financial Statements.
(a) On or before June 10, 1996, Seller shall
deliver to Buyer, the audited combined balance sheets of the
Combined Entity as of January 28, 1995 and the audited
combined income statements and statements of cash flows of
the Combined Entity for the fiscal year ended January 28,
1995 accompanied, in each case, by an unqualified report of
Seller's independent public accountants, Ernst & Young, LLP
(collectively, the "Combined Entity 1994 Audited Financial
Statements"); and
(b) Until the Closing, on or before the 30th
day of each month beginning with the month following the
execution of this Agreement, Seller shall deliver to Buyer
unaudited balance sheets and income statements of Seller
(the "Subsequent Monthly Financial Statements"), CAT (the
"CAT Subsequent Monthly Financial Statements") and the
Combined Entity (the "Combined Entity Subsequent Monthly
Financial Statements"), as at and for the monthly period
ending the last day of the preceding month, and as soon as
available, but not later than 45 days after the end of each
fiscal quarter, Seller shall deliver to Buyer unaudited
balance sheets as of the end of such fiscal quarter and
unaudited income statements and statements of cash flows for
the three-month and year-to-date periods then ended, of
Seller (the "Subsequent Quarterly Financial Statements"),
CAT (the "CAT Subsequent Quarterly Financial Statements")
and the Combined Entity (the "Combined Entity Subsequent
Quarterly Financial Statements"). The Subsequent Monthly
Financial Statements and the Subsequent Quarterly Financial
Statements are referred to, collectively herein, as the
"Subsequent Financial Statements". The CAT Subsequent
Monthly Financial Statements and the CAT Subsequent Quarter-
ly Financial Statements are referred to, collectively,
herein as the "CAT Subsequent Financial Statements". The
Combined Entity 1995 Audited Financial Statements, Combined
Entity Subsequent Monthly Financial Statements and the
Combined Entity Subsequent Quarterly Financial Statements
are referred to, collectively, herein as the "Combined
Entity Subsequent Financial Statements". The Subsequent
Financial Statements, the CAT Subsequent Financial State-
ments and the Combined Entity Subsequent Financial State-
ments shall be prepared in a format consistent with the
Audited Financial Statements, the CAT Financial Statements
and the Combined Entity Financial Statements, respectively.
(c) Until the Closing, on or before the 30th
day of each month beginning with the month following the
execution of this Agreement, ATSC shall deliver to Seller
unaudited consolidated balance sheets and income statements
of ATSC, as at and for the monthly period ending the last
day of the preceding month, and as soon as available, but
not later than 45 days after the end of each fiscal quarter,
ATSC shall deliver to Seller unaudited consolidated balance
sheets as of the end of such fiscal quarter and unaudited
income statements and statements of cash flows for the
three-month and year-to-date periods then ended of ATSC.
Such financial statements shall be prepared in a manner
consistent with ATSC's financial statements included in the
ATSC SEC Documents.
5.4 Reasonable Best Efforts. Subject to the
terms and conditions of this Agreement, each of the parties
hereto shall use its reasonable best efforts to take, or
cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under appli-
cable laws and regulations to consummate the transactions
contemplated by this Agreement no later than August 15,
1996. Each of the parties will use its reasonable best
efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effec-
tive the transactions contemplated by this Agreement (in-
cluding satisfaction, but not waiver, of the Closing condi-
tions set forth in Articles VI, VII and VIII hereof).
5.5 Consents. Without limiting the generality of
Section 5.4 hereof, each of the parties hereto shall use its
reasonable best efforts to obtain all licenses, permits,
authorizations, consents and approvals of all third parties
and Governmental Entities necessary in connection with the
consummation of the transactions contemplated by this Agree-
ment prior to the Closing, and shall use reasonable best
efforts to obtain estoppel certificates from the landlords
under the NY Lease and the FWM Lease. Notwithstanding the
foregoing, neither Buyer nor Seller shall have any obliga-
tion to pay any fee to any third party for the purpose of
obtaining any consent or approval or any costs and expenses
of any third party resulting from the process of obtaining
such consent or approval. Each of the parties hereto shall
make or cause to be made all filings and submissions under
laws and regulations applicable to it as may be required for
the consummation of the transactions contemplated by this
Agreement. Buyer and Seller shall coordinate and cooperate
with each other in exchanging such information and assis-
tance as any of the parties hereto may reasonably request in
connection with the foregoing.
5.6 Antitrust Notification. Buyer and Seller
shall use their respective reasonable best efforts to obtain
all authorizations or waivers required under the HSR Act to
consummate the transactions contemplated hereby, including,
without limitation, making all filings required in connec-
tion therewith.
5.7 Public Announcements. Neither Seller nor
Buyer shall issue any report, statement or press release, or
otherwise make any public statement, with respect to this
Agreement or the Ancillary Agreements and the transactions
contemplated hereby or thereby, without prior consultation
with and approval of the other parties, except as may be
required by federal, state, local or foreign securities laws
or stock exchange rules, or as may be necessary in order to
discharge its reporting or disclosure obligations under such
laws or rules; provided, however, that Buyer may communicate
with the Employees regarding its offer of employment pursu-
ant to Section 2.8 hereof.
5.8 Access to Books and Records Following the
Closing. Following the Closing, Buyer shall permit Seller
and its authorized representatives, during normal business
hours and upon reasonable notice, to have reasonable access
to, and examine and make copies of, all books and records
which relate to transactions or events occurring prior to
the Closing or transactions or events occurring subsequent
to the Closing which are related to or arise out of transac-
tions or events occurring prior to the Closing. Buyer shall
retain all books and records for a period of three years
following the Closing.
5.9 Other Transactions. Neither Seller nor any
of its affiliates, whether acting directly or through any
authorized agent, attorney or representative, shall, from
the date hereof through the Closing Date (the "Exclusivity
Period"), solicit, encourage or entertain any offers from
any party other than Buyer, nor shall they, during the
Exclusivity Period, initiate or enter into any form of
preliminary discussion, negotiation for a purchase (or other
acquisition), merger, share exchange or other consolidation,
sale of stock or other equity securities or any other form
or manner of transaction, howsoever described or denominat-
ed, involving any material interest in CAT or the Division
or any option or other contractual right with respect to any
of the foregoing. In the event Seller or any of its affili-
ates receives any offer or proposal to enter into any such
negotiations or other communication with a party other than
Buyer during the Exclusivity Period, Seller will provide
prompt notice of the same to Buyer.
5.10 Discharge of Liens. Seller shall cause all
Liens (other than Permitted Liens) on any real or personal
property owned or leased by Seller which is included in the
Assets to be terminated or otherwise discharged at or prior
to the Closing.
5.11 Resignations. At or prior to the Closing
Date, each officer and director of CAT designated by Seller
shall execute and deliver to Buyer a letter of resignation,
effective at the Closing Date, as an officer or director of
CAT.
5.12 Insurance. From the date hereof through and
including the Closing Date, Seller shall, at its sole ex-
pense, maintain in full force and effect the insurance
policies listed in Section 3.16 of the Seller Disclosure
Schedule and such additional insurance policies as may be
necessary to comply in all material respects with all re-
quirements of law and the Leases. As of the Closing, Seller
hereby assigns to Buyer any and all assignable rights which
Seller may have under such insurance policies covering
claims related to the Assets or the Assumed Liabilities for
the period on or prior to the Closing Date.
5.13 Supplementary Disclosure. Seller shall
promptly supplement or amend the Seller Disclosure Schedule
and Buyer shall promptly supplement or amend the Buyer
Disclosure Schedule with respect to any matter hereafter
arising or discovered which, if existing or known at the
date of this Agreement, would have been required to be set
forth or listed in the Seller Disclosure Schedule or Buyer
Disclosure Schedule, respectively; provided, however, that
for the purpose of the rights and obligations of the parties
hereunder, any such supplemental or amended disclosure shall
not affect the other party's ability to rely on the condi-
tion set forth in Section 7.1(a) or 8.1(a), as the case may
be, unless so agreed to in writing by Buyer, as to the
Seller Disclosure Schedule, or Seller, as to the Buyer
Disclosure Schedule.
5.14 Brazil Sourcing. Buyer shall use (i) rea-
sonable best efforts to enter into a new consulting agree-
ment with John Peter M. Gordon, the head of Seller's Brazil-
ian sourcing operations, pursuant to which Buyer shall
compensate Mr. Gordon in the amount of $240,000 per year
through July 31, 1998, and (ii) reasonable best efforts to
cause Seller and its affiliates to be released from their
obligations under the Consulting Agreement, dated
February 1, 1995, between Tralee, S.A., an affiliate of
Seller, and Mr. Gordon (the "Existing Gordon Agreement").
Buyer shall not assume the Existing Gordon Agreement or any
of Seller or its affiliate's obligations thereunder.
5.15 Letters of Credit.
(a) At least ten (10) business days prior to
Closing, Seller shall provide a schedule of all letters of
credit as of the Closing Date (i) for raw materials and
making charges relating to fabric and work-in-progress
included in the Assets and (ii) securing Seller's or its
affiliate's obligations under the NY Lease. At the Closing,
Buyer shall substitute letters of credit or provide an
alternative form of financial support; provided, that Buyer
shall replace only that portion of the letters of credit for
the NY Lease that relate to the sixth floor of the leased
premises.
(b) Seller shall reimburse Buyer for all
finance charges incurred by CAT as the result of the opening
of letters of credit by CAT for the benefit of Seller in
connection with piece goods purchases, FOB garment purchases
and CMT purchases relating to certain products of the Divi-
sion pursuant to Buyer purchase orders.
5.16 Amendment. At the election of Buyer, this
Agreement shall be amended in a manner reasonably acceptable
to Seller to provide for (i) the transfer and sale of the
Assets to CAT and assumption of the Liabilities by CAT prior
to Closing, and (ii) the subsequent purchase of the CAT
Shares by Buyer for the Purchase Price, provided that Seller
determines in good faith that such amendment will not have a
material adverse tax or other material economic consequences
to it.
5.17 Proxy Statement; Stockholder Approval.
(a) Seller, acting through its Board of
Directors, shall, subject to and in accordance with applica-
ble law and its Certificate of Incorporation, as amended,
and its By-Laws, (i) file with the Securities and Exchange
Commission (the "Commission") its preliminary proxy materi-
als (the "Preliminary Proxy Materials") relating to the
Annual Meeting as soon as possible; (ii) promptly and duly
call, give notice of, convene and hold an annual meeting of
stockholders of Seller ("Annual Meeting") and shall hold
such meeting not later than twenty-three (23) days subse-
quent to the date on which the Proxy Statement (as hereinaf-
ter defined) is cleared with the Commission (provided that,
if such day is not a business day, then the Annual Meeting
shall be held on the next business day); (iii) at such
Annual Meeting, introduce a proposal (the "Proposal") to
approve and adopt this Agreement and the transactions con-
templated hereby, and recommend approval and adoption of
this Agreement and the transactions contemplated hereby by
the stockholders of Seller and include in the definitive
proxy statement relating to the Annual Meeting (the "Proxy
Statement") such recommendation; and (iv) take all reason-
able action to solicit and obtain such approval.
(b) Seller, as promptly as practicable,
shall cause the Proxy Statement to be mailed to its stock-
holders. Seller shall not take any action that would re-
quire the Proxy Statement to be delayed or recirculated
under circumstances which would, in the reasonable judgment
of Buyer, delay the occurrence of the Closing beyond
August 15, 1996.
(c) Seller shall supply ATSC with copies of
(i) the Preliminary Proxy Materials at least ten (10) busi-
ness days in advance of filing with the Commission, (ii)
copies of all correspondence with the Commission relating to
the Preliminary Proxy Materials promptly upon receipt or
delivery, as the case may be, by Seller, and (iii) copies of
the Proxy Statement at least one (1) business day in advance
of mailing to Seller's stockholders; provided, that in the
cases of each clause (i)-(iii) above, Seller shall provide
ATSC and its counsel with a reasonable opportunity for
review thereof and comment thereon, such review to be con-
ducted and such comments to be delivered with reasonable
promptness.
(d) On the date hereof, Mr. Bernard M.
Manuel, Mrs. Isabelle Manuel, Mr. Irving Benson, Mrs. Dianne
Benson and Mr. Roy E. Green, as trustee of the Bernard
Manuel 1992 Irrevocable Trust for Children, are each execut-
ing and delivering to Buyer a Proxy entitling Paul E. Fran-
cis, Walter J. Parks and Jocelyn F.L. Barandiaran, each an
officer of ATSC and Buyer to vote all shares of capital
stock of Seller over which such person or entity has voting
authority (i) for the approval and adoption of this Agree-
ment and the transactions contemplated hereby and any and
all related agreements and (ii) against any other transac-
tion or proposal that could (x) prevent or delay the consum-
mation of the transactions contemplated by this Agreement or
(y) frustrate the purposes of this Agreement (each, a
"Proxy"). On or before June 30, 1996, Seller shall deliver
to Buyer executed Proxies from each of GJM International
Limited, Fenn, Wright and Manson (Antilles) N.V., and Cleve-
land Investment Limited, with respect to the shares of
capital stock of Seller owned by such entities. Seller
shall use its reasonable best efforts to obtain a Proxy from
Limited Direct Associates L.P. with respect to the shares of
capital stock of Seller owned by it.
5.18 Occupancy. Certain employees of Buyer and
CAT are occupying the fifth and sixth floors of Seller's
leased facility in New York City, New York. Commencing the
earlier of April 15, 1996 or the date on which such employ-
ees began to occupy such floors, Seller shall charge Buyer
and CAT, determined based upon head-count, a pro rata por-
tion of the cash rental, rental tax and cleaning service
costs.
5.19 Transfer Taxes. Buyer shall be responsible
for the timely payment of all transfer taxes and stamp duty
taxes attributable to the transactions effected pursuant to
this Agreement which are not measured by gain or income
realized by Seller ("Transfer Taxes"). Upon Buyer's request
on or after the Closing Date, Seller shall pay to Buyer an
amount equal to 50% of all Transfer Taxes paid or to be paid
by Buyer. Buyer shall prepare or cause to be prepared and
timely file or cause to be timely filed all tax returns
required to be filed in respect of Transfer Taxes (other
than any notices required to be given under any applicable
bulk sales laws) and, to the extent that Buyer so requests,
Seller shall sign such tax returns and notices and fully
cooperate with Buyer in connection with such filings.
5.20 Conduct of ATSC Business. Except as ex-
pressly permitted by this Agreement, during the period from
the date of this Agreement to the Closing Date, ATSC (a)
shall conduct its business in the ordinary course consistent
with past practice and use its reasonable best efforts to
preserve its current relationships with suppliers, contract
manufacturers, factors and others having business dealings
with it, (b) shall not effect a stock split or combination
with respect to, declare a stock dividend on or engage in a
recapitalization of, the ATSC Common Stock or (c) shall not,
and shall not permit any of its affiliates to, take any
action which would reasonably be expected to have a Material
Adverse Effect on CAT or the Division Business.
VI. CONDITIONS TO OBLIGATIONS OF BOTH PARTIES.
6.1 Conditions. The respective obligations of
each party to effect the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver of
the following conditions:
(a) the stockholders of Seller shall have
approved the transactions contemplated by this Agreement.
(b) No statute, rule, regulation, order,
decree or injunction shall have been enacted, entered,
promulgated or enforced by a Governmental Entity which
prohibits the consummation of the transactions contemplated
by this Agreement and shall be in effect; provided, that the
parties shall use their reasonable best efforts to have any
such injunction lifted.
(c) The waiting period under the HSR Act
with respect to the transactions contemplated by this Agree-
ment shall have expired or been terminated.
(d) Each of Mitsubishi International Corpo-
ration, Mitsubishi Corporation and HongKong and Shanghai
Banking Corporation shall have consented to the transactions
contemplated by this Agreement and released any Liens held
by them on the Assets and the CAT Shares not later than
June 30, 1996. Seller and Buyer shall use reasonable best
efforts to cause the consents required by this Subsection
6.1(d) to include an acknowledgment of fair value, a waiver
of any fraudulent transfer claims and a waiver of any right
to participate in any recovery of fraudulent transfer claims
brought by the debtor in possession or trustee.
(e) Landlords' Consents. In the event Buyer
enters into the Subleases at the time of Closing, then
Seller shall have obtained from the landlords under the NY
Lease and the FWM Lease its consent to such Subleases.
VII. CONDITIONS TO OBLIGATIONS OF SELLER.
7.1 Conditions. The obligations of Seller to
consummate the transactions contemplated by this Agreement
are subject to the fulfillment at or prior to the Closing of
each of the following conditions (any or all of which, to
the extent permitted by law, may be waived in whole or in
part by Seller):
(a) Representations and Warranties. The
representations and warranties of Buyer in this Agreement
qualified as to materiality shall be true, complete and
correct in all respects, and those not so qualified shall be
true, complete and correct in all material respects, as of
the date when made and at and as of the Closing Date, as
though such representations and warranties were made at and
as of the Closing Date.
(b) Performance. Buyer shall have performed
and complied with, in all material respects, all agreements,
obligations, covenants and conditions required by this
Agreement to be so performed or complied with by Buyer at or
prior to the Closing.
(c) Officer's Certificate. Buyer shall have
delivered to Seller a duly executed certificate, dated as of
the Closing Date, certifying the fulfillment of the condi-
tions specified in Subsections 7.1(a) and 7.1(b) hereof.
(d) Opinion of Counsel. Buyer shall have
delivered to Seller an opinion of legal counsel of Buyer,
dated the Closing Date, in substantially the form of Exhib-
it L hereto.
(e) Documents. Seller shall have received
the Instruments of Assignment, the Pledge Agreement, the
Undertaking and the Ancillary Agreements, in each case, duly
executed by each party thereto (other than Seller).
(f) Release. Seller shall have been re-
leased from its obligations in respect of CAT's credit
facility with HongKong and Shanghai Banking Corporation.
(g) Material Change. No event, occurrence,
fact, condition, change or development shall have occurred
or come to exist which, individually or in the aggregate,
has had or resulted in, or would reasonably be expected to
have or result in, a Material Adverse Effect on ATSC.
VIII. CONDITIONS TO OBLIGATIONS OF BUYER.
8.1 Conditions. The obligations of Buyer to
consummate the transactions contemplated by this Agreement
are subject to the fulfillment at or prior to the Closing of
each of the following conditions (any or all of which, to
the extent permitted by law, may be waived in whole or in
part by Buyer):
(a) Representations and Warranties. The
representations and warranties of Seller in this Agreement
qualified as to materiality shall be true, complete and
correct in all respects, and those not so qualified shall be
true, complete and correct in all material respects, as of
the date when made and at and as of the Closing Date, as
though such representations and warranties were made at and
as of the Closing Date.
(b) Performance. Seller shall have per-
formed and complied with, in all material respects, all
agreements, obligations, covenants and conditions required
by this Agreement to be so performed or complied with by
Seller at or prior to the Closing.
(c) Officer's Certificate. Seller shall
have delivered to Buyer a duly executed certificate, dated
as of the Closing Date, certifying the fulfillment of the
conditions specified in Subsections 8.1(a) and 8.1(b) here-
of.
(d) Opinion of Counsel. Seller shall have
delivered to Buyer an opinion of legal counsel to Seller,
dated as of the Closing Date, in substantially the form of
Exhibit M hereto.
(e) Documents. Buyer shall have received
the Instruments of Assignment, the Pledge Agreement and the
Ancillary Agreements, in each case, duly executed by each
party thereto (other than Buyer);
(f) CAT Credit Agreement. HongKong and
Shanghai Banking Corporation shall have entered into an
amended and restated credit agreement with CAT on substan-
tially the terms set forth in (or terms no less favorable to
CAT than those set forth in) the Commitment Letter, dated
April 22, 1996, the terms of which are satisfactory to ATSC
and Buyer.
(g) Lenders' Consent. Buyer shall have
obtained the consent of the lenders under Buyer's Second
Amended and Restated Credit Agreement, dated as of September
29, 1996, among Buyer and the Lenders named therein to the
transactions contemplated by this Agreement.
(h) Material Change. No event, occurrence,
fact, condition, change or development shall have occurred
or come to exist which, individually or in the aggregate,
has had or resulted in, or would reasonably be expected to
have or result in, a Material Adverse Effect on the Division
Business or on CAT.
(i) Employment Agreements. CAT shall have
entered into a new employment agreement reasonably satisfac-
tory to Buyer with Mr. Dwight Meyer.
IX. TERMINATION, AMENDMENT AND WAIVER.
9.1 Termination. This Agreement may be terminat-
ed and the transactions contemplated hereby may be abandoned
at any time prior to the Closing:
(a) by mutual written agreement of Buyer and
Seller;
(b) at any time after August 30, 1996 by
either Buyer or Seller, if the Closing shall not have oc-
curred, unless the Closing has not occurred due to the
failure of such party to perform or comply with any of the
agreements or covenants hereof to be performed or complied
with by such party prior to the Closing; or
(c) by either Buyer or Seller, if (i) the
stockholders of Seller fail to approve the transactions
contemplated by this Agreement at the Annual Meeting, or
(ii) any event, fact or condition shall occur or exist that
makes it impossible to satisfy a condition to such party's
obligations to consummate the transactions contemplated by
this Agreement, unless the occurrence or existence of such
event, fact or condition shall be due to the failure of such
party to perform or comply with any of the agreements or
covenants hereof to be performed or complied with by such
party prior to the Closing.
9.2 Procedure and Effect of Termination. In the
event of the termination of this Agreement and the abandon-
ment of the transactions contemplated hereby pursuant to
Section 9.1(b) or (c) hereof, written notice thereof shall
forthwith be given by the party so terminating to the other
party, and this Agreement shall terminate, and the transac-
tions contemplated hereby shall be abandoned, without fur-
ther action by Seller or Buyer. If this Agreement is termi-
nated pursuant to Section 9.1 hereof:
(a) All confidential information received by
the parties shall be treated in accordance with Section 5.2
hereof and the Confidentiality Agreements referred to in
such Section;
(b) all filings, applications and other
submissions made pursuant to Sections 5.4, 5.5 and 5.6
hereof shall, to the extent practicable, be withdrawn from
the agency or other person to which made; and
(c) the obligations provided for in this
Section 9.2, Article X, Sections 11.1 and 11.12 hereof, the
confidentiality provision contained in Section 5.2 hereof
and the Confidentiality Agreements referred to in such
Section shall survive any termination of this Agreement.
9.3 Other Remedies. In no event shall termina-
tion of this Agreement limit or restrict the rights and
remedies of any party hereto against any other party which
has willfully breached the terms of this Agreement prior to
termination hereof.
X. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.
10.1 Survival of Representations. The represen-
tations and warranties in this Agreement and in any other
document delivered in connection herewith shall survive the
Closing hereunder regardless of any investigation made by or
on behalf of any party hereto; provided, however, that all
representations and warranties in this Agreement and in any
other document delivered herewith relating to CAT (other
than Section 3.10 relating to title to the CAT Shares) shall
not survive the Closing.
10.2 Seller's Agreement to Indemnify. Upon the
terms and subject to the conditions of this Article X,
Seller shall indemnify, defend and hold harmless Buyer and
its affiliates, and its and their directors, officers,
employees and agents (collectively, the "Buyer Group"), at
any time after the Closing, from and against all demands,
claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses, including, without
limitation, interest, penalties and reasonable fees and
expenses of attorneys and other professionals (collectively,
"Damages"), asserted against, resulting to, imposed upon or
incurred by the Buyer Group or any member thereof, directly
or indirectly, by reason of or resulting from: (a) liabili-
ties, obligations or claims of or against Seller or any
affiliate of Seller other than CAT (whether absolute, ac-
crued, contingent or otherwise) existing as of the Closing
Date or arising out of facts, conditions or circumstances
occurring at or prior thereto (excluding the Liabilities),
whether or not such liabilities, obligations or claims were
known at the time of Closing; (b) a breach of any represen-
tation, warranty, covenant or agreement of Seller contained
in or made pursuant to this Agreement or any Seller Related
Instrument or any facts or circumstances constituting such a
breach; (c) each item listed in Section 3.20 of the Seller
Disclosure Schedule; (d) the violation of any Environmental
Law prior to the Closing Date (or allegation of same), by
Seller or the Division, or any other Damages arising under
Environmental Laws; (e) any tax or related claim asserted
against the Buyer Group or any member thereof relating to
the operations or properties of the Division with respect to
any period ending on or prior to or including the Closing
Date; (f) any failure to comply with any "bulk sales" laws
applicable to the transactions contemplated hereby; and (g)
all Damages arising out of or relating to any Plans or CAT
Plans, including, without limitation, all benefits accrued
by any employees under the Plans and CAT Plans and any
liability arising under Section 4980B of the Code (collec-
tively, "Seller Claims").
10.3 Seller's Limitation of Liability.
(a) Anything in this Agreement to the con-
trary notwithstanding, the liability of Seller to indemnify
the Buyer Group pursuant to Section 10.2(b) hereof against
any Damages sustained by reason of any Seller Claim thereun-
der for a breach of any representation and warranty of
Seller shall be limited to Seller Claims as to which any
member of the Buyer Group has given Seller written notice on
or prior to April 30, 1997, whether or not any Damages have
then actually been sustained; provided, however, that,
notwithstanding the foregoing, the liability of Seller to
indemnify the Buyer Group against any Damages sustained by
reason of any Seller Claim for a breach of any of the repre-
sentations and warranties set forth in Section 3.10 and the
first sentence of Section 3.11 hereof shall not be so limit-
ed.
(b) Other than with respect to the represen-
tations and warranties set forth in Section 3.10 and the
first sentence of Section 3.11 hereof, the provisions in
Section 10.2(b) hereof for indemnity by Seller of the Buyer
Group against Damages sustained by reason of any Seller
Claim thereunder for a breach of any representation or
warranty of Seller shall be effective only after the aggre-
gate amount of all such Seller Claims for which Seller is
liable exceeds $500,000, and then only to the extent of such
excess (the "Buyer's Deductible"). With respect to any
breach by Seller of the representation and warranty set
forth in the first sentence of Section 3.11 hereof, if such
breach relates to Seller's title to any of the Inventory or
the Net Fixed Assets, Seller's indemnity obligations hereun-
der shall be limited to the amount of the Inventory Consid-
eration or the Fixed Asset Consideration, respectively.
Notwithstanding the foregoing, in no event shall Seller's
indemnity obligations under this Agreement exceed $3.6
million.
(c) The liability of Seller to indemnify the
Buyer Group against any Damages sustained by reason of any
Seller Claim for a breach of any covenant or agreement shall
not be limited in any manner and shall not be subject to the
Buyer's Deductible, provided, however, that Seller shall not
be liable for breach of any covenant or agreement contained
in Section 5.1 hereof if the transactions contemplated
hereby are consummated unless such breach also constitutes a
breach of a representation or warranty for which Buyer would
otherwise be entitled to indemnification hereunder.
(d) Seller may satisfy its indemnification
obligations hereunder either by the payment of cash or by
delivering shares of ATSC Common Stock having a fair market
value equal to the amount of the claim. For purposes of
this Section 10.3(d), fair market value shall mean the
average high and low sale price of the ATSC Common Stock on
the New York Stock Exchange Composite Tape (or as reported
on any other exchange on which the ATSC Common Stock is then
listed) on each of the ten (10) consecutive trading days
ending on the trading day immediately preceding the payment
date.
10.4 Buyer's Agreement to Indemnify. Upon the
terms and subject to the conditions of this Article X, Buyer
shall indemnify, defend and hold harmless the Seller and its
affiliates, and its and their directors, officers, employees
and agents (collectively, the "Seller Group"), at any time
after the Closing, from and against all Damages asserted
against, resulting to, imposed upon or incurred by the
Seller Group or any member thereof, directly or indirectly,
by reason of or resulting from: (a) a breach of any repre-
sentation, warranty, covenant or agreement of Buyer con-
tained in or made pursuant to this Agreement or any Buyer
Related Instrument or any facts or circumstances constitut-
ing such a breach; or (b) the Liabilities ("Buyer Claims"
and, collectively with Seller Claims, "Claims").
10.5 Buyer's Limitation of Liability.
(a) Anything in this Agreement to the con-
trary notwithstanding, the liability of Buyer to indemnify
the Seller Group pursuant to Section 10.4(a) hereof against
any Damages sustained by reason of any Buyer Claim thereun-
der for a breach of any representation and warranty of Buyer
shall be limited to Buyer Claims as to which any member of
the Seller Group has given Buyer written notice on or prior
to April 30, 1997, whether or not any Damages have then
actually been sustained; provided, however, that notwith-
standing the foregoing, the liability of Buyer to indemnify
the Seller Group against any Damages sustained by reason of
any Buyer Claim for a breach of any of the representations
and warranties set forth in Section 4.5(b) hereof shall not
be so limited.
(b) Other than with respect to the represen-
tations and warranties set forth in Section 4.5(b), the
provisions in Section 10.4(a) for indemnity by Buyer of the
Seller Group against Damages sustained by reason of any
Buyer Claim thereunder for a breach of any representation
and warranty of Buyer shall be effective only after the
aggregate amount of all such Buyer Claims for which Seller
is liable exceeds $500,000, and then only to the extent of
such excess (the "Seller's Deductible"). Notwithstanding
the foregoing, in no event shall Buyer's indemnity obliga-
tions under this Agreement exceed $3.6 million.
(c) The liability of Buyer to indemnify the
Seller Group against any Damages sustained by reason of any
Buyer Claim for a breach of any covenant or agreement shall
not be limited in any manner and shall not be subject to
Seller's Deductible, provided, however, that Buyer shall not
be liable for breach of any covenant or agreement contained
in Section 5.20 hereof if the transactions contemplated
hereby are consummated unless such breach also constitutes a
breach of a representation or warranty for which Seller
would otherwise be entitled to indemnification hereunder.
10.6 Conditions of Indemnification. The obliga-
tions and liabilities of the Seller Group and Buyer Group
with respect to Claims made by third parties shall be sub-
ject to the following terms and conditions:
(a) The indemnified party will give the
indemnifying party prompt notice of any such Claim, and the
indemnifying party shall have the right to undertake the
defense thereof by representatives chosen by it;
(b) If the indemnifying party undertakes the
defense of any such Claim, the indemnified party shall, to
the best of its ability, assist the indemnifying party, at
the expense of the indemnifying party, in the defense of
such Claim, and shall promptly send to the indemnifying
party, at the expense of the indemnifying party, copies of
any documents received by the indemnified party which relate
to such Claim; provided, however, that the indemnified party
shall have no such obligation if and to the extent that such
third-party Claim arises out of or relates to facts, events
or circumstances which may also give rise to a separate
Claim by the indemnified party against the indemnifying
party;
(c) If the indemnifying party, within a
reasonable time after notice of any such Claim, fails to
defend the indemnified party against which such Claim has
been asserted, the indemnified party shall (upon further
notice to the indemnifying party) have the right to under-
take the defense, compromise or settlement of such Claim on
behalf of and for the account and risk of the indemnifying
party, subject to the right of the indemnifying party to
assume the defense of such Claim at any time prior to set-
tlement, compromise or final determination thereof; and
(d) Anything in this Article X to the con-
trary notwithstanding, (i) if there is a reasonable proba-
bility that a Claim may materially and adversely affect the
indemnified party other than as a result of money damages or
other money payments, the indemnified party shall have the
right, at its own cost and expense, to defend, compromise or
settle such Claim; and (ii) the indemnifying party shall
not, without the written consent of the indemnified party,
settle or compromise any Claim or consent to the entry of
any judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the
indemnified party a release from all liability with respect
to such Claim.
(e) Notwithstanding anything to the contrary
contained herein, if the conditions of Subsection 7.1(a) or
(b) or Subsection 8.1(a) or (b) are not satisfied as of the
Closing Date (a "Failure of Condition"), and the party for
whose benefit such condition exists (the "Waiving Party")
elects to proceed with the Closing notwithstanding such
Failure of Condition, then such condition shall be deemed to
be satisfied and the Waiving Party shall not bring any Claim
for indemnity hereunder or any other Claim arising out of
the facts or circumstances causing such Failure of Condi-
tion.
10.7 Exclusive Remedies. The remedies provided
herein shall be the exclusive remedies of each of the par-
ties hereto with respect to any Claims or Damages arising
out of the transactions contemplated by this Agreement,
including, without limitation, any Claim in tort or under
any federal or state securities laws; provided, however,
that the parties hereto shall be entitled to an injunction
or other equitable relief to prevent breaches of this Agree-
ment, to enforce specifically the terms and provisions of
this Agreement or seek any other remedy to which they are
entitled in equity in any court of the United States located
in the State of New York or in New York State court.
10.8 Transfer Pricing. Seller and Buyer acknowl-
edge and agree that the buying agent fees and other pricing
arrangements between CAT-US and CAT-Far East were estab-
lished in good faith and in accordance with industry stan-
dards.
10.9 Claims Against CAT Directors and Officers.
Buyer hereby agrees that it will not, and will not permit
any of its affiliates, including CAT, to, bring any claim
against any of Messrs. Bernard Manuel, Irving Benson or Roy
Green for any action taken or failed to be taken by such
person in his capacity as an officer or director of CAT,
other than any such claim for fraud or intentional miscon-
duct.
XI. MISCELLANEOUS.
11.1 Fees and Expenses. Whether or not the
transactions contemplated hereby or by the Ancillary Agree-
ments are consummated pursuant hereto or thereto, each of
Seller and Buyer shall pay all fees and expenses incurred by
it or on its behalf in connection with or in anticipation of
this Agreement and such related instruments and the consum-
mation of the transactions contemplated hereby and thereby.
11.2 Further Assurances. From time to time after
the Closing Date, at the request of any party hereto and at
the expense of the party so requesting, Buyer and Seller
shall execute and deliver to such requesting party such
documents and take such other action as such requesting
party may reasonably request in order to consummate more
effectively the transactions contemplated hereby, including,
without limitation, such documents or actions as Buyer may
require for the purpose of enabling the recordation of any
Instrument of Assignment.
11.3 Notices. All notices, requests, demands,
waivers and other communications required or permitted to be
given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered by hand, by mail
(certified or registered mail, return receipt requested), by
reputable overnight courier or by facsimile transmission
(receipt of which is confirmed):
(a) If to Buyer or ATSC, to:
AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention: General Counsel
Facsimile: (212) 541-3299
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq.
Facsimile: (302) 651-3001
(b) If to Seller, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: General Counsel
Facsimile: (212) 536-4174
with a copy to:
Fulbright and Jaworski, L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Roy L. Goldman, Esq.
Facsimile: (212) 752-5958
or to such other person or address as any party shall
specify by notice in writing, given in accordance with
this Section 11.3, to the other parties hereto. All such
notices, requests, demands, waivers and communications
shall be deemed to have been given on the date on which so
hand-delivered, on the third business day following the
date on which so mailed, on the next business day follow-
ing the date on which delivered to such overnight courier
and on the date of such facsimile transmission and confir-
mation, except for a notice of change of person or ad-
dress, which shall be effective only upon receipt thereof.
11.4 Entire Agreement. This Agreement, the
Seller Disclosure Schedule, the Buyer Disclosure Schedule,
and the Annexes, Exhibits and other documents referred to
herein which form a part hereof (including, without limi-
tation, the Confidentiality Agreements referred to in
Section 5.2 hereof) contain the entire understanding of
the parties hereto with respect to the subject matter
hereof. This Agreement supersedes all prior agreements
and understandings, oral and written, with respect to its
subject matter.
11.5 Severability. Should any provision of
this Agreement, or any part thereof, for any reason be
declared invalid or unenforceable, such declaration shall
not affect the validity or enforceability of any other
provision of this Agreement, or any other part thereof,
all of which other provisions, and parts, shall remain in
full force and effect, and the application of such invalid
or unenforceable provision, or such part thereof, to per-
sons or circumstances other than those as to which it is
held invalid or unenforceable shall be valid and be en-
forced to the fullest extent permitted by law.
11.6 Binding Effect; Assignment. This Agree-
ment and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and
their respective heirs, executors, successors and permit-
ted assigns, but except as contemplated herein, neither
this Agreement nor any of the rights, interests or obliga-
tions hereunder shall be assigned, directly or indirectly,
by Buyer or Seller without the prior written consent of
the other parties hereto; provided, however, that ATSC or
Buyer may assign any or all of its rights, interests or
obligations hereunder to any one or more direct or indi-
rect wholly owned subsidiaries of ATSC or Buyer, provided,
however, that no such assignment by ATSC or Buyer shall
limit or affect ATSC or Buyer's obligations hereunder.
11.7 Amendment, Modification and Waiver. This
Agreement may be amended, modified or supplemented at any
time by written agreement of the parties hereto. Any
failure by Seller, on the one hand, or ATSC or Buyer, on
the other hand, to comply with any term or provision of
this Agreement may be waived by ATSC or Buyer or Seller,
respectively, at any time by an instrument in writing
signed by or on behalf of ATSC, Buyer or Seller, but such
waiver or failure to insist upon strict compliance with
such term or provision shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other fail-
ure to comply.
11.8 Third-Party Beneficiaries. Except as
otherwise expressly provided herein, this Agreement is not
intended, and shall not be deemed, to confer upon or give
any person except the parties hereto and their respective
successors and permitted assigns, any remedy, claim, lia-
bility, reimbursement, cause of action or other right
under or by reason of this Agreement.
11.9 Counterparts. This Agreement may be exe-
cuted in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one
and the same instrument.
11.10 Bulk Sales. Without limiting Seller's
obligations under Section 10.2(f) hereof, each of Buyer
and Seller hereby waive compliance by the other with the
"bulk sales" provisions of Article 6 of the Uniform Com-
mercial Code as may be in effect in the jurisdictions
where the Assets are located and any other similar provi-
sion of applicable law as may be in effect in any such
jurisdiction.
11.11 Interpretation. The article and section
headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agree-
ment, the term "person" shall mean and include an individ-
ual, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or
any department or agency thereof. As used in this Agree-
ment, the term "affiliate" shall have the meaning set
forth in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
11.12 Governing Law. This Agreement shall be
governed by the laws of the State of New York, without
regard to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, the parties hereto have
executed this Stock and Asset Purchase Agreement as of the
day and year first above written.
CYGNE DESIGNS, INC.
By: /s/ Bernard M. Manuel
Name: Bernard M. Manuel
Title: Chairman
CYGNE GROUP (F.E.) LIMITED
By: /s/ Bernard M. Manuel
Name: Bernard M. Manuel
Title: Director
ANNTAYLOR STORES CORPORATION
By:/s/ J. Patrick Spainhour
Name: J. Patrick Spainhour
Title: President
ANNTAYLOR, INC.
By: /s/ J. Patrick Spainhour
Name: J. Patrick Spainhour
Title: President
EXHIBIT A
BILL OF SALE
THIS BILL OF SALE (the "Bill of Sale") is
executed as of ______, 1996 by CYGNE DESIGNS, INC., a
Delaware corporation ("Seller"), in favor of ANNTAYLOR,
INC., a Delaware corporation ("Buyer"), in connection
with the transactions contemplated by the Stock and Asset
Purchase Agreement dated as of , 1996 (the "Pur-
chase Agreement") by and between Seller, Buyer, ANNTAYLOR
STORES CORPORATION, a Delaware corporation and holder of
all of the outstanding capital stock of Buyer ("ATSC"),
and CYGNE GROUP (F.E.) LIMITED, a Hong Kong corporation
and a wholly owned subsidiary of Seller. Capitalized
terms used and not otherwise defined herein shall have
the respective meanings ascribed to them in the Purchase
Agreement.
INTENDING TO BE LEGALLY BOUND, and for good and
valuable consideration, sufficiency and receipt of which
are hereby acknowledged, Seller hereby sells, transfers,
conveys, assigns and delivers unto Buyer, its successors
and assigns, forever, all of Seller's right, title and
interest in and to the assets of the Division listed and
described on ANNEX I hereto (collectively, the "Assets").
Notwithstanding the foregoing, nothing herein
is intended to, nor shall this Bill of Sale, constitute
or evidence the sale, transfer, conveyance, assignment or
delivery to Buyer of any assets not listed or described
on ANNEX I hereto.
Seller hereby authorizes Buyer to take any
appropriate action to protect the right, title and inter-
est in the Assets hereby sold, conveyed, assigned, trans-
ferred and delivered to Buyer, in the name of Seller or
Buyer or any other name (for the benefit of Buyer and its
successors and assigns) against each and every person or
persons whomsoever claiming or asserting any claim
against any or all of the same.
Seller hereby covenants and agrees, pursuant to
Section 1.1(b) of the Purchase Agreement, to execute and
deliver all such Other Instruments and all such other
notices, releases, acquittances, consents and powers of
attorney as may be necessary more fully to sell, trans-
fer, convey and assign to Buyer, or its successors or
permitted assigns, all of Seller's right, title and
interest in and to the Assets therein and hereby sold,
transferred, conveyed and assigned to Buyer; and in case
of conflict, such specific instrument shall control with
respect to the Assets sold, transferred, conveyed or
assigned thereby.
Seller hereby further covenants and agrees that
in the event Buyer shall acquire title to any of the
Assets subject to any Lien, other than those expressly
permitted by the Purchase Agreement, Seller shall prompt-
ly cause such Lien to be terminated, released or other-
wise discharged.
IN WITNESS WHEREOF, Seller has caused this Bill
of Sale to be executed as of the date first above written.
CYGNE DESIGNS, INC.
By: _______________________________
Name:
Title:
ANNEX I TO
BILL OF SALE
THE ASSETS
The following property and assets of Seller com-
prise the Assets to be purchased by Buyer:
(a) the following items of inventory (the "Inven-
tory"): (x) fabric and trim owned by Seller for use by the
Division in the production of merchandise for Buyer (the
"Division Fabric and Trim") as of February 3, 1996 and
identified on Attachment A hereto to the extent not used as
of the Closing Date in the production of merchandise for
Buyer; (y) Division Fabric and Trim purchased since February
3, 1996 pursuant to written commitments or purchase orders
issued by Buyer to the extent not used as of the Closing
Date in the production of merchandise for Buyer and (z)
work-in-progress owned by Seller for use by the Division in
the production of merchandise for Buyer pursuant to purchase
orders issued by Buyer;
(b) all leasehold improvements, furniture, fix-
tures and equipment that (x) are owned by Seller or subject
to a Capital Lease (y) relate to and are used exclusively or
primarily in the Division Business and (z) are located on
the fifth, sixth or nineteenth floor of the NY Facility or
at the Florence Facility on the Closing Date, including
those listed on Attachment B to this Annex I;
(c) all licenses, permits, registrations, renew-
als thereof and applications therefor, variances, exemp-
tions, orders, approvals and authorizations issued by any
governmental, regulatory or administrative agency or author-
ity (domestic or foreign), held by Seller or any affiliate
of Seller of or relating to the Division Business, including
all quota allocations for the export of goods to the United
States and elsewhere, necessary or desirable for the lawful
conduct of the Division Business to the extent transferrable
under applicable law;
(d) all purchase orders, bills of lading, trust
receipts, warehouse receipts and other documents of title of
whatever kind and description relating to the Inventory;
(e) all rights under insurance policies covering
Inventory in transit and all rights and claims under insur-
ance policies for damage to any Assets to the extent not
repaired or replaced prior to the Closing;
(f) all goodwill, intellectual property rights,
patents, trademarks, service marks, copyrights (including
all copyrights in computer software and databases), licenses
and applications therefor (if any), know-how, processes,
methods, techniques, formulae, designs, drawings, patterns,
trade secrets, proprietary information, sketches, technical
information, computer software, databases and other propri-
etary or confidential information of or relating to the
Division Business and all rights in any licenses to or from
any third party of or for the foregoing, it being under-
stood, however, that the rights to the Intellectual Property
shall be non-exclusive unless such Intellectual Property
relates solely to the Division Business and Seller's rights
therein are exclusive;
(g) all intangible assets of or relating to the
Division Business, including claims against third parties;
and
(h) all books and records (including all comput-
erized records and storage media and associated software) of
CAT, and those relating solely to the Division Business and,
to the extent practicable, those portions of Seller's other
books and records that relate to the Division Business,
including, without limitation, (a) all Books and Records
relating to the employees of and the purchase of materials,
supplies and services for the Division Business or CAT, but
not including the tax returns, general ledger or corporate
minute books and capital stock books of Seller, and (b) the
tax returns, general ledger and corporate minute books and
capital stock books of CAT-US and CAT-Far East.
EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
(Contracts)
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the
"Assignment Agreement"), dated as of , 1996, is
made by and between Cygne Designs, Inc., a Delaware
corporation ("Assignor"), and AnnTaylor, Inc., a Delaware
corporation ("Assignee").
W I T N E S S E T H
WHEREAS, Assignor is a party to certain con-
tracts and obligations and all amendments and supplements
thereto identified on Schedule I attached hereto and
incorporated by reference herein (the "Contracts").
WHEREAS, Assignor and Assignee are parties to
the Stock and Asset Purchase Agreement, dated as of June
7, 1996 (the "Purchase Agreement") by and between Assign-
or, Assignee, AnnTaylor Stores Corporation, a Delaware
corporation and holder of all of the outstanding capital
stock of Assignee, and Cygne Group (F.E.) Limited, a Hong
Kong Corporation and a wholly owned subsidiary of Assign-
or, pursuant to which Assignor agreed to sell and Assign-
ee agreed to purchase, among other things, certain assets
of Assignor, all in accordance with the terms and condi-
tions set forth in the Purchase Agreement. Capitalized
terms used and not otherwise defined herein shall have
the respective meanings ascribed to such terms in the
Purchase Agreement.
WHEREAS, in connection with the transactions
contemplated by the Purchase Agreement, and pursuant
thereto, among other things, Assignor has agreed to enter
into this Assignment Agreement to assign all of
Assignor's right, title, interest, duties and obligations
in and to the Contracts to Assignee and, in partial
consideration therefor, among other things, Assignee has
agreed to accept such assignment of the Contracts and
assume the duties and obligations of Assignor under the
Contracts arising from and after the date hereof. Seller
shall be responsible for and retains all liabilities for
duties and obligations incurred under the Contracts prior
to the date hereof.
NOW, THEREFORE, in consideration of the forego-
ing and of the mutual covenants and agreements set forth
herein and in the Purchase Agreement, the parties hereto
agree as follows:
1. Assignment. Assignor does hereby sell,
transfer, convey, assign and deliver to Assignee all of
Assignor's right, title, interest, duties and obligation
in and to the Contracts.
2. Acceptance and Assumption. (a) Assignee
does hereby irrevocably accept such sale, transfer,
conveyance, assignment and delivery of all of Assignor's
right, title, interest, duties and obligations in and to
the Contracts, and does hereby assume all duties and
obligations of Assignor under the Contracts arising from
and after the date hereof. Seller shall be responsible
for and retains all liabilities for all duties and obli-
gations incurred prior to the date hereof.
(b) Assignee covenants and agrees to pay,
perform, discharge and satisfy when due all of Assignor's
covenants, agreements and obligations under the Contracts
arising from and after the date hereof pursuant to, and
in accordance with, the terms and conditions of the
respective Contracts.
3. Effective Time. The assignment of the
Contracts by Assignor, and the acceptance of such assign-
ment and the assumption of the duties and obligations of
Assignor under the Contracts by Assignee, all pursuant to
this Assignment Agreement, shall be effective as of the
date hereof.
4. Amendment, Modification and Waiver. This
Assignment Agreement may be amended, modified or supple-
mented at any time by written agreement of the parties
hereto. Any failure by Assignor, on the one hand, or
Assignee, on the other hand, to comply with any term or
provision of this Assignment Agreement may be waived by
Assignee or Assignor, respectively, at any time by an
instrument in writing signed by or on behalf of Assignee
or Assignor, but such waiver or failure to insist upon
strict compliance with such term or provision shall not
operate as a waiver of, or estoppel with respect to, any
subsequent or other failure to comply.
5. Notices. All notices, requests, demands,
waivers and other communications required or permitted to
be given under this Assignment Agreement shall be in
writing and shall be deemed to have been duly given if
delivered personally, by mail (certified or registered
mail, return receipt requested), by reputable overnight
courier or by facsimile transmission (receipt of which is
confirmed):
(a) If to Assignee, to:
AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention: General Counsel
Facsimile: (212) 541-3299
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq.
Facsimile: (302) 651-3001
(b) If to Assignor, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: General Counsel
Facsimile: (212) 536-4174
with a copy to:
Fulbright and Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Roy L. Goldman, Esq.
Facsimile: (212) 752-5958
or to such other person or address as any party shall
specify by notice in writing, given in accordance with
this Section 5, to the other parties hereto. All such
notices, requests, demands, waivers and communications
shall be deemed to have been given on the date on which so
hand-delivered, on the third business day following the
date on which so mailed, on the next business day follow-
ing the date on which delivered to such overnight courier
and on the date of such facsimile transmission and confir-
mation, except for a notice of change of person or ad-
dress, which shall be effective only upon receipt thereof.
6. Third-Party Beneficiaries. Except as oth-
erwise expressly provided herein, this Assignment Agree-
ment is not intended, and shall not be deemed, to confer
upon or give any person except the parties hereto and
their respective successors and permitted assigns, any
remedy, claim, liability, reimbursement, cause of action
or other right under or by reason of this Assignment
Agreement.
7. Governing Law. This Assignment Agreement
shall be governed by the laws of the State of New York,
without regard to the principles of conflicts of law
thereof.
8. Counterparts. This Assignment Agreement
may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall con-
stitute one and the same instrument.
9. Interpretation. The section headings con-
tained in this Assignment Agreement are solely for the
purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or
interpretation of this Assignment Agreement. As used in
this Assignment Agreement, the term "person" shall mean
and include an individual, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and
a government or any department or agency thereof.
10. Binding Effect; Assignment. This Assign-
ment Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties here-
to and their respective heirs, executors, successors and
permitted assigns, but except as contemplated herein,
neither this Assignment Agreement nor any of the rights,
interests or obligations hereunder shall be assigned,
directly or indirectly, by Assignee or Assignor without
the prior written consent of the other party hereto; pro-
vided, however, that Assignee may assign any or all of its
rights, interests or obligations hereunder to any one or
more wholly owned subsidiary of AnnTaylor Stores Corpora-
tion, provided, however, that no such assignment by As-
signee shall limit or affect Assignee's obligations here-
under.
IN WITNESS WHEREOF, the parties hereto have
caused this Assignment Agreement to be duly executed as of
the day and year first set forth above.
ASSIGNOR:
CYGNE DESIGNS, INC.
By:_____________________________
Name:
Title:
ASSIGNEE:
ANNTAYLOR, INC.
By:_____________________________
Name:
Title:
EXHIBIT C
UNDERTAKING
THIS UNDERTAKING ("Undertaking"), is executed
and delivered on this day of , 1996, by
AnnTaylor, Inc., a Delaware corporation ("Buyer"), in
favor of Cygne Designs, Inc., a Delaware corporation
("Seller").
W I T N E S S E T H:
WHEREAS, pursuant to the Stock and Asset Pur-
chase Agreement dated as of June 7, 1996 (the "Purchase
Agreement") by and between Buyer, Seller, AnnTaylor
Stores Corporation, a Delaware corporation and holder of
all of the outstanding capital stock of Buyer, and Cygne
Group (F.E.) Limited, a Hong Kong corporation and wholly
owned subsidiary of Seller, Seller has, among other
things, concurrently herewith sold, conveyed, assigned,
transferred and delivered to Buyer all of Seller's
rights, title and interest in and to certain of the
assets of Seller.
WHEREAS, in partial consideration therefor, the
Purchase Agreement requires that Buyer undertake to
assume and to agree to perform, pay or discharge or cause
to be performed, paid or discharged certain liabilities
and obligations of Seller.
NOW, THEREFORE, in consideration of these
premises and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowl-
edged, Buyer agrees as follows (capitalized terms used
but not otherwise defined herein having the respective
meanings ascribed to them in the Purchase Agreement):
1. Buyer hereby undertakes, assumes and
agrees to pay or discharge in accordance with their
terms, to the extent not heretofore paid or discharged
and subject to the limitations contained in this Under-
taking and to the terms of the Purchase Agreement, the
Accounts Payable of Seller which are listed or described
in Annex I hereto.
2. The assumption by Buyer of the liabilities
and obligations set forth in this Undertaking shall not
be construed to defeat, impair or limit in any way the
rights, claims or remedies of Buyer under the Purchase
Agreement.
3. Other than as expressly set forth in this
Undertaking, the Purchase Agreement or any Instruments of
Assignment, Buyer assumes no liability or obligation of
any kind, character or description of Seller or any other
person.
4. This Undertaking shall be enforceable
against the successors and assigns of Buyer and shall
inure to the benefit of the successors and assigns of
Seller.
IN WITNESS WHEREOF, this Undertaking has been
duly executed and delivered by the duly authorized offi-
cers of AnnTaylor, Inc. on the date first above written.
ANNTAYLOR, INC.
By:
Name:
Title:
ANNEX I TO
UNDERTAKING
ASSUMED LIABILITIES
EXHIBIT D
ADVANCE INSTRUMENT
THIS ADVANCE INSTRUMENT (the "Advance Instru-
ment"), dated as of , 1996, is executed and
delivered by AnnTaylor, Inc. ("Ann Taylor") in favor of
Cygne Designs, Inc., a Delaware corporation ("Cygne").
W I T N E S S E T H
WHEREAS, Ann Taylor and Cygne are parties to a
Letter Agreement, dated as of February 10, 1995, pursuant
to which Ann Taylor made cash advances to Cygne in the
amount of $5,000,000 (the "Advance").
WHEREAS, Ann Taylor made certain additional
cash advances to Cygne in the amount of $2,985,000 (the
"Additional Advances").
WHEREAS, Cygne is party to a Stock and Asset
Purchase Agreement, dated as of June 7, 1996 (the "Pur-
chase Agreement") by and among Cygne, Cygne Group (F.E.)
Limited, a Hong Kong corporation and wholly owned subsid-
iary of Cygne, AnnTaylor Stores Corporation, a Delaware
corporation and holder of all of the outstanding capital
stock of Ann Taylor ("ATSC"), and Ann Taylor, pursuant to
which Buyer is purchasing from Seller and Seller is
selling to Buyer certain assets of Seller.
WHEREAS, in connection with the transactions
contemplated by the Purchase Agreement, and pursuant
thereto, among other things, ATSC has agreed to cause Ann
Taylor to enter into this Advance Instrument to forgive,
release and discharge the Advance and the Additional
Advances.
NOW, THEREFORE, in consideration of the premis-
es contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Release and Discharge. Ann Taylor, for
itself and its successors and assigns, does hereby for-
give, release and discharge Cygne from any and all of
Cygne's obligations for the repayment of the Advance and
the Additional Advances and from any and all manner of
actions and causes of action, claims and demands, suits,
damages, costs, legal fees, expenses, debts, dues, ac-
counts, bonds, covenants, contracts, agreements and
compensation whatsoever, in law or in equity, whether the
same are known or unknown, accrued or unaccrued, fixed or
contingent ("Claims") which Ann Taylor now has or may
hereafter have against Cygne in as much as such Claims
relate to repayment of the Advance or the Additional
Advances.
2. Amendment, Modification and Waiver. This
Advance Instrument may be amended, modified or supple-
mented at any time by written agreement of the parties
hereto. Any failure by Cygne, on the one hand, or Ann
Taylor, on the other hand, to comply with any term or
provision of this Advance Instrument may be waived by Ann
Taylor or Cygne, respectively, at any time by an instru-
ment in writing signed by or on behalf of Ann Taylor or
Cygne, but such waiver or failure to insist upon strict
compliance with such term or provision shall not operate
as a waiver of, or estoppel with respect to, any subse-
quent or other failure to comply.
3. Notices. All notices, requests, demands,
waivers and other communications given under this Advance
Instrument shall be in writing and shall be deemed to
have been duly given if delivered personally, by mail
(certified or registered mail, return receipt requested),
by reputable overnight courier or by facsimile transmis-
sion (receipt of which is confirmed):
(a) If to Ann Taylor, to:
AnnTaylor, Inc.
142 West 57th Street
New York, New York 10019
Attention: General Counsel
Facsimile: (212) 541-3299
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq.
Facsimile: (302) 651-3001
(b) If to Cygne, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: General Counsel
Facsimile: (212) 536-4174
with a copy to:
Fulbright and Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Roy L. Goldman, Esq.
Facsimile: (212) 752-5958
or to such other person or address as any party shall
specify by notice in writing, given in accordance with
this Section 3, to the other parties hereto. All such
notices, requests, demands, waivers and communications
shall be deemed to have been given on the date on which so
hand-delivered, on the third business day following the
date on which so mailed, on the next business day follow-
ing the date on which delivered to such overnight courier
and on the date of such facsimile transmission and confir-
mation, except for a notice of change of person or ad-
dress, which shall be effective only upon receipt thereof.
4. Third-Party Beneficiaries. Except as oth-
erwise expressly provided herein, this Advance Instrument
is not intended, and shall not be deemed, to confer upon
or give any person except the parties hereto and their
respective successors and permitted assigns, any remedy,
claim, liability, reimbursement, cause of action or other
right under or by reason of this Advance Instrument.
5. Governing Law. This Advance Instrument
shall be governed by the laws of the State of New York,
without regard to the principles of conflicts of law
thereof.
6. Counterparts. This Advance Instrument may
be executed in counterparts, each of which shall be deemed
an original, but all of which together shall constitute
one and the same instrument.
7. Interpretation. The section headings con-
tained in this Advance Instrument are solely for the pur-
pose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or
interpretation of this Advance Instrument. As used in
this Advance Instrument, the term "person" shall mean and
include an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
8. Binding Effect; Assignment. This Advance
Instrument and all of the provisions hereof shall be bind-
ing upon and inure to the benefit of the parties hereto
and their respective heirs, executors, successors and
permitted assigns, but except as contemplated herein,
neither this Advance Instrument nor any of the rights,
interests or obligations hereunder shall be assigned,
directly or indirectly, by Ann Taylor or Cygne without the
prior written consent of the other party hereto; provided,
however, that Ann Taylor may assign any or all of its
rights, interests or obligations hereunder to any one or
more wholly owned subsidiary of ATSC, provided, however,
that no such assignment by Ann Taylor shall limit or af-
fect Ann Taylor's obligations hereunder.
IN WITNESS WHEREOF, the parties have caused this
Advance Instrument to be duly executed as of the day and
year first above written.
ANNTAYLOR, INC.
By:_____________________________
Name:
Title:
CYGNE DESIGNS, INC.
By:_____________________________
Name:
Title:
EXHIBIT E
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (the "Pledge Agreement"),
dated , 1996, is made by and between Cygne
Designs, Inc. ("Seller") and AnnTaylor, Inc., a Delaware
corporation ("Buyer") (the "Pledge Agreement"). Capital-
ized terms used and not otherwise defined herein shall
have the respective meanings set forth in the Stock and
Asset Purchase Agreement, dated , 1996, by
and among the parties hereto and AnnTaylor Stores Corpo-
ration, a Delaware corporation and holder of all of the
outstanding capital stock of Buyer, and Cygne Group
(F.E.) Limited ("CGFE"), a Hong Kong corporation and a
wholly owned subsidiary of Seller (the "Purchase Agree-
ment").
W I T N E S S E T H
WHEREAS, the parties hereto have entered into
the Purchase Agreement providing for, among other things,
the sale by Seller to Buyer of the Assets and the sale by
Seller and CGFE to Buyer of the CAT Shares owned by it,
for the Purchase Price specified in the Purchase Agree-
ment;
WHEREAS, under the terms of the Purchase Agree-
ment, a portion of the estimated Cash Consideration is to
be deposited by Buyer in an account in the name of Buyer,
subject to the security interest of Seller, at [Bank]
pending final resolution of the amount of the Cash Con-
sideration, which account and security shall be pledged
upon consummation of the Closing by Buyer to Seller,
pursuant to this Pledge Agreement;
WHEREAS, Buyer has caused to be opened Account
No. _________ (the "Bank Account") with [Bank] at its
office at [Address], in the name of Buyer, as pledgor,
subject to the security interest of Seller, as pledgee,
and has caused such account to be credited with
___________ [$ amount equal to 20% of the Estimated
Amount] in immediately available funds (the "Pledged
Amount"); and
WHEREAS, Buyer wishes to pledge and to grant a
security interest in the Bank Account and the Pledged
Amount to Seller as herein provided;
NOW, THEREFORE, in consideration of the premis-
es contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Pledge. Buyer hereby pledges and
grants to Seller a security interest in the following
collateral (the "Collateral"):
(a) the Bank Account and all certificates and
instruments, if any, from time to time representing
or evidencing the Bank Account;
(b) the Pledged Amount and all certificates
and instruments, if any, from time to time repre-
senting or evidencing the Pledged Amount;
(c) all interest, cash, instruments and other
property from time to time received, receivable or
otherwise distributed in respect of or in exchange
for any or all of the then existing Collateral or
otherwise credited to the Bank Account; and
(d) all proceeds of any and all of the forego-
ing Collateral.
SECTION 2. Security for Obligations. This
Pledge Agreement and the security interest in and pledge
of the Collateral hereunder secures the payment to Seller
of all obligations of Buyer owed to Seller now or hereaf-
ter existing under the Purchase Agreement and any fees
and expenses (including attorney's fees) incurred in
connection with the successful exercise by the secured
party of any of its remedies hereunder (all such obliga-
tions of Buyer being referred to hereinafter as the
"Obligations").
SECTION 3. Maintaining the Account. Title to
the Bank Account and the Pledged Amount shall remain and
reside in Buyer but subject to the rights of Seller
hereunder, until the proceeds of the Pledged Amount are
distributed to the parties, as their interests may ap-
pear, pursuant to the terms of the Purchase Agreement.
So long as any Obligations of Buyer are outstanding, it
shall be a term and condition of the Bank Account, except
as otherwise provided by the provisions of Section 8 of
this Pledge Agreement, that no amount (including interest
on the Bank Account) shall be paid or released to or for
the account of or withdrawn by or for the account of
Buyer or any other person or entity from the Bank Ac-
count.
SECTION 4. Investing of Amounts in the Ac-
count. Buyer may from time to time (i) invest amounts on
deposit in the Bank Account in such notes, certificates
of deposit and other debt instruments as Buyer may select
and Seller may approve ("Permitted Investments") and (ii)
invest interest paid on the Permitted Investments re-
ferred to in clause (i) above, and reinvest other pro-
ceeds of any such Permitted Investments which may mature
or be sold, in each case in such Permitted Investments as
Buyer may select and Seller may approve. Seller hereby
approves any U.S. Treasury security having a remaining
maturity of 30 days or less. Interest and proceeds that
are not invested or reinvested in Permitted Investments
as provided above shall be deposited and held in the Bank
Account.
SECTION 5. Representations and Warranties.
(a) Buyer represents that it is the legal and
beneficial owner of the Collateral free and clear of any
lien, security interest, option or other charge or encum-
brance except for the security interest created by this
Pledge Agreement.
(b) Buyer represents that the pledge of the
Collateral pursuant to this Pledge Agreement creates a
valid and perfected first priority security interest in
the Collateral, securing the payment of the Obligations.
(c) Buyer represents that no consent of any
other person or entity and no authorization, approval, or
other action by, and no notice to or filing with, any
governmental authority or regulatory body is required (i)
for the pledge by Buyer of the Collateral pursuant to
this Pledge Agreement or for the execution, delivery or
performance of this Pledge Agreement by Buyer, (ii) for
the perfection or maintenance of the security interest
created hereby (including the first priority nature of
such security interest) or (iii) for the exercise by
Seller of its rights and remedies hereunder.
(d) Buyer and Seller represent that there are
no conditions precedent to the effectiveness of this
Pledge Agreement that have not been satisfied or waived.
SECTION 6. Further Assurances. Seller and
Buyer agree that at any time and from time to time, at
the expense of Seller and Buyer, Seller and Buyer will
promptly execute and deliver all further instruments and
documents, and take all further action, that may be
necessary or desirable, or that Seller may reasonably
request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to
enable Seller to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.
SECTION 7. Transfers and Other Liens. Buyer
agrees that it will not (i) sell, assign (by operation of
law or otherwise) or otherwise dispose of, or grant any
option with respect to, any of the Collateral or (ii)
create or permit to exist any lien, security interest
option or other charge or encumbrance upon or with re-
spect to any of the Collateral except for the security
interest under this Pledge Agreement.
SECTION 8. Withdrawals Upon Final Determina-
tion of the Purchase Price Adjustment. Upon the final
determination of the Purchase Price pursuant to Section
1.6 of the Purchase Agreement, (i) Seller hereby releases
its right and security interest in the Pledged Amount
(but not in the proceeds thereof, to the extent such
proceeds are due to Seller pursuant to said Section 1.6)
without any further action required on the part of Sell-
er, (ii) Buyer shall retain any amounts to which it is
entitled under Section 1.6 of the Purchase Agreement and
(iii) Buyer shall deliver to Seller the remaining amount
in the Pledged Amount, if any.
SECTION 9. Remedies. Seller shall have all
rights and remedies available to a secured creditor under
the New York Uniform Commercial Code (the "Code").
SECTION 10. Expenses. Notwithstanding any-
thing in this Pledge Agreement to the contrary, whether
or not the transactions contemplated by this Pledge
Agreement shall be consummated, each party hereto shall
pay its own expenses incident to preparing for, entering
into and carrying out this Pledge Agreement, except to
the extent provided in Section 2 hereof.
SECTION 11. Amendments, Etc. No amendment or
waiver of any provision of this Pledge Agreement, and no
consent to any departure by Buyer herefrom shall in any
event be effective unless the same shall be in writing
and signed by Seller, and then such waiver or consent
shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 12. Addresses for Notices. All notic-
es and other communications provided for hereunder shall
be in writing and shall be deemed given upon receipt by
the parties at the following addresses (or at such other
address for a party as shall be specified by like no-
tice):
(a) if to Buyer, to:
AnnTaylor, Inc.
142 West 57th Street
New York, New York 10016
Attention: Paul E. Francis
Telecopy: (212) 541-3299
with a copy to:
AnnTaylor, Inc.
142 West 57th Street
New York, New York 10016
Attention: Jocelyn F.L. Barandiaran
Telecopy: (212) 541-3299
and a further copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
7th Floor
Wilmington, DE 19801
Attention: Patricia Moran Chuff
Telecopy: 302-651-3001
and
(b) if to Seller, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York
Attention: Bernard M. Manuel
Telecopy: (212) 921-8318
with a copy to:
Cygne Designs, Inc.
1372 Broadway
New York, New York
Attention: Paul D. Baiocchi
Telecopy: (212) 921-8318
and a further copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Roy L. Goldman
Telecopy: (212) 752-5958
SECTION 13. Continual Security Interest;
Termination. This Pledge Agreement shall create a con-
tinuing security interest in the Collateral and shall (i)
remain in full force and effect until the payment in full
of the Obligations and all other amounts payable under
this Pledge Agreement, (ii) be binding upon Buyer, its
successors and assigns, and (iii) inure to the benefit
of, and be enforceable by, Seller and its respective
successors, transferees and assigns.
SECTION 14. Governing Law; Terms. This Pledge
Agreement shall be governed by and construed in accor-
dance with the laws of the State of New York without
regard to any applicable principles of conflicts of law.
Unless otherwise defined herein or in the Purchase Agree-
ment, terms defined in Article 9 of the Code are used
herein as therein defined.
IN WITNESS WHEREOF, Buyer and Seller have
caused this Pledge Agreement to be duly executed and
delivered by their respective officers thereunto duly
authorized as of the date first above written.
ANNTAYLOR, INC.
By:
Name:
Title:
CYGNE DESIGNS, INC.
By:
Name:
Title:
EXHIBIT F
TERM SHEET
NY Transition Services Agreement
Access to CAM-CAD Equipment Buyer shall allow up to two
(2) of Seller's employees
access to the CAM-CAD mark-
ing and grading work sta-
tions free of charge from
the date of the Closing
through the end of fiscal
1996.
Option to Purchase Seller shall have the option
to purchase the CAM-CAD
equipment at the end of fis-
cal 1996 at its net book
value.
Access to Sample Room and Buyer shall allow up to
Equipment three (3) patternmakers and
up to six (6) sewers to use
the sample room and related
equipment free of charge
from the date of the Closing
through the sixty (60)-day
period following the date of
the Closing.
EXHIBIT G
TERM SHEET
Miami Transition Services Agreement
Warehouse Rental Payment Buyer shall pay to Seller
$40,000 per year (represent-
ing 50% of the amount of the
rent paid by Seller under
the Miami Lease applicable
to the portion of the Miami
Facility relating to the
trim and consolidation ware-
house) for a period of two
(2) years from the Closing
Date.
Warehouse Labor Payments Seller shall provide to Buy-
er trim and consolidation
services of five (5) employ-
ees of Seller at the Miami
Facility and Buyer shall pay
to Seller an amount equal to
50% of the labor costs asso-
ciated with such employees
for a period of two (2)
years from the Closing Date,
subject to earlier termina-
tion by Buyer upon ninety
(90) days' notice to Seller.
Expiration of Miami Lease Upon expiration of the cur-
rent term of the Miami Lease
on January 20, 1997: (i)
in the event that Seller
does not renew the Miami
Lease and ceases its Miami
trim and consolidation oper-
ations, then the Miami Tran-
sition Services Agreement
shall terminate; and (ii) in
the event that Seller does
not renew the Miami Lease
but relocates and continues
the Miami trim and consoli-
dation operations in another
facility, then the Miami
Transition Services Agree-
ment shall apply to the new
facility.
EXHIBIT H
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is made and entered
into as of the ___ day of August, 1996, by and between
AnnTaylor Stores Corporation, a Delaware corporation
("ATSC"), AnnTaylor, Inc., a Delaware corporation and
wholly owned subsidiary of ATSC ("ATI" and, together with
ATSC, "Ann Taylor"), Cygne Designs, Inc., a Delaware
corporation ("Cygne"), and Mr. Bernard M. Manuel ("Con-
sultant").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Stock and
Asset Purchase Agreement, dated as of June 7, 1996, among
ATSC, ATSI, Cygne and Cygne Group (F.E.) Limited, a
Hong Kong corporation and wholly owned subsidiary of
Cygne ("CGFE"), ATI acquired from Cygne (i) all of the
shares of common stock, par value $.01 per share, of CAT
US, Inc., a Delaware corporation ("CAT-US"), owned by
Cygne; and (ii) certain of the assets of Cygne's
AnnTaylor Woven Division (the "Division");
WHEREAS, pursuant to the Purchase Agreement,
ATI acquired from CGFE all of the shares of common stock,
par value $1 HK per share, of C.A.T. (Far East) Limited,
a Hong Kong corporation ("CAT-Far East" and, together
with CAT-US, "CAT"), owned by CGFE;
WHEREAS, CAT serves as a fully dedicated
sourcing capability for ATI;
WHEREAS, prior to the date hereof, Cygne,
through the Division, served as a private label designer,
merchandiser and manufacturer of women's apparel for ATI;
WHEREAS, Consultant is the Chairman and Chief
Executive Officer of Cygne with particular expertise
regarding sourcing of fabric and materials, particularly
with respect to suppliers and factories in Hong Kong and
Asia; and
WHEREAS, Ann Taylor, as partial consideration
for the transactions contemplated by the Purchase Agree-
ment, desires to obtain, and Cygne and Consultant desire
that Consultant provide, information, consultation,
advice and other services in aid of Ann Taylor's busi-
ness, all subject to the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the forego-
ing and of the representations, warranties, covenants,
agreements and conditions contained herein, Ann Taylor,
Cygne and Consultant, intending to be legally bound,
agree as follows:
1. Engagement of Consultant.
(a) Cygne hereby covenants and agrees to
make Consultant available to provide services to Ann
Taylor upon the terms and conditions set forth herein.
Consultant hereby agrees to act as a consultant to and on
behalf of Ann Taylor in accordance with the terms and
conditions set forth herein. Cygne, Consultant and Ann
Taylor agree that Consultant will provide services to Ann
Taylor not in excess of thirty percent (30%) of his
business time and that Consultant will continue his
duties as Chairman and Chief Executive Officer of Cygne.
Cygne agrees to allow Consultant reasonable time to
perform his duties as a consultant to Ann Taylor on a
timely basis, provided, however, that the performance of
such duties shall be at mutually agreeable times that do
not unreasonably interfere with Consultant's continuing
obligations to Cygne.
(b) Cygne shall cause Consultant to, at
the request of the President of Ann Taylor, provide Ann
Taylor information, consultation and advice on fabric and
material sourcing, particularly with respect to suppliers
and factories in Hong Kong and Asia.
(c) Cygne shall cause Consultant, and
Consultant hereby agrees, to diligently and faithfully
serve Ann Taylor and to devote his reasonable best ef-
forts, his highest talents and skills, and all necessary
time and attention in providing the information, consul-
tation and advice requested pursuant to paragraph (b) of
this Section 1; provided that Consultant shall not,
without the consent of Cygne and Consultant, be required
to travel outside HongKong. Cygne hereby consents to the
allocation of up to thirty percent (30%) of Consultant's
business time to perform services under this Agreement.
2. Term of Agreement. Unless terminated at
an earlier date in accordance with Section 4 of this
Agreement, the term of this Agreement shall commence on
the date of this Agreement and shall end on the third
anniversary thereof (the "Expiration Date").
3. Payment for Services.
(a) Consultant's Fee. In consideration
of Cygne causing Consultant to perform the services
provided for in this Agreement, Ann Taylor shall pay to
Cygne, at such time and in the manner as set forth in
Section 3(b) hereof, a fee of $225,000 per year (the
"Consultant's Fee"). Ann Taylor shall not provide Con-
sultant with any compensation or benefits, including, but
not limited to, medical or pension benefits, bonuses or
vacation, holiday or sick pay.
(b) Time of Payment. The Consultant's
Fee shall be due and payable to Cygne by Ann Taylor in
quarterly installments commencing on the date hereof;
provided, however, that the first installment shall be
prorated to reflect the remaining days of the current
fiscal quarter.
(c) Reimbursement of Expenses. Ann
Taylor shall reimburse Cygne or Consultant, as the case
may be, for all reasonable out-of-pocket expenses in-
curred by Cygne or Consultant in connection with the
performance of Consultant's services hereunder in accor-
dance with AnnTaylor's travel policies.
4. Termination.
(a) Death. This Agreement shall termi-
nate upon the Consultant's death.
(b) Termination by Default. Each of the
following shall constitute, without limitation or re-
striction, an event of default under this Agreement, in
which case, the non-defaulting party may give the other
notice that this Agreement shall terminate on the date
selected by the non-defaulting party and set forth in
such notice (the "Termination Date"), unless cured as
specified below:
i) If either Ann Taylor or
Cygne shall, whether by action or inaction,
breach in any material respect any obligation
under this Agreement, including a material
failure by Consultant to perform his duties and
responsibilities hereunder, and such breach is
not remedied within thirty (30) days after
written notice thereof from the non-defaulting
party;
ii) If, for any reason, Consul-
tant shall be convicted of a felony; or if
Consultant shall be convicted of any other
crime as a result of which his ability to per-
form the services described in Section 1 hereof
is materially impaired;
iii) If there has been fraud,
bad faith or willful misconduct on the part of
Cygne or Consultant in connection with the
performance of Consultant's duties and respon-
sibilities hereunder;
iv) If Ann Taylor institutes pro-
ceedings relief under the United States Bankruptcy
Code or any similar law, or consents to entry of an
order for relief against it in any bankruptcy or
insolvency proceeding or similar proceeding, or
files a petition or answer or consent for reorgani-
zation or other relief under any bankruptcy act or
similar law, or consents to the filing against it,
of any petition for the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or
other similar official) of it, or of any substantial
part of its property, or makes an assignment for the
benefit of creditors, or admits in writing its
inability to pay its debts as they become due, or
fails to pay its debts as they become due or takes
any action in furtherance of the foregoing; or
v) If Cygne or Consultant breaches
in any manner Section 5 hereof.
(c) Effect of Termination. Upon termina-
tion of this Agreement, Cygne's obligation to cause
Consultant to provide services to Ann Taylor hereunder,
and Ann Taylor's obligation to make payment to Cygne
under Section 3 hereof, shall terminate, except that
AnnTaylor shall be obligated to reimburse all expenses
incurred through the termination date in accordance with
Section 3(b) hereof.
5. Confidentiality.
(a) Proprietary Information. Each of
Cygne and Consultant acknowledges and agrees that during
the course of the provision of Consultant's services to
Ann Taylor, Consultant may be exposed to sensitive data
and information concerning the business and affairs of
Ann Taylor, including, without limitation, fabric, prod-
uct and merchandise designs, and that all of such data
and information, financial plans, financial results,
quantity or assortment of merchandise orders or plans and
inventory levels (collectively, the "Proprietary Informa-
tion") are vital, sensitive, confidential and proprietary
to Ann Taylor.
(b) Consultant's Agreement. In consider-
ation of the Purchase Price (as defined in the Purchase
Agreement) to be paid by Ann Taylor to Cygne in connec-
tion with the transactions contemplated by the Purchase
Agreement, Consultant agrees to the covenants and re-
strictions set forth in this Section 5.
(c) Cygne's Agreement. In consideration
of the Purchase Price to be paid by Ann Taylor to Cygne
in connection with the transactions contemplated by the
Purchase Agreement, Cygne agrees to the covenants and
restrictions set forth in this Section 5.
(d) Trade Secret Status. Each of Cygne
and Consultant expressly acknowledges the trade secret
status of the Proprietary Information and acknowledges
that the Proprietary Information constitutes a
protectable business interest of Ann Taylor, and cove-
nants and agrees that during the term of the engagement
hereunder and at all times after the expiration or termi-
nation of such engagement, neither Cygne nor Consultant
shall, directly or indirectly, whether, in the case of
Consultant, individually, as a director, stockholder,
owner, partner, employee, principal or agent of or con-
sultant to any business, or in any other capacity, make
known, disclose, furnish, make available or utilize any
of the Proprietary Information, other than in the proper
performance of the duties contemplated herein during the
term of the engagement hereunder. Cygne's and
Consultant's obligations under this Section 5(d) with
respect to particular Proprietary Information shall
terminate only at such time (if any) as the Proprietary
Information in question becomes generally known to the
public other than through a breach of either Cygne's or
Consultant's obligations hereunder.
(e) Return of Proprietary Information.
Each of Cygne and Consultant acknowledges and agrees that
all records or documents containing Proprietary Informa-
tion prepared by Consultant or coming into his possession
by virtue of the engagement are and shall remain the
property of Ann Taylor and that, upon termination or
expiration of this engagement, Consultant shall return
immediately to Ann Taylor all such items in his posses-
sion, together with all copies and extracts, and will
destroy all summaries thereof and any such information
stored electronically on tapes, computer disks or in any
other manner.
(f) Consultant Non-Solicitation. Consul-
tant agrees that during the term of this Agreement and
for a period of one (1) year thereafter he shall not,
directly or indirectly, induce or solicit (or authorize
or assist in the taking of any such actions by any third
party) any employee or consultant of Ann Taylor to leave
his or her business association with Ann Taylor.
(g) Cygne Non-Solicitation. Cygne agrees
that during the term of this Agreement and for a period
of one (1) year thereafter it shall not, directly or
indirectly, induce or solicit (or authorize or assist in
the taking of any such actions by any third party) any
employee or consultant of Ann Taylor to leave his or her
business association with Ann Taylor.
(h) Ann Taylor Non-Solicitation. Ann
Taylor agrees that during the term of this Agreement and
for a period of one (1) year thereafter it shall not, di-
rectly or indirectly, induce or solicit (or authorize or
assist in the taking of any such actions by any third
party) any employee or consultant of Cygne to leave his
or her business association with Cygne.
(i) Acknowledgment. Consultant and Cygne
acknowledge and agree that the covenants set forth in
this Section 5 and each subsection hereof are reasonable
and necessary for the protection of Ann Taylor's business
interests, that irreparable injury will result to
Ann Taylor if Consultant or Cygne breaches any of the
terms of said covenants, and that in the event of
Consultant's or Cygne's actual or threatened breach of
any such covenants, Ann Taylor will have no adequate
remedy at law. Cygne and Consultant accordingly agree
that in the event of any actual or threatened breach by
Consultant of any of said covenants, Ann Taylor shall be
entitled to immediate injunctive and other equitable
relief without bond and without the necessity of showing
actual monetary damages. Cygne accordingly agrees that
in the event of any actual or threatened breach by Cygne
of any of said covenants, Ann Taylor shall be entitled to
immediate injunctive and other equitable relief without
bond and without the necessity of showing actual monetary
damages. Notwithstanding the provisions of Section 9
hereof, such equitable relief may be sought in any court
of competent jurisdiction. Nothing contained herein
shall be construed as prohibiting Ann Taylor from pursu-
ing any other remedies available to it for such breach or
threatened breach, including the recovery of any damages
which it is able to prove.
(j) The provisions of this Section 5
shall survive the expiration or termination of this
Agreement, and any of the arrangements contained herein,
and shall be binding upon Consultant's, Cygne's and
Ann Taylor's corporate or personal successors and as-
signs.
6. Representations and Warranties of Consul-
tant. Consultant represents and warrants to Cygne and
Ann Taylor that he has full legal power and authority to
enter into this Agreement, perform all of his obligations
hereunder and to consummate the transactions contemplated
hereby.
7. Consultant's Independence and Discretion.
(a) Nothing herein contained shall be
construed to constitute the parties hereto as partners or
as joint venturers, or as agent of the others, or, as
between Ann Taylor and Consultant, as employer and em-
ployee. By virtue of the relationship described herein,
Consultant's relationship to Ann Taylor during the term
of this Agreement shall only be that of an independent
contractor and the Consultant shall perform all services
pursuant to this Agreement as an independent contractor.
The Consultant shall not provide any services under
Ann Taylor's business name and shall not present himself
as an agent or employee of Ann Taylor and shall have no
authority to enter into any binding obligation on behalf
of Ann Taylor.
(b) Subject to the terms of this Agree-
ment, the manner, means, details or methods by which the
Consultant performs his obligations under this Agreement
shall be determined by Cygne, subject to the reasonable
satisfaction of Ann Taylor.
(c) Each of Cygne and Consultant acknowl-
edges and agrees that Ann Taylor shall not provide to
Consultant any unemployment, disability, workers' compen-
sation or medical insurance or any other employee bene-
fits. Payments to Cygne under Section 3 hereof shall not
be subject to withholding taxes or other employment
taxes.
8. Arbitration. Any controversy or claim
arising out of or relating to this Agreement, or the
breach thereof, shall be settled by arbitration before
three (3) arbitrators selected in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association in the City of New York. Arbitration as
provided herein shall be the exclusive means for determi-
nation of all matters as above provided, and any decision
and award of the arbitrators shall be final, binding and
conclusive upon the parties and such decision and award
may be entered as a final judgment in any court of compe-
tent jurisdiction. Except as provided in Section 5(j)
hereof, none of the parties shall institute any action or
proceeding in any court of law or equity, state or feder-
al, other than as may be necessary for purposes of en-
forcement of the arbitrators' decision and award hereun-
der.
9. Consultant's Employment. Cygne and Con-
sultant hereby acknowledge that Consultant's execution of
this Agreement is a condition to Consultant's continued
employment with Cygne.
10. Notices. All notices, requests, demands,
waivers and other communications required or permitted to
be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered
personally, by mail (certified or registered mail, return
receipt requested), by reputable overnight courier or by
facsimile transmission (receipt of which is confirmed):
(a) If to ATSC or ATI, to:
AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention: General Counsel
Facsimile: (212) 541-3299
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq.
Facsimile: (302) 651-3001
(b) If to Cygne, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: General Counsel
Facsimile: (212) 536-4174
with a copy to:
Fulbright and Jaworski, L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Roy L. Goldman, Esq.
Facsimile: (212) 752-5958
(c) If to Consultant, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: Bernard M. Manuel
Facsimile: (212) 536-4174
or to such other person or address as any party shall
specify by notice in writing, given in accordance with
this Section 10 to the other parties hereto. All such
notices, requests, demands, waivers and communications
shall be deemed to have been given on the date on which so
hand-delivered, on the third business day following the
date on which so mailed, on the next business day follow-
ing the date on which delivered to such overnight courier
and on the date of such facsimile transmission and confir-
mation, except for a notice of change of person or ad-
dress, which shall be effective only upon receipt thereof.
11. Entire Agreement. This Agreement contains
the entire understanding of the parties hereto with re-
spect to the subject matter hereof. This Agreement super-
sedes all prior agreements and understandings, oral and
written, with respect to its subject matter.
12. Severability. Should any provision of this
Agreement, or any part thereof, for any reason be declared
invalid or unenforceable, such declaration shall not af-
fect the validity or enforceability of any other provision
of this Agreement, or any other part thereof, all of which
other provisions, and parts, shall remain in full force
and effect, and the application of such invalid or unen-
forceable provision, or such part thereof, to persons or
circumstances other than those as to which it is held
invalid or unenforceable shall be valid and be enforced to
the fullest extent permitted by law.
13. Binding Effect; Assignment. This Agreement
and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and their re-
spective heirs, executors, successors and permitted as-
signs, but, except as contemplated herein, neither this
Agreement nor any of the rights, interests or obligations
hereunder shall be assigned, directly or indirectly, by
ATSC, ATI, Cygne or Consultant without the prior written
consent of the other parties hereto; provided, however,
that ATSC or ATI may assign any or all of its rights,
interests or obligations hereunder to any one or more,
direct or indirect, wholly owned subsidiaries of ATSC or
ATI, provided, however, that no such assignment by ATSC or
ATI shall limit or affect ATSC's or ATI's obligations
hereunder; provided, further, however, that this Agreement
shall automatically be assigned to and assumed by Consul-
tant in the event that (i) Consultant's employment with
Cygne is terminated; or (ii) Cygne is liquidated or dis-
solved, whether through Chapter 7 of the U.S. Bankruptcy
Laws or otherwise; provided, however, that Consultant
hereby agrees, in the event of any such assignment by
Cygne and assumption by Consultant, to assume and perform
all of Cygne's obligations hereunder, to the extent appli-
cable.
14. Amendment, Modification and Waiver. This
Agreement may be amended, modified or supplemented at any
time by written agreement of the parties hereto. Any
failure by Cygne or Consultant, on the one hand, or ATSC
or ATI, on the other hand, to comply with any term or
provision of this Agreement may be waived by ATSC, ATI,
Cygne or Consultant, respectively, at any time by an in-
strument in writing signed by or on behalf of ATSC, ATI,
Cygne or Consultant, but such waiver or failure to insist
upon strict compliance with such term or provision shall
not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure to comply.
15. Third-Party Beneficiaries. Except as oth-
erwise expressly provided herein, this Agreement is not
intended, and shall not be deemed, to confer upon or give
any person except the parties hereto and their respective
successors and permitted assigns, any remedy, claim, lia-
bility, reimbursement, cause of action or other right
under or by reason of this Agreement.
16. Counterparts. This Agreement may be exe-
cuted in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one
and the same instrument.
17. Interpretation. The section headings con-
tained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties
and shall not in any way affect the meaning or interpreta-
tion of this Agreement. As used in this Agreement, the
term "person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any de-
partment or agency thereof.
18. Governing Law. This Agreement shall be
governed by the laws of the State of New York, without
regard to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date and year first
above written.
ANNTAYLOR STORES CORPORATION
By:
Name:
Title:
ANNTAYLOR, INC.
By:__________________________
Name:
Title:
CYGNE DESIGNS, INC.
By:__________________________
Name:
Title:
CONSULTANT
Bernard M. Manuel
Consultant
EXHIBIT I
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is made and entered
into as of the ___ day of August, 1996, by and between
AnnTaylor Stores Corporation, a Delaware corporation
("ATSC"), AnnTaylor, Inc., a Delaware corporation and
wholly owned subsidiary of ATSC ("ATI" and, together with
ATSC, "Ann Taylor"), Cygne Designs, Inc., a Delaware
corporation ("Cygne"), and Mr. Irving Benson ("Consul-
tant").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Stock and
Asset Purchase Agreement, dated as of June 7, 1996, among
ATSC, ATSI, Cygne and Cygne Group (F.E.) Limited, a
Hong Kong corporation and wholly owned subsidiary of
Cygne ("CGFE"), ATI acquired from Cygne (i) all of the
shares of common stock, par value $.01 per share, of CAT
US, Inc., a Delaware corporation ("CAT-US"), owned by
Cygne; and (ii) certain of the assets of Cygne's
AnnTaylor Woven Division (the "Division");
WHEREAS, pursuant to the Purchase Agreement,
ATI acquired from CGFE all of the shares of common stock,
par value $1 HK per share, of C.A.T. (Far East) Limited,
a Hong Kong corporation ("CAT-Far East" and, together
with CAT-US, "CAT"), owned by CGFE;
WHEREAS, CAT serves as a fully dedicated
sourcing capability for ATI;
WHEREAS, prior to the date hereof, Cygne,
through the Division, served as a private label designer,
merchandiser and manufacturer of women's apparel for ATI;
WHEREAS, Consultant is the President and Vice
Chairman of Cygne with particular expertise regarding
design, merchandising and product development; and
WHEREAS, Ann Taylor, as partial consideration
for the transactions contemplated by the Purchase Agree-
ment, desires to obtain, and Cygne and Consultant desire
that Consultant provide, information, consultation,
advice and other services in aid of Ann Taylor's busi-
ness, all subject to the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the forego-
ing and of the representations, warranties, covenants,
agreements and conditions contained herein, Ann Taylor,
Cygne and Consultant, intending to be legally bound,
agree as follows:
1. Engagement of Consultant.
(a) Cygne hereby covenants and agrees to
make Consultant available to provide services to Ann
Taylor upon the terms and conditions set forth herein.
Consultant hereby agrees to act as a consultant to and on
behalf of Ann Taylor in accordance with the terms and
conditions set forth herein. Cygne, Consultant and Ann
Taylor agree that Consultant will provide services to Ann
Taylor not in excess of thirty percent (30%) of his
business time and that Consultant will continue his
duties as President and Vice Chairman of Cygne. Cygne
agrees to allow Consultant reasonable time to perform his
duties as a consultant to Ann Taylor on a timely basis,
provided, however, that the performance of such duties
shall be at mutually agreeable times that do not unrea-
sonably interfere with Consultant's continuing obliga-
tions to Cygne.
(b) Cygne shall cause Consultant to, at
the request of the President of Ann Taylor, provide Ann
Taylor information, consultation and advice on design,
merchandising and product development.
(c) Cygne shall cause Consultant, and
Consultant hereby agrees, to diligently and faithfully
serve Ann Taylor and to devote his reasonable best ef-
forts, his highest talents and skills, and all necessary
time and attention in providing the information, consul-
tation and advice requested pursuant to paragraph (b) of
this Section 1; provided that Consultant shall not,
without the consent of Cygne and Consultant, be required
to travel outside New York. Cygne hereby consents to the
allocation of up to thirty percent (30%) of Consultant's
business time to perform services under this Agreement.
2. Term of Agreement. Unless terminated at
an earlier date in accordance with Section 4 of this
Agreement, the term of this Agreement shall commence on
the date of this Agreement and shall end on the third
anniversary thereof (the "Expiration Date").
3. Payment for Services.
(a) Consultant's Fee. In consideration
of Cygne causing Consultant to perform the services
provided for in this Agreement, Ann Taylor shall pay to
Cygne, at such time and in the manner as set forth in
Section 3(b) hereof, a fee of $225,000 per year (the
"Consultant's Fee"). Ann Taylor shall not provide Con-
sultant with any compensation or benefits, including, but
not limited to, medical or pension benefits, bonuses or
vacation, holiday or sick pay.
(b) Time of Payment. The Consultant's
Fee shall be due and payable to Cygne by Ann Taylor in
quarterly installments commencing on the date hereof;
provided, however, that the first installment shall be
prorated to reflect the remaining days of the current
fiscal quarter.
(c) Reimbursement of Expenses. Ann
Taylor shall reimburse Cygne or Consultant, as the case
may be, for all reasonable out-of-pocket expenses in-
curred by Cygne or Consultant in connection with the
performance of Consultant's services hereunder in accor-
dance with AnnTaylor's travel policies.
4. Termination.
(a) Death. This Agreement shall termi-
nate upon the Consultant's death.
(b) Termination by Default. Each of the
following shall constitute, without limitation or re-
striction, an event of default under this Agreement, in
which case, the non-defaulting party may give the other
notice that this Agreement shall terminate on the date
selected by the non-defaulting party and set forth in
such notice (the "Termination Date"), unless cured as
specified below:
i) If either Ann Taylor or
Cygne shall, whether by action or inaction,
breach in any material respect any obligation
under this Agreement, including a material
failure by Consultant to perform his duties and
responsibilities hereunder, and such breach is
not remedied within thirty (30) days after
written notice thereof from the non-defaulting
party;
ii) If, for any reason, Consul-
tant shall be convicted of a felony; or if
Consultant shall be convicted of any other
crime as a result of which his ability to per-
form the services described in Section 1 hereof
is materially impaired;
iii) If there has been fraud,
bad faith or willful misconduct on the part of
Cygne or Consultant in connection with the
performance of Consultant's duties and respon-
sibilities hereunder;
iv) If Ann Taylor institutes pro-
ceedings relief under the United States Bankruptcy
Code or any similar law, or consents to entry of an
order for relief against it in any bankruptcy or
insolvency proceeding or similar proceeding, or
files a petition or answer or consent for reorgani-
zation or other relief under any bankruptcy act or
similar law, or consents to the filing against it,
of any petition for the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or
other similar official) of it, or of any substantial
part of its property, or makes an assignment for the
benefit of creditors, or admits in writing its
inability to pay its debts as they become due, or
fails to pay its debts as they become due or takes
any action in furtherance of the foregoing; or
v) If Cygne or Consultant breaches
in any manner Section 5 hereof.
(c) Effect of Termination. Upon termina-
tion of this Agreement, Cygne's obligation to cause
Consultant to provide services to Ann Taylor hereunder,
and Ann Taylor's obligation to make payment to Cygne
under Section 3 hereof, shall terminate, except that
AnnTaylor shall be obligated to reimburse all expenses
incurred through the termination date in accordance with
Section 3(b) hereof.
5. Confidentiality.
(a) Proprietary Information. Each of
Cygne and Consultant acknowledges and agrees that during
the course of the provision of Consultant's services to
Ann Taylor, Consultant may be exposed to sensitive data
and information concerning the business and affairs of
Ann Taylor, including, without limitation, fabric, prod-
uct and merchandise designs, and that all of such data
and information, financial plans, financial results,
quantity or assortment of merchandise orders or plans and
inventory levels (collectively, the "Proprietary Informa-
tion") are vital, sensitive, confidential and proprietary
to Ann Taylor.
(b) Consultant's Agreement. In consider-
ation of the Purchase Price (as defined in the Purchase
Agreement) to be paid by Ann Taylor to Cygne in connec-
tion with the transactions contemplated by the Purchase
Agreement, Consultant agrees to the covenants and re-
strictions set forth in this Section 5.
(c) Cygne's Agreement. In consideration
of the Purchase Price to be paid by Ann Taylor to Cygne
in connection with the transactions contemplated by the
Purchase Agreement, Cygne agrees to the covenants and
restrictions set forth in this Section 5.
(d) Trade Secret Status. Each of Cygne
and Consultant expressly acknowledges the trade secret
status of the Proprietary Information and acknowledges
that the Proprietary Information constitutes a
protectable business interest of Ann Taylor, and cove-
nants and agrees that during the term of the engagement
hereunder and at all times after the expiration or termi-
nation of such engagement, neither Cygne nor Consultant
shall, directly or indirectly, whether, in the case of
Consultant, individually, as a director, stockholder,
owner, partner, employee, principal or agent of or con-
sultant to any business, or in any other capacity, make
known, disclose, furnish, make available or utilize any
of the Proprietary Information, other than in the proper
performance of the duties contemplated herein during the
term of the engagement hereunder. Cygne's and
Consultant's obligations under this Section 5(d) with
respect to particular Proprietary Information shall
terminate only at such time (if any) as the Proprietary
Information in question becomes generally known to the
public other than through a breach of either Cygne's or
Consultant's obligations hereunder.
(e) Return of Proprietary Information.
Each of Cygne and Consultant acknowledges and agrees that
all records or documents containing Proprietary Informa-
tion prepared by Consultant or coming into his possession
by virtue of the engagement are and shall remain the
property of Ann Taylor and that, upon termination or
expiration of this engagement, Consultant shall return
immediately to Ann Taylor all such items in his posses-
sion, together with all copies and extracts, and will
destroy all summaries thereof and any such information
stored electronically on tapes, computer disks or in any
other manner.
(f) Consultant Non-Solicitation. Consul-
tant agrees that during the term of this Agreement and
for a period of one (1) year thereafter he shall not,
directly or indirectly, induce or solicit (or authorize
or assist in the taking of any such actions by any third
party) any employee or consultant of Ann Taylor to leave
his or her business association with Ann Taylor.
(g) Cygne Non-Solicitation. Cygne agrees
that during the term of this Agreement and for a period
of one (1) year thereafter it shall not, directly or
indirectly, induce or solicit (or authorize or assist in
the taking of any such actions by any third party) any
employee or consultant of Ann Taylor to leave his or her
business association with Ann Taylor.
(h) Ann Taylor Non-Solicitation. Ann
Taylor agrees that during the term of this Agreement and
for a period of one (1) year thereafter it shall not, di-
rectly or indirectly, induce or solicit (or authorize or
assist in the taking of any such actions by any third
party) any employee or consultant of Cygne to leave his
or her business association with Cygne.
(i) Acknowledgment. Consultant and Cygne
acknowledge and agree that the covenants set forth in
this Section 5 and each subsection hereof are reasonable
and necessary for the protection of Ann Taylor's business
interests, that irreparable injury will result to
Ann Taylor if Consultant or Cygne breaches any of the
terms of said covenants, and that in the event of
Consultant's or Cygne's actual or threatened breach of
any such covenants, Ann Taylor will have no adequate
remedy at law. Cygne and Consultant accordingly agree
that in the event of any actual or threatened breach by
Consultant of any of said covenants, Ann Taylor shall be
entitled to immediate injunctive and other equitable
relief without bond and without the necessity of showing
actual monetary damages. Cygne accordingly agrees that
in the event of any actual or threatened breach by Cygne
of any of said covenants, Ann Taylor shall be entitled to
immediate injunctive and other equitable relief without
bond and without the necessity of showing actual monetary
damages. Notwithstanding the provisions of Section 9
hereof, such equitable relief may be sought in any court
of competent jurisdiction. Nothing contained herein
shall be construed as prohibiting Ann Taylor from pursu-
ing any other remedies available to it for such breach or
threatened breach, including the recovery of any damages
which it is able to prove.
(j) The provisions of this Section 5
shall survive the expiration or termination of this
Agreement, and any of the arrangements contained herein,
and shall be binding upon Consultant's, Cygne's and
Ann Taylor's corporate or personal successors and as-
signs.
6. Representations and Warranties of Consul-
tant. Consultant represents and warrants to Cygne and
Ann Taylor that he has full legal power and authority to
enter into this Agreement, perform all of his obligations
hereunder and to consummate the transactions contemplated
hereby.
7. Consultant's Independence and Discretion.
(a) Nothing herein contained shall be
construed to constitute the parties hereto as partners or
as joint venturers, or as agent of the others, or, as
between Ann Taylor and Consultant, as employer and em-
ployee. By virtue of the relationship described herein,
Consultant's relationship to Ann Taylor during the term
of this Agreement shall only be that of an independent
contractor and the Consultant shall perform all services
pursuant to this Agreement as an independent contractor.
The Consultant shall not provide any services under
Ann Taylor's business name and shall not present himself
as an agent or employee of Ann Taylor and shall have no
authority to enter into any binding obligation on behalf
of Ann Taylor.
(b) Subject to the terms of this Agree-
ment, the manner, means, details or methods by which the
Consultant performs his obligations under this Agreement
shall be determined by Cygne, subject to the reasonable
satisfaction of Ann Taylor.
(c) Each of Cygne and Consultant acknowl-
edges and agrees that Ann Taylor shall not provide to
Consultant any unemployment, disability, workers' compen-
sation or medical insurance or any other employee bene-
fits. Payments to Cygne under Section 3 hereof shall not
be subject to withholding taxes or other employment
taxes.
8. Arbitration. Any controversy or claim
arising out of or relating to this Agreement, or the
breach thereof, shall be settled by arbitration before
three (3) arbitrators selected in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association in the City of New York. Arbitration as
provided herein shall be the exclusive means for determi-
nation of all matters as above provided, and any decision
and award of the arbitrators shall be final, binding and
conclusive upon the parties and such decision and award
may be entered as a final judgment in any court of compe-
tent jurisdiction. Except as provided in Section 5(j)
hereof, none of the parties shall institute any action or
proceeding in any court of law or equity, state or feder-
al, other than as may be necessary for purposes of en-
forcement of the arbitrators' decision and award hereunder.
9. Consultant's Employment. Cygne and Con-
sultant hereby acknowledge that Consultant's execution of
this Agreement is a condition to Consultant's continued
employment with Cygne.
10. Notices. All notices, requests, demands,
waivers and other communications required or permitted to
be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered
personally, by mail (certified or registered mail, return
receipt requested), by reputable overnight courier or by
facsimile transmission (receipt of which is confirmed):
(a) If to ATSC or ATI, to:
AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention: General Counsel
Facsimile: (212) 541-3299
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq.
Facsimile: (302) 651-3001
(b) If to Cygne, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: General Counsel
Facsimile: (212) 536-4174
with a copy to:
Fulbright and Jaworski, L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Roy L. Goldman, Esq.
Facsimile: (212) 752-5958
(c) If to Consultant, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: Irving Benson
Facsimile: (212) 536-4174
or to such other person or address as any party shall
specify by notice in writing, given in accordance with
this Section 10 to the other parties hereto. All such
notices, requests, demands, waivers and communications
shall be deemed to have been given on the date on which so
hand-delivered, on the third business day following the
date on which so mailed, on the next business day follow-
ing the date on which delivered to such overnight courier
and on the date of such facsimile transmission and confir-
mation, except for a notice of change of person or ad-
dress, which shall be effective only upon receipt thereof.
11. Entire Agreement. This Agreement contains
the entire understanding of the parties hereto with re-
spect to the subject matter hereof. This Agreement super-
sedes all prior agreements and understandings, oral and
written, with respect to its subject matter.
12. Severability. Should any provision of this
Agreement, or any part thereof, for any reason be declared
invalid or unenforceable, such declaration shall not af-
fect the validity or enforceability of any other provision
of this Agreement, or any other part thereof, all of which
other provisions, and parts, shall remain in full force
and effect, and the application of such invalid or unen-
forceable provision, or such part thereof, to persons or
circumstances other than those as to which it is held
invalid or unenforceable shall be valid and be enforced to
the fullest extent permitted by law.
13. Binding Effect; Assignment. This Agreement
and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and their re-
spective heirs, executors, successors and permitted as-
signs, but, except as contemplated herein, neither this
Agreement nor any of the rights, interests or obligations
hereunder shall be assigned, directly or indirectly, by
ATSC, ATI, Cygne or Consultant without the prior written
consent of the other parties hereto; provided, however,
that ATSC or ATI may assign any or all of its rights,
interests or obligations hereunder to any one or more,
direct or indirect, wholly owned subsidiaries of ATSC or
ATI, provided, however, that no such assignment by ATSC or
ATI shall limit or affect ATSC's or ATI's obligations
hereunder; provided, further, however, that this Agreement
shall automatically be assigned to and assumed by Consul-
tant in the event that (i) Consultant's employment with
Cygne is terminated; or (ii) Cygne is liquidated or dis-
solved, whether through Chapter 7 of the U.S. Bankruptcy
Laws or otherwise; provided, however, that Consultant
hereby agrees, in the event of any such assignment by
Cygne and assumption by Consultant, to assume and perform
all of Cygne's obligations hereunder, to the extent appli-
cable.
14. Amendment, Modification and Waiver. This
Agreement may be amended, modified or supplemented at any
time by written agreement of the parties hereto. Any
failure by Cygne or Consultant, on the one hand, or ATSC
or ATI, on the other hand, to comply with any term or
provision of this Agreement may be waived by ATSC, ATI,
Cygne or Consultant, respectively, at any time by an in-
strument in writing signed by or on behalf of ATSC, ATI,
Cygne or Consultant, but such waiver or failure to insist
upon strict compliance with such term or provision shall
not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure to comply.
15. Third-Party Beneficiaries. Except as oth-
erwise expressly provided herein, this Agreement is not
intended, and shall not be deemed, to confer upon or give
any person except the parties hereto and their respective
successors and permitted assigns, any remedy, claim, lia-
bility, reimbursement, cause of action or other right
under or by reason of this Agreement.
16. Counterparts. This Agreement may be exe-
cuted in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one
and the same instrument.
17. Interpretation. The section headings con-
tained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties
and shall not in any way affect the meaning or interpreta-
tion of this Agreement. As used in this Agreement, the
term "person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any de-
partment or agency thereof.
18. Governing Law. This Agreement shall be
governed by the laws of the State of New York, without
regard to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date and year first
above written.
ANNTAYLOR STORES CORPORATION
By:
Name:
Title:
ANNTAYLOR, INC.
By:__________________________
Name:
Title:
CYGNE DESIGNS, INC.
By:__________________________
Name:
Title:
CONSULTANT
Irving Benson
Consultant
EXHIBIT J
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of August __,
1996 (the "Agreement"), among AnnTaylor Stores Corpora-
tion, a Delaware corporation (the "Company"), Cygne
Designs, Inc., a Delaware corporation ("Cygne"), and
Cygne Group ( F.E.) Limited, a Hong Kong corporation and
wholly owned subsidiary of Cygne ("CGFE" and, together
with Cygne, "Holder").
WHEREAS, pursuant to that certain Stock and
Asset Purchase Agreement, dated as of June ___, 1996 (the
"Purchase Agreement"), the Company has acquired (the
"Acquisition") from Holder (i) all of the shares of
common stock, par value $.01 per share, of CAT US, Inc.,
a Delaware corporation, and all of the HK $1 ordinary
shares of C.A.T. (Far East) Limited, a Hong Kong corpora-
tion, owned by Holder and (ii) certain of the assets of
Cygne's AnnTaylor Woven Division;
WHEREAS, in consideration for the Acquisition,
the Company has, among other things, issued to Holder
______ shares of common stock, par value $.0068 per share
(the "Common Stock"), of the Company (the shares of
Common Stock issued to Holder in consideration for the
Acquisition are hereinafter referred to as the "Acquisi-
tion Shares"); and
WHEREAS, the Company and Holder have determined
that it is in their best interests that certain aspects
of their relationship be regulated according to the terms
and provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein and for good
and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions.
As used in this Agreement, the following terms
shall have the following meanings:
The term "Acquisition" shall have the meaning
ascribed to it in the second paragraph of the preamble.
The term "Acquisition Shares" shall have the
meaning ascribed to it in the third paragraph of the
preamble.
The term "Affiliate" shall have the meaning
ascribed to it in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
The term "Agreement" shall have the meaning
ascribed to it in the first paragraph of the preamble.
The term "Common Stock" shall have the meaning
ascribed to it in the third paragraph of the preamble.
The term "Company" shall have the meaning
ascribed to it in the first paragraph of the preamble.
The term "Company Offering" shall mean the sale
of equity securities of the Company, or securities con-
vertible into or exchangeable or exercisable for equity
securities of the Company, pursuant to a registration
statement filed by the Company under the Securities Act
(other than (i) a registration statement filed on Form S-
4 or any successor form or (ii) a registration statement
filed on Form S-8 or any successor form) respecting an
underwritten offering, whether primary or secondary, that
is declared effective by the SEC.
The term "Company Subsidiary" shall mean any
Person the majority of the outstanding voting securities
or interests of which are owned by the Company, and shall
include AnnTaylor Stores Corporation Finance Trust.
The term "Effective Date" shall have the mean-
ing ascribed to it in Section 2.02.
The term "Exchange Act" shall mean the Securi-
ties Exchange Act of 1934, as amended, and the rules and
regulations of the SEC promulgated thereunder.
The term "Holder" shall have the meaning as-
cribed to it in the first paragraph of the preamble.
The term "Losses" shall have the meaning as-
cribed to it in Section 2.06(a).
The term "Person" shall mean an individual,
trustee, corporation, partnership, business trust, limit-
ed liability company, limited liability partnership,
joint stock company, trust, unincorporated association,
union, business association, firm or other entity.
The term "Purchase Agreement" shall have the
meaning ascribed to it in the second paragraph of the
preamble.
The term "Registration Expenses" shall have the
meaning ascribed to it in Section 2.05.
The term "Rule 144" shall mean Rule 144 promul-
gated under the Securities Act (or any successor rule).
The term "Rule 415 Offering" shall have the
meaning ascribed to it in Section 2.01(a).
The term "SEC" shall mean the Securities and
Exchange Commission.
The term "Securities Act" shall mean the Secu-
rities Act of 1933, as amended, and the rules and regula-
tions of the SEC promulgated thereunder.
The term "Shelf Registration Statement" shall
have the meaning ascribed to it in Section 2.01(a).
The term "Transfer" shall mean any attempt to,
directly or indirectly, offer, sell, assign, transfer,
grant a participation in, pledge or otherwise dispose of
any of the Acquisition Shares, or the consummation of any
such transactions, or the soliciting of any offers to
purchase or otherwise acquire, or take a pledge of any of
the Acquisition Shares.
ARTICLE II
REQUIRED REGISTRATION
Section 2.01 Required Registration.
(a) Form S-3. As promptly as practicable, but
in no event later than fifteen (15) business days after
the date on which the Acquisition closes, the Company
shall use reasonable best efforts to prepare and file
with the SEC a registration statement (the "Shelf Regis-
tration Statement") on Form S-3 or another appropriate
form permitting registration of the Acquisition Shares so
as to permit promptly the resale of the Acquisition
Shares by Holder pursuant to an offering on a delayed or
continuous basis pursuant to Rule 415 (or any successor
rule) under the Securities Act (a "Rule 415 Offering")
and shall use reasonable best efforts to cause the Shelf
Registration Statement to be declared effective by the
SEC as promptly as practicable.
(b) Effectiveness. The Company shall use
reasonable best efforts to keep the Shelf Registration
Statement continuously effective under the Securities Act
until the date that is the earliest to occur of (i) the
date that all Acquisition Shares covered by the Shelf
Registration Statement have been sold, (ii) the third
anniversary of the date hereof and (iii) when, in the
written opinion of counsel to the Company, all outstand-
ing Acquisition Shares held by persons which are not
Affiliates of the Company may be resold without registra-
tion under the Securities Act pursuant to Rule 144(k)
under the Act or any successor provision thereto.
(c) Amendments/Supplements. The Company shall
amend and supplement the Shelf Registration Statement and
the prospectus contained therein if required by the
rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf
Registration Statement or if required by the Securities
Act; provided, however, that the Company may delay the
filing of any such amendment or supplement for up to 90
days if the Company in good faith has a valid business
reason for such delay.
(d) Offerings. At any time after the effec-
tive date of the Shelf Registration Statement, Holder,
subject to the restrictions and conditions contained
herein, and to compliance which all applicable state and
federal securities laws, shall have the right to dispose
of all or any portion of the Acquisition Shares from time
to time in negotiated or market transactions (which may
include delivery to class action plaintiffs or a distri-
bution to Holder's stockholders).
Section 2.02 Holdback Agreement.
From and after the first anniversary of the
date on which the Shelf Registration Statement is de-
clared effective by the SEC (the "Effective Date"), upon
the request of the Company, Holder shall not effect any
public sale or distribution (including sales pursuant to
Rule 144) of Acquisition Shares, during the ten (10)-day
period prior to the date on which the Company has noti-
fied Holder that the Company intends to commence a Compa-
ny Offering through the filing of a registration state-
ment with the Securities and Exchange Commission, through
the one hundred twenty (120)-day period immediately
following the closing date of such Company Offering;
provided, however, that Holder shall not be obligated to
comply with this Section 2.02 on more than one (1) occa-
sion in any twelve (12)-month period.
Section 2.03 Blackout Provisions.
The Company shall be deemed not to have used
its reasonable best efforts to keep the Shelf Registra-
tion Statement effective during the requisite period if
the Company voluntarily takes any action that would
result in Holder not being able to offer and sell any
Acquisition Shares during that period, unless (i) such
action is required by applicable law, (ii) upon the
occurrence of any event contemplated by Section
2.04(a)(8) below, such action is taken by the Company in
good faith and for valid business reasons or (iii) the
continued effectiveness of the Shelf Registration State-
ment would require the Company to disclose a material
financing, acquisition or other corporate development,
and the proper officers of the Company shall have deter-
mined in good faith that such disclosure is not in the
best interests of the Company and its stockholders, and,
in the case of clause (ii) above, the Company thereafter
promptly comply with the requirements of Section
2.04(a)(8) below; provided that the Company takes the
same action in respect of the Shelf Registration State-
ment filed pursuant to that certain Registration Rights
Agreement, dated as of April 25, 1996, between the Compa-
ny and the Initial Purchasers named therein.
Section 2.04 Registration Procedures.
(a) Procedures. In connection with the regis-
tration of the Acquisition Shares pursuant to this Agree-
ment, the Company shall use reasonable best efforts to
effect the registration and sale of the Acquisition
Shares in accordance with Holder's intended method of
disposition thereof and, in connection therewith, the
Company shall as expeditiously as practicable:
(1) prepare and file with the SEC
the Shelf Registration Statement and use rea-
sonable best efforts to cause the Shelf Regis-
tration Statement to become and remain effec-
tive in accordance with Section 2.01(a) and (b)
above;
(2) prepare and file with the SEC
amendments and supplements to the Shelf Regis-
tration Statement and the prospectuses used in
connection therewith in accordance with Section
2.01(c) above;
(3) before filing with the SEC the
Shelf Registration Statement or prospectus or
any amendments or supplements thereto, the
Company shall furnish to one counsel selected
by Holder and one counsel for the underwriter
or sales or placement agent, if any, in connec-
tion therewith, drafts of all such documents
proposed to be filed and provide such counsel
with a reasonable opportunity for review there-
of and comment thereon, such review to be con-
ducted and such comments to be delivered with
reasonable promptness;
(4) promptly (i) notify Holder of
each of (x) the filing and effectiveness of the
Shelf Registration Statement and each prospec-
tus and any amendments or supplements thereto,
(y) the receipt of any comments from the SEC or
any state securities law authorities or any
other governmental authorities with respect to
any such Shelf Registration Statement or pro-
spectus or any amendments or supplements there-
to, and (z) any oral or written stop order with
respect to such registration, any suspension of
the registration or qualification of the sale
of the Acquisition Shares in any jurisdiction
or any initiation or threatening of any pro-
ceedings with respect to any of the foregoing
and (ii) use reasonable best efforts to obtain
the withdrawal of any order suspending the
registration or qualification (or the effec-
tiveness thereof) or suspending or preventing
the use of any related prospectus in any juris-
diction with respect thereto;
(5) furnish to Holder, the under-
writers or the sales or placement agent, if
any, and one counsel for each of the foregoing,
a conformed copy of the Shelf Registration
Statement and each amendment and supplement
thereto (in each case, including all exhibits
thereto) and such additional number of copies
of such Shelf Registration Statement, each
amendment and supplement thereto (in such case,
without such exhibits), the prospectus (includ-
ing each preliminary prospectus) included in
such Shelf Registration Statement and prospec-
tus supplements and all exhibits thereto and
such other documents as Holder, underwriter,
agent or such counsel may reasonably request in
order to facilitate the disposition of the
Acquisition Shares by Holder;
(6) if requested by Holder or the
managing underwriter or underwriters of a Rule
415 Offering, subject to approval of counsel to
the Company in its reasonable judgment, prompt-
ly incorporate in a prospectus, supplement or
post-effective amendment to the Shelf Registra-
tion Statement such information concerning
underwriters and the plan of distribution of
the Acquisition Shares as such managing under-
writer or underwriters or Holder reasonably
shall furnish to the Company in writing and
request be included therein, including, without
limitation, information with respect to the
number of Acquisition Shares being sold by
Holder to such underwriter or underwriters, the
purchase price being paid therefor by such
underwriter or underwriters and with respect to
any other terms of the underwritten offering of
the Acquisition Shares to be sold in such of-
fering; and make all required filings of such
prospectus, supplement or post-effective amend-
ment as soon as reasonably practicable after
being notified of the matters to be incorporat-
ed in such prospectus, supplement or post-ef-
fective amendment;
(7) use reasonable best efforts to
register or qualify the Acquisition Shares
under such securities or "blue sky" laws of
such jurisdictions as Holder reasonably re-
quests and do any and all other acts and things
which may be reasonably necessary or advisable
to enable Holder to consummate the disposition
in such jurisdictions in which the Acquisition
Shares are to be sold and keep such registra-
tion or qualification in effect for so long as
the Shelf Registration Statement remains effec-
tive under the Securities Act (provided that
the Company shall not be required to (i) quali-
fy generally to do business in any jurisdiction
where it would not otherwise be required to
qualify but for this paragraph, (ii) subject
itself to taxation in any such jurisdiction
where it would not otherwise be subject to
taxation but for this paragraph or (iii) con-
sent to the general service of process in any
jurisdiction where it would not otherwise be
subject to general service of process but for
this paragraph);
(8) notify Holder, at any time when
a prospectus relating to the Shelf Registration
Statement is required to be delivered under the
Securities Act, upon the discovery that, or of
the happening of any event as a result of
which, the Shelf Registration Statement, as
then in effect, contains an untrue statement of
a material fact or omits to state any material
fact required to be stated therein or any fact
necessary to make the statements therein not
misleading, and, subject to Section 2.03 above,
promptly prepare and furnish to the Holder a
supplement or amendment to the prospectus con-
tained in the Shelf Registration Statement so
that the Shelf Registration Statement shall
not, and such prospectus as thereafter deliv-
ered to the purchasers of such Acquisition
Shares shall not, contain an untrue statement
of a material fact or omit to state any materi-
al fact required to be stated therein or any
fact necessary to make the statements therein
not misleading;
(9) cause all of the Acquisition
Shares to be listed on each national securities
exchange and included in each established over-
the-counter market on which or through which
the Common Stock is then listed or traded;
(10) make available for inspection by
Holder, any underwriter participating in any
disposition pursuant to the Shelf Registration
Statement, and any attorney, accountant or
other agent retained by Holder or underwriter,
all reasonably requested financial and other
records, pertinent corporate documents and
properties of the Company, and cause the
Company's officers, directors, employees, at-
torneys and independent accountants to supply
all information reasonably requested by Hold-
er, underwriters, attorneys, accountants or
agents in connection with the Shelf Registra-
tion Statement; information which the Company
determines, in good faith, to be confidential
shall not be disclosed by such persons unless,
subject to Section 2.03 above, (i) the disclo-
sure of such information is required by appli-
cable federal securities laws or is necessary
to avoid or correct a misstatement or omission
in such Shelf Registration Statement or (ii)
the release of such information is ordered
pursuant to a subpoena or other order from a
court of competent jurisdiction; Holder agrees,
on its own behalf and on behalf of all of its
underwriters, accountants, attorneys and
agents, that the information obtained by any of
them as a result of such inspections shall be
deemed confidential unless and until such is
made generally available to the public; Holder
further agrees, on its own behalf and on behalf
of all of its underwriters, accountants, attor-
neys and agents, that it will, upon learning
that disclosure of such information is sought
in a court of competent jurisdiction, give
notice to the Company and allow the Company, at
its expense, to undertake appropriate action to
prevent disclosure of the information deemed
confidential; nothing contained herein shall
require the Company to waive any attorney-cli-
ent privilege or disclose attorney work prod-
uct;
(11) use reasonable best efforts to
comply with all applicable laws related to the
Shelf Registration Statement and offering and
sale of securities and all applicable rules and
regulations of governmental authorities in
connection therewith (including, without limi-
tation, the Securities Act and the Exchange
Act, and the rules and regulations promulgated
by the Commission) and make generally available
to its security holders as soon as practicable
(but in any event not later than fifteen (15)
months after the effectiveness of the Shelf
Registration Statement) an earnings statement
of the Company and the Company Subsidiaries
complying with Section 11(a) of the Securities
Act;
(12) use reasonable best efforts to
furnish to Holder a signed counterpart of (x)
an opinion of counsel for the Company and (y) a
"comfort" letter signed by the independent
public accountants who have certified the
Company's financial statements included or
incorporated by reference in such registration
statement, covering such matters with respect
to such registration statement and, in the case
of the accountants' comfort letter, with re-
spect to events subsequent to the date of such
financial statements as are customarily covered
in opinions of issuer's counsel and in
accountants' comfort letters delivered to the
underwriters in underwritten public offerings
of securities for the account of, or on behalf
of, a holder of common stock, such opinion and
comfort letters to be dated the date that such
opinion and comfort letters are customarily
dated in such transactions; and
(13) take other actions as Holder or
the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition
of the Acquisition Shares.
(b) Further Agreements. Without limiting any
of the foregoing, in the event that the sale of Acquisi-
tion Shares is to be made by or through an underwriter,
the Company shall enter into an underwriting agreement
with a managing underwriter or underwriters selected by
Holder containing representations, warranties, indemni-
ties and agreements customarily included (but not incon-
sistent with the agreements contained herein) by an
issuer of common stock in underwriting agreements with
respect to offerings of common stock for the account of,
or on behalf of, holders of common stock; provided,
however, that the Holder shall not utilize the Shelf
Registration Statement for more than one underwritten
offering during the term of this Agreement. In connec-
tion with the sale of Acquisition Shares hereunder,
Holder may, at its option, require that any and all
representations and warranties by, and the other agree-
ments of, the Company to or for the benefit of such
underwriter or underwriters (or which would be made to or
for the benefit of such an underwriter or underwriter if
such sale of Acquisition Shares were pursuant to a cus-
tomary underwritten offering) be made to and for the
benefit of Holder and that any or all of the conditions
precedent to the obligations of such underwriter or
underwriters (or which would be so for the benefit of
such underwriter or underwriters under a customary under-
writing agreement) be conditions precedent to the obliga-
tions of Holder in connection with the disposition of its
securities pursuant to the terms hereof. In connection
with any offering of Acquisition Shares registered pursu-
ant to this Agreement, the Company shall, upon receipt of
duly endorsed certificates representing the Acquisition
Shares, (x) furnish to the underwriter, if any (or, if no
underwriter, Holder), unlegended certificates represent-
ing ownership of Acquisition Shares being sold, in such
denominations as requested, and (y) instruct any transfer
agent and registrar of the Acquisition Shares to release
any stop transfer order with respect thereto.
Holder agrees that upon receipt of any notice
from the Company of the happening of any event of the
kind described in paragraph (8) of Section 2.04(a),
Holder shall forthwith discontinue its disposition of
Acquisition Shares pursuant to the Shelf Registration
Statement and prospectus relating thereto until its
receipt of the copies of the supplemented or amended
prospectus contemplated by paragraph (8) of Section
2.04(a) and, if so directed by the Company, deliver to
the Company all copies, other than permanent file copies,
then in Holder's possession of the prospectus current at
the time of receipt of such notice relating to the Acqui-
sition Shares.
Section 2.05 Registration Expenses.
All expenses incidental to the Company's per-
formance of, or compliance with, its obligations under
this Agreement including, without limitation, all regis-
tration and filing fees, all fees and expenses of compli-
ance with securities and "blue sky" laws (including,
without limitation, the fees and expenses of counsel for
underwriters or placement or sales agents in connection
with "blue sky" law compliance), all printing and copying
expenses, all messenger and delivery expenses, all rea-
sonable out-of-pocket expenses of underwriters and sales
and placement agents in connection therewith (excluding
discounts and commissions and the fees and expenses of
counsel therefor), all fees and expenses of the Company's
independent certified public accountants and counsel
(including, without limitation, with respect to "comfort"
letters and opinions) and other Persons retained by the
Company in connection therewith (collectively, the "Reg-
istration Expenses"), shall be borne by the Company. The
Company shall not be responsible for and shall not pay
the fees and expenses of legal counsel, accountants,
agents or experts retained by Holder in connection with
the sale of the Acquisition Shares. The Company will pay
its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees
performing legal or accounting duties, the expense of any
annual audit and the expense of any liability insurance)
and the expenses and fees for listing the Acquisition
Shares on the New York Stock Exchange.
Section 2.06 Indemnification.
(a) By the Company. The Company agrees to
indemnify Holder, its officers, directors, employees and
agents and each Person who controls (within the meaning
of Section 15 of the Securities Act or Section 20 of the
Exchange Act) Holder or such other indemnified Person
against all losses, claims, damages, liabilities and
expenses (collectively, the "Losses") caused by, result-
ing from or relating to any untrue or alleged untrue
statement of material fact contained in the Shelf Regis-
tration Statement, any prospectus or preliminary prospec-
tus or any amendment thereof or supplement thereto or any
omission or alleged omission of 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, or alleged to be omitted from,
any information furnished in writing to the Company by
Holder or its underwriter or other agent expressly for
use therein or by Holder's failure to deliver, or its
underwriter's or other agent's failure to deliver, a copy
of the Shelf Registration Statement or prospectus or any
amendments or supplements thereto after the Company has
furnished Holder with the requested number of copies of
the same. In connection with an underwritten offering
and without limiting any of the Company's other obliga-
tions under this Agreement, the Company shall indemnify
such underwriters, their officers, directors, employees
and agents and each Person who controls (within the
meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) such underwriters or such other
indemnified Person to the same extent as provided above
with respect to the indemnification of Holder.
(b) By Holder. In connection with the Shelf
Registration Statement, Holder shall furnish to the
Company in writing information regarding Holder's owner-
ship of Acquisition Shares and its intended method of
distribution thereof and shall indemnify the Company, its
directors, officers, employees and agents and each Person
who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) the
Company or such other indemnified Person against all
Losses caused by, resulting from or relating to any
untrue or alleged untrue statement of material fact
contained in the Shelf Registration Statement, any pro-
spectus or preliminary prospectus or any amendment there-
of or supplement thereto or any omission or alleged
omission of a material fact required to be stated therein
or necessary to make the statements therein not mislead-
ing, but only to the extent that such untrue statement or
omission or alleged untrue statement or omission (i) is
caused by, results from or relates to, or is alleged to
be omitted from, such information so furnished in writing
by Holder or (ii) arises out of or results from Holder's
failure to deliver, or its underwriter's or other agent's
failure to deliver, a copy of the Shelf Registration
Statement or prospectus or any amendments or supplements
thereto after the Company has furnished Holder with the
requested number of copies of the same; provided, howev-
er, that Holder shall not be liable for any claims here-
under in excess of the amount of net proceeds received by
Holder from the sale of Acquisition Shares pursuant to
the Shelf Registration Statement. In connection with an
underwritten offering and without limiting any of
Holder's other obligations under this Agreement, (i)
Holder shall indemnify such underwriters, their officers,
directors, employees and agents and each Person who
controls (within the meaning of Section 15 of the Securi-
ties Act or Section 20 of the Exchange Act) such under-
writers or such other indemnified Person to the same
extent as provided above with respect to the indemnifica-
tion of the Company and (ii) Holder shall cause each
underwriter of an underwritten offering to indemnify the
Company, its directors, officers, employees and agents
and each Person who controls (within the meaning of
Section 15 of the Securities Act or Section 20 of the
Exchange Act) the Company or such indemnified Person
against all Losses caused by, resulting from or relating
to any untrue or alleged untrue statement of material
fact contained in the Shelf Registration Statement, any
prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged
omission of a material fact required to be stated therein
or necessary to make the statements therein not mislead-
ing, but only to the extent that such untrue statement or
omission or alleged untrue statement or omission (x) is
caused by, results from or relates to, or is alleged to
be omitted from, such information furnished in writing by
such underwriter or (y) arises out of or results from
such underwriter's failure to delivery a copy of the
Shelf Registration Statement or prospectus or any amend-
ments or supplements thereto after the Company has fur-
nished such underwriter with the requested number of
copies of the same.
(c) Notice. Any Person entitled to indemnifi-
cation hereunder shall give prompt written notice to the
indemnifying party of any claim with respect to which it
seeks indemnification; provided, however, the failure to
give such notice shall not release the indemnifying party
from its obligation, except to the extent that the indem-
nifying party has been prejudiced by such failure to
provide such notice.
(d) Defense of Actions. In any case in which
any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to
participate therein, and, to the extent that it may wish,
jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemni-
fied party of its election so to assume the defense
thereof, the indemnifying party shall not (so long as it
shall continue to have the right to defend, contest,
litigate and settle the matter in question in accordance
with this paragraph) be liable to such indemnified party
hereunder for any legal or other expense subsequently
incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investiga-
tion, supervision and monitoring (unless such indemnified
party reasonably objects to such assumption on the
grounds that there may be defenses available to it which
are different from or in addition to the defenses avail-
able to such indemnifying party, in which event the
indemnified party shall be reimbursed by the indemnifying
party for the reasonable expenses incurred in connection
with retaining one separate legal counsel). An indemni-
fying party shall not be liable for any settlement of an
action or claim effected without its consent. The indem-
nifying party shall lose its right to defend, contest,
litigate and settle a matter if it shall fail to dili-
gently contest such matter (except to the extent settled
in accordance with the next following sentence). No
matter shall be settled by an indemnifying party without
the consent of the indemnified party unless such settle-
ment contains a full and unconditional release of the
indemnified party.
(e) Survival. The indemnification provided
for under this Agreement shall remain in full force and
effect regardless of any investigation made by or on
behalf of the indemnified Person and will survive the
transfer of the Registrable Securities.
(f) Contribution. If recovery is not avail-
able under the foregoing indemnification provisions for
any reason or reasons other than as specified therein,
any Person who otherwise would be entitled to indemnifi-
cation by the terms thereof shall nevertheless be enti-
tled to contribution with respect to any Losses with
respect to which such Person would be entitled to such
indemnification but for such reason or reasons. In
determining the amount of contribution to which the
respective Persons are entitled, there shall be consid-
ered the Persons' relative knowledge and access to infor-
mation concerning the matter with respect to which the
claim was asserted, the opportunity to correct and pre-
vent any statement or omission, and other equitable
considerations appropriate under the circumstances. It
is hereby agreed that it would not necessarily be equita-
ble if the amount of such contribution were determined by
pro rata or per capita allocation. No person guilty of
fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not found guilty of
such fraudulent misrepresentation.
Section 2.07 Transferability of Registration Rights.
The rights and obligations of Holder under this
ARTICLE II may not be transferred or assigned without the
prior written consent of the Company; provided, however,
that such rights and obligations may be assigned by
Holder in connection with a pledge of the Acquisition
Shares in a bona fide transaction to secure indebtedness
of Cygne for borrowed money to a lender that agrees in a
writing reasonably satisfactory to the Company to be
subject to the terms of this Agreement.
ARTICLE III
STANDSTILL PROVISIONS
Section 3.01 Certain Prohibited Actions.
During the term of this Agreement, without the
prior written consent of the Company, neither Cygne nor
CGFE shall, and each shall cause each of its Affiliates
not to, singly or as part of a "group", directly or
indirectly, through one or more intermediaries or other-
wise (i) make, or in any way participate, directly or
indirectly, in, any "solicitation" of "proxies" (as such
terms are defined or used in Regulation 14A under the
Exchange Act) with respect to the Common Stock or any
securities of the Company Subsidiaries (including by the
execution of actions by written consent), become a "par-
ticipant" in any "election contest" (as such terms are
defined or used in Rule 14a-11 under the Exchange Act)
with respect to the Company or seek to advise or influ-
ence any person or entity with respect to the voting of
any shares of Common Stock or any securities of the
Company Subsidiaries; (ii) initiate, propose, or partici-
pate in the solicitation of stockholders for the approval
of one or more stockholder proposals with respect to the
Company, as described in Rule 14a-8 under the Exchange
Act, or induce or encourage any other individual or
entity to initiate any stockholder proposal relating to
the Company; (iii) form, join, influence or participate
in a "group", or act in concert with any other person or
entity, for the purpose of acquiring, holding, voting or
disposing of any securities of the Company or the Company
Subsidiaries or taking any other actions prohibited under
this Section 3.01; (iv) hold any discussions with another
Person regarding, make any proposal to or any public
announcement relating to a tender or exchange offer for
any securities of the Company or the Company Subsidiar-
ies, or a merger, business combination, sale of assets,
liquidation, restructuring, recapitalization or other
extraordinary corporate transaction relating to the
Company or any of the Company Subsidiaries or its or
their material assets or take any action which might
require the Company to make a public announcement regard-
ing any of the foregoing; (v) cause the merger of Cygne
or CGFE with or into, the consolidation of the Cygne or
CGFE with, or the sale of the business or assets of Cygne
or CGFE substantially as an entirety to, any other Person
unless (A) Cygne or CGFE, as the case may be, is the
surviving Person or the surviving Person agrees in writ-
ing to be bound by this Agreement and (B) within 120 days
after consummation of the transaction, the surviving
Person disposes of all shares of Common Stock owned by it
(in excess of those owned by Cygne or CGFE, as the case
may be, prior to consummation of the transaction);
(vi) act, alone or in concert with others (including by
providing financing for another party), to seek or offer
to control the Company; (vii) deposit any Acquisition
Shares in a voting trust or subject any Acquisition
Shares to any arrangement or agreement with respect to
the voting thereof (except pursuant to Section 3.03
below); (viii) execute any written consents; (ix) enter
into any discussions, negotiations, arrangements or
understandings with or provide any information to any
third party with respect to any of the foregoing;
(x) disclose any intention, plan or arrangement inconsis-
tent with the foregoing prohibitions or advise or assist
any other Person in connection with any activity included
in the foregoing prohibitions; or (xi) seek, request, or
propose any waiver, modification, amendment or termina-
tion of any provision of this Section 3.01 (other than
any request or proposal made or solicited by the Company).
Section 3.02 Transferability of Acquisition Shares.
(a) Lock-up Period. Except pursuant to a
pledge in a bona fide transaction to secure indebtedness
of Cygne for borrowed money to a lender that agrees in a
writing reasonably acceptable to the Company to be sub-
ject to the terms of this Agreement, Holder may not
Transfer any of the Acquisition Shares prior to the
Effective Date.
(b) Permitted Transfers. From and after the
Effective Date, Holder may not Transfer the Acquisition
Shares except in the following circumstances:
(i) to the Company or with the
Company's prior written consent;
(ii) pursuant to a pledge in a
bona fide transaction to secure indebtedness of
Cygne for borrowed money to a lender that
agrees in a writing reasonably acceptable to
the Company to be subject to the terms of this
Agreement;
(iii) to an Affiliate that agrees
in a writing reasonably acceptable to the Com-
pany to be bound by the terms of this Agreement;
(iv) pursuant to a tender offer made
by a person with respect to which the Company
does not recommend rejection;
(v) pursuant to a settlement with
the plaintiffs in the class action Veronica
Zucker v. Sasaki, et al.;
(vi) pursuant to a pro rata dividend
or other pro rata distribution to all of
Cygne's stockholders, upon liquidation of Cygne
or otherwise; or
(vii) pursuant to Rule 144 or
otherwise pursuant to the Shelf Registration
Statement;
provided, however, that, other than pursuant to clauses
(iv)-(vi) above or pursuant to an underwritten public
offering, no Transfers of more than two percent (2%) of
the Company's then outstanding shares of Common Stock may
be made in any two (2)-week period; and provided, fur-
ther, that any underwriter of a public offering or any
placement agent, broker or other agent shall be instruct-
ed that (x) no Transfers of any Acquisition Shares may
knowingly be made to any person who beneficially owns in
excess of five percent (5%) of the then outstanding
shares of Common Stock, and (y) no Transfer of more than
two percent (2%) of the Company's then outstanding Common
Stock may knowingly be made to a single purchaser (or
group of related purchasers).
Section 3.03 Voting.
During the term of this Agreement, the Holder
(i) shall be present in person or represented by proxy at
all stockholder meetings of the Company so that all
Acquisition Shares then beneficially owned by Holder
shall be counted for the purpose of determining the
presence of a quorum at such meetings, and (ii) shall
vote, or act by consent with respect to, all Acquisition
Shares then beneficially owned by Holder pro rata in the
same proportion as the votes cast by all other stockhold-
ers of the Company.
ARTICLE IV
MISCELLANEOUS
Section 4.01 Effectiveness of Agreement.
The provisions of this Agreement shall be
effective as of the date hereof.
Section 4.02 Restrictive Legends.
Holder hereby acknowledges and agrees that,
during the term of this Agreement, each of the certifi-
cates representing Acquisition Shares shall be subject to
stop transfer instructions and shall include the follow-
ing legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED WHETHER BY SALE, ASSIGNMENT, PLEDGE, ENCUM-
BRANCE, GIFT, BEQUEST, APPOINTMENT OR OTHERWISE, AND
ANNTAYLOR STORES CORPORATION (THE "COMPANY") WILL NOT
REGISTER THE TRANSFER OF SUCH SHARES, EXCEPT PURSUANT AND
SUBJECT TO THAT CERTAIN STOCKHOLDERS AGREEMENT DATED
AUGUST __, 1996, AS MAY BE AMENDED FROM TIME TO TIME,
BETWEEN ATSC AND CYGNE DESIGNS, INC. A COPY OF SUCH
AGREEMENT IS ON FILE WITH THE SECRETARY OF THE COMPANY."
Section 4.03 Recapitalization.
In the event that any capital stock or other
securities are issued as a dividend or distribution on,
in respect of, in exchange for, or in substitution of,
any Acquisition Shares, such securities shall be deemed
to be Acquisition Shares for all purposes under this
Agreement.
Section 4.04 Notices.
All notices, requests, demands, waivers and
other communications required or permitted to be given
under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered personally,
by mail (certified or registered mail, return receipt
requested), by reputable overnight courier or by facsimi-
le transmission (receipt of which is confirmed):
(a) If to the Company, to:
AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention: General Counsel
Facsimile: (212) 541-3299
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq.
Facsimile: (302) 651-3001
(b) If to Holder, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: General Counsel
Facsimile: (212) 536-4174
with a copy to:
Fulbright and Jaworski, L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Roy L. Goldman, Esq.
Facsimile: (212) 752-5958
or to such other person or address as any party shall
specify by notice in writing, given in accordance with
this Section 4.04, to the other parties hereto. All such
notices, requests, demands, waivers and communications
shall be deemed to have been given on the date on which so
hand-delivered, on the third business day following the
date on which so mailed, on the next business day follow-
ing the date on which delivered to such overnight courier
and on the date of such facsimile transmission and confir-
mation, except for a notice of change of person or ad-
dress, which shall be effective only upon receipt thereof.
Section 4.05 Entire Agreement.
This Agreement contains the entire understanding
of the parties hereto with respect to the subject matter
hereof. This Agreement supersedes all prior agreements
and understandings, oral and written, with respect to its
subject matter.
Section 4.06 Severability.
Should any provision of this Agreement, or any
part thereof, for any reason be declared invalid or unen-
forceable, such declaration shall not affect the validity
or enforceability of any other provision of this Agree-
ment, or any other part thereof, all of which other provi-
sions, and parts, shall remain in full force and effect,
and the application of such invalid or unenforceable pro-
vision, or such part thereof, to persons or circumstances
other than those as to which it is held invalid or unen-
forceable shall be valid and be enforced to the fullest
extent permitted by law.
Section 4.07 Binding Effect; Assignment.
This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors,
successors and permitted assigns, but, except as expressly
contemplated herein, neither this Agreement nor any of the
rights, interests or obligations hereunder shall be as-
signed, directly or indirectly, by the Company or Holder
without the prior written consent of the other. Upon any
such assignment, this Agreement shall be amended to sub-
stitute the assignee as a party hereto in a writing rea-
sonably acceptable to the other party.
Section 4.08 Amendment, Modification and Waiver.
This Agreement may be amended, modified or sup-
plemented at any time by written agreement of the parties
hereto. Any failure by Holder, on the one hand, or the
Company, on the other hand, to comply with any term or
provision of this Agreement may be waived by the Company
or Holder, respectively, at any time by an instrument in
writing signed by or on behalf of the Company and Holder,
but such waiver or failure to insist upon strict compli-
ance with such term or provision shall not operate as a
waiver of, or estoppel with respect to, any subsequent or
other failure to comply.
Section 4.09 Third-Party Beneficiaries.
This Agreement is not intended, and shall not be
deemed, to confer upon or give any person except the par-
ties hereto and their respective successors and permitted
assigns, any remedy, claim, liability, reimbursement,
cause of action or other right under or by reason of this
Agreement.
Section 4.10 Counterparts.
This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 4.11 Interpretation.
The article and section headings contained in
this Agreement are solely for the purpose of reference,
are not part of the agreement of the parties and shall not
in any way affect the meaning or interpretation of this
Agreement.
Section 4.12 Governing Law.
This Agreement shall be governed by the laws of
the State of New York, without regard to the principles of
conflicts of law thereof.
Section 4.13 Termination; Restrictive Legend.
This Agreement shall terminate on the third
anniversary of the date hereof; provided, however, that
the provisions of Section 2.06 hereof shall survive termi-
nation of this Agreement. It is understood and agreed
that any restrictive legends set forth on any Acquisition
Shares shall be removed by delivery of substitute certifi-
cates without such legends and such Acquisition Shares
shall no longer be subject to the terms of this Agreement,
upon the resale of such Acquisition Shares in accordance
with the terms of this Agreement (other than pursuant to
Section 3.02(b) (i), (ii) or (iii)) or, if not theretofore
removed, on the third anniversary of the date hereof.
IN WITNESS WHEREOF, the undersigned hereby agree
to be bound by the terms and provisions of this Stockhold-
ers Agreement as of the date first above written.
ANNTAYLOR STORES CORPORATION
By:_________________________
Name:
Title:
CYGNE DESIGNS, INC.
By:_________________________
Name:
Title:
CYGNE GROUP (F.E.) LIMITED
By:_________________________
Name:
Title:
EXHIBIT K
TERM SHEET
Florence Lease
Lease Seller shall lease to Buyer the
second floor of the Florence
Facility.
Term Five (5) years, subject to can-
cellation at any time by either
party upon six (6) months' no-
tice of termination. In the
event of termination by Seller,
Seller shall purchase the
leasehold improvements from
Buyer at their then net book
value.
Rent $6,666.67 per month (which
Seller represents is equivalent
to the current intercompany
charge for rent of the Florence
Facility from an affiliate of
Seller).
EXHIBIT L
Skadden, Arps, Slate, Meagher & Flom, special
counsel to Buyer and ATSC, shall render its opinion to
the following effect in a form reasonably acceptable to
Buyer (capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Stock
and Asset Purchase Agreement):
1. Each of Buyer and ATSC are corporations
validly existing and in good standing under the laws of
the State of Delaware. Each of Buyer and ATSC is quali-
fied to do business and is in good standing as a foreign
corporation under the laws of the State of New York.
2. Buyer has all requisite corporate power
and authority to execute, deliver and perform all of its
obligations under (i) the Agreement, (ii) the Assignment
and Assumption Agreement, (iii) the Undertaking, (iv) the
Manuel Consulting Agreement, (v) the Benson Consulting
Agreement, (vi) [the Subleases], (vii) the Pledge Agree-
ment and (viii) the Florence Lease. (The agreements
listed in clauses (ii)-(viii) are hereinafter collective-
ly referred to as the "Buyer Transaction Documents.")
The execution and delivery of each of the Agreement and
the Buyer Transaction Documents, and the consummation by
Buyer of the transactions contemplated thereby, have been
duly authorized by all requisite corporate action on the
part of Buyer.
3. ATSC has all requisite corporate power and
authority to execute, deliver and perform all of its
obligations under (i) the Agreement and (ii) the Stock-
holders Agreement. The execution and delivery of the
Agreement and the Stockholders Agreement, and the consum-
mation of the transactions contemplated thereby, have
been duly authorized by all requisite corporate action on
the part of ATSC.
4. Each of the Agreement and the Buyer Trans-
action Documents have been duly and validly executed and
delivered by Buyer and (assuming each of the Agreement
and the Buyer Transaction Documents is a valid and bind-
ing obligation of each of the other parties thereto) each
constitutes the valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms,
except that the enforceability thereof may be limited by
(i) bankruptcy, insolvency, reorganization, fraudulent
transfer, equity of redemption, moratorium or other
similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles
of equity (regardless of whether enforceability is con-
sidered in a proceeding in equity or at law).
5. Each of the Agreement and the Stockholders
Agreement has been duly and validly executed and deliv-
ered by ATSC and (assuming each of the Agreement and the
Stockholders Agreement is a valid and binding obligation
of each of the other parties thereto) each constitutes
the valid and binding obligation of ATSC enforceable
against ATSC in accordance with its terms, except that
the enforceability thereof may be limited by (i) bank-
ruptcy, insolvency, reorganization, fraudulent transfer,
equity of redemption, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights
generally, and (ii) general principles of equity (regard-
less of whether enforceability is considered in a pro-
ceeding in equity or at law).
6. The execution and delivery by Buyer of
each of the Agreement and the Buyer Transaction Documents
and the performance of its obligations under each of the
Agreement and the Buyer Transaction Documents, each in
accordance with its terms, do not (i) conflict with the
Certificate of Incorporation or By-laws of Buyer, (ii)
constitute a violation of, or a default under, any Appli-
cable Contract (as hereinafter defined) or (iii) cause
the creation of any security interest or lien upon any
property of Buyer pursuant to any Applicable Contract.
As used in such counsel's opinion, "Applicable Contracts"
shall mean those agreements or instruments set forth on a
Schedule to such opinion and which have been identified
to such counsel as all the agreements and instruments
which are material to the business or financial condition
of ATSC and its subsidiaries, taken as a whole.
7. The execution and delivery by ATSC of each
of the Agreement and the Stockholders Agreement and the
performance of its obligations under each of the Agree-
ment and the Stockholders Agreement, each in accordance
with its terms, do not (i) conflict with the Certificate
of Incorporation or By-laws of ATSC, (ii) constitute a
violation of, or a default under, any Applicable Contract
or (iii) cause the creation of any security interest or
lien upon any property of ATSC pursuant to any Applicable
Contract.
8. The shares of ATSC Common Stock to be
delivered to Seller in payment of the Stock Consideration
have been duly authorized and, upon issuance of certifi-
cates therefor conforming to the specimen examined by
such counsel, against delivery of the CAT shares and the
Assets for such ATSC Common Stock in accordance with the
terms of the Agreement, will be validly issued, fully
paid and non-assessable shares of common stock of ATSC.
9. No Governmental Approval (as hereinafter
defined), which has not been obtained or taken and is not
in full force and effect, is required to authorize or is
required in connection with the execution, delivery or
performance of the Agreement or the Buyer Transaction
Documents by Buyer.
10. No Governmental Approval, which has not
been obtained or taken and is not in full force and
affect, is required to authorize or is required in con-
nection with the execution, delivery or performance of
the Agreement or the Stockholders Agreement by ATSC.
11. Neither the execution, delivery or perfor-
mance by Buyer of the Agreement and the Buyer Transaction
Documents nor the compliance by Buyer with the terms and
provisions thereof will contravene any provision of any
Applicable Law.
12. Neither the execution, delivery or perfor-
mance by ATSC of the Agreement and the Stockholders
Agreement nor the compliance by ATSC with the terms and
provisions thereof will contravene any provision of any
Applicable Law.
As used in such counsel's opinion, (i) "Govern-
mental Approval" shall mean any consent, approval, li-
cense, authorization or validation of, or filing, record-
ing or registration with, any Governmental Authority
pursuant to any Applicable Law, (ii) "Governmental Au-
thority" shall mean any Delaware, New York or federal
executive, legislative, judicial, administrative or
regulatory body under any Applicable Law, and (iii)
"Applicable Law" shall mean any law of the State of New
York, the General Corporation Law of the State of Dela-
ware or any law of the United States, which, in such
counsel's experience, are normally applicable to transac-
tions of the type contemplated by the Agreement, the
Buyer Transaction Documents and the Stockholders Agree-
ment.
EXHIBIT M
Fulbright & Jaworski, special counsel to Seller
and CGFE, shall render its opinion to the following
effect in a form reasonably acceptable to Buyer (capital-
ized terms used herein and not otherwise defined shall
have the meanings set forth in the Stock and Asset Pur-
chase Agreement):
1. Each of Seller, CGFE, CAT-US and CAT-Far
East is a corporation validly existing and in good stand-
ing under the laws of its jurisdiction of organization.
Each of Seller and CAT-US is qualified to do business and
is in good standing as a foreign corporation under the
laws of the State of New York, and, in the case of Sell-
er, the laws of the State of Florida.
2. Seller has all requisite corporate power
and authority to execute, deliver and perform all of its
obligations under (i) the Agreement, (ii) the Assignment
and Assumption Agreement, (iii) the Bill of Sale,
(iv) the Manuel Consulting Agreement, (v) the Benson
Consulting Agreement, (vi) the [Subleases], (vii) the
Pledge Agreement, (viii) the Florence Lease and (ix) the
Stockholders Agreement. (The agreements listed in claus-
es (ii)-(ix) are hereinafter collectively referred to as
the "Seller Transaction Documents".) The execution and
delivery of each of the Agreement and the Seller Transac-
tion Documents, and the consummation by Seller of the
transactions contemplated thereby, have been duly autho-
rized by all requisite corporate action on the part of
Seller.
3. CGFE has all requisite corporate power and
authority to execute, deliver and consummate the transac-
tions contemplated by the Agreement and the Stockholders
Agreement. The execution and delivery of the Agreement
and the Stockholders Agreement, and the consummation of
the transactions contemplated thereby, have been duly
authorized by all requisite corporate action on the part
of CGFE.
4. Each of the Agreement and the Seller
Transaction Documents has been duly and validly executed
and delivered by Seller, and (assuming each of the Agree-
ment and the Seller Transaction Documents is a valid and
binding obligation of each of the other parties thereto)
each constitutes the valid and binding obligation of
Seller enforceable against Seller in accordance with its
terms, except that the enforceability thereof may be
limited by (i) bankruptcy, insolvency, reorganization,
fraudulent transfer, equity of redemption, moratorium or
other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles
of equity (regardless of whether enforceability is con-
sidered in a proceeding in equity or at law).
5. Each of the Agreement and the Stockholders
Agreement has been duly and validly executed and deliv-
ered by CGFE and (assuming each of the Agreement and the
Stockholders Agreement is a valid and binding obligation
of each of the other parties thereto) each constitutes
the valid and binding obligation of CGFE enforceable
against CGFE in accordance with its terms, except that
the enforceability thereof may be limited by (i) bank-
ruptcy, insolvency, reorganization, fraudulent transfer,
equity of redemption, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights
generally, and (ii) general principles of equity (regard-
less of whether enforceability is considered in a pro-
ceeding in equity or at law).
6. The certificates representing the CAT US
Shares are listed on Schedule I hereto. Assuming that
Buyer acquired its interest in the CAT US Shares in good
faith and without notice of any adverse claims (within
the meaning of Section 8-302 of the New York Uniform
Commercial Code) and has not been a party to any fraud or
illegality affecting such shares, upon delivery to Buyer
at the Closing in the State of New York of the CAT US
Shares, duly endorsed to Buyer or accompanied by stock
powers duly executed in blank, Buyer will acquire all of
Seller's rights in the CAT US Shares free of any adverse
claims (within the meaning of Section 8-302 of the New
York Uniform Commercial Code).
7. The certificates representing the CAT-Far
East Shares are listed on Schedule II hereto. Assuming
that Buyer acquired its interest in the CAT-Far East
Shares in good faith and without notice of any adverse
claims (within the meaning of Section 8-302 of the New
York Uniform Commercial Code) and has not been a party to
any fraud or illegality affecting such shares, upon
delivery to Buyer at the Closing in the State of New York
of the CAT-Far East Shares, duly endorsed to Buyer or
accompanied by stock powers duly executed in blank, Buyer
will acquire all of CGFE's rights in the CAT-Far East
Shares free of any adverse claims (within the meaning of
Section 8-302 of the New York Uniform Commercial Code).
8. No Governmental Approval (as hereinafter
defined), which has not been obtained or taken and is not
in full force and effect, is required to authorize or is
required in connection with the execution, delivery or
performance of the Agreement or the Seller Transaction
Documents by Seller.
9. No Foreign Governmental Approval (as
hereinafter defined), which has not been obtained or
taken and is not in full force and effect, is required to
authorize or is required in connection with the execu-
tion, delivery or performance of the Agreement or the
Stockholders Agreement by CGFE. As used in such
counsel's opinion, "Foreign Governmental Approval" shall
mean any consent, approval, license, authorization or
validation of, or filing, recording or registration with,
any governmental authority pursuant to the laws of Hong
Kong to the extent specifically referred to herein.
10. The execution and delivery by Seller of
each of the Agreement and the Seller Transaction Docu-
ments and the performance by Seller of its obligations
under each of the Agreement and the Seller Transaction
Documents, each in accordance with its terms, do not (i)
violate the Certificate of Incorporation or By-laws of
Seller, (ii) constitute a violation of or a default under
any Applicable Contract or (iii) cause the creation of
any security interest or lien upon any of the property of
Seller pursuant to any Applicable Contract. As used in
such counsel's opinion, "Applicable Contracts" shall mean
those agreements or instruments set forth on a Schedule
to such opinion and which have been identified to such
counsel as all the agreements and instruments which are
material to the business or financial condition of Seller
and its subsidiaries taken as a whole.
11. The execution and delivery by CGFE of each
of the Agreement and the Stockholders Agreement and the
performance by CGFE of its obligations under each of the
Agreement and the Stockholders Agreement, each in accor-
dance with its terms, do not (i) violate the organiza-
tional documents of CGFE, (ii) constitute a violation of
or a default under any Applicable Contract or (iii) cause
the creation of any security interest or lien upon any of
the property of CGFE pursuant to any Applicable Contract.
12. Neither the execution, delivery or perfor-
mance by Seller of the Agreement and the Seller Transac-
tion Documents nor the compliance by Seller with the
terms and provisions thereof will contravene any Applica-
ble Law.
13. Neither the execution, delivery or perfor-
mance by CGFE of the Agreement and the Stockholders
Agreement nor the compliance by CGFE with the terms and
provisions thereof will contravene any provision of any
Applicable Law.
As used in such counsel's opinion, (i) "Govern-
mental Approval" shall mean any consent, approval, li-
cense, authorization or validation of, or filing, record-
ing or registration with, any Governmental Authority
pursuant to any Applicable Law, (ii) "Governmental Au-
thority" shall mean any Delaware, New York or federal
executive, legislative, judicial, administrative or
regulatory body under any Applicable Law, and (iii)
"Applicable Law" shall mean any law of the State of New
York, the General Corporation Law of the State of Dela-
ware or any law of the United States, which, in such
counsel's experience, are normally applicable to transac-
tions of the type contemplated by the Agreement and the
Seller Transaction Documents.
Grunfeld, Desiderio, Lebowitz & Silverman
LLP, customs counsel to Seller and CGFE, shall render its
opinion to the following effect in a form reasonably
acceptable to Buyer (capitalized terms used herein and
not otherwise defined shall have the meanings set forth
in the Stock and Asset Purchase Agreement):
1. Seller has all licenses, permits, con-
sents, orders, approvals and other authorizations neces-
sary under the customs and trade laws of the United
States of America, including, without limitation, bilat-
eral trade agreements (collectively, "Customs Laws"), to
carry on the Division Business as currently being con-
ducted, except where the failure to have such licenses,
permits, consents, orders, approvals or other authoriza-
tions would not have a Material Adverse Effect on Seller,
CAT or the Division.
2. The execution and delivery by Seller of
the Agreement and the Seller Transaction Documents do
not, and the consummation by Seller of the transactions
contemplated thereby will not, (a) result in any viola-
tion of or default under, or to our knowledge the cre-
ation of any Lien, charge or encumbrance upon any of the
Assets of Seller related to the Division Business under,
any law or any rule or regulation known to us, or any
judgment, decree or order of any Governmental Authority
known to us, in each case under the Customs Laws, to
which Seller is a party or to which any property or asset
related to the Division Business is subject; or (b)
result in any suspension, revocation, impairment, forfei-
ture or nonrenewal of any license under the Customs Laws.
