SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Danskin, Inc.
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(Exact name of registrant as specified in its charter)
September 22, 1997
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Date of Report (Date of earliest event reported)
Delaware 0-20382 62-1284179
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(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) Identification No.)
111 West 40th Street, New York, New York 10018
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(Address of principal executive offices) (Zip Code)
212-764-4630
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(Registrant's telephone number, including area code)
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Item 1. Change in Control of Registrant.
--------------------------------
On September 22, 1997, Danskin, Inc. (the "Company") consented to the assignment
of approximately $21.265 million face amount (the "Loan Amount") of the
Company's term loan obligations owing to First Union National Bank ("First
Union"), the Company's principal lender, to Danskin Investors, LLC (the
"Investor"), a company newly formed by an investment group led by Onyx Partners,
Inc.
In accordance with the terms of the Securities Purchase Agreement, dated
September 22, 1997, entered into by the Company and the Investor, the Investor,
and certain other persons, contributed to the Company in the aggregate (a) the
Loan Amount and (b) $4 million (together, the "Capital Contribution") in
exchange for (i) $15 million aggregate principal amount of subordinated debt of
the Company (the "Subordinated Debt") and (ii) $500,000 in stated value of
Series C Cumulative Convertible Preferred Stock (the "Series C Stock", and
together with the Subordinated Debt, the "Securities") of the Company. The
Investor funded the Capital Contribution through capital contributions made to
it by its members and $544,129 paid by Oppenheimer Bond Fund for Growth to the
Company in exchange for a portion of the Securities.
The Subordinated Debt bears interest, commencing on December 22, 1997, at the
rate of 8% per annum. Holders of the Series C Stock have, among other rights,
the right to elect four of nine directors to the Board of Directors of the
Company. In connection with the closing of the Capital Contribution, the Board
of Directors of the Company accepted the resignations of Patricia Patterson,
John Burden and Edwin Dean as directors of the Company and elected Andrew
Astrachan, Nina McLemore, Gabriel Brener and Jim Jalil as directors.
In connection with the closing of the Capital Contribution, the Board of
Directors approved amendments to both the Certificate of Incorporation and the
By-laws of the Company to effectuate agreements reached between the Company and
the Investor, including, among other things, increasing the number of authorized
shares of its common stock to 100,000,000 and removing the provisions for a
classified Board of Directors (the "Certificate Amendments").
As reported by the Investor on Schedule 13D, SunAmerica Life Insurance Company
has granted an irrevocable proxy to Andrew Astrachan and David Sachs to vote all
shares of the Common Stock held by it in favor of the Certificate Amendments. In
addition, Oppenheimer Bond Fund for Growth has granted an irrevocable proxy to
Astrachan and Sachs to vote all shares of Common Stock held by it in favor of
the Certificate Amendments and on any additional proposal in accordance with the
recommendation of the Company's Board of Directors until such time as the
Investor possesses a majority of the voting power of the Company. Accordingly,
as reported by the Investor on Schedule 13D, Astrachan and Sachs share voting
power with each other of 5,446,214 shares of Common Stock and may be deemed to
have beneficial ownership of 56.3% of the outstanding shares of Common Stock.
In addition, in connection with the closing of the Capital Contribution, the
Company announced that (a) its Board of Directors declared a stock dividend on
the common stock of the Company equal to one share of common stock for each
11.99 shares of common stock held of record as of the close of business on
September 22, 1997, (b) its Board of Directors redeemed the Rights
<PAGE>
issued pursuant to the Rights Agreement, dated as of June 5, 1996, between the
Company and First Union Bank, as Rights Agent, for $.01 per right in cash to
holders of common stock held of record as of the close of business on September
22, 1997, and (c) it will offer to its shareholders, including the Investor, the
right to purchase, pro rata, 10 million shares of common stock of the Company at
a per share price of $0.30 (the "Rights Offering"). The Investor will standby to
purchase any shares of common stock offered in the Rights Offering and not
purchased by other shareholders of the Company.
Upon the refinancing of the Company's revolving credit facility with First Union
(the "Refinancing"), the Series C Stock and the Subordinated Debt, by their
terms, will be automatically exchanged for (a) $12 million stated value of
Series D Cumulative Convertible Preferred Stock (the "Series D Stock") of the
Company, (b) a seven year warrant to purchase 10 million shares of common stock
of the Company at a per share price of $0.30, and (c) if the Refinancing shall
occur prior to effectiveness of the Certificate Amendments and effectiveness of
the registration statement filed with the Securities and Exchange Commission
with respect to the Rights Offering, a $3 million aggregate principal amount
subordinated note of the Company. The description of the terms of the
Subordinated Debt, the Series C Stock, the Series D Stock and the Warrant set
forth in this Item 1 is qualified in its entirety by reference to the form of
Promissory Note, the Certificate of Designations for the Series C Stock, the
Certificate of Designations for the Series D Stock and the form of Warrant which
are attached to this Form 8-K as Exhibits.
The Series D Stock, if issued, is convertible, at the option of the holder and,
in certain circumstances, mandatorily, at a per share conversion price of $0.30.
Holders of the Series D Stock would be entitled to designate five of nine
directors to the Board of Directors of the Company. In connection with the
Refinancing, an additional director would be elected to the Company's Board of
Directors by the holders of the Series D Stock as the fifth designee of the
Investor to replace one member of the Board of Directors who will resign on such
date. The Series D Stock would have an 8% annual dividend rate, payment of which
would be deferred through December 31,1999, and a seven year maturity. If for
any fiscal year beginning with the fiscal year ended December 31, 1999, the
Company meets certain agreed upon financial targets, all accrued dividends for
such fiscal year would be forgiven and the Series D Stock would automatically
convert into 40 million shares of common stock of the Company at a conversion
price of $0.30 per share.
In connection with the closing of the Capital Contribution, Oppenheimer Bond
Fund for Growth ("BFG") exchanged the 10% Cumulative Preferred Stock of the
Company held by it for 3,436,214 shares of common stock of the Company and
certain other rights, including the right to participate in the purchase of the
Securities on the same terms as the Investor. The 10% Cumulative Preferred Stock
was cancelled and retired.
On September 22, 1997, the Company accepted a commitment letter from Century
Business Credit Corporation ("CBCC") which sets forth terms and conditions upon
which CBCC is prepared to make loans to the Company, in an amount not to exceed
$45 million, for, among other uses, the refinancing of the Company's existing
revolving credit facility with First Union and ongoing working capital needs.
There can, however, be no assurances that the Refinancing will occur.
<PAGE>
Item 7(c) Exhibits.
---------
99.1 Press Release dated September 23, 1997
4.2 Securities Purchase Agreement dated as of September 22, 1997
between the Issuer and Investors.
4.2.1 Form of Warrant to be issued to Investors.
4.2.2 Certificate of Designations of Series C Cumulative Convertible
Preferred Stock.
4.2.3 Certificate of Designations of Series D Cumulative Convertible
Preferred Stock.
4.2.4 Promissory Note of the Issuer in favor of Investors.
Signature
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DANSKIN, INC.
(Registrant)
Dated: October 7, 1997 By: /s/ Beverly Eichel
-------------------
Name: Beverly Eichel
Title: Executive Vice President
Chief Financial Officer
News From
DANSKIN, INC.
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DANSKIN RECAPITALIZES
NEW YORK, N.Y., September 23, 1997--DANSKIN, INC. (DANS) today announced a
comprehensive recapitalization of the Company intended to deleverage the
Company's balance sheet and to enable the Company to capitalize upon the strong
name recognition of and consumer response to the Danskin(R) brand.
The Company announced that, on September 22, 1997, it consented to the
assignment of approximately $21.265 million face amount (the "Loan Amount") of
the Company's term loan obligations owing to First Union National Bank ("First
Union"), the Company's principal lender, to Danskin Investors, LLC (the
"Investor"), a company newly formed by an investment group led by Onyx Partners,
Inc.
The Company also announced that, in accordance with the terms of a Memorandum of
Understanding reached with the Investor on August 28, 1997, the Investor and
certain other persons contributed to the Company in the aggregate (a) the Loan
Amount and (b) $4 million (together, the "Capital Contribution") in exchange for
(i) $15 million aggregate principal amount of subordinated debt of the Company
(the "Subordinated Debt") and (ii) $500,000 in stated value of cumulative
convertible preferred stock of the Company (the "Preferred Stock") having, among
other rights, the right to elect four of nine directors to the Board of
Directors of the Company.
Upon the occurrence of certain events, including a refinancing of the revolving
credit facility with First Union and the successful completion of negotiations
with certain of the Company's landlords, the Preferred Stock and $12 million of
Subordinated Debt will be exchanged for (a) $12 million stated value of
cumulative convertible preferred stock of the Company (the "New Preferred
Stock") and (b) seven year warrants to purchase 10 million shares of common
stock of the Company at a per share price of $0.30.
The New Preferred Stock , if issued, will have an 8% annual dividend rate,
payment of which will be deferred through December 31,1999, and a seven year
maturity. The holder of the New Preferred Stock would be entitled to designate
five of nine directors to the Board of Directors of the Company. If for any
fiscal year beginning with the fiscal year ended December 31, 1999, the Company
meets certain agreed upon financial targets, all accrued dividends for such
fiscal year would be forgiven and the New Convertible Preferred Stock would
automatically convert into 40 million shares of common stock of the Company at a
conversion price of $0.30 per share.
<PAGE>
News From
DANSKIN, INC.
-2-
In connection with the closing of the Capital Contribution (the "Closing"),
Oppenheimer Bond Fund for Growth ("BFG") exchanged the 10% Cumulative Preferred
Stock of the Company held by it for shares of common stock of the Company. The
10% Cumulative Preferred Stock was cancelled and retired.
Also in connection with the Closing, the Board of Directors approved amendments
to both the Certificate of Incorporation and the By-laws of the Company to
effectuate agreements reached between the Company and the Investor, including,
among other things, increasing the number of authorized shares of its common
stock to 100,000,000 and removing the provisions for a classified Board of
Directors.
The Company also announced that, on September 22, 1997, the Company accepted a
commitment letter from Century Business Credit Corporation ("CBCC") which sets
forth terms and conditions upon which CBCC is prepared to make loans to the
Company, in an amount not to exceed $45 million, for, among other uses, the
refinancing of the Company's existing revolving credit facility with First Union
and ongoing working capital needs.
The Company also announced that it will offer to its shareholders, including the
Investor, the right to purchase, pro rata, 10 million shares of common stock of
the Company at a per share price of $0.30. The Investor will standby to purchase
any shares of common stock offered in the rights offering not purchased by other
shareholders of the Company.
The Company also announced that the Board of Directors of the Company declared a
stock dividend on the common stock of the Company equal to one share of common
stock for each 11.99 shares of common stock held of record as of the close of
business on September 22, 1997.
The Company also announced that the Board of Directors of the Company redeemed
the Rights issued pursuant to the Rights Agreement dated as of June 5, 1996
between the Company and First Union Bank, as Rights Agent, for $.01 per right in
cash to holders of common stock held of record as of the close of business on
September 22, 1997.
In connection with the closing of the Capital Contribution, the Board of
Directors of the Company accepted the resignations of Patricia Patterson, John
Burden and Edwin Dean as directors of the Company and elected Andrew Astrachan,
Nina McLemore, Gabriel Brener and Jim Jalil as directors.
"These transactions provide the foundation for the Company to focus its efforts
on the growth of its Danskin(R) and licensed brands. All of the parties to the
transactions worked diligently to provide a platform for our shareholders to
realize value" stated Chairman of the Board, Donald Schupak.
<PAGE>
News From
DANSKIN, INC.
-3-
Mary Ann Domuracki, Chief Executive Officer of the Company stated, "The
recapitalization provides the Company with a strengthened balance sheet. Our
strategy to enhance our Danskin(R) brand name, expand our product lines and
increase our marketing programs can be executed. While the sheer hosiery market
continues to be difficult, we expect our licensed designer brands, new programs
and product additions of socks and tights to provide stability in legwear
operations. The Investor group brings added strength to our Board of Directors
and organization. I look forward to working with them toward enhancing the value
of the Company for our shareholders."
* * * * *
If the rights offering is made, a registration statement with respect to such
rights will be filed with the Securities and Exchange Commission. Such rights
may not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This news release shall not constitute
an offer to sell or the solicitation of an offer to buy nor shall there be any
sale of these rights in any State in which such offer, solicitation or sale
would be unlawful prior to the registration or qualification under the
securities laws of any such State. Each offering will be made only by means of a
prospectus.
Danskin, Inc. markets and manufactures women's activewear and dancewear under
the Danskin(R), and Dance France(R) trademarks and legwear under the Danskin(R),
Anne Klein(R), Givenchy(R) and Round-the-Clock(R) trademarks. Danskin's Pennaco
Hosiery Division is the largest manufacturer of private label hosiery sold in
department stores and fine specialty stores nationwide.
Contact: Beverly Eichel
Executive Vice President
Chief Financial Officer
(212)930-9157
SECURITIES PURCHASE AGREEMENT
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between
DANSKIN INVESTORS, LLC
a Delaware Limited Liability Company
and
DANSKIN, INC.
a Delaware Corporation
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As of September 22, 1997
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TABLE OF CONTENTS
Page
ARTICLE I.
PURCHASE AND SALE OF SECURITIES..................................... 1
Section 1.01 Authorization of Securities....................... 1
Section 1.02 Sale and Purchase of Securities................... 2
Section 1.03 Purchase Price.................................... 2
Section 1.04 Transfer Taxes.................................... 2
Section 1.05 Closing Date...................................... 2
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... 2
Section 2.01 Organization and Qualification.................... 3
Section 2.02 Authority......................................... 3
Section 2.03 Consents and Approvals; No Violations............. 3
Section 2.04 Capitalization.................................... 4
Section 2.05 Subsidiaries...................................... 5
Section 2.06 Articles of Incorporation and By-laws............. 5
Section 2.07 Compliance With Laws; Licenses.................... 5
Section 2.08 Litigation; Investigations........................ 5
Section 2.09 Taxes............................................. 6
Section 2.10 Employee Benefit Plans; ERISA..................... 8
Section 2.11 Labor Relations................................... 10
Section 2.12 Insurance Policies................................ 11
Section 2.13 Environmental Laws................................ 11
Section 2.14 Financial Statements and Books and Records........ 13
Section 2.15 Absence of Liabilities............................ 14
Section 2.16 Absence of Specified Changes...................... 14
Section 2.17 Real Property; Leases............................. 16
Section 2.18 Equipment and Personal Property................... 17
Section 2.19 Intangible Property............................... 18
Section 2.20 Software.......................................... 18
Section 2.21 Contracts......................................... 18
Section 2.22 Inventory......................................... 20
Section 2.23 Title to Properties; Liens........................ 20
Section 2.24 Condition of Assets............................... 20
Section 2.25 Transactions with Affiliates...................... 21
Section 2.26 Valid Transfer.................................... 21
Section 2.27 Absence of Certain Practices...................... 21
ii
<PAGE>
Section 2.28 Accounts Payable and Accrued Expenses............. 21
Section 2.29 Accounts Receivable............................... 21
Section 2.30 Solvency.......................................... 22
Section 2.31 Investment Company Act............................ 22
Section 2.32 Securities Exchange Act Reports................... 22
Section 2.33 Securities Exemption.............................. 23
Section 2.34 Customers and Suppliers........................... 23
Section 2.35 Rights Plan....................................... 23
Section 2.36 Promotional Programs.............................. 23
Section 2.37 Orders, Commitments and Returns................... 24
Section 2.38 Warranty Claims................................... 24
Section 2.39 Disclosure........................................ 24
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE BUYER......................... 24
Section 3.01 Organization...................................... 24
Section 3.02 Authority......................................... 24
Section 3.03 Consents and Approvals; No Violations............. 25
Section 3.04 Own Account....................................... 25
Section 3.05 Limited Transferability........................... 25
Section 3.06 Accredited Investor............................... 25
Section 3.07 Furnishing the Company with Information........... 25
ARTICLE IV.
CONDITIONS TO EACH PARTY'S OBLIGATIONS.............................. 26
Section 4.01 Governmental Authorizations; Consents............. 26
Section 4.02 Absence of Litigation............................. 26
Section 4.03 No Injunction..................................... 26
Section 4.04 Opinion of Investment Banker...................... 26
ARTICLE V.
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS..................... 26
Section 5.01 Accuracy of Representations and Warranties........ 26
Section 5.02 Performance by the Company........................ 27
Section 5.03 Opinion of Counsel................................ 27
Section 5.04 Casualty Losses; Material Change.................. 27
Section 5.05 Customer Consents................................. 27
Section 5.06 Securities........................................ 27
Section 5.07 Deliveries........................................ 27
Section 5.08 By-law Amendments................................. 27
iii
<PAGE>
Section 5.09 Lease............................................. 28
Section 5.10 Employment Agreements............................. 28
Section 5.11 License Modifications............................. 28
Section 5.12 Modification of Preferred Stock................... 29
Section 5.13 SunAmerica Waiver................................. 29
Section 5.14 Net Operating Losses.............................. 29
Section 5.15 Board of Directors................................ 29
Section 5.16 FIRPTA Affidavit.................................. 29
Section 5.17 Rights Plan....................................... 29
Section 5.18 Registration Rights Agreement..................... 29
Section 5.19 Patent Collateral and Security Agreement.......... 29
Section 5.20 Trademark Security Agreement...................... 30
Section 5.21 License Security Agreement........................ 30
Section 5.22 Loan and Security Agreement....................... 30
Section 5.23 Guaranty.......................................... 30
ARTICLE VI.
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS................... 30
Section 6.01 Accuracy of Representations and Warranties........ 30
Section 6.02 Performance by the Buyer.......................... 30
Section 6.03 Deliveries........................................ 30
ARTICLE VII.
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS............................................ 31
ARTICLE VIII.
INDEMNIFICATION..................................................... 31
Section 8.01 General Indemnity................................. 31
Section 8.02 Indemnification Procedure......................... 32
ARTICLE IX.
COVENANTS/OBLIGATIONS AFTER THE CLOSING.
................................................................... 34
Section 9.01 Further Assurances................................ 34
Section 9.02 Maintenance of Office............................. 34
Section 9.03 Corporate Existence; Status....................... 34
Section 9.04 Dividends......................................... 34
Section 9.05 Application of Proceeds........................... 34
iv
<PAGE>
Section 9.06 Observance of Statutes, Regulations and Orders.... 35
Section 9.07 Taxes............................................. 35
Section 9.08 Maintenance of Properties......................... 35
Section 9.09 Books and Records................................. 35
Section 9.10 Maintenance of Insurance; Indemnification......... 35
Section 9.11 Inspection........................................ 35
Section 9.12 Furnish Reports................................... 35
Section 9.13 Furnish Additional Information.................... 36
Section 9.14 Rights Offering................................... 36
Section 9.15 Transfer of Securities............................ 38
Section 9.16 Corporate Governance.............................. 38
Section 9.17 Options........................................... 39
Section 9.18 Exchange of Securities............................ 39
Section 9.19 Information Statement; Certificate of
Incorporation..................................... 40
Section 9.20 Confidentiality................................... 41
ARTICLE X.
MISCELLANEOUS....................................................... 41
Section 10.01 Costs............................................. 41
Section 10.02 Headings.......................................... 42
Section 10.03 Notices........................................... 42
Section 10.04 Binding Effect.................................... 43
Section 10.05 Governing Law; Forum; Process..................... 43
Section 10.06 Entire Agreement.................................. 43
Section 10.07 Counterparts...................................... 44
Section 10.08 Severability...................................... 44
Section 10.09 No Prejudice...................................... 44
Section 10.10 Words in Singular and Plural Form................. 44
Section 10.11 Parties in Interest............................... 44
Section 10.12 Amendment and Modification........................ 44
Section 10.13 Waiver............................................ 44
Section 10.14 Knowledge of the Company.......................... 44
Section 10.15 Remedy for Breach................................. 44
EXHIBITS
A. Certificate of Designations of Investor Preferred Stock
B. Notes
C. Certificate of Designations of Convertible Preferred Stock
D. Warrant
E. Opinion of Company Counsel
v
<PAGE>
F. Registration Rights Agreement
G. Patent Collateral Assignment and Security Agreement
H. Trademark Security Agreement
I. License Security Agreement
J. Loan and Security Agreement
K. Mortgage and Deed of Trust Documents
L. Guaranty of Danpen, Inc.
M. Agreement with Donald Schupak
N. Fourth Amendment to Employment Agreement with Mary Ann Domuracki
O. Fifth Amendment to Employment Agreement with Beverly Eichel
P. Warrant Agreement granted to Donald Schupak
Q. Option Agreement granted to Mary Ann Domuracki
R. Option Agreement granted to Beverly Eichel
S. Option Agreement granted to Nina McLemore
vi
<PAGE>
SECURITIES PURCHASE AGREEMENT
-----------------------------
SECURITIES PURCHASE AGREEMENT, dated as of September 22, 1997 (this
"Agreement"), by and between Danskin Investors, LLC, a Delaware limited
liability company (the "Buyer"), and Danskin, Inc. a Delaware corporation (the
"Company").
R E C I T A L S
---------------
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, the Buyer desires to purchase from the Company and the Company
desires to sell to the Buyer (i) Series C Convertible Preferred Stock of the
Company, $.01 par value per share ("Investor Preferred Stock") and (ii)
convertible subordinated notes (the "Notes" and collectively with the Investor
Preferred Stock, the "Securities), as more particularly described herein in
consideration for the payments from the Buyer, as set forth herein;
WHEREAS, the Buyer and the Company also desire to establish in this
Agreement certain terms and conditions concerning the corporate governance of
the Company.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein,
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
PURCHASE AND SALE OF SECURITIES
-------------------------------
Section 1.01 Authorization of Securities. Upon the terms and subject to
the conditions set forth herein, the Company has authorized the issuance and
sale of (i) Five Hundred Thousand Dollars ($500,000) in stated value of Investor
Preferred Stock which shall contain the terms and conditions and be in the form
of Exhibit A hereto, (ii) Fifteen Million Dollars ($15,000,000) aggregate
principal amount of Notes which shall contain the terms and conditions and be in
the form of Exhibit B hereto, (iii) upon conversion or exchange of the
Securities, Twelve Million Dollars ($12,000,000) in stated value of Series D
Cumulative Convertible Preferred Stock of the Company, $.01 par value per share
("Convertible Preferred Stock"), which shall contain the terms and conditions
and be in the form of Exhibit C hereto, (iv) upon conversion or exchange of the
Securities, a warrant to purchase 10,000,000 shares of common stock of the
Company, $.01 par value per share ("Common Stock"), at an exercise price per
share equal to $.30 (the "Warrant") which shall contain the terms and conditions
and be in the form of Exhibit D hereto, (v) subject to stockholder approval of
an increase in the authorized capital stock of the Company, upon conversion of
the Convertible Preferred Stock and exercise of the Warrant, up to 50,000,000
shares of Common Stock (such shares of Common Stock, Investor Preferred Stock,
Convertible Preferred Stock and the shares of Common Stock referred to in clause
(vi) below are
1
<PAGE>
sometimes referred to herein as the "Stock") and (vi) upon conversion or
exchange of the Securities, up to 10,000,000 shares of Common Stock to be
offered in the Rights Offering (as defined in Section 9.14).
Section 1.02 Sale and Purchase of Securities. Upon the terms and
subject to the conditions set forth herein, at the Closing (as defined in
Section 1.05), the Company shall sell, convey, transfer, assign and deliver to
the Buyer, and the Buyer shall purchase, acquire and accept from the Company,
free and clear of all liens, charges, encumbrances, security interests, pledges,
equities, assessments or restrictions of any nature whatsoever, (i) Five Hundred
Thousand Dollars ($500,000) in stated value of Investor Preferred Stock and (ii)
$15,000,000 aggregate principal amount of Notes.
Section 1.03 Purchase Price. The aggregate purchase price (the
"Purchase Price") for the Securities to be purchased pursuant to Section 1.02
shall be paid by the Buyer at the Closing by (i) cancelling in part and
contributing to the capital of the Company in part the outstanding principal
amount of the term loan portion (the "Loan Amount") of the Company's obligations
under the Amended and Restated Loan and Security Agreement between the Company
and First Union National Bank of North Carolina (the "Bank"), as agent, and the
lender's named therein, dated as of June 22, 1995, as amended to date (the "Loan
Agreement") and (ii) wire transfer of $4,000,000 (the "Cash Purchase Price") to
an account(s) designated in writing by the Company.
Section 1.04 Transfer Taxes. The Company shall pay on the Closing Date
all municipal, county, state and federal sales and transfer taxes incurred and
the costs of preparing or documenting the same, if any, in connection with the
transactions contemplated by this Agreement. The Company shall prepare, and each
party, as appropriate, shall in a timely manner sign and swear to any return,
certificate, questionnaire or affidavit as to matters within its knowledge
required in connection with the payment of any such tax.
Section 1.05 Closing Date. Subject to the fulfillment or waiver of the
conditions precedent set forth in Articles IV, V, and VI, the closing of the
transactions contemplated by Section 1.02 of this Agreement (the "Closing")
shall take place at the offices of Shereff, Friedman, Hoffman & Goodman, LLP,
919 Third Avenue, New York, New York 10022 on September 22, 1997, or such other
location, date and time as to which the parties may mutually agree (such date
and time of the Closing is referred to herein as the "Closing Date").
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to the Buyer as of the date hereof
and the date of the Closing as follows:
2
<PAGE>
Section 2.01 Organization and Qualification. The Company and each of
its Subsidiaries (as defined in Rule 405 under the Securities Act of 1933, as
amended (each a "Subsidiary" and collectively, the "Subsidiaries")), is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization. The Company and each Subsidiary has all
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. The Company and each Subsidiary is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except where failure to be so duly qualified or licensed and in good standing
would not individually or in the aggregate have a Material Adverse Effect on the
Company or such Subsidiary. A true, correct and complete list of such
jurisdictions is set forth on Schedule 2.01. For purposes of this Agreement, a
"Material Adverse Effect" with respect to the Company and the Subsidiaries means
any event, circumstance or condition that, individually or when aggregated with
all other similar events, circumstances or conditions could reasonably be
expected to have, or has had, a material adverse effect on: (i) the business,
property, operations, condition (financial or otherwise), results of operations
or prospects of the Company or such Subsidiary, (ii) the Securities or (iii) the
ability of the Company to consummate the transactions contemplated hereunder.
Section 2.02 Authority. The Company has the requisite corporate power
and authority to execute and deliver this Agreement and each of the other
exhibits hereto, documents otherwise to be delivered at the Closing pursuant to
Section 5.07 hereof, the Seventh Amendment to the Loan Agreement, the
Subordination Agreement and the Assignment and Acceptance to be entered into
between the Buyer and the Bank and acknowledged by the Company and each other
agreement or instrument delivered at the Closing (the "Related Agreements") and
to consummate the transactions contemplated by this Agreement and the Related
Agreements. Except as set forth on Schedule 2.02, the execution, delivery and
performance of this Agreement and the Related Agreements, and the consummation
of the transactions contemplated hereby and thereby, have been duly authorized
by all necessary corporate action on the part of the Company, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or the Related Agreements or to consummate the transactions
contemplated hereby or thereby, except that the approval of the holders of not
less than a majority of the outstanding shares of voting stock of the Company
are required to amend the Company's certificate of incorporation (the
"Certificate of Incorporation") as contemplated by Section 9.19 hereof. This
Agreement and the Related Agreements have been duly executed and delivered by
the Company and, assuming this Agreement and the Related Agreements constitute
valid and binding obligations of the Buyer, constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms.
Section 2.03 Consents and Approvals; No Violations. Except as set forth
on Schedule 2.03, neither the execution, delivery or performance of this
Agreement or the Related Agreements by the Company, nor the consummation by it
of the transactions contemplated hereby or thereby nor compliance by it with any
of the provisions hereof or thereof will (i)
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conflict with or result in any breach of any provision of the charter or by-laws
of the Company or any Subsidiary, (ii) require any filing with, or permit,
authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency (a "Governmental Entity"), except where the failure to
obtain any permit, authorization, consent or approval, or to make such filing or
notification would not have a Material Adverse Effect, (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any Subsidiary is a party
or by which any of their properties or assets may be bound, except where such
violation or breach would not have a Material Adverse Effect, (iv) result in any
payment being required or being accelerated on the part of the Company to any
person on account of severance arrangements or otherwise or (v) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any Subsidiary or any of their properties or assets.
Section 2.04 Capitalization. The authorized and outstanding capital
stock of the Company as of the date hereof is as set forth on Schedule 2.04(a)
hereto. All of the outstanding shares of the capital stock of the Company are
validly issued, fully paid and non-assessable and have been issued by the
Company in compliance with all applicable federal and state securities laws and
all applicable rules and regulations thereunder. The Securities to be issued
hereunder have been validly authorized, and when delivered and paid for pursuant
to this Agreement, will be validly issued and outstanding, and fully paid and
non-assessable. Except for the satisfaction of any stockholder approvals and the
clearance of the Information Statement (as defined in Section 3.07), the
Convertible Preferred Stock, the Warrant and the Common Stock to be issued upon
conversion or exchange of the Securities and the Convertible Preferred Stock or
exercise of the Warrant have been validly authorized, and when delivered and
paid for pursuant to this Agreement, will be validly issued and outstanding, and
fully paid and non-assessable. Except as set forth on Schedule 2.04(b), the
issuance and sale of the Securities and the Stock will not give rise to (x) any
preemptive rights or rights of first refusal or similar rights (other than the
rights of other shareholders of the Company to purchase in the Rights Offering)
or (y) any anti-dilution rights or similar rights on behalf of anyone in
existence either on the date hereof or on or prior to the Closing Date. Except
as set forth on Schedule 2.04(b), there are no outstanding (i) securities
convertible into or exchangeable for the Company's capital stock; (ii) options,
warrants or other rights to purchase or subscribe for capital stock of the
Company; or (iii) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance of any capital stock of the
Company, any such convertible or exchangeable securities or any such options,
warrants or rights. Except as set forth on Schedule 2.04(b), there is no
outstanding right, option or other agreement of any kind to purchase or
otherwise to receive from the Company any ownership interest in the Company or
the Subsidiaries, and there is no outstanding right or security of any kind
convertible into such ownership interest. Except as set forth on Schedule
2.04(b), there is no outstanding right, option or other agreement of any kind to
register under the Securities Act of 1933, as amended, any securities of the
Company.
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Section 2.05 Subsidiaries. Schedule 2.05 attached hereto lists the name
of each Subsidiary and sets forth the number and class of the authorized capital
stock of each Subsidiary and the number of shares of each Subsidiary which are
issued and outstanding, all of which shares (except as set forth on Schedule
2.05) are owned by the Company, free and clear of all liens, claims, charges or
encumbrances of every kind. Except as set forth on Schedule 2.05, the Company
does not presently own, of record or beneficially, or control, directly or
indirectly, any capital stock, securities convertible into capital stock or any
other equity interest in any corporation, association or business entity nor is
the Company, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
Section 2.06 Articles of Incorporation and By-laws. Attached hereto on
Schedule 2.06 are true and complete copies of the Company's Certificate of
Incorporation and by-laws (the "Bylaws") as in effect on the date hereof.
Section 2.07 Compliance With Laws; Licenses.
(a) The conduct of the business of the Company and each
Subsidiary is in material compliance with all federal, state, local or foreign
laws, rules, regulations or ordinances, or judgments, injunctions, writs,
decrees, orders or guidance documents and memos of any court or Governmental
Entity (collectively, the "Orders"), and all industry manufacturing and safety
standards, and the Company has not received any notice of any material violation
of any Order which remains outstanding except those listed on Schedule 2.07.
Neither the Company nor any Subsidiary is subject to any Order currently in
effect which could individually or in the aggregate have a Material Adverse
Effect.
(b) Except as set forth on Schedule 2.07, the Company
possesses all licenses, permits, consents, authorizations, registrations and
approvals of, with or from Governmental Entities which have jurisdiction over
it, and occupancy, fire, business and other permits from local officials
("Licenses"), and is in full compliance with the terms thereof except where any
violations, or the absence of such License, would not singly, or in the
aggregate, have a Material Adverse Effect. All of the Licenses are valid and in
full force and effect.
Section 2.08 Litigation; Investigations. Schedule 2.08 sets forth a
complete and accurate list of all suits, claims, proceedings, investigations,
audits or reviews which are pending or, to the best knowledge of the Company,
threatened against, probable of assertion against or affecting the Company or
any Subsidiary, any of their directors or any properties or assets used in the
conduct of the business of the Company (other than routine proceedings or
routine, uncontested claims for benefits under any Plans (as defined in Section
2.10)). Except as disclosed in Schedule 2.08 (i) no investigation, audit or
review by any Governmental Entity with respect to the Company or any Subsidiary
is pending or, to the best of the Company's knowledge, threatened, nor has any
Governmental Entity indicated to the Company an intention to conduct the same,
and (ii) there is no action, suit or proceeding pending or, to the best of the
Company's knowledge, threatened against or affecting the Company or any
Subsidiary at law or in equity
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where the relief claimed exceeds $10,000 above applicable insurance coverage, or
before any Governmental Entity. Except as set forth on Schedule 2.08, there is
no pending action or suit seeking in excess of $250,000 brought by the Company
or any Subsidiary against others.
Section 2.09 Taxes.
(a) The terms "Tax" and "Taxes" shall mean any and all taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, premium, sales, use, ad valorem,
transfer, franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupation, property or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties (including penalties for failure to file in accordance with
applicable information reporting requirements), and additions to tax by any
authority, whether federal, state, or local or domestic or foreign. The term
"Tax Return" shall mean any report, return, form, declaration or other document
or information required to be supplied to any authority in connection with
Taxes.
(b) All Tax Returns for all periods which end prior to or
which include the Closing Date that are or were required to be filed prior to
Closing by the Company have been or shall be filed on a timely basis in
accordance with the applicable laws of each Governmental Entity. The Company
shall timely file or cause to be filed all franchise, income or other Tax
Returns including Tax Returns relating to the transactions contemplated by the
Agreement that shall be required to be filed after the Closing Date. All such
Tax Returns that have been filed were, when filed, and continue to be, true,
correct and complete. All such franchise, income or other Tax Returns that will
be filed shall be true, correct and complete when filed.
(c) Schedule 2.09(c) hereto lists all United States federal,
state, local and foreign income Tax Returns that have been filed since January
1, 1991 by the Company that have been audited by any Governmental Entity. Except
as set forth on Schedule 2.09(c), any deficiencies proposed as a result of such
audits have been paid or finally settled. The Company is not aware of any fact
which would constitute substantial grounds for any further material tax
liability with respect to the years which have not been or are currently being
audited. There are no outstanding waivers or extensions of any statute of
limitations relating to the payment of Taxes or the assessment of any Taxes by
the Company to which the Company may be liable, and no Governmental Entity has
either formally or informally requested such a waiver or extension.
(d) Except as set forth on Schedule 2.09(d) hereto, the
Company has paid all of its Taxes that have become due and will make
arrangements for the timely payment of any Taxes that may become due, for all
periods which end prior to or which include the Closing Date, including all
Taxes reflected, or required to be reflected, on the Tax Returns referred to in
this Section 2.09, or in any assessment, proposed assessment or notice, either
formal or informal, received by the Company, except such Taxes, if any, as are
set forth on Schedule 2.09(d) hereto that are being contested in good faith and
as to which adequate reserves (determined in accordance with GAAP (as defined
herein)) have been provided. All Taxes that the Company is
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or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the appropriate
Governmental Entities. There are no liens with respect to Taxes on the capital
stock or any property or assets of the Company other than permitted liens for
certain Taxes not yet due (or taxes that are being contested in good faith by
appropriate proceedings and for which adequate reserves (determined in
accordance with GAAP) have been provided).
(e) The Company has not agreed to make, nor is it required to
make, any adjustments under Section 481(a) of the Code by reason of or change in
accounting method or otherwise.
(f) Except as set forth on Schedule 2.09(f), with respect to
the Subsidiaries, the Company is not, and has never been (and was not required
to have been) included in any consolidated, combined or unitary Tax Return with
any other person.
(g) Except as set forth on Schedule 2.09(g), the Company is
not a party to any agreement or arrangement (whether or not written) providing
for the payment (whether by indemnification or otherwise) of the Tax liability
of (or the relinquishment of any Tax Refund to) any other person, and is not
otherwise liable, by law, judgment or otherwise, for the Tax liability of any
other person.
(h) There are no outstanding requests for rulings with any
Taxing or revenue authority that might affect the operations or Tax liability of
the Company.
(i) The Company was not a United States Real Property Holding
Corporation within the meaning of Section 897 (c)(2) of the Code on any
applicable determination date during the preceding 5-year period and will not
constitute such a United States Real Property Holding Corporation on any
applicable determination date during any 5-year period ending on any date on
which the Buyer will acquire an interest in the Company pursuant to this
Agreement and the Related Agreements.
(j) Except as set forth on Schedule 2.09(j) hereto (i) no
deficiency for any Taxes has been proposed, asserted or assessed against the
Company that has not been resolved and properly paid in full, (ii) no waiver,
extension or comparable consent given by the Company regarding the application
of the statute of limitations with respect to any Taxes or Tax Returns is
outstanding, nor is any request for any such waiver or consent pending, (iii)
there is no Tax audit or other administrative proceeding or court proceeding
with regard to any Taxes or Tax Returns pending, nor has there been any notice
to the Company by any Taxing authority regarding any Tax audit or other
proceeding which has not been completed, nor, to the best knowledge of the
Company, is any such Tax audit or other proceeding threatened with regard to any
Taxes or Tax Returns; (iv) no power of attorney authorizing any person to take
any action on behalf of the Company with respect to any Taxes is currently in
force; and (v) there are no pending claims for refund of Taxes filed by the
Company.
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(k) None of the assets of the Company are assets that the
Buyer or the Company is or shall be required to treat as being owned by another
person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately before the enactment of the
Tax Reform Act of 1986, or is "tax-exempt use property" within the meaning of
Section 168(h)(1) of the Code.
(l) The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code.
(m) The Company has not made an election under Section 341(f)
of the Code.
(n) For purpose of this Section 2.09, references to the
Company shall also refer to the Subsidiaries.
Section 2.10 Employee Benefit Plans; ERISA.
(a) Attached hereto as Schedule 2.10 are complete and accurate
copies of all employee benefit plans, all employee welfare benefit plans, all
employee pension benefit plans, all multi-employer plans and all multi-employer
welfare arrangements (as defined in Sections 3(3), (1), (2), (37) and (40),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), which are currently maintained and/or sponsored by the Company (or
any Subsidiary), or to which the Company (or any Subsidiary) currently
contributes, or has an obligation to contribute in the future (including,
without limitation, benefit plans or arrangements that are not subject to ERISA,
such as employment agreements and any other agreements containing "golden
parachute" provisions and deferred compensation agreements), together with
copies of any trusts related thereto and a classification of employees covered
thereby (collectively, the "Plans"). Schedule 2.10 sets forth all of the Plans
that have been terminated within the past three years.
(b) Except for the Plans, the Company (including any
Subsidiary) does not maintain or sponsor, nor is it a contributing employer to,
a pension, profit-sharing, deferred compensation, stock option, employee stock
purchase or other employee benefit plan, employee welfare benefit plan, or any
other arrangement with its employees whether or not subject to ERISA. All Plans
are in substantial compliance with all applicable provisions of ERISA and the
regulations issued thereunder, as well as with all other applicable laws, and,
in all material respects, have been administered, operated and managed in
substantial accordance with the governing documents. All Plans that are intended
to qualify (the "Qualified Plans") under Section 401(a) of the Code are so
qualified and have been determined by the IRS to be so qualified (or
applications for determination letters have been timely submitted to the
Internal Revenue Service (the "IRS")), and copies of the current plan
determination letters, most recent actual valuation reports, if any, most recent
Form 5500, or, as applicable, Form 5500-C/R filed with respect to each such
Qualified Plan or employee welfare benefit plan and most recent trustee
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or custodian report, are included as part of Schedule 2.10. To the extent that
any Qualified Plans have not been amended to comply with applicable law, the
remedial amendment period permitting retroactive amendment of such Qualified
Plans has not expired and will not expire within 120 days after the Closing
Date. All reports and other documents required to be filed with any Governmental
Entity or distributed to plan participants or beneficiaries (including, but not
limited to, annual reports, summary annual reports, actuarial reports, PBGC-1
forms, audits or Tax Returns) have been timely filed or distributed. Neither any
Plan nor the Company (included any Subsidiary) has engaged in any transaction
prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA. No Plan has incurred an accumulated funding deficiency (as defined in
Section 412(a) of the Code and Section 302(l) of ERISA); and no event has
occurred pursuant to which the Company (including any Subsidiary) could have any
direct or indirect liability whatsoever (including being subject to any
statutory lien to secure payment of any such liability), to the Pension Benefit
Guaranty Corporation ("PBGC") under Title IV of ERISA or to the IRS for any
excise tax or penalty with respect to any plan now or hereafter maintained or
contributed to by the Company or any member of a "controlled group" (as defined
in Section 4001(a)(14) of ERISA) that includes the Company; and the Company
(including any Subsidiary) or any member of a "controlled group" (as defined
above) that includes the Company does not currently have (or at the Closing Date
will not have) any obligation whatsoever to contribute to any "multi-employer
pension plan" (as defined in ERISA Section 4001(a)(14)), nor has any withdrawal
liability whatsoever (whether or not yet assessed) arising under or capable of
assertion under Title IV of ERISA (including, but not limited to, Sections 4201,
4202, 4203, 4204, or 4205 thereof) been incurred by any Plan. Further, except as
set forth on Schedule 2.10,:
(i) since January 1, 1992, there have been no
terminations, partial terminations or discontinuance of contributions
to any Qualified Plan without a determination by the IRS that such
action does not adversely affect the tax-qualified status of such
Qualified Plan;
(ii) since January 1, 1992, no Plan which is subject
to the provisions of Title IV of ERISA, has been terminated;
(iii) since January 1, 1992, there have been no
"reportable events" (as that phrase is defined in Section 4043 of
ERISA) with respect to any Plan which were not properly reported;
(iv) the valuation of assets of any Qualified Plan,
as of the Closing Date, shall equal or exceed the actuarial present
value of all accrued pension benefits under any such Qualified Plan in
accordance with the assumptions contained in the Regulations of the
PBGC governing the funding of terminated defined benefit plans;
(v) with respect to Plans which qualified as "group
health plans" under Section 4980B of the Code and Section 607(1) of
ERISA and related regulations (relating to the benefit continuation
rights imposed by "COBRA"), the Company (including any
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Subsidiary) has complied (and on the Closing Date will have complied)
in all material respects with all reporting, disclosure, notice,
election and other benefit continuation requirements imposed thereunder
as and when applicable to such plans, and the Company (including any
Subsidiary) has not incurred (and will not incur) any direct or
indirect liability and is not (and will not be) subject to any loss,
assessment, excise tax penalty, loss of federal income tax deduction or
other sanction, arising on account of or in respect to any direct or
indirect failure by the Company (including any Subsidiary), at any time
prior to the Closing Date to comply with any such federal or state
benefit continuation requirement, which is capable of being assessed or
is asserted before or after the Closing Date directly or indirectly
against the Company (including any Subsidiary) with respect to such
group health plans;
(vi) the Company (including any Subsidiary) is not
now nor has it been within the past five years a member of a
"controlled group" as defined in ERISA Section 4001(a)(14) other than
with respect to each other;
(vii) there is no pending litigation, arbitration or
disputed claim, settlement or adjudication proceeding, and, to the best
of the Company's knowledge, there is no threatened litigation,
arbitration or disputed claim, settlement or adjudication proceeding,
or investigation with respect to any Plan, or with respect to any
fiduciary, administrator or sponsor thereof (in their capacities as
such), or any party in interest thereof; and
(viii) the Company (including any Subsidiary) has not
incurred liability under Sections 4062, 4063, 4064 and 4069 of ERISA.
Section 2.11 Labor Relations. Except as set forth on Schedule 2.11: (i)
the Company and each Subsidiary has paid and performed all material obligations
with respect to its employees, independent sales representatives, consultants,
agents, officers and directors, including without limitation all wages,
salaries, commissions, bonuses, severance pay, vacation pay, benefits and other
direct compensation for all services performed by such persons to the date
hereof and all amounts required to be reimbursed to such persons; (ii) the
Company and each Subsidiary is in compliance in all material respects with all
federal, state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours;
(iii) there is no pending, or to the Company's knowledge threatened, charge,
complaint, allegation, application or other process against the Company or any
Subsidiary before the National Labor Relations Board or any comparable state,
local or foreign agency, governmental or administrative; (iv) there is no labor
strike, dispute, slowdown or work stoppage or other job action pending, or to
the Company's knowledge, threatened against or otherwise materially affecting or
involving the Company or any Subsidiary; and (v) no employees of the Company or
any Subsidiary are covered by any collective bargaining agreements and to the
best knowledge of the Company no effort is being made by any union to organize
any of the Company's or the Subsidiaries' employees.
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Section 2.12 Insurance Policies. The Company and each Subsidiary
maintain insurance covering all risks customarily insured against and in amounts
reasonable and customary in light of the Company's and the Subsidiaries' assets,
properties, business, operations, products and services as the same are
presently owned or conducted. Each current policy is in full force and effect
and all premiums are currently paid and no notice of cancellation or termination
has been received with respect to any such policy. Such policies have been
sufficient for compliance with all material requirements of law. Except as set
forth on Schedule 2.12, there are no material claims, actions, suits or
proceedings arising out of or based upon any of such policies of insurance and,
to the knowledge of the Company, no basis for any such material claim, action,
suit or proceeding exists. The Company has not been refused any insurance with
respect to its assets and operations, nor has its coverage been limited by any
insurance carrier to which it has applied for any such insurance or with which
it has carried insurance during the last five (5) years.
Section 2.13 Environmental Laws.
(a) As used in this Section 2.13, the following terms shall
have the following meanings:
(A) "CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act, as amended.
(B) "CERCLIS" means the Comprehensive Environmental Response
Compensation and Liability Information System.
(C) "Environmental Laws" means all applicable federal, state,
local and foreign laws, rules, regulations, codes, ordinances, orders,
decrees, directives, treaties, protocols, permits, licenses and
judgments relating to pollution, contamination or protection of the
environment (including without limitation all applicable federal,
state, local and foreign laws, rules, regulations, codes, ordinances,
orders, decrees, directives, permits, licenses and judgments relating
to Hazardous Materials).
(D) "Hazardous Materials" means any dangerous, toxic or
hazardous pollutant, contaminant, chemical, waste, material or
substance as defined in or governed by any federal, state, local or
foreign law, statute, code, ordinance, regulation, rule or other
requirement relating to such substance or otherwise relating to the
environment or human health or safety, including without limitation any
chemical, waste, material, substance, pollutant or contaminant that
might cause any injury to human health or safety or to the environment
or might subject the Company or any Subsidiary to any environmental
costs or liability under any Environmental Law.
(E) "Regulatory Actions" mean any claim, demand, action or
proceeding with respect to the Company or any Subsidiary brought or
instigated by any governmental
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authority in connection with any Environmental Law, including without
limitation, civil, criminal and/or administrative proceedings, and
whether or not seeking environmental costs.
(F) "Release" means the spilling, leaking, disposing,
discharging, emitting, depositing, ejecting, leaching, escaping or any
other release or threatened release, however defined, whether
intentional or unintentional, of any Hazardous Material in quantities
or concentrations regulated under Environmental Laws.
(G) "Third-Party Environmental Claims" means any third-party
claim, action, demand or proceeding (other than a Regulatory Action)
based on negligence, trespass, strict liability, nuisance, toxic tort,
or any other cause of action or theory under common law or
Environmental Law.
(b) Attached hereto as Schedule 2.13 are all environmental
site assessments, reports, documentation, information and other studies relating
to the presence or possible presence of Hazardous Materials (as defined
hereafter) on, at, in, under, about or from the Real Property (as defined in
Section 2.17) or from the activities of the Company or any Subsidiary on, at,
in, under, about or from the Real Property (collectively, the "Environmental
Assessments").
(c) The Company and each Subsidiary at all times has been in
compliance with all applicable Environmental Laws. Neither, the Company nor any
Subsidiary has received any notice of any violation of Environmental Law
relating to the Real Property or the operations of the Company or any
Subsidiary. No Third-Party Environmental Claims and/or Regulatory Actions have
been asserted or assessed against the Company or any Subsidiary relating to the
Real Property or the operations of the Company or any Subsidiary, and to the
knowledge of the Company after due inquiry, no Third-Party Environmental Claims
and/or Regulatory Actions are pending or threatened against the Company or any
Subsidiary relating to the Real Property or the operations of the Company or any
Subsidiary or to properties owned by the Company to which the Company has
shipped Hazardous Materials for treatment, storage or disposal.
(d) The Company and each Subsidiary has obtained all permits,
licenses, certificates of compliance, approvals and other authorizations
relating to any Environmental Law (collectively referred to herein as
"Authorizations") necessary for the operation of the Company and each
Subsidiary. The Company and each Subsidiary is in compliance with the
requirements of all Authorizations.
(e) The Real Property is not listed in the United States
Environmental Protection Agency's (the "EPA") National Priorities List of
Hazardous Waste Sites under CERCLA or any similar state list, schedule, log,
inventory or record (however defined), of sites from which there has been a
Release of Hazardous Materials. No part of the owned Real Property or to the
knowledge of the Company, the leased Real Property was ever used, nor is it now
being used, as a landfill, dump or other disposal, storage, transfer, handling,
or treatment
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area for Hazardous Materials, or as a gasoline service station or a facility for
selling, dispensing, storing, transferring, disposing or handling petroleum
and/or petroleum products.
(f) All transfer, transportation or disposal of Hazardous
Materials by the Company or any Subsidiary to properties not owned, leased or
operated by the Company or any Subsidiary has been in compliance with applicable
Environmental Laws. Neither the Company nor any Subsidiary has transported or
arranged for the transportation of any Hazardous Materials to any location which
is (A) listed on the EPA's National Priorities List of Hazardous Waste Sites
under CERCLA or any similar state list, schedule, log, inventory or record
(however defined), of sites from which there has been a Release of Hazardous
Materials; (B) listed for possible inclusion on the National Priorities List by
the EPA in CERCLIS or any similar state or local list; or (C) the subject of any
Regulatory Action or Third-Party Environmental Claim.
(g) There has not been, and is not now occurring, any Release
of any Hazardous Material on, in, under, about, or from the Real Property,
including to the knowledge of the Company, a Release that has come to be located
on or under the Real Property from another location.
(h) Except as set forth on Schedule 2.13(h), no above ground
or underground storage tanks or wells are located on, under or about the Real
Property, or have been located on, under or about the Real Property and then
subsequently been removed or filled. If any such storage tanks exist on, under
or about the Real Property, such storage tanks have been duly registered with
all appropriate governmental entities and are otherwise in compliance with all
applicable Environmental Laws.
(i) Except as set forth on Schedule 2.13(i), the Company has
successfully taken all remedial measures, conducted all tests and analyses and
instituted all policies recommended to the Company by HTS Environmental Group in
their Phase I Environmental Assessments of the Company's facilities in Grenada,
Mississippi and York, Pennsylvania dated as of January 14, 1992 and January 15,
1992, respectively, and, as a result of such action on the part of the Company,
no condition or thing has come to the attention of the Company which would (or
with the lapse of time will) individually or in the aggregate have a Material
Adverse Effect.
Section 2.14 Financial Statements and Books and Records. The Company
has previously delivered to the Buyer a copy of the following consolidated
financial statements: the balance sheet of the Company as at December 28, 1996
and June 30, 1997, and the related results of operation and statement of cash
flows for the periods then ended (the "Financial Statements"). Copies of the
Financial Statements are annexed as Schedule 2.14 hereto. The Financial
Statements are true and accurate, are in accordance with the books and records
of the Company and present fairly in all material respects the financial
position and related results of operations of the Company and the Subsidiaries
as of the times and for the periods referred to herein, in accordance with U.S.
generally accepted accounting principles consistently applied throughout
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the periods covered thereby ("GAAP"). All of the financial books and records of
the Company have been made available to the Buyers.
Section 2.15 Absence of Liabilities. Except as described on Schedule
2.15, the Company and each Subsidiary has no debt, liabilities or obligations of
any nature, whether accrued, absolute, contingent or otherwise, whether due or
to become due and whether or not the amount thereof is readily ascertainable,
that are not reflected as a liability in the Financial Statements except for
liabilities incurred by the Company or the Subsidiaries in the ordinary course
of business consistent with past practices which are not otherwise prohibited
by, in violation of or which will result in a breach of the representations,
warranties and covenants of the Company contained in this Agreement.
Section 2.16 Absence of Specified Changes. Except as disclosed on
Schedule 2.16, in the Company's Current Report on Form 8-K dated May 19, 1997,
in the Company's Annual Report on Form 10-K, in the Company's Quarterly Report
on Form 10-Q for the period ended June 30, 1997, or as contemplated by the
transactions to be consummated at the Closing, since December 28, 1996, there
has not been with respect to the Company (including any Subsidiary) any:
(a) action which would result in a material adverse change,
whether direct or indirect, in the business, operations, condition (financial or
otherwise), prospects, liabilities or assets of the Company and the Company does
not know of any change that is threatened or pending which could have a Material
Adverse Effect;
(b) transaction not in the ordinary course of business,
including without limitation any sale of all or substantially all of the assets
of the Company or any merger of the Company and any other entity;
(c) unfulfilled commitments requiring expenditures by the
Company exceeding $250,000 (excluding commitments expressly described elsewhere
in this Agreement or the Schedules hereto or which were undertaken in the
ordinary course of business consistent with past practice);
(d) material damage, destruction or loss, whether or not
insured;
(e) failure to maintain in full force and effect substantially
the same level and types of insurance coverage as in effect on December 28, 1996
or destruction, damage to, or loss of any asset of the Company (whether or not
covered by insurance) that materially and adversely affects the business,
operations, condition (financial or otherwise), prospects, liabilities or assets
of the Company;
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(f) change in accounting principles, methods or practices,
investment practices, claims, payment and processing practices or policies
regarding intercompany transactions;
(g) revaluation of any assets or material write down of the
value of any inventory;
(h) loan or payment to any stockholder or any declaration,
setting aside, or payment of a dividend (whether in cash or in shares of capital
stock) or other distribution in respect of its capital stock, or any direct or
indirect redemption, purchase or other acquisition of any shares of its capital
stock;
(i) issuance or sale of any shares of capital stock or of any
other equity security or any security convertible into or exchangeable or
exercisable for equity securities (except pursuant to the exercise of
outstanding derivative securities or otherwise pursuant to currently authorized
and outstanding employee stock options) or the repricing of any such share of
capital stock, other equity security or securities convertible into or
exchangeable or exercisable for equity securities;
(j) amendment to its Certificate of Incorporation or By-laws
other than those disclosed on Schedule 2.06;
(k) sale, assignment or transfer of any tangible or intangible
asset, including any rights to intellectual property, in the aggregate in excess
of $50,000, except in the ordinary course of business consistent with past
practice;
(l) (x) disposition of or lapse of any material patent,
trademark, trade name, service mark or copyright or any application for the
foregoing, (y) disposition of any material technology, software or know-how, or
(z) disposition of any license, permit or authorization to use any of the
foregoing or any other material right;
(m) mortgage, pledge or other encumbrance, including liens and
security interests, of any tangible or intangible asset;
(n) discharge or satisfaction of any lien or encumbrance or
payment or cancellation of any liability other than payment of current
liabilities in the ordinary course of business consistent with past practice;
(o) cancellation of any debt owed to the Company or any
Subsidiary or waiver or release of any material contract, right or claim, except
for cancellations, waivers and releases in the ordinary course of business which
do not exceed $ 250,000 in the aggregate;
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(p) indebtedness incurred for borrowed money or any commitment
to borrow money, any capital expenditure or capital commitment requiring an
expenditure of monies in the future, any incurrence of a contingent liability or
any guaranty or commitment to guaranty the indebtedness of others entered into,
by the Company, other than customary transactions in the ordinary course of
business not in excess of $ 250,000 in the aggregate;
(q) amendment, termination or revocation of, or a failure to
perform obligations or the occurrence of any default under, any contract or
agreement to which the Company, is, or as of December 28, 1996 was, a party or
of any license, permit or franchise required for the continued operation of any
business conducted by the Company on December 28, 1996;
(r) increase or commitment to increase the salary or other
compensation payable or to become payable to any of its officers, directors or
employees, agents or independent contractors, or the payment of any bonus to the
foregoing persons or enter into any employment agreement except as may be
required under employment, collective bargaining or termination agreements in
effect on the date hereof or, solely with respect to employees other than
officers, executive officers and directors, in the ordinary course of business
and consistent with past practice and applicable policies and procedures of the
Company; or
(s) agreement or understanding to take any of the actions
described above in this Section 2.16.
Section 2.17 Real Property; Leases.
(a) Schedule 2.17(a) sets forth a correct and complete list of
all real property owned by the Company or any Subsidiary and Schedule 2.17(b)
sets forth a correct and complete list of each lease, sublease or other
arrangement pursuant to which the Company or any Subsidiary leases or subleases
real property (collectively, the owned and leased or subleased real property is
herein referred to as "Real Property"). The Company and the Subsidiaries are the
sole and exclusive legal and equitable owner of all right, title and interest
in, and have good, marketable and insurable title in fee simple to, all of the
Real Property set forth on Schedule 2.17 as being owned by the Company or such
Subsidiary, free and clear of all liens, security interests, charges or
encumbrances of any kind, except for liens the presence of which would not be
likely to have a Material Adverse Effect. All Real Property is in condition and
repair adequate for its current use, is suitable for the purposes for which it
is presently being used and in the aggregate is adequate to meet all present
requirements of the business of the Company and each of its Subsidiaries, as
currently conducted.
(b) The Company has heretofore delivered or will deliver to
the Buyer prior to Closing a complete and accurate copy of each lease and
sublease included on Schedule 2.17(b). Unless otherwise noted on Schedule
2.17(b), the Company or a Subsidiary is the sole lessee or sublessee under each
of the leases and subleases listed on Schedule 2.17(b) and each such lease
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and sublease is valid and in full force and effect and enforceable in accordance
with its terms and has not been further supplemented, amended or modified.
Unless otherwise noted on Schedule 2.17(b), there exists no event of default or
event, occurrence, condition or act, including without limitation the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereunder, which constitutes or would constitute (with notice or
lapse of time or both) a default in any respect under any of the leases or
subleases on Schedule 2.17(b) that would cause, individually or in the
aggregate, a Material Adverse Effect. To the best of the Company's knowledge,
neither the Company nor any Subsidiary has received any notice of any event of
default or any event, occurrence, condition or act, including without limitation
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder, which constitutes or would constitute (with
notice or lapse of time or both) a default in any respect under any of the
leases or subleases on Schedule 2.17(b). The leased premises are structurally
sound with no material defects and are in good operating condition and repair
and are adequate for the uses to which they are being put; and none of such
leased premises are in need of maintenance or repairs except for ordinary,
routine maintenance and repairs which are not material in nature or cost. The
Real Property covered by any leasehold interests listed on Schedule 2.17(b), the
buildings, fixtures and improvements on such, and the present use thereof,
comply in all material respects with all restrictive covenants, deeds and other
restrictions and all zoning laws, ordinances and regulations of Governmental
Entities or other authorities having jurisdiction thereof, including provisions
relating to permissible nonconforming uses, if any, and any such premises are
not presently affected, nor to the best knowledge of the Company threatened, by
any condemnation or eminent domain proceeding or any proceeding by a mortgagee.
Section 2.18 Equipment and Personal Property. Except as described in
Schedule 2.18, all equipment and tangible personal property used by the Company
or any Subsidiary are either owned, free and clear of all liens and
encumbrances, or are (i) used under capital leases reflected on the Financial
Statements or (ii) used under operating leases. All such leases are valid and in
full force and effect and enforceable in accordance with their terms and have
not been further supplemented, amended or modified. Neither the Company nor any
Subsidiary has received any notice of, and there exists no event of default, or
event, occurrence, condition or act, including, without limitation, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein, which constitutes or would constitute (with
notice or lapse of time or both) a default in any respect under any such lease.
All of the equipment and tangible personal property owned or leased by the
Company and each Subsidiary is in good operating condition and repair, subject
to normal wear and tear, none of such assets is in need of maintenance or
repairs except for ordinary, routine maintenance and such assets are suitable
for and operating according to their intended use in accordance with industry
standards.
Section 2.19 Intangible Property. Schedule 2.19 sets forth a complete
and accurate list of the Intangible Property. The Company and each Subsidiary
owns or possesses, or has adequate and enforceable licenses or other rights to
use and license for all purposes, all proprietary rights necessary for its
business (as now conducted or as proposed to be conducted)
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without any conflict with or infringement of the rights of others including,
without limitation, trade secrets, inventions, processes, formulae, technology,
technological data, information and know-how. Except as set forth on Schedule
2.19, with respect to the Company and each Subsidiary (i) the Company or such
Subsidiary has sole and exclusive good, valid and transferable title with
respect to the Intangible Property identified thereon as owned by the Company,
(ii) no royalties or other consideration is required in connection with the
Company's or any Subsidiary's use and enjoyment of the Intangible Property,
except as provided under the terms of any license agreement or other instrument
pursuant to which the Company has obtained rights to use such Intangible
Property identified on Schedule 2.19 as not owned by the Company and (iii) no
material claim has been asserted by any person against the Company or any
Subsidiary with respect to the ownership or use of any Intangible Property by
the Company or any Subsidiary nor has the Company or any Subsidiary asserted any
similar claim against any person, and to the best knowledge of the Company,
there exists no valid basis for any such claim. Except as set forth on Schedule
2.19, the use of the Intangible Property does not violate or infringe, and has
not violated or infringed, the rights of any person. Except as set forth on
Schedule 2.19, neither the Company nor any Subsidiary is a licensor with respect
to any Intangible Property. "Intangible Property" means all trade names,
trademarks, service marks, patents and copyrights (including any registrations
or pending applications for registration of any of the foregoing), and all
licenses or other rights relating to any of the foregoing that are attributable
to the conduct of, used in, or related to, the operations of the Company and
each Subsidiary.
Section 2.20 Software. All computer software, databases and programs
utilized by the Company and each Subsidiary are owned by, or are licensed to the
Company or a Subsidiary, without any restrictions thereon other than those
generally applicable to software licenses pursuant to the licensor's general
terms and conditions.
Section 2.21 Contracts.
(a) Schedule 2.21 sets forth an accurate, correct and complete
list of the following contracts, agreements, arrangements or instruments (the
"Contracts") in effect at any time from January 1, 1996 through the date hereof,
to which the Company or any Subsidiary is or was a party, by which it is bound
or pursuant to which the Company or any Subsidiary is or was an obligor or a
beneficiary:
(i) Any material contracts with respect to tangible
property other than Real Property which are included on Schedule 2.17,
all Contracts with affiliates (whether or not material) other than
employment agreements providing for an annual salary and bonus of less
than $100,000 or option agreements, material license agreements,
termination agreements, consulting or severance agreements, and
agreements relating to labor or collective bargaining matters;
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(ii) Any Contract for capital expenditures or
services by the Company or any Subsidiary which involves consideration
payable by the Company or any Subsidiary in excess of $250,000 in any
fiscal year;
(iii) Any Contract evidencing any indebtedness for
borrowed money in excess of $ 250,000 or obligation for the deferred
purchase price of assets in excess of $250,000 (excluding normal trade
payables) or guaranteeing any indebtedness, obligation nor liability in
excess of $ 250,000;
(iv) Any Contract wherein the Company or any
Subsidiary has agreed to a non-competition provision;
(v) Any joint venture, partnership, cooperative
arrangement or any other Contract involving a sharing of profits;
(vi) Any Contract with any Governmental Entity other
than for services in the ordinary course of business;
(vii) Manufacturers' representative, sales agency,
dealer or advertising Contract which is not terminable on notice
without cost or other liability to the Company or any Subsidiary;
(viii) Contract for the conversion of any obligation,
instrument or security, into debt or equity securities of the Company
or any Subsidiary other than the Securities, the Stock or the Warrant;
(ix) Settlement agreement of any material
administrative or judicial proceeding within the past five years other
than those the effect of which is reflected in the Financial
Statements;
(x) Any power of attorney, proxy or similar
instrument granted by or to the Company or any Subsidiary other than in
the ordinary course of business consistent with past practice; and
(xi) Any other material Contract related to the
business of the Company or any Subsidiary, as currently conducted or
any other Contract not in the ordinary course of business of the
Company consistent with past practice.
Accurate, correct and complete copies of each such written
Contract and written summaries of each such oral Contract have been delivered by
the Company to the Buyer.
(b) Each Contract listed or referred to on Schedule 2.21 to
which the Company or any Subsidiary is a party, by which it is bound or pursuant
to which the Company or
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any Subsidiary is an obligor or a beneficiary is in full force and effect,
except where the failure to be in full force and effect will not cause a
Material Adverse Effect. The Company and each Subsidiary has complied with all
commitments and obligations on its part to be performed or observed under each
such Contract, except for such noncompliance which is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect. To the
knowledge of the Company, each party to each such Contract other than the
Company or any Subsidiary has complied, and is in continuous compliance, with
all commitments and obligations on its part to be performed or observed
thereunder, except for such noncompliance which is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect. The Company
has not received any notice of a default under any such Contract and no event or
condition has happened or presently exists which constitutes a default or, after
notice or lapse of time or both, would constitute a default under any such
Contract, except for such notices and defaults which are not reasonably likely,
individually or in the aggregate (together with the items set forth in Schedule
2.21 annexed hereto), to have a Material Adverse Effect.
(c) Except as set forth on Schedule 2.21, no consent of any
other party to any of the Contracts is required in connection with the
execution, delivery and performance of this Agreement by the Company.
Section 2.22 Inventory. All inventory of the Company and each
Subsidiary, whether reflected in the Financial Statements or otherwise and
whether existing now or at the Closing, consists or will consist of a quality
and quantity usable in the ordinary course of business, except for items of
obsolete materials, prior season, slow moving, irregular or defective stock and
materials of below-standard quality, all of which have been written off or down
to fair market value as reflected in the Financial Statements. The inventory
reflected in the Financial Statements were on the date thereof properly recorded
thereon and reflected at such date proper reserves as determined in accordance
with GAAP, consistently applied, and stated, on an aggregate basis, at the lower
of cost (based on the first-in, first-out method) or market value. The current
inventory of the Company and each Subsidiary are not, except in amounts which in
the aggregate are not material, in excess of their reasonably anticipated
requirements. The current inventory of the Company conforms to customary trade
standards for marketable goods.
Section 2.23 Title to Properties; Liens. The Company and each
Subsidiary has good, valid and marketable title to all of its assets, free and
clear of any lien, charge or other encumbrance, except for (a) the lien of the
Bank pursuant to the Loan Agreement, (b) such liens or other encumbrances
specifically set forth on Schedule 2.23 and (c) liens for current Taxes not yet
due and payable.
Section 2.24 Condition of Assets. The assets, including, without
limitation, manufacturing plants, of the Company and each Subsidiary are in good
working order and condition, subject to normal wear and tear, and have no
defects which would materially interfere with the business of the Company or any
Subsidiary as presently conducted or to be conducted after the Closing Date.
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Section 2.25 Transactions with Affiliates. Except as set forth on
Schedule 2.25 or as contemplated by the transactions to be consummated at the
Closing, no officer, director or 5% stockholder of the Company or any Subsidiary
(i) has borrowed money from, or loaned money to, the Company or any Subsidiary
pursuant to which any amount remains outstanding, (ii) is a party to any
contract with the Company or any Subsidiary,(iii) has asserted or threatened to
assert any claim against the Company or any Subsidiary within the past 36 months
or that has not been fully discharged or (iv) is engaged in any transaction with
the Company or any Subsidiary.
Section 2.26 Valid Transfer. At the Closing, the Company will convey to
the Buyer good title to the Securities purchased free and clear of any liens,
claims, charges, encumbrances, security interests, pledges, equities,
assessments or restrictions of any nature whatsoever. Upon conversion or
exchange, if any, of the Securities into Convertible Preferred Stock, the
Warrant and Common Stock, the Company will convey to the holders of such
securities good title to the Convertible Preferred Stock, the Warrant and Common
Stock purchased thereby free and clear of any liens, claims, charges,
encumbrances, security interests, pledges, equities, assessments or restrictions
of any nature whatsoever. The form of certificates representing the Stock to be
delivered to the Buyer shall conform to all applicable requirements of the State
of Delaware.
Section 2.27 Absence of Certain Practices. To the best knowledge of the
Company, neither the Company, the Subsidiaries, nor any director, officer,
agent, employee or other person acting on their behalf, has given or agreed to
give any gift or similar benefit of more than nominal value to any customer,
supplier, or governmental employee or official or any other person who is or may
be in a position to help or hinder the Company or any Subsidiary or assist the
Company or any Subsidiary in connection with any proposed transaction involving
the Company or any Subsidiary, which gift or similar benefit, if not given in
the past, would have materially and adversely affected the business or prospects
of the Company or any Subsidiary.
Section 2.28 Accounts Payable and Accrued Expenses. All accounts
payable and accrued expenses reflected on the Financial Statements arose from
bona fide transactions in the ordinary course of business.
Section 2.29 Accounts Receivable. All accounts receivable reflected on
the Financial Statements arose from bona fide transactions in the ordinary
course of business and, to the best knowledge of the Company, there are no facts
or circumstances which will cause such receivables not to be current and fully
collectible in accordance with their terms, net of any reserves or allowances
reflected on the Financial Statements for accounts receivable included in the
Financial Statements.
Section 2.30 Solvency. After giving effect to the transactions
contemplated by this Agreement and the other transactions related hereto, and
the payment of fees and expenses in connection therewith, the Company in good
faith after due inquiry believes that:
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(a) The present fair salable value of all of the assets
(including goodwill), taken as a whole, of the Company will be greater than the
total amount of liabilities, including contingent, subordinated, absolute,
fixed, matured or unmatured and liquidated or unliquidated liabilities, of the
Company.
(b) The present fair salable value of all of the assets
(including goodwill), taken as a whole, of the Company is sufficient to pay the
probable liability of the Company on its existing debts as such debts become
absolute and matured. The Company currently pays and expects it will be able to
pay its debts and other liabilities, contingent obligations and other
commitments as they mature or come due in the normal course of business.
(c) The Company is not engaged in, and is not about to engage
in, business or transactions for which it has unreasonably small capital.
No transfer of property is being made and no obligation is
being incurred in connection with the transactions contemplated by this
Agreement or any other document contemplated herein with the intent to hinder,
delay or defraud either present or future creditors of the Company.
Section 2.31 Investment Company Act. The Company is not an investment
company or a person directly or indirectly controlled by or acting on behalf of
an investment company within the meaning of the Investment Company Act of 1940,
as amended.
Section 2.32 Securities Exchange Act Reports. True and complete
copies of the following documents, have been separately delivered and identified
by the Company to the Buyer:
(i) The Company's Annual Reports on Form 10-K for the fiscal
years ended December 30, 1995 and December 28, 1996;
(ii) The Company's Quarterly Reports on Form 10-Q for the
periods ended March 31, 1997 and June 30, 1997;
(iii) The Company's definitive proxy statement relating to the
Company's 1996 annual meeting of stockholders; and
(iv) The Company's Current Report on Form 8-K dated May 19,
1997.
All reports, forms and statements required to be filed by the Company
during the period from January 1, 1995 to the date of this Agreement under
Securities Exchange Act of 1934, as amended (the "Exchange Act") have been duly
filed. The Company has heretofore made public disclosure of such additional
material information since the date of the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1996 as it was required to disclose
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pursuant to the requirements of applicable federal and state securities and
other laws and has furnished copies of such disclosure to the Buyer. The report
on Form 10-K for the fiscal year ended December 28, 1996 and all subsequent
reports on Form 10-Q and 8-K, annual reports to stockholders, proxy statements
and other public disclosures as of the dates thereof or the dates made, and such
other documents or information with respect to the Company and its Subsidiaries
required to be supplied to the Buyer pursuant to this Agreement or supplied to
the Buyer at its request by the Company or on its behalf, taken as a whole, were
or are true, correct and complete and did not or do not contain any statement
which is false or misleading with respect to a material fact, and did not or do
not omit to state a material fact necessary in order to make the statements
therein not false or misleading.
Section 2.33 Securities Exemption. Assuming the representations and
warranties of the Buyer are true, the offer and sale of the Securities pursuant
to this Agreement and the issuance of the Convertible Preferred Stock, the
Warrant and the Common Stock to the Buyer upon the conversion or exchange, if
any, of the Securities are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act") and the Company has
not and will not take any actions which would cause the offers and sales
contemplated hereunder to be ineligible for such exemption or subject the same
to the registration or qualification requirements of any securities or blue sky
laws of any applicable jurisdiction. The offer of the Securities was made in
accordance with, and in full compliance with, all applicable federal and state
securities or blue sky laws.
Section 2.34 Customers and Suppliers. To the knowledge of the Company,
except as set forth on Schedule 2.34, none of the Company's ten largest
customers in terms of sales or ten largest suppliers in terms of purchases, in
each case with respect to the fiscal year ended December 28, 1996, has ceased
doing business with the Company and, to the knowledge of the Company, none of
such customers or suppliers intends to cease doing business with the Company or
to materially and adversely change its relationship with the Company.
Section 2.35 Rights Plan. Neither the execution nor delivery of this
Agreement or the Related Documents nor the consummation of the transactions
contemplated hereby and thereby will result in the rights issued by the Company
under the Rights Agreement, dated as of June 5, 1996 between the Company and
First Union National Bank of North Carolina, N.A., as rights agent (the "Rights
Plan"), becoming exercisable by the holders thereof or result in the creation or
vesting of any rights in such holders under the Rights Plan.
Section 2.36 Promotional Programs. Since January 1, 1995, the
promotional programs of the Company and the Subsidiaries and the Subsidiaries
have been and are being conducted in the ordinary course of business consistent
with past practice. Schedule 2.36 describes all material obligations,
commitments, agreements and understandings, whether oral or written, with any
person having relations with the Company relating to or involving advertising
and promotional programs or plans whether directed to customers, trade parties
or others.
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Section 2.37 Orders, Commitments and Returns. As of the date of this
Agreement, the aggregate of all accepted and unfulfilled orders for the sale of
merchandise entered into by the Company is approximately $17,769,585 as of
September 19, 1997, and all contracts or commitments for the purchase of
supplies by the Company and all orders were made in the ordinary course of
business. As of the date of this Agreement, there are no claims against the
Company to return in excess of an aggregate of $250,000 of merchandise by reason
of alleged overshipments, defective merchandise or otherwise, and there is no
merchandise in the hands of customers under an understanding that such
merchandise would be returnable.
Section 2.38 Warranty Claims. The schedule of warranty expenses of the
Company for the two fiscal years ended December 31, 1996 as described on
Schedule 2.38 is true, complete and correct.
Section 2.39 Disclosure. No representation, warranty or statement made
by the Company in (i) this Agreement, (ii) the Schedules attached hereto, or
(iii) any other written materials furnished or to be furnished by the Company to
the Buyer or its representatives, attorneys and accountants pursuant to this
Agreement, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact required to be stated herein or
therein or necessary to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
The Buyer represents and warrants to the Company as of the date hereof
and the date of the Closing as follows:
Section 3.01 Organization. The Buyer is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Buyer has all requisite power and authority to own, lease
and operate its properties and to carry on its business as being conducted.
Section 3.02 Authority. The Buyer has the requisite power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated hereby, has been duly
authorized by all necessary action on the part of the Buyer, and no other
proceedings on the part of the Buyer are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Buyer and, assuming this Agreement
constitutes a valid and binding obligation of the Company, constitutes a valid
and binding obligation of the Buyer, enforceable against the Buyer in accordance
with its terms.
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Section 3.03 Consents and Approvals; No Violations. Neither the
execution, delivery or performance of this Agreement by the Buyer nor the
consummation by the Buyer of the transactions contemplated hereby nor compliance
by the Buyer with any of the provisions hereof will require any filing with, or
permit, authorization, consent or approval of, any Governmental Entity (except
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings would not have a material adverse effect on the Buyer).
Section 3.04 Own Account. The Buyer is acquiring the Securities, the
Warrant and the Stock for its own account, for investment and not with a view to
the distribution thereof within the meaning of the Securities Act; provided,
that under the terms of organization of the Buyer, under certain circumstances,
the Securities, the Warrant and the Stock will be distributed to the members of
the Buyer.
Section 3.05 Limited Transferability. The Buyer understands that (i)
the Securities, the Warrant and the Stock have not been registered under the
Securities Act, by reason of their issuance by the Company in transactions
exempt from the registration requirements of the Securities Act and (ii) the
Securities, the Warrant and the Stock must be held by the Buyer indefinitely
unless a subsequent disposition thereof is registered under the Securities Act
or is exempt from such registration requirement; provided, that under the terms
of organization of the Buyer, under certain circumstances, the Securities, the
Warrant and the Stock will be distributed to the members of the Buyer.
Section 3.06 Accredited Investor. The Buyer, and each of the members of
the Buyer, is an "accredited investor" as defined in Rule 501(a) promulgated
under the Securities Act. Buyer has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
the acquisition of the Securities, the Warrant and the Stock, and, having had
access to, or having been furnished with, all such information as it has
considered necessary, has concluded that it is able to bear those risks.
Section 3.07 Furnishing the Company with Information. The Buyer, on its
own behalf and on behalf of its members, will furnish to the Company such
information as is required in accordance with the Securities Act for inclusion
in a registration statement to be filed by the Company in connection with the
Rights Offering and such information as is required in accordance with the
Exchange Act, and the proxy rules promulgated thereunder for inclusion in an
information statement to be distributed to stockholders regarding the amendments
to the Certificate of Incorporation contemplated hereby and the other
transactions contemplated hereby (the "Information Statement").
ARTICLE IV.
CONDITIONS TO EACH PARTY'S OBLIGATIONS
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The respective obligations of each party hereunder are subject to the
satisfaction, at or before the Closing, of the conditions set out below.
Section 4.01 Governmental Authorizations; Consents. The Company and the
Buyer shall have obtained all Consents necessary for the consummation of the
transactions contemplated hereby or that thereafter may be necessary to
effectuate the transactions contemplated hereby.
Section 4.02 Absence of Litigation. There shall not have been issued
and be in effect any order of any court or tribunal of competent jurisdiction
which (i) prohibits or makes illegal the purchase by the Buyer of the
Securities, the Warrant or the Stock, (ii) would require the divestiture by the
Buyer of all or a material portion of the Securities, the Warrant or the Stock
or the assets of the Buyer as a result of the transactions contemplated hereby,
or (iii) would impose limitations on the ability of the Buyer to effectively
exercise full rights of ownership of the Securities, the Warrant or the Stock as
a result of the transactions contemplated hereby.
Section 4.03 No Injunction. On the Closing Date there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by a court of competent jurisdiction directing that the
transactions provided for herein or any of them not be consummated as so
provided or imposing any conditions on the consummation of the transactions
contemplated hereby.
Section 4.04 Opinion of Investment Banker. The Company shall have
received the opinion of Wasserstein, Perella & Co. that the Purchase Price is
fair to the Company from a financial point of view.
ARTICLE V.
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS
-----------------------------------------------
The obligation of the Buyer to purchase the Securities is subject to
the satisfaction, at or before the Closing, of the conditions set out below. The
benefits of these conditions are for the Buyer only and may be waived in writing
by the Buyer at any time in its sole discretion.
Section 5.01 Accuracy of Representations and Warranties. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of Closing Date as though made
at that time, and the Buyer shall have received a certificate attesting thereto
from the Company signed by a duly authorized officer of the Company.
Section 5.02 Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions
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required by this Agreement, including, without limitation, the deliveries
required under this Article V and the Buyer shall have received a certificate
attesting thereto from the Company signed by a duly authorized officer of the
Company.
Section 5.03 Opinion of Counsel. The Buyer shall have received from
counsel to the Company an opinion of counsel, dated as of the Closing Date and
addressed to the Buyer in the form annexed hereto as Exhibit E.
Section 5.04 Casualty Losses; Material Change. Since December 28, 1996,
neither the Company nor any Subsidiary shall have suffered (i) any material
casualty loss, (ii) any material business interruption, (iii) any material labor
difficulty or customer boycott or (iv) any material adverse change in its
business, operations, prospects or financial condition.
Section 5.05 Customer Consents. The consent of each customer of the
Company or licensor/licensee of the Company listed on Schedule 5.05 shall have
been obtained to the issuance and transfer of the ownership of the Securities,
the Warrant and the Stock.
Section 5.06 Securities. The Securities shall be free and clear of
liens, charges or encumbrances.
Section 5.07 Deliveries. At the Closing, the Company shall deliver to
the Buyer: (i) duly executed certificates representing all of the Investor
Preferred Stock being purchased hereby; (ii) duly executed Notes representing
all of the Notes being purchased hereby; (iii) such other bills of sale,
instruments of assignment and other documents as may be reasonably requested by
the Buyer in order to effect or evidence the transactions contemplated
hereunder; (iv) an opinion of counsel to the Company in the form attached hereto
as Exhibit E; (v) a certificate of the chief executive officer of the Company
certifying to the fulfillment of the conditions set forth in Sections 5.01 and
5.02; (vi) a copy of the resolutions of the Company's Board of Directors and of
its stockholders, certified by its secretary, authorizing the execution,
delivery and performance of this Agreement and the Related Agreements; (vii)
good standing certificates for the Company and its Subsidiaries relating to
their respective jurisdictions of incorporation and the jurisdictions listed on
Schedule 2.01, a certified Certificate of Incorporation of the Company and the
By-laws of the Company reflecting the amendments referred to in Section 5.08;
(viii) copies of the consents referred to in Section 5.05, if any; and (ix) such
other instruments and certificates as may be reasonably requested by the Buyer.
Section 5.08 By-law Amendments. The Company shall have amended its
By-laws to fix the number of the members of the Board of Directors at nine.
Section 5.09 Lease. The Company shall have entered into a modification
of the lease relating to the Company's Showroom at 111 West 40th Street, New
York, New York, in form and substance satisfactory to the Buyer.
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Section 5.10 Employment Agreements.
(a) The Company shall have entered into an agreement with
Edwin Dean, providing for his agreement to remain reasonably accessible to the
Company and assist in a smooth transition, in form and substance satisfactory to
the Buyer.
(b) The Company shall have entered into a modification of the
Company's employment agreement with Mary Ann Domuracki, providing for (i) the
deferral by Ms. Domuracki of certain rights under the change-of-control
provisions of such agreement and (ii) the continued employment of Ms. Domuracki
by the Company, in form and substance satisfactory to the Buyer.
(c) The Company shall have entered into a modification of the
Company's employment agreement with Beverly Eichel, providing for (i) the
deferral by Ms. Eichel of certain rights under the change-of-control provisions
of such agreement and (ii) the continued employment of Ms. Eichel by the
Company, in form and substance satisfactory to the Buyer.
(d) The Company shall have entered into an agreement with
Donald Schupak, providing for (i) the continued employment of Mr. Schupak by the
Company, (ii) the termination of that certain Heads of Agreement dated March 27,
1997 between the Company and Mr. Schupak and (iii) the issuance on the Closing
Date, to Mr. Schupak of a warrant to purchase 5,372,315 shares of Common Stock
at $.30 per share.
(e) The Company shall have entered into option agreements with
each of Mary Ann Domuracki, Beverly Eichel and Nina McLemore in form and
substance satisfactory to the Buyer.
Section 5.11 License Modifications.
(a) The Company shall have entered into a modification of the
Company's license agreement with Givenchy Corporation ("Givenchy"), providing
for (i) the waiver by Givenchy of its rights under the change-of-control
provisions of such agreement and (ii) the continuation of such license agreement
on the terms contained therein, in form and substance satisfactory to the Buyer.
(b) The Company shall have entered into a modification of the
Company's license agreement with Anne Klein & Company ("AKC"), providing for (i)
the waiver by AKC of its rights under the change-of-control provisions of such
agreement and (ii) the continuation of such license agreement on the terms
contained therein, in form and substance satisfactory to the Buyer.
Section 5.12 Modification of Preferred Stock. The Company shall have
authorized an agreement with the holder of the Company's 10% Cumulative
Convertible Preferred Stock
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("Preferred Stock"), providing for the modification and/or exchange or
conversion of the Preferred Stock, in form and substance satisfactory to the
Buyer.
Section 5.13 SunAmerica Waiver. The Company shall have entered into an
agreement with SunAmerica Life Insurance Company ("SunAmerica"), providing for
the termination by SunAmerica of its right to designate members of the Board of
Directors of the Company, in form and substance satisfactory to the Buyer.
Section 5.14 Net Operating Losses. The Buyer shall be reasonably
satisfied that, for federal income tax purposes, the net operating losses of the
Company (which at June 29, 1997 were approximately $11.6 million) shall be
available to shelter cancellation of indebtedness income, if any, arising from
the discharge of the term loan portion of the Loan Agreement.
Section 5.15 Board of Directors. Subject to the succeeding sentence,
the Buyer shall have received, and the Company shall have accepted, resignations
of such members of the Board of Directors of the Company as the Buyer shall have
designated. The Company shall have taken all actions necessary to cause the
Board of Directors of the Company to be comprised of nine persons as follows:
four designees of the Buyer; three designees of the Board of Directors of the
Company as comprised prior to the date of the Closing; Donald Schupak and Mary
Ann Domuracki. The Company's Board of Directors shall recommend or approve all
such designees to the Board prior to their appointment as directors. The Company
shall have taken all actions necessary to cause the Board of Directors of the
Company to establish the Credit Facility Committee (as defined in Section 9.17).
Section 5.16 FIRPTA Affidavit. The Company shall have delivered an
affidavit, dated the Closing Date, pursuant to Section 1445 of the Code (Foreign
Investment in Real Property Tax Act of 1990 Affidavit).
Section 5.17 Rights Plan. The Company shall have taken all action
required under the Rights Plan to redeem the rights granted thereunder and shall
have delivered to the Buyer evidence satisfactory to the Buyer of such action.
Section 5.18 Registration Rights Agreement. At the Closing, the Company
shall deliver to the Buyer the duly executed Registration Rights Agreement in
the form attached hereto as Exhibit F.
Section 5.19 Patent Collateral and Security Agreement. At the Closing,
the Company shall deliver to the Buyer the duly executed Patent Collateral
Assignment and Security Agreement in the form attached hereto as Exhibit G.
Section 5.20 Trademark Security Agreement. At the Closing, the Company
shall deliver to the Buyer the duly executed Trademark Security Agreement in the
form attached hereto as Exhibit H.
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Section 5.21 License Security Agreement. At the Closing, the Company
shall deliver to the Buyer the duly executed License Agreement in the form
attached hereto as Exhibit I.
Section 5.22 Loan and Security Agreement. At the Closing, the Company
shall deliver to the Buyer the duly executed Loan and Security Agreement in the
form attached hereto as Exhibit J.
Section 5.23 Guaranty. At the Closing, the Company shall deliver to the
Buyer the duly executed Guaranty of Danpen, Inc. in the form attached hereto as
Exhibit L.
ARTICLE VI.
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS.
--------------------------------------------------
The obligation of the Company to sell the Securities is subject to the
satisfaction, at or before the Closing, of the conditions set out below. The
benefits of these conditions are for the Company only and may be waived by the
Company in writing at any time in its sole discretion.
Section 6.01 Accuracy of Representations and Warranties. The
representations and warranties of the Buyer shall be true and correct in all
material respects as of the date when made and as of the Closing Date, as though
made at that time.
Section 6.02 Performance by the Buyer. The Buyer shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement, including, without limitation, the
deliveries required by Section 6.03 and the Company shall have received a
certificate attesting thereto from a duly authorized officer of the Buyer.
Section 6.03 Deliveries. At the Closing, the Buyer shall deliver to the
Company: (i) documents evidencing the Loan Amount in transferable form
satisfactory to the Company for cancellation in part and contribution to the
Company's equity in part; (ii) the Cash Purchase Price; (iii) a certificate of
the Buyer certifying as to the fulfillment of the conditions set forth in
Section 6.01 and 6.02; (iv) evidence of the consent of the Bank to the
consummation of the transactions contemplated hereby; (v) a good standing
certificate for the Buyer issued by the Secretary of State of Delaware; and (vi)
such other instruments and certificates as may be reasonably requested by the
Company.
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ARTICLE VII.
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
----------------------------------------
COVENANTS AND AGREEMENTS.
-------------------------
Except as otherwise specifically provided for herein, the
representations, warranties, covenants and agreements of the Buyer and the
Company included or provided for herein, or in other instruments or agreements
delivered or to be delivered at or prior to Closing in connection herewith,
including the representations and warranties of all entities or persons made in
the certificates to be delivered to the Buyers pursuant hereto (each, an
"Ancillary Document"), and the obligation of the Buyer and the Company to
indemnify on account of a breach or violation thereof shall survive for a period
of eighteen (18) months following the Closing Date (or such longer period as set
forth in the succeeding sentences). There shall be no limit on the survival of
the indemnification obligations of the Company for breaches of the
representations or warranties made by the Company as to the transfer of legal
and valid title to the Securities, the Warrant and the Stock and as to
Environmental Matters. The indemnification obligations of the Company for
breaches of the representations or warranties made by the Company with respect
to Taxes or Tax matters shall survive until the expiration of the applicable
statute of limitations. Notwithstanding anything herein to the contrary, if,
prior to the expiration of any indemnification period, either the Buyer or the
Company shall have been notified of a claim for indemnity hereunder and such
claim shall not have been finally resolved before the expiration of such period,
any representation, warranty, covenant or agreement that is the basis for such
claim shall continue to survive and shall remain a basis for indemnity as to
such claim until such claim is finally resolved. All statements contained herein
and in the Schedules, the Financial Statements and the certificates delivered
pursuant to this Agreement shall be deemed representations and warranties for
all purposes of this Agreement. The respective representations and warranties of
the Company and the Buyer contained herein or in any other documents covered in
the preceding sentence shall not be deemed waived or otherwise affected by any
investigation made by any party hereto or any amendment or supplement to the
schedules or exhibits hereto occurring after the signing of this Agreement.
ARTICLE VIII.
INDEMNIFICATION.
----------------
Section 8.01 General Indemnity.
Subject to the limitations and other provisions of Article VII and this
Article VIII, the Company agrees to indemnify and hold harmless the Buyer, its
Affiliates (as defined below), and the successors and assigns of each of them
from, against and in respect of any and all Losses (as defined below) resulting
from, incurred in connection with or arising out of (i) any breach of any
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representation, warranty, covenant or agreement of the Company or any breach of
the representations and warranties made in the certificates delivered to the
Buyer pursuant hereto and any actual or threatened action or proceeding in
connection with any such breach, (ii) any litigation to which the Buyer or any
of its Affiliates is or becomes subject relating to the conduct of the business
of the Company on or prior to the Closing Date, (iii) any liens, charges or
encumbrances on the Securities, the Warrant or the Stock or (iv) any untrue
statement or alleged untrue statement of any material fact contained in or
omission or alleged omission to state in the Information Statement or in any of
the Rights Offering Materials (as defined in Section 9.14) a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made except insofar
as the untrue statement, alleged untrue statement, omission or alleged omission
is based upon information furnished in writing to the Company by the Buyer
expressly for use in the Information Statement or in the Rights Offering
Materials, as the case may be. The Buyer shall indemnify and hold harmless the
Company, its Affiliates and their successors and assigns from, against and in
respect of any and all Losses resulting from, incurred in connection with or
arising out of (i) any breach of any representation, warranty, covenant or
agreement of the Buyer and any actual or threatened action or proceeding in
connection therewith and (ii) any untrue statement or alleged untrue statement
of any material fact contained in or omission or alleged omission to state in
any of the Rights Offering Materials a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances in which they were made if and only to the extent that such
untrue statement, alleged untrue statement, omission or alleged omission is
based upon information furnished to the Company in writing by the Buyer
expressly for use in the Rights Offering Materials. The party or parties being
indemnified are referred to herein as the "Indemnitee" and the indemnifying
party is referred to herein as the "Indemnitor". The term "Affiliate" or
"Affiliated" or any similar term shall mean a person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, a specified person. The term "Loss" or "Losses" or
any similar term shall mean any and all liabilities (whether accrued, contingent
or otherwise), damages, deficiencies, costs, claims, judgments, amounts paid in
settlement, interest, penalties, assessments and out-of-pocket expenses
(including reasonable attorneys' and auditors' fees and disbursements).
Section 8.02 Indemnification Procedure.
(a) Any party who receives notice of a potential claim that
may, in the judgment of such party, result in a Loss shall use all reasonable
efforts to provide the parties hereto notice thereof, provided that failure or
delay or alleged delay in providing such notice shall not adversely affect such
party's right to indemnification hereunder. In the event that any party shall
incur or suffer any Losses in respect of which indemnification may be sought by
such party hereunder, the Indemnitee shall assert a claim for indemnification by
written notice (a "Notice") to the Indemnitor stating the nature and basis of
such claim. In the case of Losses arising by reason of any third party claim,
the Notice shall be given within 30 days of the filing or other written
assertion of any such claim against the Indemnitee, but the failure of the
Indemnitee
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to give the Notice within such time period shall not relieve the Indemnitor of
any liability that the Indemnitor may have to the Indemnitee.
(b) In the case of third party claims for which
indemnification is sought, the Indemnitor shall have the option (i) to conduct
any proceedings or negotiations in connection therewith, (ii) to take all other
steps to settle or defend any such claim (provided that the Indemnitor shall not
settle any such claim without the consent of the Indemnitee which consent shall
not be unreasonably withheld) and (iii) to employ counsel to contest any such
claim or liability in the name of the Indemnitee or otherwise. In any event the
Indemnitee shall be entitled to participate at its own expense and by its own
counsel in any proceedings relating to any third party claim. The Indemnitor
shall, within 20 days of receipt of the Notice, notify the Indemnitee of its
intention to assume the defense of such claim. If (i) the Indemnitor shall
decline to assume the defense of any such claim, (ii) the Indemnitor shall fail
to notify the Indemnitee within 20 days after receipt of the Notice of the
Indemnitor's election to defend such claim or (iii) the Indemnitee shall have
reasonably concluded that there may be defenses available to it which are
different from or in addition to those available to the Indemnitor (in which
case the Indemnitor shall not have the right to direct the defense of such
action on behalf of the Indemnitee), the Indemnitee shall defend against such
claim and the Indemnitee may settle such claim without the consent of the
Indemnitor, and Indemnitor may not challenge the reasonableness of any such
settlement. The expenses of all proceedings, contests or lawsuits in respect of
such claims shall be borne and paid by the Indemnitor and the Indemnitor shall
pay the Indemnitee, in immediately available funds, the amount of any Losses, as
such Losses are incurred. Regardless of which party shall assume the defense of
the claim, the parties agree to cooperate fully with one another in connection
therewith. In the event that any Losses incurred by the Indemnitee do not
involve payment by the Indemnitee of a third party claim, then, the Indemnitor
shall within 10 days after agreement on the amount of Losses or the occurrence
of a final non-appealable determination of such amount, pay to the Indemnitee,
in immediately available funds, the amount of such Losses. Anything in this
Article VIII to the contrary notwithstanding, the Indemnitor shall not, without
the Indemnitee's prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the Indemnitee or which does not include, as an unconditional term
thereof, the giving by the claimant or plaintiff to the Indemnitee, a release
from all liability in respect of such claim.
(c) The remedies provided for in this Agreement shall not be
exclusive of any other rights or remedies available to one party against the
other, either at law or in equity.
(d) No claim may be made against the Company for
indemnification pursuant to this Article VIII with respect to any individual
item of liability or damage, unless the aggregate of all such liabilities and
damages of Buyer, its Affiliates, and their respective successors and assigns
under this Article VIII shall exceed $500,000, and the Company shall not be
required to pay or be liable for the first $500,000 in aggregate amount of any
such liabilities and damages. Neither Buyer, its Affiliates nor any of their
respective successors or assigns shall be indemnified pursuant to this Article
VIII with respect to any individual item of liability or damage if the
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aggregate of all liabilities and damages of Buyer, its Affiliates and their
respective successors and assigns for which they have received indemnification
hereunder shall have exceeded $3,000,000. For the purposes of this Article VIII,
in computing such individual or aggregate amounts of claims, the amount of each
claim shall be deemed to be an amount (i) net or any Tax benefit to the Buyer,
(ii) net of any insurance proceeds and any indemnity, contribution or other
similar payment payable by any third party with respect thereto, and (iii) net
of any reserves provided for in the Financial Statements.
ARTICLE IX.
COVENANTS/OBLIGATIONS AFTER THE CLOSING.
----------------------------------------
Section 9.01 Further Assurances. Subject to the terms and conditions
hereof, the Company agrees that after the Closing Date it will execute and
deliver such documents to the Buyer as the Buyer may reasonably request in order
to more effectively vest in the Buyer good title to the Securities and to
consummate the transactions contemplated hereby and the Buyer agrees that after
the Closing Date it will execute and deliver such documents to the Company as
the Company may reasonably request to evidence consummation of the transactions
Contemplated hereunder.
Section 9.02 Maintenance of Office. The Company shall maintain at its
principal place of business, an office where the Notes, the Warrant and the
Stock may be surrendered for transfer and where notices and demands to or upon
the Company in respect of the Notes, the Warrant and the Stock may be served.
Section 9.03 Corporate Existence; Status. The Company shall do or cause
to be done, and shall cause each of its subsidiaries to do or cause to be done,
all things necessary to preserve and keep in full force and effect its and their
corporate existence in accordance with the rights, licenses and franchises of
the Company and its subsidiaries.
Section 9.04 Dividends. The Company shall not make, pay or declare,
directly or indirectly, any dividends or other distributions with respect to its
capital stock (other than dividends in the form of additional capital stock of
the Company) or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, retirement or
other acquisition of, any of its capital stock prior to the payment in full of
the obligations with respect to the Notes, the Investor Preferred Stock and the
Convertible Preferred Stock, except to the extent expressly permitted by the
terms of the Notes, the Investor Preferred Stock or the Convertible Preferred
Stock.
Section 9.05 Application of Proceeds. The Company shall apply the
proceeds under Article I hereof from the sale of the Securities for working
capital and general corporate purposes; provided, however, the Company may apply
$200,000 of the proceeds to pay the fee of
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Wasserstein, Perella & Co. for the fairness opinion contemplated by Section 4.04
hereof, $150,000 of the proceeds to pay an amendment fee to the Bank and may
apply proceeds to pay other fees due to the Bank on the date hereof and the fees
and expenses of the Buyer pursuant to Section 10.01.
Section 9.06 Observance of Statutes, Regulations and Orders. The
Company shall, and shall cause each of its subsidiaries to remain at all times
in compliance with all laws, statutes or other rules or regulations of any
Governmental Entity or other regulatory authority.
Section 9.07 Taxes. The Company shall pay, and shall cause each of its
subsidiaries to pay, prior to delinquency, all such Taxes, assessments and
governmental levies as are imposed upon the Company or its subsidiaries, except
as contested in good faith and by appropriate proceedings and for which reserves
or other appropriate provisions, if any, as shall be required by GAAP, shall
have been made.
Section 9.08 Maintenance of Properties. The Company shall, and shall
cause each of its subsidiaries to, maintain, preserve, protect and keep the
properties material to the operation of its business, and its subsidiaries, in
good repair, working order and condition (ordinary wear and tear excepted), and
make all necessary and proper repairs, renewals and replacements so that its
business carried on in connection therewith may be properly conducted at all
times consistent with past practices of the Company.
Section 9.09 Books and Records. The Company shall, and shall cause each
of its subsidiaries to keep books and records which accurately reflect all of
its material business affairs and transactions.
Section 9.10 Maintenance of Insurance; Indemnification. The Company
shall maintain insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in a similar business and owning similar properties in the
same general areas in which the Company operates. In addition, the Company shall
enter into and maintain indemnification agreements with the members of the
Company's Board of Directors, such agreements to indemnify such persons to the
maximum extent provided by law.
Section 9.11 Inspection. As often as may reasonably be requested, the
Company will permit any authorized representative designated by Buyer to visit
and inspect any of their respective properties, including its financial and
accounting records, and to make copies and extracts therefrom, and to discuss
the Company's affairs and finances with its officers and independent
accountants, all upon reasonable prior notice and at reasonable times during
normal business hours.
Section 9.12 Furnish Reports. For so long as the Buyer owns any Notes
or Stock, the Company shall maintain a system of accounting established and
administered in accordance with
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U.S. generally accepted accounting principles consistently applied, and shall
furnish to Buyer (i) within ninety (90) days of its fiscal year end a copy of
its audited financial statements, (ii) within forty-five (45) days of the end of
each quarter a copy of its unaudited quarterly financial statements and (iii)
within ten (10) days of the end of each month a copy of its unaudited monthly
financial statements.
Section 9.13 Furnish Additional Information. The Company will furnish
the following additional information to the Buyer:
(a) Promptly (but in any event within five days) after receipt
thereof, any letters furnished to the Company by its independent public
accountants which comment on the accounting practices of the Company;
(b) Promptly (but in any event within five days) after the
discovery of any material adverse event or circumstance affecting the Company,
including but not limited to the filing of any material litigation against the
Company or any subsidiary or the discovery that the Company is not, or with the
passage of time will not be, in compliance with any provision of its certificate
of incorporation or By-laws or with any provision of this Agreement or any other
material agreement, a letter from the president or chief financial officer of
the Company speci fying the nature and period of existence thereof and the
actions the Company has taken or proposes to take with respect thereto;
(c) Promptly (but in any event within five days) after
transmission thereof, copies of any communication from the Company to its
stockholders or the financial community at large, and any reports filed by the
Company with any securities exchange, the National Association of Securities
Dealers, Inc., the Commission, any state official or agency charged with
securities regulation, any other governmental agency, domestic or foreign, and
any material correspondence between the Company and any of the foregoing
(including, without limitation, any correspondence from any of the foregoing);
and
(d) With reasonable promptness, such other information and
data with respect to the Company and its subsidiaries as the Buyer may from time
to time reasonably request.
Section 9.14 Rights Offering.
(a) Promptly after the conversion or exchange of the
Securities into Convertible Preferred Stock, Common Stock and the Warrant in
accordance with the terms of the Securities, the Company shall offer each of the
holders of Common Stock and preferred stock of the Company (including the Buyer)
the transferable right (the "Rights") to subscribe for Common Stock with respect
to each share of Common Stock owned by such stockholders at a subscription price
per share of Common Stock equal to $.30 (the "Rights Offering"). Subscriptions
for fractional shares will not be accepted, but will be rounded down to the
nearest whole number.
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(b) Pursuant to the Rights Offering, each stockholder of the
Company will receive one Right for each share of Common Stock held by such
stockholder (on a fully diluted basis). The Buyer will commit to subscribe for
its pro rata portion of shares of Common Stock offered pursuant to the Rights
issued to it based on the number of shares of Common Stock owned by the Buyer at
the time of the Rights Offering (on a fully diluted basis). If the stockholders
of the Company (including the Buyer) subscribe for less than 10,000,000 shares
of Common Stock (representing an aggregate subscription price of $3.0 million)
(such number of shares less than 10,000,000 being referred to herein as the
"Share Deficiency"), then the Buyer (or its designee) will subscribe for that
number of additional shares of Common Stock as is equal to the Share Deficiency.
It is acknowledged that the purchase price for any Common Stock subscribed for
by the Buyer shall have been satisfied by conversion or exchange of the
Securities into Convertible Preferred Stock, Common Stock and the Warrant and no
further amount shall be due or owing from the Buyer on account of any such
Common Stock subscribed for by the Buyer. The proceeds of any Common Stock
subscribed for in the Rights Offering by stockholders of the Company other than
the Buyer shall be promptly paid to the Buyer in reduction of any outstanding
Notes. The Company will use all reasonable efforts to file a registration
statement with respect to the Rights Offering with the Commission within five
days of the Closing Date, and to have such registration statement declared
effective by the Commission within 40 days of the Closing Date, and to
consummate such Rights Offering promptly thereafter. The Registration Statement,
the prospectus included therein, and the other materials used in connection with
the Rights Offering are referred to herein as the "Rights Offering Materials."
(c) In connection with the Rights Offering, the Company will
(i) prepare and file and use its reasonable efforts to have declared effective a
registration statement under the Securities Act related thereto (the
"Registration Statement"); (ii) prepare and file with the Commission such
amendments and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for the period of the offering and to comply with the
provisions of the Securities Act (such amendments and supplements, together with
the Registration Statement and prospectus, being referred to herein as the
"Rights Offering Materials"); (iii) use all reasonable efforts to register or
qualify all Rights, to the extent necessary, and the shares of Common Stock
issuable upon the exercise of the Rights and to the Buyer as a result of a Share
Deficiency under any applicable securities or blue sky laws; and (iv) to do any
and all other things reasonably necessary or advisable to consummate the
distribution of the Rights and the consummation of the Rights Offering in
compliance with the Securities Act and all applicable state securities and blue
sky laws; provided, however, that the Company shall not be required to (x)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for the Rights Offering, (y) subject itself
to taxation in any such jurisdiction or (z) consent to general service of
process in any such jurisdiction.
(d) When the Rights Offering Materials shall first be mailed
or distributed to stockholders (the "Mailing Date"), the information with
respect to the Company and the
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Subsidiaries set forth in the Rights Offering Materials or incorporated therein
by reference (i) will comply in all material respects with the provisions of the
federal securities laws; (ii) will comply in all material respects with all
applicable provisions of Delaware law; and (iii) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading, and the consolidated financial statements contained therein will
fairly present the consolidated financial condition of the Company and its
consolidated subsidiaries (including the Subsidiaries). At all times subsequent
to the Mailing Date up to and including the closing of the Rights Offering, the
information with respect to the Company and the Subsidiaries set forth in the
Rights Offering Materials (x) will comply in all material respects with the
provisions of the federal securities laws and (y) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading, and the consolidated financial statements contained therein will
fairly present the consolidated financial condition of the Company and its
consolidated subsidiaries (including the Subsidiaries).
Section 9.15 Transfer of Securities. The Buyer, subject to applicable
federal and state securities laws, may transfer all or any portion of the Notes,
the Warrant or the Stock.
Section 9.16 Corporate Governance.
(a) At the Closing, and for so long as any Investor Preferred
Stock is outstanding, the Buyer shall have the right to designate that number of
the Company's nominees for election to the Board which shall be equal to one
director less than a majority of the total number of directors constituting the
whole Board of Directors; provided, that such nominees are "Suitable Directors."
At the Closing of the conversion or exchange of the Securities pursuant to
Section 9.18 and for so long as the outstanding shares of Convertible Preferred
Stock which have not been converted, redeemed or exchanged in accordance with
their terms shall constitute fifty percent (50%) or more of the shares of
Convertible Preferred Stock originally issued (beginning with the period
commencing at the Closing Date, the "Covered Period"), the Buyer shall have the
right to designate a majority of the Company's nominees for election to the
Board; provided, that such nominees are "Suitable Directors". The nominees
designated by the Buyer are herein referred to as the "Buyer Nominees." The
Company's Board of Directors shall recommend or approve all such Buyer Nominees
prior to their appointment as directors. In furtherance of the foregoing, the
Company, acting through its Board and in accordance with its Certificate of
Incorporation, By-laws and applicable law, shall recommend in the proxy
statement for each annual or special meeting of stockholders at which directors
shall be elected, and shall recommend at each such stockholders meeting, as part
of the management or Board slate for election to the Board, the Buyer Nominees.
All shares for which the Company's management or Board holds proxies (including
undesignated proxies) shall be voted in favor of the election of such Buyer
Nominees, except as may otherwise be provided by stockholders submitting such
proxies. In the event that any Buyer Nominee shall cease to serve as a director
for any reason, the Company shall cause (subject to the provisions of applicable
law) the vacancy resulting
38
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thereby to be filled as promptly as practicable by a Suitable Director selected
by the Buyer. The Buyer shall cause the Buyer Nominees to provide the Company
with such information as the Company may reasonably request for inclusion in the
Company's proxy statement for each meeting at which their election is to be
acted upon. "Suitable Directors" shall mean (x) persons of appropriate
experience who possess the same level of general business experience as the
present non-employee members of the Board, and (y) persons with respect to whom
no disclosure would be required in compliance with the requirements of Item
401(f) of Regulation S-K promulgated under the Securities Act. The parties
hereto agree that the determination of "appropriate experience," as such term is
used in the preceding sentence, shall be made in good faith and subject to their
fiduciary obligations by a majority of the Company's independent directors. If a
nominee designated by the Buyer is determined not to be a Suitable Director, the
directors who made such determination shall set forth, in reasonable detail,
their reasons for such determination in a written statement to be delivered to
the Buyer promptly after such determination.
The Buyer and the Company will each use its best efforts to
effectuate the provisions of this Section 9.16.
(b) All deliberations and approvals regarding the refinancing or
replacement of the revolving credit portion of the Company's Loan Agreement
shall be made by the Credit Facility Committee (as defined below). For purposes
of this Section 9.16, the term "Credit Facility Committee" shall mean a
committee of the Board of Directors of the Company comprised of Mary Ann
Domuracki and two Buyer Nominees selected for such committee by the Buyer. The
Buyer may, in its sole discretion, waive the formation of the Credit Facility
Committee and the requirements of this Section 9.16(c).
Section 9.17 Options. From and after the Closing, so long as any Notes
or shares of Stock are held by the Buyer, no options to purchase Common Stock
shall be repriced or new options to purchase Common Stock issued without the
approval of the Buyer Nominees.
Section 9.18 Exchange of Securities. Upon the closing (the "Refinancing
Closing") of the repayment of all amounts due and owing to the Bank by the
Company under the revolving credit portion of the Company's Loan
Agreement,$14,396,488.20 aggregate principal amount of the Notes and the
Investor Preferred Stock shall be automatically converted into (i) shares of
fully paid and non-assessable Convertible Preferred Stock equal to $12,000,000
in stated value, (ii) the fully paid and non-assessable Warrant and (iii) to the
extent the authorized capital stock of the Company permits and the Registration
Statement shall have been declared effective by the Commission, 7,988,294 shares
of fully paid and non-assessable Common Stock in the Rights Offering, without
further notice and without action on the part of the Buyer (or such lesser
number of shares of Common Stock as are available for purchase by the Buyer
(provided, that no shares shall be deemed available for purchase if the
Registration Statement shall not have been declared effective by the
Commission)); provided, however, that if the Refinancing Closing shall not have
occurred on or prior to March 31, 1998, the Notes and the Investor Preferred
Stock shall
39
<PAGE>
no longer be convertible or exchangeable hereunder. The remaining $603,511.80
aggregate principal amount of the Notes (assuming authorized capital stock of
the Company is available to permit the purchase of the full 7,988,294 shares of
Common Stock and the Registration Statement shall have been declared effective
by the Commission) shall be used to purchase Common Stock in the Rights Offering
by paying the exercise price of Rights not exercised by stockholders of the
Company other than the Buyer pursuant to the Rights Offering. The Company shall
promptly remit to the Buyer all monies representing the exercise of the Rights
by stockholders of the Company other than the Buyer pursuant to the Rights
Offering and the remaining principal amount of the Notes shall be repaid dollar
for dollar as the Buyer receives such monies from the Company. If the
Refinancing Closing occurs prior to the time that the Company has 7,988,294
shares of Common Stock available for purchase by the Buyer and prior to the time
the Registration Statement shall have been declared effective by the Commission,
the Notes shall remain outstanding in a principal amount equal to $3,000,000.
Any remaining balance of the Notes will be converted into Common Stock, upon the
Company authorizing a sufficient amount of capital stock and the Registration
Statement having been declared effective by the Commission, in an amount equal
to the quotient obtained by dividing (aa) the balance of such Notes less the
aggregate dollar amount to be paid by other stockholders in the exercise of
their rights to purchase Common Stock in the Rights Offering by (bb) .30. The
Company shall pay all issue taxes, if any, incurred in respect of the issue of
the securities delivered on conversion or exchange of the Securities pursuant to
this Section 9.18.
Section 9.19 Information Statement; Certificate of Incorporation. (a)
The Company, in compliance with applicable law, shall prepare and file with the
Securities and Exchange Commission (the "Commission") no later than September
26, 1997, the Information Statement subject to prior consultation with the
Buyer. The Company shall respond promptly to any comments made by the Commission
with respect to the Information Statement and shall provide the Buyer with
copies of all its correspondence with the Commission relating thereto, and the
Company shall not file an amendment or any other document with the Commission
unless the Buyer shall first have had adequate opportunity to review and comment
on such document. The Company will amend, supplement or revise the Information
Statement as may from time to time be necessary in order to insure that the
Information Statement does not contain any statement which, at the time and in
the light of the circumstances under which it is made, is false or misleading
with respect to any material fact, or omits to state any material fact necessary
in order to make the statements therein not false or misleading. The Company
shall cause the Information Statement to be mailed to the Company's stockholders
at the earliest practicable date.
(b) The Company shall, as soon as practicable, amend its
Certificate of Incorporation to (x) eliminate the provisions for a classified
Board of Directors and (y) increase its authorized capital stock. The amendment
shall be duly authorized by the Company and its stockholders and shall be duly
filed with the Secretary of State of Delaware.
Section 9.20 Confidentiality. Except to the extent necessary to
develop, preserve and maintain the Company's business relationships and to
perform the terms of this Agreement, no
40
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party (or its representatives, agents, counsel or accountants) hereto shall
disclose to any third party any confidential or proprietary information about
the business or operations of the other party hereto or their subsidiaries or
the transactions contemplated hereby, except as may be required by applicable
law. The parties hereto agree that the remedy at law for any breach of the
requirements of this Section 9.20 will be inadequate and that any breach would
cause such immediate and permanent damage as would be impossible to ascertain,
and, therefore, the parties hereto agree and consent that in the event of any
breach of this Section 9.20, in addition to any and all other legal and
equitable remedies available for such breach, including a recovery of damages,
the non-breaching party shall be entitled to obtain preliminary or permanent
injunctive relief without the necessity of proving actual damage by reason of
such breach and, to the extent permissible under applicable law, a temporary
restraining order may be granted immediately on commencement of such action. The
Buyer shall have the right to review and provide input on press releases of the
Company relating to this Agreement and the transaction contemplated hereby.
Notwithstanding the foregoing, the Buyer shall be entitled to (a) discuss this
Agreement and the transactions contemplated hereby with stockholders of the
Company and to solicit their approval of such transactions and (b) discuss this
Agreement, the transactions contemplated hereby and the Company with the Buyer's
members.
9.21 Modification of Preferred Stock. The Company shall promptly modify
and/or exchange or convert the Preferred Stock, on terms satisfactory to the
Buyer.
ARTICLE X.
MISCELLANEOUS.
--------------
Section 10.01 Costs. The Buyer on the one hand and the Company on the
other each represent to the other that it has not used a broker in connection
with the transactions contemplated by this Agreement. The Company shall pay the
costs and expenses incurred by the Company and all reasonable legal fees and
expenses incurred by the Buyer in negotiating and preparing this Agreement and
in closing and carrying out the transactions contemplated by this Agreement,
including, without limitation, the fees and expenses incurred by the Buyer with
respect to the Loan Amount and the fees and expenses of an advisor retained by
the Buyer to provide advice to the Buyer in respect of the potential tax
consequences to the Company of the contribution to the Company of the Loan
Amount. In addition, the Company shall pay the out of pocket costs of the Buyer
and Onyx Partners, Inc. ("Onyx") up to a maximum of $75,000 in the aggregate.
The Company shall reimburse the Buyer (or Onyx, as appropriate) by bank check or
wire transfer of immediately available funds for the expenses reflected in this
Section 10.01. Such amounts shall be paid promptly by the Company upon
presentation of documentation reasonably satisfactory to it evidencing such
expenditures. The Company acknowledges that the agreements contained in this
Section 10.01 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the Buyer would not enter into
this Agreement; accordingly, if the Company fails to promptly pay the expenses
hereunder when due,
41
<PAGE>
the Company shall in addition thereto pay to the Buyer all costs and expenses
(including reasonable fees and disbursements of counsel) incurred in collecting
such expenses due under this Section 10.01 together with interest on the amount
of the expenses due under this Section 10.01 (or any unpaid portion thereof)
from the date such payment is received by the Buyer at the rate of 15% per
annum.
Section 10.02 Headings. Subject headings are included for convenience
only and shall not affect the interpretation of any provisions of this
Agreement.
Section 10.03 Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if personally served or sent by
telecopy, on the business day after notice is delivered to a courier or mailed
by express mail if sent by courier delivery service or express mail for next day
delivery and on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered, return receipt
requested, postage prepaid and addressed as follows:
If to the Company to:
Chief Executive Officer
Danskin, Inc.
111 West 40th Street
New York, New York
Fax: (212) 768-1638
Phone: (212) 764-4630
with a copy to:
Samuel B. Fortenbaugh III, Esq.
Morgan, Lewis & Bockius
101 Park Avenue
New York, NY 10178
Fax: (212) 309-6273
Phone: (212) 309-6000
If to the Buyer, to:
Andrew Astrachan
Danskin Investors, LLC
c/o Onyx Partners, Inc.
9595 Wilshire Blvd.
Suite 700
42
<PAGE>
Beverly Hills, CA 90212
Fax: (310) 246-9937
Phone: (310) 724-5599
with a copy to:
Martin Nussbaum, Esq.
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Fax: (212) 758-9526
Phone: (212) 758-9500
Section 10.04 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the parties.
Section 10.05 Governing Law; Forum; Process. This Agreement shall be
construed in accordance with, and governed by, the laws of the State of New York
as applied to contracts made and to be performed entirely in the State of New
York without regard to principles of conflicts of law. Each of the parties
hereto hereby irrevocably and unconditionally submits to the exclusive
jurisdiction of any court of the State of New York or any federal court sitting
in the State of New York for purposes of any suit, action or other proceeding
arising out of this Agreement (and agrees not to commence any action, suit or
proceedings relating hereto except in such courts). Each of the parties hereto
agrees that service of any process, summons, notice or document by U.S.
registered mail at its address set forth herein shall be effective service of
process for any action, suit or proceeding brought against it in any such court.
Each of the parties hereto hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement, which is brought by or against it, in the courts of the State
of New York or any federal court sitting in the State of New York and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
Section 10.06 Entire Agreement. This Agreement, including the Related
Agreements, Schedules and Exhibits hereto, sets forth the entire understanding
and agreement and supersedes any and all other understandings, negotiations or
agreements between the Company and the Buyer relating to the sale and purchase
of the Securities, including, but not limited to, that certain letter of
agreement, dated May 19, 1997, by and between the Company and Onyx on behalf of
the Buyer.
Section 10.07 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which
together shall constitute a single agreement.
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<PAGE>
Section 10.08 Severability. In the event that any one or more of the
immaterial provisions contained in this Agreement shall for any reason be held
to be invalid, illegal or unenforceable, the same shall not affect any other
provision of this Agreement, but this Agreement shall be construed in a manner
which, as nearly as possible, reflects the original intent of the parties.
Section 10.09 No Prejudice. The terms of this Agreement shall not be
construed in favor of or against any party on account of its participation in
the preparation hereof.
Section 10.10 Words in Singular and Plural Form. Words used in the
singular form in this Agreement shall be deemed to import the plural, and vice
versa, as the sense may require.
Section 10.11 Parties in Interest. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give to any
person, firm or corporation other than the parties hereto any rights or remedies
under or by reason of this Agreement or any transaction contemplated hereby.
Section 10.12 Amendment and Modification. This Agreement may be amended
or modified only by written agreement executed by all parties hereto.
Section 10.13 Waiver. At any time prior to the Closing, the Buyer or
the Company may (i) extend the time for the performance of any of the
obligations or other acts of the other, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party granting such waiver but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or future failure.
Section 10.14 Knowledge of the Company. References herein to the
Company's knowledge shall include the knowledge of Donald Schupak, Mary Ann
Domuracki, Beverly Eichel and Edwin Dean.
Section 10.15 Remedy for Breach. The Company hereby acknowledges that
in the event of any breach or threatened breach by the Company of any of the
provisions of this Agreement, the Buyer would have no adequate remedy at law and
could suffer substantial and irreparable damage. Accordingly, the Company hereby
agrees that, in such event, the Buyer shall be entitled, without the necessity
of proving damages or posting bond, and notwithstanding any election by the
Buyer to claim damages, to obtain a temporary and/or permanent injunction
(without proving a breach therefor) to restrain any such breach or threatened
breach or to obtain specific performance of any such provisions, all without
prejudice to any and all other remedies which the Buyer may have at law or in
equity.
44
<PAGE>
10.16 Assignment. The Buyer may assign a portion of its rights and
benefits hereunder to the Oppenheimer Bond Fund for Growth.
45
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
DANSKIN, INC.
a Delaware corporation
By:
---------------------------------
Name:
Title:
DANSKIN INVESTORS, LLC
a Delaware limited liability company
By: Onyx Partners, Inc.
its manager
By:
---------------------------------
Name:
Title:
46
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on [September 30], 2004.
WARRANT TO PURCHASE COMMON STOCK
OF
DANSKIN, INC.
FOR VALUE RECEIVED, DANSKIN, INC. (the "Company"), a Delaware
corporation, hereby certifies that Danskin Investors, LLC, or its permitted
assigns, is entitled to purchase from the Company, at any time or from time to
time commencing [September 30], 1997, and prior to 5:00 P.M., Eastern Standard
Time, on [September 30], 2004, a total of 9,632,199 fully paid and nonassessable
shares of Common Stock, par value $.01 per share, of the Company for an
aggregate purchase price of $2,889,659.70 (computed on the basis of $.30 per
share). (Hereinafter, (i) said Common Stock, together with any other equity
securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock," (ii) the shares of
the Common Stock purchasable hereunder are referred to as the "Warrant Shares,"
(iii) the aggregate purchase price payable hereunder for the Warrant Shares is
referred to as the "Aggregate Warrant Price," (iv) the price payable hereunder
for each of the Warrant Shares is referred to as the "Per Share Warrant Price,"
(v) this Warrant, and all warrants hereafter issued in exchange or substitution
for this Warrant are referred to as the "Warrant" and (vi) the holder of this
Warrant is referred to as the "Holder.") The number of Warrant Shares for which
this Warrant is exercisable is subject to adjustment as hereinafter provided. In
the event of any such adjustment, the Per Share Warrant Price shall be adjusted
by multiplying the Per Share Warrant Price in effect immediately prior to such
adjustment by a fraction the numerator of which is the aggregate number of
Warrant Shares for which this Warrant may be exercised immediately prior to such
adjustment and the denominator of which is the aggregate number of Warrant
Shares for which this Warrant may be exercised immediately after such
adjustment.
1. Exercise of Warrant. This Warrant may be exercised, in whole at any time
or in part from time to time, commencing [September 30], 1997, and prior to 5:00
P.M., Eastern Standard Time, on [September 30], 2004, by the Holder of this
Warrant by the surrender of this Warrant (with the
<PAGE>
subscription form at the end hereof duly executed) at the address set forth in
Subsection 9(a) hereof, together with proper payment of the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in part.
The Aggregate Warrant Price or Per Share Warrant Price may be paid: (a) in
cash, (b) by surrender to the Company of shares of its Common Stock with a fair
value, on the date of exercise that is equal to the Aggregate Warrant Price or
Per Share Warrant Price, as the case may be, in respect of the number of
Warrants exercised, (c) by surrender to the Company of Warrants (as provided
below) or (d) by a combination of (a), (b) or (c) hereof. The Holder shall have
the right to convert Warrants or any portion thereof (the "Conversion Right")
into Warrant Shares as provided in this paragraph, but only if, at the time of
such conversion, the Per Share Warrant Price shall be less than the current
market price per share of Common Stock and the Warrants shall otherwise be
exercisable under the provisions of this Warrant. Upon exercise of the
Conversion Right with respect to a particular number of Warrants (the "Converted
Warrants"), the Company shall deliver to the Holder (without payment by the
Holder of any cash or other consideration) that number of Warrant Shares equal
to the quotient obtained by dividing (a) the difference between (i) the product
of the fair value per share of Common Stock as of the date the Conversion Right
is exercised (the "Conversion Date") and the number of Warrant Shares into which
the Converted Warrants could have been exercised hereunder and (ii) the
aggregate Per Share Warrant Price that would have been payable upon such
exercise of the Converted Warrants as of the Conversion Date, by (b) the fair
value per share of Common Stock as of the Conversion Date. For purposes of this
paragraph, the fair value per share of Common Stock shall mean the average
Closing Price of the Company's Common Stock for the ten Trading Days immediately
preceding the Conversion Date.
As used in this Section 1, Trading Day means, in the event that the Common
Stock is listed or admitted to trading on the New York Stock Exchange (or any
successor to such exchange), a day on which the New York Stock Exchange (or such
successor) is open for the transaction of business, or, if the Common Stock is
not listed or admitted to trading on such exchange, a day on which the principal
national securities exchange on which the Common Stock is listed is open for the
transaction of business, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, a day on which any New York Stock
Exchange member firm is open for the transaction of business.
As used in this Section 1, the Closing Price of the Company's Common Stock
shall be the last reported sale price as shown on the Composite Tape of the New
York Stock Exchange, or, in case no such reported sale price is quoted on such
day, the average of the reported closing bid and asked prices on the New York
Stock Exchange, or, if the Common Stock is not listed or admitted to trading on
such exchange, the last reported sales price, or in case no such reported sales
price is quoted on such day, the average of the reported closing bid and asked
prices, on the principal national securities exchange (including, for purposes
hereof, the National Association of Securities Dealers, Inc. National Market
System) on which the Common Stock is listed or admitted to trading, or, if it is
not listed or admitted to trading on any national securities exchange, the
average of the high closing bid price and the low closing asked price as
reported on an inter-dealer quotation system. In the absence of any available
public quotations for the Common Stock, the Board of
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<PAGE>
Directors of the Company shall determine in good faith the fair value of the
Common Stock, which determination shall be set forth in a certificate by the
Secretary of the Company.
Payment for Warrant Shares if made by cash shall be made by certified or
official bank check payable to the order of the Company. If this Warrant is
exercised in part, the Holder shall be entitled to receive a new Warrant
covering the number of Warrant Shares in respect of which this Warrant has not
been exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon such surrender of this Warrant,
the Company will (a) issue a certificate or certificates in the name of the
Holder for the shares of the Common Stock to which the Holder shall be entitled,
and (b) deliver the proportionate part thereof if this Warrant is exercised in
part, pursuant to the provisions of the Warrant.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the fair value of a
share.
2. Reservation of Warrant Shares. The Company agrees that, prior to the
expiration of this Warrant, the Company will at all times have authorized and in
reserve, and will keep available, solely for issuance or delivery upon the
exercise of this Warrant, the shares of the Common Stock as from time to time
shall be receivable upon the exercise of this Warrant.
3. Anti-Dilution Provisions. The number and kind of securities issuable upon
the exercise of this Warrant, the Per Share Warrant Price and the number of
Warrant Shares for which this Warrant may be exercised shall be subject to
adjustment from time to time in accordance with the following provisions:
(a) Certain Definitions. For purposes of this Warrant:
(1) The term "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued, or deemed to be issued by the
Company pursuant to paragraph (g) of this Section 3, after the
Original Issue Date except:
(i) shares of Common Stock issuable upon conversion of, or
distributions with respect to, the Series D Cumulative
Convertible Preferred Stock ("Series D Stock") now or
hereafter issued by the Company;
(ii) up to 790,000 shares of Common Stock issuable upon the
exercise of options issued to officers, directors and
employees of the Company under stock option plans
maintained from time to time by the Company and approved
by the Board of Directors (the "Employee Options"); and
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<PAGE>
(iii) up to 3,291,797 shares of Common Stock issuable upon the
exercise of options issued to Mary Ann Domuracki,
Beverly Eichel and Nina McLemore (collectively, the
"Management Options") in connection with the closing of
that certain Securities Purchase Agreement dated as of
September 22, 1997 between the Company and Danskin
Investors, LLC (the "Purchase Agreement");
(iv) shares of Common Stock issuable upon exercise of this
Warrant, the Warrant issued to Oppenheimer Bond Fund for
Growth pursuant to the terms of the Purchase Agreement
(the "BFG Warrant") and the Warrant issued to Donald
Schupak pursuant to the terms of that certain Warrant
Purchase Agreement dated as of September 22, 1997
between the Company and Donald Schupak (the "Schupak
Warrant"); and
(v) up to 10,000,000 shares of Common Stock issuable
pursuant to the Rights Offering contemplated by the
terms of the Purchase Agreement.
(2) The term "Convertible Securities" shall mean any evidence of
indebtedness, shares (other than the Promissory Note issued
pursuant to the Purchase Agreement, Series D Stock, the
Schupak Warrant, the BFG Warrant and this Warrant) or other
securities convertible into or exchangeable for Common Stock.
(3) The term "Options" shall mean rights, options or warrants
(other than the Employee Options and the Management Options)
to subscribe for, purchase or otherwise acquire Common Stock
or Convertible Securities.
(4) The term "Original Issue Date" shall mean the date of the
initial issuance of this Warrant.
(b) Reorganization, Reclassification. In the event of a reorganization,
share exchange, or reclassification, other than a change in par
value, or from par value to no par value, or from no par value to
par value or a transaction described in subsection (c) or (d) below,
this Warrant shall, after such reorganization, share exchange or
reclassification (a "Reclassification Event"), be exercisable at the
option of the holder into the kind and number of shares of stock or
other securities or other property of the Company which the holder
of this Warrant would have been entitled to receive if the holder
had held the Warrant Shares issuable upon exercise of this Warrant
immediately prior to such reorganization, share exchange, or
reclassification.
(c) Consolidation, Merger. In the event of a merger or consolidation to
which the Company is a party this Warrant shall, after such merger
or consolidation, be
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<PAGE>
exercisable at the option of the holder for the kind and number of
shares of stock and/or other securities, cash or other property
which the holder of this Warrant would have been entitled to receive
if the holder had held the Warrant Shares issuable upon exercise of
this Warrant immediately prior to such consolidation or merger.
(d) Subdivision or Combination of Shares. In case outstanding shares of
Common Stock shall be subdivided, the Per Share Warrant Price shall
be proportionately reduced as of the effective date of such
subdivision, or as of the date a record is taken of the holders of
Common Stock for the purpose of so subdividing, whichever is
earlier. In case outstanding shares of Common Stock shall be
combined, the Per Share Warrant Price shall be proportionately
increased as of the effective date of such combination, or as of the
date a record is taken of the holders of Common Stock for the
purpose of so combining, whichever is earlier.
(e) Stock Dividends. In case shares of Common Stock are issued as a
dividend or other distribution on the Common Stock (or such dividend
is declared), then the Per Share Warrant Price shall be adjusted, as
of the date a record is taken of the holders of Common Stock for the
purpose of receiving such dividend or other distribution (or if no
such record is taken, as at the earliest of the date of such
declaration, payment or other distribution), to that price
determined by multiplying the Per Share Warrant Price in effect
immediately prior to such declaration, payment or other distribution
by a fraction (i) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to the
declaration or payment of such dividend or other distribution, and
(ii) the denominator of which shall be the total number of shares of
Common Stock outstanding immediately after the declaration or
payment of such dividend or other distribution. In the event that
the Company shall declare or pay any dividend on the Common Stock
payable in any right to acquire Common Stock for no consideration,
then the Company shall be deemed to have made a dividend payable in
Common Stock in an amount of shares equal to the maximum number of
shares issuable upon exercise of such rights to acquire Common
Stock.
(f) Issuance of Additional Shares of Common Stock. If the Company shall
issue any Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to paragraph (g)
below) after the Original Issue Date (other than as provided in the
foregoing subsections (b) through (e)), for no consideration or for
a consideration per share less than the Per Share Warrant Price in
effect on the date of and immediately prior to such issue, then in
such event, the Per Share Warrant Price shall be reduced,
concurrently with such issue, to a price equal to the quotient
obtained by dividing:
(1) an amount equal to (x) the total number of shares of Common
Stock outstanding immediately prior to such issuance or sale
multiplied by the Per Share Warrant Price in effect
immediately prior to such issuance or sale, plus
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<PAGE>
(y) the aggregate consideration received or deemed to be
received by the Company upon such issuance or sale, by
(2) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
For purposes of the formulas expressed in paragraph 3(e) and 3(f),
all shares of Common Stock, including Warrant Shares, issuable upon the exercise
of outstanding Options or this Warrant or issuable upon the conversion of the
Series C Stock, the Series D Stock or outstanding Convertible Securities
(including Convertible Securities issued upon the exercise of outstanding
Options), shall be deemed outstanding shares of Common Stock both immediately
before and after such issuance or sale.
(g) Deemed Issue of Additional Shares of Common Stock. In the event the
Company at any time or from time to time after the Original Issue
Date shall issue any Options or Convertible Securities or shall fix
a record date for the determination of holders of any class of
securities then entitled to receive any such Options or Convertible
Securities, then the maximum number of shares (as set forth in the
instrument relating thereto without regard to any provisions
contained therein designed to protect against dilution) of Common
Stock issuable upon the exercise of such Options, or, in the case of
Convertible Securities and Options therefor, the conversion or
exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such
issue of Options or Convertible Securities or, in case such a record
date shall have been fixed, as of the close of business on such
record date, provided that in any such case in which Additional
Shares of Common Stock are deemed to be issued:
(1) no further adjustments in the Per Share Warrant Price shall be
made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or
the issue of Common Stock upon the conversion or exchange of
such Convertible Securities;
(2) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any
increase or decrease in the consideration payable to the
Company, or increase or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Per Share Warrant Price computed upon
the original issuance of such Options or Convertible
Securities (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based
thereon, upon any such increase or decrease becoming
effective, shall be recomputed to reflect such increase or
decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities
(provided, however, that no such adjustment of the Per Share
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Warrant Price shall affect Common Stock previously issued upon
exercise of this Warrant in whole or in part);
(3) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which
shall not have been exercised, the Per Share Warrant Price
computed upon the original issue of such Options or
Convertible Securities (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments
based thereon, shall, upon such expiration, be recomputed as
if:
(i) in the case of Options or Convertible Securities, the
only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration
received therefor was the consideration actually
received by the Company (x) for the issue of all such
Options, whether or not exercised, plus the
consideration actually received by the Company upon
exercise of the Options or (y) for the issue of all such
Convertible Securities which were actually converted or
exchanged plus the additional consideration, if any,
actually received by the Company upon the conversion or
exchange of the Convertible Securities; and
(ii) in the case of Options for Convertible Securities, only
the Convertible Securities, if any, actually issued upon
the exercise thereof were issued at the time of issue of
such Options, and the consideration received by the
Company for the Additional Shares of Common Stock deemed
to have been then issued was the consideration actually
received by the Company for the issue of all such
Options, whether or not exercised, plus the
consideration deemed to have been received by the
Company upon the issue of the Convertible Securities
with respect to which such Options were actually
exercised.
(4) No readjustment pursuant to clause (2) or (3) above shall have
the effect of increasing the Per Share Warrant Price to an
amount which exceeds the lower of (x) the Per Share Warrant
Price on the original adjustment date or (y) the Per Share
Warrant Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original
adjustment date and such readjustment date.
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<PAGE>
(5) In the case of any Options which expire by their terms not
more than 30 days after the date of issue thereof, no
adjustment of the Per Share Warrant Price shall be made until
the expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause
(3) above.
(h) Determination of Consideration. For purposes of this Section 3, the
consideration received by the Company for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property. Such consideration shall:
(i) insofar as it consists of cash, be the aggregate amount
of cash received by the Company; and
(ii) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of the
issue, as determined by the vote of a majority of the
Company's Board of Directors or if the Board of
Directors cannot reach such agreement, by a qualified
independent public accounting firm, other than the
accounting firm then engaged as the Company's
independent auditors.
(2) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common
Stock deemed to have been issued pursuant to paragraph (g)
above, relating to Options and Convertible Securities shall be
determined by dividing:
(i) the total amount, if any, received or receivable by the
Company as consideration for the issue of such Options
or Convertible Securities, plus the minimum aggregate
amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any
provision contained therein designed to protect against
dilution) payable to the Company upon the exercise of
such Options or the conversion or exchange of such
Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of
such Convertible Securities by
(ii) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without
regard to any provision contained therein designed to
protect against dilution) issuable upon the exercise of
such Options or conversion or exchange of such
Convertible Securities.
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<PAGE>
(i) Adjustment of Aggregate Number of Warrant Shares Issuable. Upon each
adjustment of the Per Share Warrant Price under the provisions of
this Section 3, the aggregate number of Warrant Shares issuable upon
exercise of this Warrant shall be adjusted to an amount determined
by dividing (x) the Per Share Warrant Price in effect immediately
prior to the event causing such adjustment by (y) such adjusted Per
Share Warrant Price.
(j) Other Provisions Applicable to Adjustment Under this Section. The
following provisions will be applicable to the adjustments in Per
Share Warrant Price and the aggregate number of Warrant Shares
issuable upon exercise of this Warrant as provided in this Section
3:
(1) Treasury Shares. The number of shares of Common Stock at any
time outstanding shall not include any shares thereof then
directly or indirectly owned or held by or for the account of
the Company.
(2) Other Action Affecting Common Stock. In case the Company shall
take any action affecting the outstanding number of shares of
Common Stock other than an action described in any of the
foregoing subsections 3(b) to 3(g) hereof, inclusive, which
would have an inequitable effect on the holder of this
Warrant, the Per Share Warrant Price shall be adjusted in such
manner and at such time as the Board of Directors of the
Company on the advice of the Company's independent public
accountants may in good faith determine to be equitable in the
circumstances.
(3) Minimum Adjustment. No adjustment of the Per Share Warrant
Price shall be made if the amount of any such adjustment would
be an amount less than one percent (1%) of the Per Share
Warrant Price then in effect, but any such amount shall be
carried forward and an adjustment in respect thereof shall be
made at the time of and together with any subsequent
adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate an
increase or decrease of one percent (1%) or more.
(4) Certain Adjustments. The Per Share Warrant Price shall not be
adjusted upward except in the event of a combination of the
outstanding shares of Common Stock into a smaller number of
shares of Common Stock or in the event of a readjustment of
the Per Share Warrant Price pursuant to Section 3(g)(2) or
(3).
(k) Notices of Adjustments. Whenever the aggregate number of Warrant
Shares issuable upon exercise of this Warrant and Per Share Warrant
Price is adjusted as herein provided, an officer of the Company
shall compute the adjusted number of
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<PAGE>
Warrant Shares and Per Share Warrant Price in accordance with the
foregoing provisions and shall prepare a written certificate setting
forth such adjusted number of Warrant Shares and Per Share Warrant
Price and showing in detail the facts upon which such adjustment is
based, and such written instrument shall promptly be delivered to
the recordholder of this Warrant.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the Common
Stock represented by each and every certificate for Warrant Shares delivered on
the proper exercise of this Warrant shall, at the time of such delivery, be
validly issued and outstanding, fully paid and nonassessable, and not subject to
preemptive rights, and the Company will take all such actions as may be
necessary to assure that the par value or stated value, if any, per share of the
Common Stock is at all times equal to or less than the then Per Share Warrant
Price. Subject to Section 6(c) hereof, the Company further covenants and agrees
that it will pay, when due and payable, any and all Federal and state stamp,
original issue or similar taxes that may be payable in respect of the issuance
of any Warrant Shares or certificates therefor. The Holder covenants and agrees
that it shall pay, when due and payable, any and all federal, state and local
income or similar taxes that may be payable in respect of the issuance of any
Warrant Shares or certificates therefor.
5. Repurchase of Warrant.
(a) Holders Option to Put Warrant. Subject to the succeeding provisions
of this Section 5, if at any time the Warrant Shares shall not be
issuable because the Company has insufficient authorized capital
stock, the Holder may, by notice to the Company (a "Put Notice"),
elect to sell to the Company (and the Company hereby agrees to
repurchase from the Holder(s)), at the repurchase price specified in
Section 5(d) hereof (the "Repurchase Price"), such portion of the
Warrant exercisable for that number of Warrant Shares as are
specified in the Put Notice (the "Put Number"). For all purposes of
this Section 5, each Warrant shall be treated as the number of
Warrant Shares for which it is then exercisable.
(b) Put Closing. The closing of the exercise of the put right shall take
place at the offices of the Company at 10:00 a.m. local time on a
date not more than seven (7) days after the date of the Put Notice,
or at such other time and place as the Company and the Holder(s) may
agree upon (the "Put Closing Date"). At the closing the Holder(s)
will deliver to the Company a Warrant or Warrants evidencing or
exercisable for at least the Put Number of Warrant Shares (properly
endorsed or accompanied by assignments, with signature(s) guaranteed
or similar appropriate documentation of authority to transfer)
against payment of the Repurchase Price to the Holder(s) in the
manner specified in Section 5(c) hereof (together with Warrants of
like tenor evidencing the right to purchase any Warrant Shares, in
either case to the extent that the number of shares represented by
the Warrants presented to the Company were in excess of the Put
Number).
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<PAGE>
(c) Payment. The Company shall pay the Repurchase Price to the Holder(s)
out of funds legally available therefor at any closing under Section
5(b) hereof in cash or immediately available funds (the "Final
Payment Date"). In the event that any portion of the Repurchase
Price is not paid as provided in the preceding sentence as a result
of any insufficiency of legally available funds or otherwise, such
portion shall remain an obligation of the Company and shall become
due and payable, in cash or immediately available funds, as soon as
there are funds legally available therefor.
(d) Repurchase Price for Warrant.
(1) the Repurchase Price shall be equal to that number which is
equal to the difference between (I) the product of (i) the Put
Number of Warrant Shares, multiplied by (ii) the quotient
obtained by dividing (A) the Market Value of the Company's
Common Stock (as determined pursuant to Section 5(d)(2)
hereof), calculated as of the date of the Put Notice given by
the Holder under Section 5(a), by (B) the total number of
shares of Common Stock outstanding on the date of such Put
Notice on a fully diluted basis, and (II) the Product obtained
by multiplying the Per Share Warrant Price by the Put Number
of Warrant Shares;
(2) The Market Value as of a given date shall be the product of
(i) the Current Market Price (as hereinafter defined) on such
date multiplied by (ii) the number of shares of Common Stock
issued and outstanding on such date on a fully diluted basis.
The term "Current Market Price", as of the date of any
determination thereof, shall be deemed to be the average of
the Closing Price per share for ten Trading Days commencing
immediately before such date.
6. Transfer
(a) Securities Laws. Neither this Warrant nor the Warrant Shares
issuable upon the exercise hereof have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under
any state securities laws and unless so registered may not be
transferred, sold, pledged, hypothecated or otherwise disposed of
unless an exemption from such registration is available. In the
event the Holder desires to transfer this Warrant or any of the
Warrant Shares issued, the Holder must give the Company prior
written notice of such proposed transfer including the name and
address of the proposed transferee. Such transfer may be made only
either (i) upon publication by the Securities and Exchange
Commission (the "Commission") of a ruling, interpretation, opinion
or "no action letter" based upon facts presented to said Commission,
or (ii) upon receipt by the Company of an opinion of counsel
acceptable to the Company to the effect that the proposed transfer
will not violate the provisions of the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
the rules and regulations promulgated under either such act,
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<PAGE>
or to the effect that the Warrant or Warrant Shares to be sold or
transferred have been registered under the Securities Act of 1933,
as amended, and that there is in effect a current prospectus meeting
the requirements of Subsection 10(a) of the Securities Act, which is
being or will be delivered to the purchaser or transferee at or
prior to the time of delivery of the certificates evidencing the
Warrant or Warrant Shares to be sold or transferred. Notwithstanding
anything else contained herein, Danskin Investors, LLC may
distribute the Warrant or the Warrant Shares to its members.
(b) Transfer. Upon surrender of this Warrant to the Company or at the
office of its stock transfer agent, if any, with assignment
documentation duly executed and funds sufficient to pay any transfer
tax, and upon compliance with the foregoing provisions, the Company
shall, without charge, execute and deliver a new Warrant in the name
of the assignee named in such instrument of assignment, and this
Warrant shall promptly be canceled. Any assignment, transfer,
pledge, hypothecation or other disposition of this Warrant attempted
contrary to the provisions of this Warrant, or any levy of
execution, attachment or other process attempted upon the Warrant,
shall be null and void and without effect.
(c) Legend and Stop Transfer Orders. Unless the Warrant Shares have been
registered under the Securities Act, upon exercise of any part of
the Warrant and the issuance of any of the Warrant Shares, the
Company shall instruct its transfer agent to enter stop transfer
orders with respect to such shares, and all certificates
representing Warrant Shares shall bear on the face thereof
substantially the following legend, insofar as is consistent with
Delaware law:
"The shares of common stock represented by this certificate
have not been registered under the Securities Act of 1933, as
amended, and may not be sold, offered for sale, assigned,
transferred or otherwise disposed of unless registered
pursuant to the provisions of that Act or an opinion of
counsel to the Company is obtained stating that such
disposition is in compliance with an available exemption from
such registration."
7. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. Warrant Holder Not Shareholder. Except as otherwise provided herein, this
Warrant does not confer upon the Holder any right to vote or to consent to or
receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
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<PAGE>
9. Communication. No notice or other communication under this Warrant shall
be effective unless the same is in writing and is mailed by first-class mail,
postage prepaid, addressed to:
(a) the Company at 111 West 40th Street, New York, NY 10018, attention:
Chairman, or such other address as the Company has designated in
writing to the Holder, or
(b) the Holder at c/o Onyx Partners, Inc., 9595 Wilshire Blvd., Suite
700, Beverly Hills, CA 90212, attention: President, or such other
address as the Holder has designated in writing to the Company.
10. Headings. The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflict of laws thereof.
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<PAGE>
IN WITNESS WHEREOF, DANSKIN, INC., has caused this Warrant to be signed
by a duly authorized officer as of this [30th day of September], 1997.
DANSKIN, INC.
By:
---------------------------------
Name:
Title:
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<PAGE>
SUBSCRIPTION
The undersigned, __________________________________________, pursuant
to the provisions of the foregoing Warrant, hereby agrees to subscribe for the
purchase of _________________________ shares of the Common Stock of DANSKIN,
INC. covered by said Warrant, and makes payment therefor in full at the price
per share provided by said Warrant.
Dated Signature
----------------------- ---------------------------
Address
--------------------------------
--------------------------------
ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _________________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_________________________, attorney, to transfer said Warrant on the books of
DANSKIN, INC.
Dated Signature
----------------------- ---------------------------
Address
--------------------------------
--------------------------------
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby assigns and
transfers unto _________________________ the right to purchase
_________________________ shares of the Common Stock of DANSKIN, INC. by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced hereby, and does irrevocably constitute and appoint
_________________________, attorney, to transfer that part of said Warrant on
the books of DANSKIN, INC.
Dated Signature
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Address
--------------------------------
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CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES C CUMULATIVE CONVERTIBLE
PREFERRED STOCK OF DANSKIN, INC.
DANSKIN, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY
CERTIFY THAT:
A. Pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") and pursuant to the provisions of ss. 151 of the Delaware
General Corporation Law, the Board of Directors, pursuant to a meeting held
September 18, 1997, adopted the following resolution providing for the
designations, preferences and relative, participating, optional and other
rights, and the qualifications, limitations and restrictions of the Series C
Cumulative Convertible Preferred Stock.
WHEREAS, the Certificate of Incorporation of the Corporation
provides for two classes of shares known as common stock, $.01 par value per
share (the "Common Stock"), and preferred stock, $.01 par value per share
("Preferred Stock"); and
WHEREAS, the Board of Directors of the Corporation is authorized by
the Certificate of Incorporation to provide for the issuance of the shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in such series and to fix the designations,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors deems it
advisable to, and hereby does, designate a Series C Cumulative Convertible
Preferred Stock and fixes and determines the rights, preferences,
qualifications, limitations and restrictions relating to the Series C Cumulative
Convertible Preferred Stock as follows:
1. Designation. The shares of such series of Preferred Stock shall be
designated "Series C Cumulative Convertible Preferred Stock" (referred to herein
as the "Series C Stock").
2. Authorized Number. The number of shares constituting the Series C
Stock shall be 100.
3. Ranking. The Corporation's Series C Stock shall rank, as to
dividends and upon Liquidation (as defined in Section 5(a) hereof), senior and
prior to the Corporation's Common Stock and to all other classes or series of
stock issued by the Corporation, except as otherwise approved
<PAGE>
by the affirmative vote or consent of the holders of shares of Series C Stock
pursuant to Section 10(d) hereof.
4. Dividends. Commencing three (3) months after the issuance of the
shares of the Series C Stock (the "Dividend Initiation Date"), dividends shall
begin to accrue on such shares at an initial rate of 8% (i.e., 400.00) per share
per annum. The holders of shares of Series C Stock shall be entitled to receive
such dividends when and as declared by the Board of Directors of the
Corporation, in cash, out of assets legally available for such purpose,
semi-annually in arrears on the last day of June and December in each year
following the Dividend Initiation Date. Dividends on the Series C Stock shall be
cumulative so that if, for any dividend accrual period, cash dividends at the
rate hereinabove specified are not declared and paid or set aside for payment,
the amount of accrued but unpaid dividends shall accumulate with interest at the
then applicable dividend rate per annum and shall be added to the dividends
payable for subsequent dividend accrual periods and upon any redemption or
conversion of shares of Series C Stock. If the shares of Series C Stock are
issued on a date which does not coincide with a dividend payment date, then the
initial dividend accrual period applicable to such shares shall be the period
from the Dividend Initiation Date through whichever of June 30 or December 31
next occurs after the Dividend Initiation Date. If the date fixed for payment of
a final liquidating distribution on any shares of Series C Stock, or the date on
which any shares of Series C Stock are redeemed or converted into Common Stock
does not coincide with a dividend payment date, then subject to the provisions
hereof relating to such payment, redemption or conversion, the final dividend
accrual period applicable to such shares shall be the period from whichever of
July 1 or January 1 most recently precedes the date of such payment, conversion
or redemption through the effective date of such payment, conversion or
redemption. The rate at which dividends are paid shall be adjusted for any
combinations or divisions or similar recapitalizations affecting the shares of
Series C Stock. Without the written consent of the holders of at least 662/3% of
the then outstanding Series C Stock, the Corporation shall not declare or pay
any cash dividend on, or redeem or repurchase or make any other cash
distribution in respect of any other equity securities of the Corporation unless
at the time of such declaration, payment or distribution all dividends on the
Series C Stock accrued for all past dividend accrual periods shall have been
paid and the full dividends thereon for the current dividend period shall be
paid or declared and set aside for payment.
5. Liquidation.
(a) Liquidation Procedure. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the
holders of the shares of Series C Stock shall be entitled, before any
distribution or payment is made upon any Common Stock or any other class
or series of stock ranking junior to the Series C Stock as to distribution
of assets upon liquidation, to be paid an amount equal to the greater of
(i) $5,000 per share (as adjusted for any combinations, divisions or
similar recapitalizations affecting the shares of Series C Stock) (the
"Series C Issue Price") plus all accrued and unpaid dividends to such date
and (ii) the percentage of the assets of the Corporation equal to the
percentage which the Common Stock of the Corporation issuable upon
conversion of the Series C Stock represents of all of the outstanding
Common Stock (and the Common Stock issuable on conversion of
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<PAGE>
the Series C Stock) of the Corporation at the time of the making of the
Liquidation Payments plus all accrued and unpaid dividends to such date
(the "Liquidation Payments"). If upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the
assets to be distributed among the holders of Series C Stock shall be
insufficient to permit payment in full to the holders of Series C Stock of
the Liquidation Payments, then the entire assets of the Corporation shall
be distributed ratably among such holders in proportion to the full
respective distributive amounts to which they are entitled.
(b) Remaining Assets. Upon any liquidation, dissolution or winding
up of the Corporation, after the holders of Series C Stock shall have been
paid in full the Liquidation Payments, the remaining assets of the
Corporation may be distributed ratably per share in order of preference to
the holders of Common Stock and any other class or series of stock ranking
junior to the Series C Stock as to distribution of assets upon
liquidation.
(c) Notice of Liquidation. Written notice of a liquidation,
dissolution or winding up, stating a payment date, the amount of the
Liquidation Payments and the place where said Liquidation Payments shall
be payable, shall be given by mail, postage prepaid, not less than 30 days
prior to the payment date stated therein, to each holder of record of
Series C Stock at his post office address as shown by the records of the
Corporation.
6. Conversion/Exchange.
The holders of the Series C Stock shall have the following
conversion/exchange rights:
(a) Mandatory Exchange. Upon the closing (the "Closing") of the
repayment of all amounts due and owing to First Union National Bank of
North Carolina (the "Bank") by the Company under the revolving credit
portion of the Corporation's Amended and Restated Loan and Security
Agreement with the Bank, as agent, dated approximately as of June 22,
1995, as the same has further been amended, the Series C Stock (together
with $14,396,488.20 aggregate principal amount of the Promissory Note held
by the holder of the Series C Stock) shall be automatically exchanged for
(i) shares of fully paid and non-assessable Series D Cumulative
Convertible Preferred Stock of the Corporation in the form of Exhibit C to
that certain Securities Purchase Agreement dated as of September 22, 1997
between the Corporation and Danskin Investors, LLC (the "Purchase
Agreement") equal to Twelve Million Dollars ($12,000,000) in stated value,
(ii) a fully paid and non-assessable common stock purchase warrant in the
form of Exhibit D to the Purchase Agreement (the "Warrant") and (iii) to
the extent the authorized capital stock of the Corporation permits and the
Registration Statement (as defined in the Purchase Agreement) shall have
been declared effective by the Securities and Exchange Commission,
7,988,294 shares of fully paid and non-assessable common stock of the
Corporation in the Rights Offering (as defined in the Purchase Agreement),
without further notice and without action on the part of the holder (or
such lesser number of shares of common stock as are available for purchase
by the holder); provided, however, that if the Closing shall not have
occurred on or prior to March 31, 1998,
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the Series C Stock shall no longer be exchangeable as provided herein. The
Corporation shall pay all issue taxes, if any, incurred in respect of the
issue of the securities delivered as provided herein in exchange of the
Series C Stock pursuant to this Section 6(a).
(b) Optional Conversion. Subject to the limitations set forth below
and to subsection (a) above, at any time on or after April 1, 1998, each
share of Series C Stock shall be convertible (subject to there being
sufficient available authorized shares of Common Stock into which to
convert), at the option of the holder of record thereof, into fully paid
and nonassessable shares of Common Stock at the "conversion rate" (as
defined in paragraph (c) below) then in effect upon surrender to the
Corporation or its transfer agent of the certificate or certificates
representing the Series C Stock to be converted, as provided below, or if
the holder notifies the Corporation or its transfer agent that such
certificate or certificates have been lost, stolen or destroyed, upon the
execution and delivery of an agreement satisfactory to the Corporation to
indemnify the Corporation from any losses incurred by it in connection
therewith.
(c) Basis For Optional Conversion; Converted Shares. The basis for
any conversion under this Section 6 shall be the "conversion rate" in
effect at the time of conversion, which for the purposes hereof shall mean
the number of shares of Common Stock issuable for each share of Series C
Stock surrendered for conversion under this Section 6. Initially, the
conversion rate shall be 16,666.66:1, i.e., 16,666.66 shares of Common
Stock for each share of Series C Stock being converted. Such conversion
rate shall be subject to adjustment as provided in Section 8 below. As
used herein, the term "conversion price" shall be an amount computed by
dividing the Series C Issue Price by the conversion rate then in effect.
Initially, the conversion price shall be $.30 per share of Common Stock.
If a holder of Series C Stock shall surrender more than one share of
Series C Stock for conversion at any one time, the number of such shares
of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares of Series C Stock so surrendered.
If any fractional interest in a share of Common Stock would be deliverable
upon conversion of Series C Stock, the Corporation shall pay in lieu of
such fractional share an amount in cash equal to the conversion price of
such fractional share (computed to the nearest one hundredth of a share)
in effect at the close of business on the date of conversion. Any shares
of Series C Stock which have been converted shall be cancelled and all
dividends on converted shares shall cease to accrue and the certificates
representing shares of Series C Stock so converted shall represent the
right to receive (i) such number of shares of Common Stock into which such
shares of Series C Stock are convertible, plus (ii) cash payable for any
fractional share plus (iii) all accrued but unpaid dividends relating to
such shares, together with interest thereon, payable in cash, through the
immediately preceding dividend payment date. At its option, the holder of
the Series C Stock may elect to receive dividend payments in additional
shares of Common Stock at the conversion rate. Upon the conversion of
shares of Series C Stock as provided in this Section 6, the Corporation
shall promptly pay all then accrued but unpaid dividends to the holder of
the Series C Stock being converted. The Board of Directors of the
Corporation shall at all times so long as any shares of Series C Stock
remain outstanding reserve a sufficient number of authorized but unissued
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shares of Common Stock to be issued in satisfaction of the conversion
rights and privileges aforesaid.
(d) Mechanics of Conversion. In the case of an optional conversion,
before any holder of Series C Stock shall be entitled to convert the same
into shares of Common Stock, it shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or
its transfer agent for the Series C Stock, and shall give written notice
to the Corporation of the election to convert the same and shall state
therein the name or names in which the certificate of certificates for
shares of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series C Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to
which such holder shall be entitled as aforesaid. A certificate or
certificates will be issued for the remaining shares of Series C Stock in
any case in which fewer than all of the shares of Series C Stock
represented by a certificate are converted.
(e) Issue Taxes. The Corporation shall pay all issue taxes, if any,
incurred in respect of the issue of securities on conversion. If a holder
of shares surrendered for conversion specifies that the securities to be
issued on conversion are to be issued in a name or names other than the
name or names in which such surrendered shares stand, the Corporation
shall not be required to pay any transfer or other taxes incurred by
reason of the issuance of such securities to the name of another, and if
the appropriate transfer taxes shall not have been paid to the Corporation
or the transfer agent for the Series C Stock at the time of surrender of
the shares involved, the securities issued upon conversion thereof may be
registered in the name or names in which the surrendered shares were
registered, despite the instructions to the contrary.
(f) Valid Issuance. All securities which may be issued in connection
with the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable, free from
preemptive rights and free from all taxes, liens or charges with respect
thereto created or imposed by the Corporation.
7. Adjustment of Conversion Price and Conversion Rate. The number and
kind of securities issuable upon the optional conversion of the Series C Stock,
the conversion price and the conversion rate shall be subject to adjustment from
time to time in accordance with the following provisions:
(a) Certain Definitions. For purposes of this Certificate:
(i) The term "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued, or deemed to be issued by the
Corporation pursuant to paragraph (g) of this Section 7, after the
Original Issue Date except:
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(A) shares of Common Stock issuable upon conversion of,
or distributions with respect to, the Series C Stock now or
hereafter issued by the Corporation;
(B) up to 790,000 shares of Common Stock issuable upon
the exercise of options issued to officers, directors and
employees of the Corporation under stock option plans
maintained from time to time by the Corporation and approved
by the Board of Directors (the "Employee Options");
(C) up to 3,291,797 shares of Common Stock issuable upon
the exercise of options issued to Mary Ann Domuracki, Beverly
Eichel and Nina McLemore (collectively, the "Management
Options") in connection with the closing of the Purchase
Agreement;
(D) shares of Common Stock issuable upon exercise of the
Warrant and the Warrant issued to Donald Schupak pursuant to
the terms of the Purchase Agreement (the "Schupak Warrant");
and
(E) up to 10,000,000 shares of Common Stock issuable
pursuant to the Rights Offering contemplated by the terms of
the Purchase Agreement.
(ii) The term "Common Stock" shall mean (i) the Common Stock,
$.01 par value, and (ii) the stock of the Corporation of any class,
or series within a class, whether now or hereafter authorized, which
has the right to participate in the distribution of either earnings
or assets of the Corporation without limit as to the amount or
percentage.
(iii) The term "Convertible Securities" shall mean any
evidence of indebtedness, shares (other than the Promissory Note
issued pursuant to the Purchase Agreement, Series C Stock, Series D
Stock, the Schupak Warrant and the Warrant) or other securities
convertible into or exchangeable for Common Stock.
(iv) The term "Options" shall mean rights, options or warrants
(other than the Employee Options and the Management Options) to
subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities.
(v) The term "Original Issue Date" shall mean the date of the
initial issuance of the Series C Stock.
(b) Reorganization, Reclassification. In the event of a
reorganization, share exchange, or reclassification, other than a change
in par value, or from par value to no par value, or from no par value to
par value or a transaction described in subsection (c) or (d) below, each
share of Series C Stock shall, after such reorganization, share exchange
or
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reclassification (a "Reclassification Event"), be convertible at the
option of the holder into the kind and number of shares of stock or other
securities or other property of the Corporation which the holder of Series
C Stock would have been entitled to receive if the holder had held the
Common Stock issuable upon conversion of his Series C Stock immediately
prior to such reorganization, share exchange, or reclassification.
(c) Consolidation, Merger. In the event of a merger or consolidation
to which the Corporation is a party each share of Series C Stock shall,
after such merger or consolidation, be convertible at the option of the
holder into the kind and number of shares of stock and/or other
securities, cash or other property which the holder of such share of
Series C Stock would have been entitled to receive if the holder had held
the Common Stock issuable upon conversion of such share of Series C Stock
immediately prior to such consolidation or merger.
(d) Subdivision or Combination of Shares. In case outstanding shares
of Common Stock shall be subdivided, the conversion price shall be
proportionately reduced as of the effective date of such subdivision, or
as of the date a record is taken of the holders of Common Stock for the
purpose of so subdividing, whichever is earlier. In case outstanding
shares of Common Stock shall be combined, the conversion price shall be
proportionately increased as of the effective date of such combination, or
as of the date a record is taken of the holders of Common Stock for the
purpose of so combining, whichever is earlier.
(e) Stock Dividends. In case shares of Common Stock are issued as a
dividend or other distribution on the Common Stock (or such dividend is
declared), then the conversion price shall be adjusted, as of the date a
record is taken of the holders of Common Stock for the purpose of
receiving such dividend or other distribution (or if no such record is
taken, as at the earliest of the date of such declaration, payment or
other distribution), to that price determined by multiplying the
conversion price in effect immediately prior to such declaration, payment
or other distribution by a fraction (i) the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to the
declaration or payment of such dividend or other distribution, and (ii)
the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after the declaration or payment of such
dividend or other distribution. In the event that the Corporation shall
declare or pay any dividend on the Common Stock payable in any right to
acquire Common Stock for no consideration, then the Corporation shall be
deemed to have made a dividend payable in Common Stock in an amount of
shares equal to the maximum number of shares issuable upon exercise of
such rights to acquire Common Stock.
(f) Issuance of Additional Shares of Common Stock. If the
Corporation shall issue any Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to
paragraph (g) below) after the Original Issue Date (other than as provided
in the foregoing subsections (b) through (e)), for no consideration or for
a consideration per share less than the conversion price in effect on the
date of and
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immediately prior to such issue, then in such event, the conversion price
shall be reduced, concurrently with such issue, to a price equal to the
quotient obtained by dividing:
(A) an amount equal to (x) the total number of shares of
Common Stock outstanding immediately prior to such issuance or sale
multiplied by the conversion price in effect immediately prior to
such issuance or sale, plus (y) the aggregate consideration received
or deemed to be received by the Corporation upon such issuance or
sale, by
(B) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
For purposes of the formulas expressed in paragraph 7(e) and 7(f),
all shares of Common Stock issuable upon the exercise of outstanding Options or
issuable upon the conversion of the Series C Stock or outstanding Convertible
Securities (including Convertible Securities issued upon the exercise of
outstanding Options), shall be deemed outstanding shares of Common Stock both
immediately before and after such issuance or sale.
(g) Deemed Issue of Additional Shares of Common Stock. In the event
the Corporation at any time or from time to time after the Original Issue
Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities
then entitled to receive any such Options or Convertible Securities, then
the maximum number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein designed to
protect against dilution) of Common Stock issuable upon the exercise of
such Options, or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall
be deemed to be Additional Shares of Common Stock issued as of the time of
such issue of Options or Convertible Securities or, in case such a record
date shall have been fixed, as of the close of business on such record
date, provided that in any such case in which Additional Shares of Common
Stock are deemed to be issued:
(i) no further adjustments in the conversion price shall be
made upon the subsequent issue of Convertible Securities or shares
of Common Stock upon the exercise of such Options or the issue of
Common Stock upon the conversion or exchange of such Convertible
Securities;
(ii) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or
increase or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the
conversion price computed upon the original issuance of such Options
or Convertible Securities (or upon the occurrence of a record date
with respect thereto), and any subsequent adjustments based thereon,
upon any such increase or decrease becoming effective, shall be
recomputed to reflect such increase or decrease insofar as it
affects
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<PAGE>
such Options or the rights of conversion or exchange under such
Convertible Securities (provided, however, that no such adjustment
of the conversion price shall affect Common Stock previously issued
upon conversion of the Series C Stock);
(iii) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall
not have been exercised, the conversion price computed upon the
original issue of such Options or Convertible Securities (or upon
the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration,
be recomputed as if:
(A) in the case of Options or Convertible Securities,
the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor
was the consideration actually received by the Corporation (x)
for the issue of all such Options, whether or not exercised,
plus the consideration actually received by the Corporation
upon exercise of the Options or (y) for the issue of all such
Convertible Securities which were actually converted or
exchanged plus the additional consideration, if any, actually
received by the Corporation upon the conversion or exchange of
the Convertible Securities; and
(B) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon
the exercise thereof were issued at the time of issue of such
Options, and the consideration received by the Corporation for
the Additional Shares of Common Stock deemed to have been then
issued was the consideration actually received by the
Corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received
by the Corporation upon the issue of the Convertible
Securities with respect to which such Options were actually
exercised.
(iv) No readjustment pursuant to clause (ii) or (iii) above
shall have the effect of increasing the conversion price to an
amount which exceeds the lower of (x) the conversion price on the
original adjustment date or (y) the conversion price that would have
resulted from any issuance of Additional Shares of Common Stock
between the original adjustment date and such readjustment date.
(v) In the case of any Options which expire by their terms not
more than 30 days after the date of issue thereof, no adjustment of
the conversion price shall be made until the expiration or exercise
of all such Options, whereupon such adjustment shall be made in the
same manner provided in clause (iii) above.
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(h) Determination of Consideration. For purposes of this Section
7, the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be the aggregate amount of
cash received by the Corporation; and
(B) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of the issue, as
determined by the vote of a majority of the Corporation's Board of
Directors or if the Board of Directors cannot reach such agreement,
by a qualified independent public accounting firm, other than the
accounting firm then engaged as the Corporation's independent
auditors.
(ii) Options and Convertible Securities. The consideration per
share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to paragraph (g) above, relating to
Options and Convertible Securities shall be determined by dividing:
(A) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein designed
to protect against dilution) payable to the Corporation upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities by
(B) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) issuable
upon the exercise of such Options or conversion or exchange of such
Convertible Securities.
(i) Adjustment of Conversion Rate. Upon each adjustment of the
conversion price under the provisions of this Section 7, the
conversion rate shall be adjusted to an amount determined by
dividing (x) the conversion price in effect immediately prior to the
event causing such adjustment by (y) such adjusted conversion price.
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<PAGE>
(j) Other Provisions Applicable to Adjustment Under this Section.
The following provisions will be applicable to the adjustments in
conversion price and conversion rate as provided in this Section 7:
(i) Treasury Shares. The number of shares of Common Stock at
any time outstanding shall not include any shares thereof then
directly or indirectly owned or held by or for the account of the
Corporation.
(ii) Other Action Affecting Common Stock. In case the
Corporation shall take any action affecting the outstanding number
of shares of Common Stock other than an action described in any of
the foregoing subsections 7(b) to 7(g) hereof, inclusive, which
would have an inequitable effect on the holders of Series C Stock,
the conversion price shall be adjusted in such manner and at such
time as the Board of Directors of the Corporation on the advice of
the Corporation's independent public accountants may in good faith
determine to be equitable in the circumstances.
(iii) Minimum Adjustment. No adjustment of the conversion
price shall be made if the amount of any such adjustment would be an
amount less than one percent (1%) of the conversion price then in
effect, but any such amount shall be carried forward and an
adjustment in respect thereof shall be made at the time of and
together with any subsequent adjustment which, together with such
amount and any other amount or amounts so carried forward, shall
aggregate an increase or decrease of one percent (1%) or more.
(iv) Certain Adjustments. The conversion price shall not be
adjusted upward except in the event of a combination of the
outstanding shares of Common Stock into a smaller number of shares
of Common Stock or in the event of a readjustment of the conversion
price pursuant to Section 7(g)(ii) or (iii).
(k) Notices of Adjustments. Whenever the conversion rate and
conversion price is adjusted as herein provided, an officer of the
Corporation shall compute the adjusted conversion rate and conversion
price in accordance with the foregoing provisions and shall prepare a
written certificate setting forth such adjusted conversion rate and
conversion price and showing in detail the facts upon which such
adjustment is based, and such written instrument shall promptly be
delivered to the recordholders of the Series C Stock.
8. Redemption.
(a) Redemption by the Corporation. The Corporation shall have
no rights to redeem the Series C Stock or to cause the sale by the
holders of such Series C Stock.
(b) Redemption on Maturity. Upon the seventh (7th) anniversary
of the Original Issue Date, any Series C Stock then outstanding
shall be redeemed by the Corporation at the Redemption Price per
share defined in paragraph (c) below, payable in cash on the date of
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redemption (such date being referred to herein as the "Redemption
Date") without further notice and without action on the part of the
holder.
(c) Redemption Price. The Redemption Price per share of Series
C Stock shall equal the sum of (x) 100% of the Series C Issue Price
plus (y) all accrued and unpaid dividends on such share of Series C
Stock to the Redemption Date.
(d) Redemption Procedure. On or prior to the Redemption Date,
the Corporation shall deposit the Redemption Price of all
outstanding shares of Series C Stock to be redeemed with a bank or
trust corporation having aggregate capital and surplus in excess of
$100,000,000 as a trust fund for the benefit of the holders of the
shares of Series C Stock, with irrevocable instructions and
authority to the bank or trust corporation to pay the Redemption
Price for such shares to their respective holders on or after the
Redemption Date upon receipt of the certificate or certificates of
the shares of Series C Stock to be redeemed. From and after the
Redemption Date, unless there shall have been a default in payment
of the Redemption Price, all rights of the holders of shares of
Series C Stock as holders of Series C Stock (except the right to
receive the Redemption Price upon surrender of their certificate or
certificates) shall cease as to those shares of Series C Stock
redeemed, and such shares shall not thereafter be transferred on the
books of the Corporation or be deemed to be outstanding for any
purpose whatsoever. If on the Redemption Date the funds of the
Corporation legally available for redemption of shares of Series C
Stock are insufficient to redeem the total number of shares of
Series C Stock to be redeemed on such date, the Corporation will use
those funds which are legally available therefor to redeem the
maximum possible number of shares of Series C Stock ratably among
the holders of such shares to be redeemed based upon their holdings
of Series C Stock. Payments shall first be applied against accrued
and unpaid dividends and thereafter against the remainder of the
Redemption Price. The shares of Series C Stock not redeemed shall
remain outstanding and entitled to all the rights and preferences
provided herein. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of shares of
Series C Stock such funds will immediately be used to redeem the
balance of the shares of Series C Stock to be redeemed. No dividends
or other distributions shall be declared or paid on, nor shall the
Corporation redeem, purchase or acquire any shares of, the Common
Stock or any other class or series of stock of the Corporation
unless the Redemption Price of all shares elected to be redeemed
shall have been paid in full. Until the Redemption Price for a share
of Series C Stock elected to be redeemed shall have been paid in
full, such share of Series C Stock shall remain outstanding for all
purposes and entitle the holder thereof to all the rights and
privileges provided herein, including, without limitation, that
dividends and interest thereon shall continue to accrue and, if
unpaid prior to the date such shares are redeemed, shall be included
as part of the Redemption Price as provided in paragraph (c) above.
9. Notices of Record Dates and Effective Dates. In case: (a) the
Corporation shall declare a dividend (or any other distribution) on the Common
Stock payable otherwise than in shares of Common Stock; or (b) the Corporation
shall authorize the granting to the holders of Common Stock of rights to
subscribe for or purchase any shares of capital stock of any class or any other
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rights; or (c) of any reorganization, share exchange or reclassification of the
capital stock of the Corporation (other than a subdivision or combination of
outstanding shares of Common Stock), or of any consolidation or merger to which
the Corporation is party or of the sale, lease or exchange of all or
substantially all of the property of the Corporation; or (d) of the voluntary or
involuntary dissolution, liquidation or winding up of the Corporation; then the
Corporation shall cause to be mailed to the recordholders of the Series C Stock
at least 20 days prior to the applicable record date or effective date
hereinafter specified, a notice stating (i) the date on which a record is to be
taken for the purpose of such dividend, distribution or rights, or, if a record
is not to be taken, the date as of which the holders of record of Common Stock
to be entitled to such dividend, distribution or rights are to be determined or
(ii) the date on which such reclassification, reorganization, share exchange,
consolidation, merger, sale, lease, exchange, dissolution, liquidation or
winding up is expected to become effective or be consummated, and the date as of
which it is expected that holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, reorganization share exchange,
consolidation, liquidation, merger, sale, lease, exchange, dissolution,
liquidation or winding up.
10. Voting Rights.
(a) General. In addition to the rights otherwise provided for
herein or by law, holders of the Series C Stock shall be entitled to vote,
together with the holders of the Common Stock and any other class or
series of stock then entitled to vote, as one class on all matters
submitted to a vote of stockholders of the Corporation, in the same manner
and with the same effect as the holders of the Common Stock. In any such
vote, and in any vote or action of the holders of the Series C Stock
voting together as a separate class, each share of issued and outstanding
Series C Stock shall entitle the holder thereof to one vote per share for
each share of Common Stock (including fractional shares) which would be
obtained upon conversion of all of the outstanding shares of the Series C
Stock held by such holder, rounded up to the nearest one-tenth of a share.
(b) Election of Board of Directors.
(i) In addition to the rights specified in Section 10(a), the
holders of a majority in voting power of the Series C Stock, voting
together as a separate class or in such other manner as the holders
of the Series C Stock shall agree among themselves shall have the
exclusive right to elect to the Board of Directors of the
Corporation that number of directors which shall be equal to one
director less than a majority of the total number of directors
constituting the whole Board of Directors at any given time (the
"Preferred Directors"). In any election of Preferred Directors
pursuant to this Section 10(b), each share of issued and outstanding
Series C Stock shall entitle the holder thereof to the number of
votes per share that equals the number of shares of Common Stock
(including fractional shares) into which each such share is then
convertible, rounded up to the nearest one-tenth of a share. The
voting rights of the holders of Series C Stock contained in this
Section 10(b) may be exercised at a special meeting of the holders
of Series C Stock called as provided in
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accordance with the By-laws of the Corporation, at any annual or
special meeting of the stockholders of the Corporation, or by
written consent of the holders of Series C Stock in lieu of a
meeting. The Preferred Directors elected pursuant to this Section
10(b) shall serve from the date of their election and qualification
until their successors have been duly elected and qualified.
(ii) A vacancy in the directorships to be elected pursuant to
Section 10(b)(i) (including any vacancy created on account of an
increase in the number of directors on the Board of Directors) may
be filled only by vote of the holders of Series C Stock at a meeting
called in accordance with the By-laws of the Corporation or written
consent in lieu of a meeting in accordance with Section 10(b)(i).
(iii) No director elected by the holders of Series C Stock as
a class, or elected by other directors to fill a vacancy resulting
from the death, resignation or removal of a director elected by such
class vote, may be removed from office by the vote or written
consent of stockholders unless such vote or written consent includes
that of the holders of a majority of the outstanding shares of
Series C Stock.
(c) Protective Provisions. In addition to any other vote or
consent of stockholders provided by law or by the Corporation's
Certificate of Incorporation, the Corporation shall not, without the
approval by vote or written consent of the holders of not less than 662/3%
of the then outstanding shares of Series C Stock:
(i) amend, waive or repeal any provisions of, or add any
provision to, (i) this Certificate of Designation or (ii) any
provision of the Corporation's Certificate of Incorporation or any
other certificate of designation filed with the Secretary of State
of Delaware by the Corporation with respect to its preferred stock;
(ii) amend, waive or repeal any provisions of, or add any
provision to, the Corporation's By-Laws;
(iii) enter into any agreement, indenture or other instrument
which contains any provisions restricting the Corporation's
obligation to pay dividends on, make liquidation payments in respect
of, or make redemptions of the Series C Stock in accordance
herewith; or
(iv) dissolve the Corporation.
(d) Amendment of Series C Stock. Notwithstanding anything else
contained herein, the affirmative vote or written consent of the holders
of 75% of the outstanding shares of Series C Stock shall be necessary to
amend, alter or repeal any of the provisions of the Certificate of
Designation creating this Series C Stock which would alter or change (i)
the dividend rate, (ii) redemption provisions, (iii) anti-dilution
provisions, (iv) the place or currency of payments hereunder, (v) the
right to institute suit for the enforcement of any
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payment hereunder, (vi) the conversion provisions,(vii) the voting rights,
or (viii) provisions of this Section 10, so as to affect any of the
foregoing adversely.
11. Shares to be Retired. All shares of the Series C Stock redeemed,
converted, exchanged or purchased by the Corporation shall be retired and
canceled and shall be restored to the status of authorized but unissued shares
of Preferred Stock, without designation as to series and may thereafter be
reissued.
*****
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this 22nd day of September, 1997.
DANSKIN, INC.
By:
----------------------------------
Name:
Title:
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES D CUMULATIVE CONVERTIBLE
PREFERRED STOCK OF DANSKIN, INC.
DANSKIN, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY
CERTIFY THAT:
A. Pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") and pursuant to the provisions of ss. 151 of the Delaware
General Corporation Law, the Board of Directors, pursuant to a meeting held
September 18, 1997, adopted the following resolution providing for the
designations, preferences and relative, participating, optional and other
rights, and the qualifications, limitations and restrictions of the Series D
Cumulative Convertible Preferred Stock.
WHEREAS, the Certificate of Incorporation of the Corporation
provides for two classes of shares known as common stock, $.01 par value per
share (the "Common Stock"), and preferred stock, $.01 par value per share
("Preferred Stock"); and
WHEREAS, the Board of Directors of the Corporation is authorized by
the Certificate of Incorporation to provide for the issuance of the shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in such series and to fix the designations,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors deems it
advisable to, and hereby does, designate a Series D Cumulative Convertible
Preferred Stock and fixes and determines the rights, preferences,
qualifications, limitations and restrictions relating to the Series D Cumulative
Convertible Preferred Stock as follows:
1. Designation. The shares of such series of Preferred Stock shall be
designated "Series D Cumulative Convertible Preferred Stock" (referred to herein
as the "Series D Stock").
2. Authorized Number. The number of shares constituting the Series D
Stock shall be 2,400.
3. Ranking. The Corporation's Series D Stock shall rank, as to
dividends and upon Liquidation (as defined in Section 5(a) hereof), senior and
prior to the Corporation's Common Stock and to all other classes or series of
stock issued by the Corporation, except as otherwise approved
<PAGE>
by the affirmative vote or consent of the holders of shares of Series D Stock
pursuant to Section 10(d) hereof.
4. Dividends.
(a) Dividend Accrual and Payment. From and after the issuance of the
Series D Stock (the "Original Issue Date"), dividends shall accrue on the
shares of Series D Stock at the rate of 8% (i.e., $400) per share per
annum. The holders of shares of Series D Stock shall be entitled to
receive such dividends when and as declared by the Board of Directors of
the Corporation, in cash, out of assets legally available for such
purpose, semi-annually in arrears on the last day of March and September
in each year following the Original Issue Date; provided, however, that
dividends on the Series D Stock shall accrue but are not required to be
paid during the period ending December 31, 1999. Dividends on the Series D
Stock shall be cumulative so that if, for any dividend accrual period,
cash dividends at the rate hereinabove specified are not declared and paid
or set aside for payment, the amount of accrued but unpaid dividends shall
accumulate with interest at the then applicable dividend rate per annum
and shall be added to the dividends payable for subsequent dividend
accrual periods and upon any redemption or conversion of shares of Series
D Stock, subject to the dividend forgiveness provisions set forth in
paragraph (b) below. If the shares of Series D Stock are issued on a date
which does not coincide with a dividend payment date, then the initial
dividend accrual period applicable to such shares shall be the period from
the Original Issue Date through whichever of March 31 or September 30 next
occurs after the Original Issue Date. If the date fixed for payment of a
final liquidating distribution on any shares of Series D Stock, or the
date on which any shares of Series D Stock are redeemed or converted into
Common Stock does not coincide with a dividend payment date, then subject
to the provisions hereof relating to such payment, redemption or
conversion, the final dividend accrual period applicable to such shares
shall be the period from whichever of April 1 or October 1 most recently
precedes the date of such payment, conversion or redemption through the
effective date of such payment, conversion or redemption. The rate at
which dividends are paid shall be adjusted for any combinations or
divisions or similar recapitalizations affecting the shares of Series D
Stock. Without the written consent of the holders of at least 662/3% of
the then outstanding Series D Stock, the Corporation shall not declare or
pay any cash dividend on, or redeem or repurchase or make any other cash
distribution in respect of any other equity securities of the Corporation
unless at the time of such declaration, payment or distribution all
dividends on the Series D Stock accrued for all past dividend accrual
periods shall have been paid and the full dividends thereon for the
current dividend period shall be paid or declared and set aside for
payment.
(b) Dividend Forgiveness. Notwithstanding the foregoing, in the
event that the Corporation achieves the Financial Targets (as defined
below) for any of the 1999, 2000, 2001 or 2002 fiscal years, then all
dividends accrued but unpaid in respect of such fiscal year (or in the
case of the fiscal year ending 1999, all preceding fiscal years), together
with any interest thereon, shall be forgiven and the Corporation shall
have no further obligations with respect thereto. For the avoidance of
doubt, if the Financial Targets are not achieved in any
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<PAGE>
year, then dividends accrued for all preceding fiscal years shall be due
and payable notwithstanding that the Financial Targets may have been met
for a succeeding fiscal year. "Financial Targets" means, with respect to
each of the 1999, 2000, 2001 and 2002 fiscal years of the Corporation, the
Annual Gross Profit Target (the "Gross Profit Target") of the Danskin
division of the Corporation ("Danskin Division") and the Annual Earnings
before Interest and Taxes Target (the "EBIT Target") for the Corporation
for such fiscal year as set forth in the charts below. The achievement by
the Danskin Division of the Gross Profit Target and the Corporation's
achievement of the EBIT Target shall be measured by reference to the
corresponding line items on the certified financial statements of the
Corporation (or of the Danskin Division if it has separate certified
financial statements) for the relevant fiscal year.
Annual Gross Profit Target of the Danskin Division:
Target
Fiscal Year (in millions of dollars)
----------- ------------------------
1999..................................................44.3
2000..................................................51.7
2001..................................................56.8
2002..................................................62.0
Annual Earnings before
Interest and Taxes Target of the Corporation:
Target
Fiscal Year (in millions of dollars)
----------- ------------------------
1999...................................................5.7
2000..................................................10.2
2001..................................................15.0
2002..................................................19.0
5. Liquidation.
(a) Liquidation Procedure. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the
holders of the shares of Series D Stock shall be entitled, before any
distribution or payment is made upon any Common Stock or any other class
or series of stock ranking junior to the Series D Stock as to distribution
of assets upon liquidation, to be paid an amount equal to the greater of
(i) $5,000 per share (as adjusted for any combinations, divisions or
similar recapitalizations affecting the shares of Series D Stock) (the
"Series D Issue Price") plus all accrued and unpaid dividends to such date
and (ii) the percentage of the assets of the Corporation equal to the
percentage which the Common Stock of the Corporation issuable upon
conversion of the Series D Stock
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<PAGE>
represents of all of the outstanding Common Stock (and the Common Stock
issuable on conversion of the Series D Stock) of the Corporation at the
time of the making of the Liquidation Payments plus all accrued and unpaid
dividends to such date (the "Liquidation Payments"). If upon any
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders
of Series D Stock shall be insufficient to permit payment in full to the
holders of Series D Stock of the Liquidation Payments, then the entire
assets of the Corporation shall be distributed ratably among such holders
in proportion to the full respective distributive amounts to which they
are entitled.
(b) Remaining Assets. Upon any liquidation, dissolution or winding
up of the Corporation, after the holders of Series D Stock shall have been
paid in full the Liquidation Payments, the remaining assets of the
Corporation may be distributed ratably per share in order of preference to
the holders of Common Stock and any other class or series of stock ranking
junior to the Series D Stock as to distribution of assets upon
liquidation.
(c) Notice of Liquidation. Written notice of a liquidation,
dissolution or winding up, stating a payment date, the amount of the
Liquidation Payments and the place where said Liquidation Payments shall
be payable, shall be given by mail, postage prepaid, not less than 30 days
prior to the payment date stated therein, to each holder of record of
Series D Stock at his post office address as shown by the records of the
Corporation.
6. Conversion.
The holders of the Series D Stock shall have the following
conversion rights:
(a) Mandatory Conversion. Subject to the Corporation having received
the Stockholder Related Approvals (as defined below), upon the
Corporation's delivery to the holders of the Series D Stock of annual
financial statements of the Corporation prepared by the Corporation's
independent certified public accountants in accordance with GAAP
evidencing the achievement of the Financial Targets by the Corporation and
the Danskin Division for the immediately prior fiscal year, any Series D
Stock remaining outstanding shall be automatically converted into
fully-paid and nonassessable shares of Common Stock at the "conversion
rate" (as defined in paragraph (c) below) then in effect without further
notice and without action on the part of the holder.
(b) Optional Conversion. Subject to the limitations set forth below
and to subsection (a) above, each share of Series D Stock shall be
convertible at any time (subject to there being sufficient available
authorized shares of Common Stock into which to convert), at the option of
the holder of record thereof, into fully paid and nonassessable shares of
Common Stock at the "conversion rate" (as defined in paragraph (c) below)
then in effect upon surrender to the Corporation or its transfer agent of
the certificate or certificates representing the Series D Stock to be
converted, as provided below, or if the holder notifies the Corporation or
its transfer agent that such certificate or certificates have
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<PAGE>
been lost, stolen or destroyed, upon the execution and delivery of an
agreement satisfactory to the Corporation to indemnify the Corporation
from any losses incurred by it in connection therewith.
(c) Basis For Conversion; Converted Shares. The basis for any
conversion under this Section 6 shall be the "conversion rate" in effect
at the time of conversion, which for the purposes hereof shall mean the
number of shares of Common Stock issuable for each share of Series D Stock
surrendered for conversion under this Section 6. Initially, the conversion
rate shall be 16,666.66:1, i.e., 16,666.66 shares of Common Stock for each
share of Series D Stock being converted. Such conversion rate shall be
subject to adjustment as provided in Section 8 below. As used herein, the
term "conversion price" shall be an amount computed by dividing the Series
D Issue Price by the conversion rate then in effect. Initially, the
conversion price shall be $.30 per share of Common Stock. If a holder of
Series D Stock shall surrender more than one share of Series D Stock for
conversion at any one time, the number of such shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares of Series D Stock so surrendered. If any
fractional interest in a share of Common Stock would be deliverable upon
conversion of Series D Stock, the Corporation shall pay in lieu of such
fractional share an amount in cash equal to the conversion price of such
fractional share (computed to the nearest one hundredth of a share) in
effect at the close of business on the date of conversion. Any shares of
Series D Stock which have been converted shall be cancelled and all
dividends on converted shares shall cease to accrue and the certificates
representing shares of Series D Stock so converted shall represent the
right to receive (i) such number of shares of Common Stock into which such
shares of Series D Stock are convertible, plus (ii) cash payable for any
fractional share, plus (iii) subject to the dividend forgiveness
provisions set forth in Section 4(b) hereof, all accrued but unpaid
dividends relating to such shares, together with interest thereon, payable
in cash, through the immediately preceding dividend payment date. At its
option, the holder of the Series D Stock may elect to receive dividend
payments in additional shares of Common Stock at the conversion rate. Upon
the conversion of shares of Series D Stock as provided in this Section 6,
the Corporation shall promptly pay all then accrued but unpaid dividends
to the holder of the Series D Stock being converted. The Board of
Directors of the Corporation shall at all times so long as any shares of
Series D Stock remain outstanding (and after the Stockholder Related
Approvals have been obtained) reserve a sufficient number of authorized
but unissued shares of Common Stock to be issued in satisfaction of the
conversion rights and privileges aforesaid. The Corporation shall use its
best efforts to promptly obtain the "Stockholder Related Approvals."
"Stockholder Related Approvals" means all consents and approvals of the
holders of the Corporation's capital stock and clearances of any
information statement or proxy by the Securities and Exchange Commission
which may be necessary to amend the Corporation's Certificate of
Incorporation in order to (i) eliminate the provisions of the Certificate
of Incorporation providing for a classified Board of Directors and (ii)
increase the Corporation's authorized Common Stock by an amount sufficient
to permit the Corporation to issue the number of duly authorized,
fully-paid and nonassessable shares of Common Stock which would be
required upon the conversion of all of the authorized shares
-5-
<PAGE>
of Series D Stock in accordance with this certificate or otherwise approve
the acquisition of such shares of Common Stock and any substantially
contemporaneous offering of shares of the Corporation's Common Stock.
(d) Mechanics of Conversion. In the case of an optional conversion,
before any holder of Series D Stock shall be entitled to convert the same
into shares of Common Stock, it shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or
its transfer agent for the Series D Stock, and shall give written notice
to the Corporation of the election to convert the same and shall state
therein the name or names in which the certificate of certificates for
shares of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series D Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to
which such holder shall be entitled as aforesaid. A certificate or
certificates will be issued for the remaining shares of Series D Stock in
any case in which fewer than all of the shares of Series D Stock
represented by a certificate are converted.
(e) Issue Taxes. The Corporation shall pay all issue taxes, if any,
incurred in respect of the issue of shares of Common Stock on conversion.
If a holder of shares surrendered for conversion specifies that the shares
of Common Stock to be issued on conversion are to be issued in a name or
names other than the name or names in which such surrendered shares stand,
the Corporation shall not be required to pay any transfer or other taxes
incurred by reason of the issuance of such shares of Common Stock to the
name of another, and if the appropriate transfer taxes shall not have been
paid to the Corporation or the transfer agent for the Series D Stock at
the time of surrender of the shares involved, the shares of Common Stock
issued upon conversion thereof may be registered in the name or names in
which the surrendered shares were registered, despite the instructions to
the contrary.
(f) Valid Issuance. All shares of Common Stock which may be issued
in connection with the conversion provisions set forth herein will, upon
issuance by the Corporation, be validly issued, fully paid and
nonassessable, free from preemptive rights and free from all taxes, liens
or charges with respect thereto created or imposed by the Corporation.
7. Adjustment of Conversion Price and Conversion Rate. The number and
kind of securities issuable upon the conversion of the Series D Stock, the
conversion price and the conversion rate shall be subject to adjustment from
time to time in accordance with the following provisions:
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<PAGE>
(a) Certain Definitions. For purposes of this Certificate:
(i) The term "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued, or deemed to be issued by the
Corporation pursuant to paragraph (g) of this Section 7, after the
Original Issue Date except:
(A) shares of Common Stock issuable upon conversion of,
or distributions with respect to, the Series D Stock now or
hereafter issued by the Corporation;
(B) up to 790,000 shares of Common Stock issuable upon
the exercise of options issued to officers, directors and
employees of the Corporation under stock option plans
maintained from time to time by the Corporation and approved
by the Board of Directors (the "Employee Options");
(C) up to 3,291,797 shares of Common Stock issuable upon
the exercise of options issued to Mary Ann Domuracki, Beverly
Eichel and Nina McLemore (collectively, the "Management
Options") in connection with the closing of that certain
Securities Purchase Agreement dated as of September 22, 1997
between the Corporation and Danskin Investors, LLC (the
"Purchase Agreement");
(D) shares of Common Stock issuable upon exercise of
that certain Warrant issued on the Original Issue Date
pursuant to the Purchase Agreement (the "Warrant") and the
Warrant issued to Donald Schupak pursuant to the terms of the
Purchase Agreement (the "Schupak Warrant"); and
(E) up to 10,000,000 shares of Common Stock issuable
pursuant to the Rights Offering contemplated by the terms of
the Purchase Agreement.
(ii) The term "Common Stock" shall mean (i) the Common Stock,
$.01 par value, and (ii) the stock of the Corporation of any class,
or series within a class, whether now or hereafter authorized, which
has the right to participate in the distribution of either earnings
or assets of the Corporation without limit as to the amount or
percentage.
(iii) The term "Convertible Securities" shall mean any
evidence of indebtedness, shares (other than the Promissory Note
issued pursuant to the Purchase Agreement, Series C Stock, Series D
Stock, the Schupak Warrant and the Warrant) or other securities
convertible into or exchangeable for Common Stock.
-7-
<PAGE>
(iv) The term "Options" shall mean rights, options or warrants
(other than the Employee Options and the Management Options) to
subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities.
(v) The term "Original Issue Date" shall mean the date of the
initial issuance of the Series D Stock.
(b) Reorganization, Reclassification. In the event of a
reorganization, share exchange, or reclassification, other than a change
in par value, or from par value to no par value, or from no par value to
par value or a transaction described in subsection (c) or (d) below, each
share of Series D Stock shall, after such reorganization, share exchange
or reclassification (a "Reclassification Event"), be convertible at the
option of the holder into the kind and number of shares of stock or other
securities or other property of the Corporation which the holder of Series
D Stock would have been entitled to receive if the holder had held the
Common Stock issuable upon conversion of his Series D Stock immediately
prior to such reorganization, share exchange, or reclassification.
(c) Consolidation, Merger. In the event of a merger or consolidation
to which the Corporation is a party each share of Series D Stock shall,
after such merger or consolidation, be convertible at the option of the
holder into the kind and number of shares of stock and/or other
securities, cash or other property which the holder of such share of
Series D Stock would have been entitled to receive if the holder had held
the Common Stock issuable upon conversion of such share of Series D Stock
immediately prior to such consolidation or merger.
(d) Subdivision or Combination of Shares. In case outstanding shares
of Common Stock shall be subdivided, the conversion price shall be
proportionately reduced as of the effective date of such subdivision, or
as of the date a record is taken of the holders of Common Stock for the
purpose of so subdividing, whichever is earlier. In case outstanding
shares of Common Stock shall be combined, the conversion price shall be
proportionately increased as of the effective date of such combination, or
as of the date a record is taken of the holders of Common Stock for the
purpose of so combining, whichever is earlier.
(e) Stock Dividends. In case shares of Common Stock are issued as a
dividend or other distribution on the Common Stock (or such dividend is
declared), then the conversion price shall be adjusted, as of the date a
record is taken of the holders of Common Stock for the purpose of
receiving such dividend or other distribution (or if no such record is
taken, as at the earliest of the date of such declaration, payment or
other distribution), to that price determined by multiplying the
conversion price in effect immediately prior to such declaration, payment
or other distribution by a fraction (i) the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to the
declaration or payment of such dividend or other distribution, and (ii)
the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after the
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<PAGE>
declaration or payment of such dividend or other distribution. In the
event that the Corporation shall declare or pay any dividend on the Common
Stock payable in any right to acquire Common Stock for no consideration,
then the Corporation shall be deemed to have made a dividend payable in
Common Stock in an amount of shares equal to the maximum number of shares
issuable upon exercise of such rights to acquire Common Stock.
(f) Issuance of Additional Shares of Common Stock. If the
Corporation shall issue any Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to
paragraph (g) below) after the Original Issue Date (other than as provided
in the foregoing subsections (b) through (e)), for no consideration or for
a consideration per share less than the conversion price in effect on the
date of and immediately prior to such issue, then in such event, the
conversion price shall be reduced, concurrently with such issue, to a
price equal to the quotient obtained by dividing:
(A) an amount equal to (x) the total number of shares of
Common Stock outstanding immediately prior to such issuance or sale
multiplied by the conversion price in effect immediately prior to
such issuance or sale, plus (y) the aggregate consideration received
or deemed to be received by the Corporation upon such issuance or
sale, by
(B) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
For purposes of the formulas expressed in paragraph 7(e) and 7(f),
all shares of Common Stock issuable upon the exercise of outstanding Options or
issuable upon the conversion of the Series D Stock or outstanding Convertible
Securities (including Convertible Securities issued upon the exercise of
outstanding Options), shall be deemed outstanding shares of Common Stock both
immediately before and after such issuance or sale.
(g) Deemed Issue of Additional Shares of Common Stock. In the event
the Corporation at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities or shall fix a record date for
the determination of holders of any class of securities then entitled to receive
any such Options or Convertible Securities, then the maximum number of shares
(as set forth in the instrument relating thereto without regard to any
provisions contained therein designed to protect against dilution) of Common
Stock issuable upon the exercise of such Options, or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue of Options or Convertible Securities or, in case such a
record date shall have been fixed, as of the close of business on such record
date, provided that in any such case in which Additional Shares of Common Stock
are deemed to be issued:
(i) no further adjustments in the conversion price shall be
made upon the subsequent issue of Convertible Securities or shares
of Common Stock upon
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<PAGE>
the exercise of such Options or the issue of Common Stock upon the
conversion or exchange of such Convertible Securities;
(ii) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or
increase or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the
conversion price computed upon the original issuance of such Options
or Convertible Securities (or upon the occurrence of a record date
with respect thereto), and any subsequent adjustments based thereon,
upon any such increase or decrease becoming effective, shall be
recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under
such Convertible Securities (provided, however, that no such
adjustment of the conversion price shall affect Common Stock
previously issued upon conversion of the Series D Stock);
(iii) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall
not have been exercised, the conversion price computed upon the
original issue of such Options or Convertible Securities (or upon
the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration,
be recomputed as if:
(A) in the case of Options or Convertible Securities,
the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor
was the consideration actually received by the Corporation (x)
for the issue of all such Options, whether or not exercised,
plus the consideration actually received by the Corporation
upon exercise of the Options or (y) for the issue of all such
Convertible Securities which were actually converted or
exchanged plus the additional consideration, if any, actually
received by the Corporation upon the conversion or exchange of
the Convertible Securities; and
(B) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon
the exercise thereof were issued at the time of issue of such
Options, and the consideration received by the Corporation for
the Additional Shares of Common Stock deemed to have been then
issued was the consideration actually received by the
Corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received
by the Corporation upon the issue of the Convertible
Securities with respect to which such Options were actually
exercised.
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(iv) No readjustment pursuant to clause (ii) or (iii) above
shall have the effect of increasing the conversion price to an
amount which exceeds the lower of (x) the conversion price on the
original adjustment date or (y) the conversion price that would have
resulted from any issuance of Additional Shares of Common Stock
between the original adjustment date and such readjustment date.
(v) In the case of any Options which expire by their terms not
more than 30 days after the date of issue thereof, no adjustment of
the conversion price shall be made until the expiration or exercise
of all such Options, whereupon such adjustment shall be made in the
same manner provided in clause (iii) above.
(h) Determination of Consideration. For purposes of this Section 7,
the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be the aggregate
amount of cash received by the Corporation; and
(B) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of the
issue, as determined by the vote of a majority of the
Corporation's Board of Directors or if the Board of Directors
cannot reach such agreement, by a qualified independent public
accounting firm, other than the accounting firm then engaged
as the Corporation's independent auditors.
(ii) Options and Convertible Securities. The consideration
per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to paragraph
(g) above, relating to Options and Convertible Securities
shall be determined by dividing:
(A) the total amount, if any, received or receivable by
the Corporation as consideration for the issue of such Options
or Convertible Securities, plus the minimum aggregate amount
of additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein designed to protect against dilution) payable to the
Corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in
the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to
any provision
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contained therein designed to protect against dilution)
issuable upon the exercise of such Options or conversion or
exchange of such Convertible Securities.
(i) Adjustment of Conversion Rate. Upon each adjustment of the
conversion price under the provisions of this Section 7, the conversion
rate shall be adjusted to an amount determined by dividing (x) the
conversion price in effect immediately prior to the event causing such
adjustment by (y) such adjusted conversion price.
(j) Other Provisions Applicable to Adjustment Under this Section.
The following provisions will be applicable to the adjustments in
conversion price and conversion rate as provided in this Section 7:
(i) Treasury Shares. The number of shares of Common Stock at
any time outstanding shall not include any shares thereof then
directly or indirectly owned or held by or for the account of the
Corporation.
(ii) Other Action Affecting Common Stock. In case the
Corporation shall take any action affecting the outstanding number
of shares of Common Stock other than an action described in any of
the foregoing subsections 7(b) to 7(g) hereof, inclusive, which
would have an inequitable effect on the holders of Series D Stock,
the conversion price shall be adjusted in such manner and at such
time as the Board of Directors of the Corporation on the advice of
the Corporation's independent public accountants may in good faith
determine to be equitable in the circumstances.
(iii) Minimum Adjustment. No adjustment of the conversion
price shall be made if the amount of any such adjustment would be an
amount less than one percent (1%) of the conversion price then in
effect, but any such amount shall be carried forward and an
adjustment in respect thereof shall be made at the time of and
together with any subsequent adjustment which, together with such
amount and any other amount or amounts so carried forward, shall
aggregate an increase or decrease of one percent (1%) or more.
(iv) Certain Adjustments. The conversion price shall not be
adjusted upward except in the event of a combination of the
outstanding shares of Common Stock into a smaller number of shares
of Common Stock or in the event of a readjustment of the conversion
price pursuant to Section 7(g)(ii) or (iii).
(k) Notices of Adjustments. Whenever the conversion rate and
conversion price is adjusted as herein provided, an officer of the
Corporation shall compute the adjusted conversion rate and conversion
price in accordance with the foregoing provisions and shall prepare a
written certificate setting forth such adjusted conversion rate and
conversion price and showing in detail the facts upon which such
adjustment is based, and such written instrument shall promptly be
delivered to the recordholders of the Series D Stock.
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<PAGE>
8. Redemption.
(a) Redemption by the Corporation. The Corporation shall have no
rights to redeem the Series D Stock or to cause the sale by the holders of
such Series D Stock.
(b) Redemption on Maturity. Upon the seventh (7th) anniversary of
the Original Issue Date, any Series D Stock then outstanding shall be
redeemed by the Corporation at the Redemption Price per share defined in
paragraph (c) below, payable in cash on the date of redemption (such date
being referred to herein as the "Redemption Date") without further notice
and without action on the part of the holder.
(c) Redemption Price. The Redemption Price per share of Series D
Stock shall equal the sum of (x) 100% of the Series D Issue Price plus (y)
all accrued and unpaid dividends on such share of Series D Stock to the
Redemption Date.
(d) Redemption Procedure. On or prior to the Redemption Date, the
Corporation shall deposit the Redemption Price of all outstanding shares
of Series D Stock to be redeemed with a bank or trust corporation having
aggregate capital and surplus in excess of $100,000,000 as a trust fund
for the benefit of the holders of the shares of Series D Stock, with
irrevocable instructions and authority to the bank or trust corporation to
pay the Redemption Price for such shares to their respective holders on or
after the Redemption Date upon receipt of the certificate or certificates
of the shares of Series D Stock to be redeemed. From and after the
Redemption Date, unless there shall have been a default in payment of the
Redemption Price, all rights of the holders of shares of Series D Stock as
holders of Series D Stock (except the right to receive the Redemption
Price upon surrender of their certificate or certificates) shall cease as
to those shares of Series D Stock redeemed, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to
be outstanding for any purpose whatsoever. If on the Redemption Date the
funds of the Corporation legally available for redemption of shares of
Series D Stock are insufficient to redeem the total number of shares of
Series D Stock to be redeemed on such date, the Corporation will use those
funds which are legally available therefor to redeem the maximum possible
number of shares of Series D Stock ratably among the holders of such
shares to be redeemed based upon their holdings of Series D Stock.
Payments shall first be applied against accrued and unpaid dividends and
thereafter against the remainder of the Redemption Price. The shares of
Series D Stock not redeemed shall remain outstanding and entitled to all
the rights and preferences provided herein. At any time thereafter when
additional funds of the Corporation are legally available for the
redemption of shares of Series D Stock such funds will immediately be used
to redeem the balance of the shares of Series D Stock to be redeemed. No
dividends or other distributions shall be declared or paid on, nor shall
the Corporation redeem, purchase or acquire any shares of, the Common
Stock or any other class or series of stock of the Corporation unless the
Redemption Price of all shares elected to be redeemed shall have been paid
in full. Until the Redemption Price for a share of Series D Stock elected
to be redeemed shall have been paid in full, such share of Series D Stock
shall remain outstanding for all purposes and entitle the holder thereof
to
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<PAGE>
all the rights and privileges provided herein, including, without
limitation, that dividends and interest thereon shall continue to accrue
and, if unpaid prior to the date such shares are redeemed, shall be
included as part of the Redemption Price as provided in paragraph (c)
above.
9. Notices of Record Dates and Effective Dates. In case: (a) the
Corporation shall declare a dividend (or any other distribution) on the Common
Stock payable otherwise than in shares of Common Stock; or (b) the Corporation
shall authorize the granting to the holders of Common Stock of rights to
subscribe for or purchase any shares of capital stock of any class or any other
rights; or (c) of any reorganization, share exchange or reclassification of the
capital stock of the Corporation (other than a subdivision or combination of
outstanding shares of Common Stock), or of any consolidation or merger to which
the Corporation is party or of the sale, lease or exchange of all or
substantially all of the property of the Corporation; or (d) of the voluntary or
involuntary dissolution, liquidation or winding up of the Corporation; then the
Corporation shall cause to be mailed to the recordholders of the Series D Stock
at least 20 days prior to the applicable record date or effective date
hereinafter specified, a notice stating (i) the date on which a record is to be
taken for the purpose of such dividend, distribution or rights, or, if a record
is not to be taken, the date as of which the holders of record of Common Stock
to be entitled to such dividend, distribution or rights are to be determined or
(ii) the date on which such reclassification, reorganization, share exchange,
consolidation, merger, sale, lease, exchange, dissolution, liquidation or
winding up is expected to become effective or be consummated, and the date as of
which it is expected that holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, reorganization share exchange,
consolidation, liquidation, merger, sale, lease, exchange, dissolution,
liquidation or winding up.
10. Voting Rights.
(a) General. In addition to the rights otherwise provided for herein
or by law, holders of the Series D Stock shall be entitled to vote,
together with the holders of the Common Stock and any other class or
series of stock then entitled to vote, as one class on all matters
submitted to a vote of stockholders of the Corporation, in the same manner
and with the same effect as the holders of the Common Stock. In any such
vote, and in any vote or action of the holders of the Series D Stock
voting together as a separate class, each share of issued and outstanding
Series D Stock shall entitle the holder thereof to one vote per share for
each share of Common Stock (including fractional shares) which would be
obtained upon conversion of all of the outstanding shares of the Series D
Stock held by such holder, rounded up to the nearest one-tenth of a share.
(b) Election of Board of Directors.
(i) In addition to the rights specified in Section 10(a), and
for so long as the outstanding shares of Series D Stock which have
not been converted, redeemed or exchanged in accordance with the
terms hereof shall constitute fifty percent
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<PAGE>
(50%) or more of the shares of Series D Stock issued on the Original
Issue Date, the holders of a majority in voting power of the Series
D Stock, voting together as a separate class or in such other manner
as the holders of the Series D Stock shall agree among themselves
shall have the exclusive right to elect to the Board of Directors of
the Corporation that number of directors which shall be equal to a
majority of the total number of directors constituting the whole
Board of Directors at any given time (the "Preferred Directors"). In
any election of Preferred Directors pursuant to this Section 10(b),
each share of issued and outstanding Series D Stock shall entitle
the holder thereof to the number of votes per share that equals the
number of shares of Common Stock (including fractional shares) into
which each such share is then convertible, rounded up to the nearest
one-tenth of a share. The voting rights of the holders of Series D
Stock contained in this Section 10(b) may be exercised at a special
meeting of the holders of Series D Stock called as provided in
accordance with the By-laws of the Corporation, at any annual or
special meeting of the stockholders of the Corporation, or by
written consent of the holders of Series D Stock in lieu of a
meeting. The Preferred Directors elected pursuant to this Section
10(b) shall serve from the date of their election and qualification
until their successors have been duly elected and qualified.
(ii) A vacancy in the directorships to be elected pursuant to
Section 10(b)(i) (including any vacancy created on account of an
increase in the number of directors on the Board of Directors) may
be filled only by vote of the holders of Series D Stock at a meeting
called in accordance with the By-laws of the Corporation or written
consent in lieu of a meeting in accordance with Section 10(b)(i).
(iii) No director elected by the holders of Series D Stock as
a class, or elected by other directors to fill a vacancy resulting
from the death, resignation or removal of a director elected by such
class vote, may be removed from office by the vote or written
consent of stockholders unless such vote or written consent includes
that of the holders of a majority of the outstanding shares of
Series D Stock.
(c) Protective Provisions. In addition to any other vote or consent
of stockholders provided by law or by the Corporation's Certificate of
Incorporation, the Corporation shall not, without the approval by vote or
written consent of the holders of not less than 662/3% of the then
outstanding shares of Series D Stock:
(i) amend, waive or repeal any provisions of, or add any
provision to, (i) this Certificate of Designation or (ii) any
provision of the Corporation's Certificate of Incorporation or any
other certificate of designation filed with the Secretary of State
of Delaware by the Corporation with respect to its preferred stock;
(ii) amend, waive or repeal any provisions of, or add any
provision to, the Corporation's By-Laws;
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<PAGE>
(iii) enter into any agreement, indenture or other instrument
which contains any provisions restricting the Corporation's
obligation to pay dividends on, make liquidation payments in respect
of, or make redemptions of the Series D Stock in accordance
herewith; or
(iv) dissolve the Corporation.
(d) Amendment of Series D Stock. Notwithstanding anything else
contained herein, the affirmative vote or written consent of the holders
of 75% of the outstanding shares of Series D Stock shall be necessary to
amend, alter or repeal any of the provisions of the Certificate of
Designation creating this Series D Stock which would alter or change (i)
the dividend rate, (ii) redemption provisions, (iii) anti-dilution
provisions, (iv) the place or currency of payments hereunder, (v) the
right to institute suit for the enforcement of any payment hereunder, (vi)
the conversion provisions,(vii) the voting rights, or (viii) provisions of
this Section 10, so as to affect any of the foregoing adversely.
11. Shares to be Retired. All shares of the Series D Stock redeemed,
converted, exchanged or purchased by the Corporation shall be retired and
canceled and shall be restored to the status of authorized but unissued shares
of Preferred Stock, without designation as to series and may thereafter be
reissued.
*****
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this 22nd day of September, 1997.
DANSKIN, INC.
By:
---------------------------------
Name:
Title:
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No. 1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR QUALIFIED UNDER ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED OR QUALIFIED THEREUNDER OR
AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS AVAILABLE.
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL OF CERTAIN SENIOR DEBT (AS DEFINED IN THE SUBORDINATION
AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE EXTENT PROVIDED IN,
THAT CERTAIN SUBORDINATION AGREEMENT DATED AS OF SEPTEMBER 22, 1997, AMONG FIRST
UNION NATIONAL BANK OF NORTH CAROLINA, FIRST UNION COMMERCIAL CORPORATION, AS
LENDERS (COLLECTIVELY, THE "LENDERS"), FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, AS AGENT (THE "AGENT"), DANSKIN, INC. AND DANSKIN INVESTORS, LLC. ANY
HOLDER OF THIS INSTRUMENT SHALL BE DEEMED TO BE BOUND BY, AND SUBJECT TO, THE
TERMS OF THE SUBORDINATION AGREEMENT.
PROMISSORY NOTE
$15,000,000 New York, New York
September 22, 1997
FOR VALUE RECEIVED, DANSKIN, INC., a Delaware corporation (the "Company"),
hereby promises to pay to Danskin Investors, LLC ("Payee"), 9595 Wilshire Blvd.,
Suite 700, Beverly Hills, CA 90212, the principal sum of Fifteen Million Dollars
($15,000,000), on the dates and in the amounts hereinafter set forth. This
Promissory Note is issued by the Company with an initial aggregate principal
amount of $15,000,000 pursuant to (a) the Securities Purchase Agreement, dated
as of the date hereof, between the Company and the Payee (the "Purchase
Agreement") and (b) the Loan and Security Agreement, dated as of the date
hereof, between the Company and the Payee (the "Security Agreement"), and the
Payee shall be entitled to all benefits thereof. The provisions of the Purchase
Agreement and the Security Agreement are incorporated herein by reference.
Capitalized terms used in this Promissory Note but not defined shall have the
respective meanings ascribed to them in the Security Agreement. This Promissory
Note is hereinafter referred to as this "Note."
1. Principal and Maturity Date. The principal amount of this Note
shall be due and payable on March 31, 1998 (the "Maturity Date"), unless earlier
exchanged for other securities of the Company as provided in Section 5 of this
Note.
<PAGE>
2. Interest. The outstanding principal amount of this Note shall
bear interest beginning December 22, 1997, at the per annum rate as provided in
Section 2 of the Security Agreement through the earlier of the date of repayment
of this Note or exchange for other securities of the Company as provided in
Section 5 of this Note. Interest shall be payable each month, in arrears,
beginning on January 1, 1998, and on the first day of each calendar month
thereafter and upon the date of repayment or exchange of this Note, if earlier.
3. Prepayment. This Note may not be prepaid, in whole or in part,
without the prior written consent of the Payee as to such prepayment, which
consent may be withheld in the discussion of Payee. All prepayments made on this
Note shall be applied first to the payment of all fees under this Note, then
unpaid interest accrued on this Note, and then to the outstanding and unpaid
principal amount of this Note as of the date of prepayment.
4. General Payment Provisions. All payments or prepayments of
principal and interest and other sums due pursuant to this Note shall be made by
wire transfer to an account(s) designated in writing by the Payee.
If the due date of any payment under this Note would otherwise fall
on a day which is not a Business Day, such date will be extended to the
immediately succeeding Business Day and interest shall be payable at the rate
set forth herein for the period of the extension. The term "Business Day" shall
mean any day on which commercial banks in the State of New York are not
authorized or required to close.
5. Exchange of Securities. Upon the closing (the "Closing") of
the repayment of all amounts due and owing to the Lenders by the Company under
the revolving credit portion of the Company's Amended and Restated Loan and
Security Agreement with the Lenders, dated as of June 22, 1995, as the same has
further been amended, $14,396,488.20 aggregate principal amount of this Note
(together with Five Hundred Thousand Dollars ($500,000) in stated value of
Series C Cumulative Convertible Preferred Stock of the Company held by the
Payee) shall be automatically exchanged for (i) shares of fully paid and
non-assessable Series D Cumulative Convertible Preferred Stock of the Company in
the form of Exhibit C to the Purchase Agreement equal to Twelve Million Dollars
($12,000,000) in stated value, (ii) a fully paid and non-assessable common stock
purchase warrant in the form of Exhibit D to the Purchase Agreement and (iii) to
the extent the authorized capital stock of the Company permits and the
Registration Statement (as defined in the Purchase Agreement) shall have been
declared effective by the Securities and Exchange Commission (the "Commission"),
7,988,294 shares of fully paid and non-assessable common stock of the Company in
the Rights Offering at $.30 per share, without further notice and without action
on the part of the Payee (or such lesser number of shares of common stock as are
available for purchase by the Payee (provided, that no shares shall be deemed
available for purchase if the Registration Statement shall not have been
declared effective by the Commission)); provided, however, that if for any
reason the Closing shall not have occurred on or prior to March 31, 1998, the
Notes shall no longer be exchangeable as provided herein. The remaining
$603,511.80 aggregate principal amount of this Note
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<PAGE>
(assuming authorized capital stock of the Company is available to permit the
purchase by the Payee for the full 7,988,294 shares of the Company's common
stock and the Registration Statement shall have been declared effective by the
Commission) shall be used to purchase Common Stock in the Rights Offering by
paying the exercise price of Rights (as defined in the Purchase Agreement) not
exercised by stockholders of the Company other than the Payee pursuant to the
Rights Offering. The Company shall promptly remit to the Payee all monies
representing the exercise of Rights by stockholders of the Company other than
the Payee pursuant to the Rights Offering (as defined in the Purchase Agreement)
and the remaining principal amount of this Note shall be repaid dollar for
dollar as the Payee receives such monies from the Company. If the Closing occurs
prior to the time that the Company has 7,988,294 shares of common stock
available for purchase by the Payee and prior to the time the Registration
Statement shall have been declared effective by the Commission, this Note shall
remain outstanding in a principal amount equal to $3,000,000. Any remaining
balance of this Note will be converted into Common Stock, upon the Company
authorizing a sufficient amount of capital stock and the Registration Statement
having been declared effective by the Commission, in an amount equal to the
quotient obtained by dividing (aa) the balance of this Note less the aggregate
dollar amount to be paid by other stockholders, in the exercise of their Rights
to purchase Common Stock in the Rights Offering by (bb) .30. The Company shall
pay all issue taxes, if any, incurred in respect of the issue of the securities
delivered on as provided herein exchange of this Note pursuant to this Section
5.
6. Security. This Note is secured by the Collateral as defined
in, and provided under, the Security Agreement.
7. Subordination of Note. This Note is subject to the provisions
of the Subordination Agreement, dated as of September 22, 1997, among the Agent,
the Lender, the Company and the Payee. In the event of a conflict between the
provisions of this Note and the provisions of the Subordination Agreement, the
provisions of the Subordination Agreement shall control.
8. Events of Default/Maturity of Senior Debt. If the Senior Debt
shall have become due at maturity or one or more of the following events (an
"Event of Default") shall occur and be continuing:
(a) the Company shall default in the payment when due of any
principal of or interest under this Note and such default, in respect of the
payment of interest, shall continue for ten (10) days; or
(b) any representation, warranty or certification made or deemed
made by the Company in this Note, the Security Agreement or the Purchase
Agreement shall prove to have been false or misleading as of the time made or
furnished in any material respect; or
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<PAGE>
(c) any default by the Company in the performance of any of its
covenants or agreements in this Note, the Security Agreement or the Purchase
Agreement, and such default shall continue unremedied for a period of 30 days
after notice thereof to the Company by Payee; or
(d) any indebtedness of the Company (i) for borrowed money in the
aggregate in excess of $250,000 or (ii) constituting Senior Debt, shall become
repayable prior to the due date for payment thereof by reason of default by the
Company or shall not be repaid at maturity as extended by any applicable grace
period therefor; or
(e) an uninsured final judgment or judgments aggregating $250,000
or more shall have been entered by a court of competent jurisdiction against the
Company and such judgment(s) shall remain unstayed or undischarged for three
days or more; or
(f) the Company shall admit in writing its inability to pay its
debts as such debts generally become due; or
(g) the Company shall (i) apply for or consent in writing to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence a
voluntary case under Title II of the United States Code (as now or hereafter in
effect) (the "Bankruptcy Code"), (iv) file a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency, reorganization, winding-up,
or composition or readjustment of debts, (v) acquiesce in writing to any
petition filed against it in an involuntary case under the Bankruptcy Code, or
(vi) take any corporate action for the purpose of effecting any of the
foregoing; or
(h) a proceeding or case shall be commenced, without the
application or consent of the Company in any court of competent jurisdiction,
seeking (i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of such entity or of all or any
substantial part of its assets, or (iii) similar relief in respect of such
entity, under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, and such proceeding or case
shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in
effect, for a period of at least 30 days; or an order for relief against any
such entity shall be entered in an involuntary case under the Bankruptcy Code;
THEREUPON: if the Senior Debt (as defined in the Subordination
Agreement) has been indefeasibly paid in full in cash as provided in the
Subordination Agreement, the maturity thereof has been accelerated or the
outstanding balance of the Senior Debt has come due at maturity or an Event of
Default referred to in clause (d)(ii), (f), (g) or (h) above has occurred, (i)
in the case of an Event of Default (other than an Event of Default referred to
in clause (d)(ii),
-4-
<PAGE>
(f), (g) or (h) above), the Payee, by notice to the Company, may declare the
principal amount then outstanding of, and the accrued interest on, this Note and
all other amounts payable by the Company under this Note to be forthwith due and
payable, whereupon such amount shall be immediately due and payable without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by the Company; (ii) in the case of the occurrence of an
Event of Default referred to in clause (d)(ii), (f), (g) or (h) above or the
Senior Debt coming due at maturity, the principal amount then outstanding of,
and the accrued interest on, this Note shall become automatically immediately
due and payable without presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by the Company, and in any case
Payee may take such action as is permitted to enforce its rights hereunder;
(iii) the Company shall pay all of the expenses of the Payee incurred for the
collection of this Note and for the enforcement of its rights to obtain payment
of this Note, including reasonable attorneys' fees and legal expenses; and (iv)
the Payee may exercise from time to time any rights and remedies available to it
by law, including those available under any agreement or other instrument
relating to the amounts owed under this Note or any security therefor. No delay
on the part of the Payee in the exercise of any right or remedy shall operate as
a waiver thereof, and no single or partial exercise by the Payee of any right or
remedy shall preclude other or further exercise thereof or the exercise of any
other right or remedy. Notwithstanding Section 3 above, Payee may apply any
funds received from the Company, in such manner and order of priority and
against such payment obligations hereunder as Payee may determine.
9. Subrogation. Subject to the prior indefeasible payment in full
in cash of the Senior Debt as provided in the Subordination Agreement, and until
this Note is paid in full, the Payee shall be subrogated to the rights of the
Senior Debt including the right to receive distributions applicable to the
Senior Debt to the extent that distributions otherwise payable to the Payee have
been applied to the Senior Debt.
10. Assignment.
(a) Securities Laws. This Note has not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any state
securities laws and unless so registered may not be transferred, sold, pledged,
hypothecated or otherwise disposed of unless an exemption from such registration
is available. In the event the Payee desires to transfer this Note, the Payee
must give the Company prior written notice of such proposed transfer including
the name and address of the proposed transferee. Such transfer may be made only
either (i) upon publication by the Securities and Exchange Commission (the
"Commission") of a ruling, interpretation, opinion or "no action letter" based
upon facts presented to said Commission, or (ii) upon receipt by the Company of
an opinion of counsel acceptable to the Company to the effect that the proposed
transfer will not violate the provisions of the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or the rules and
regulations promulgated under either such act, or to the effect that this Note
has been registered under the Securities Act of 1933, as amended, and that there
is in effect a current prospectus meeting the requirements of Subsection 10(a)
of the Securities Act, which is being or will be delivered to the
-5-
<PAGE>
purchaser or transferee at or prior to the time of delivery of this Note to be
sold or transferred. Notwithstanding anything else contained herein, Danskin
Investors, LLC (x) may distribute this Note to its members at any time and (y)
may not transfer, sell, pledge, hypothecate or otherwise dispose of this Note
prior to March 31, 1998, except to its members or to The Oppenhiemer Bond Fund
for Growth or any of their respective affiliates.
(b) Transfer. Upon surrender of this Note to the Company with
assignment documentation duly executed, and upon compliance with the foregoing
provisions, the Company shall, without charge, execute and deliver a new Note in
the name of the assignee named in such instrument of assignment, and this Note
shall promptly be canceled. Any assignment, transfer, pledge, hypothecation or
other disposition of this Note attempted contrary to the provisions of this
Note, or any levy of execution, attachment or other process attempted upon the
Note, shall be null and void and without effect.
11. Governing Law. This Note shall be construed in accordance
with, and governed by, the laws of the State of New York as applied to contracts
made and to be performed entirely in the State of New York without regard to
principles of conflicts of law. Each of the parties hereto hereby irrevocably
and unconditionally submits to the exclusive jurisdiction of any court of the
State of New York or any federal court sitting in the State of New York for
purposes of any suit, action or other proceeding arising out of this Note (and
agrees not to commence any action, suit or proceedings relating hereto except in
such courts). Each of the parties hereto agrees that service of any process,
summons, notice or document by U.S. registered mail at its address set forth
herein shall be effective service of process for any action, suit or proceeding
brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Note, which is brought by or
against it, in the courts of the State of New York or any federal court sitting
in the State of New York and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum.
12. Adjustment of Interest Rate. No provision of this Note shall
require the payment of interest to the extent that receipt of any such payment
by the Company would be contrary to the provisions of law applicable to the
Company limiting the maximum amount of interest that may be charged to or
collected from the Company, and if any sum in excess of such maximum rate of
interest is paid or charged, the excess will be deemed to have been a prepayment
of principal of this Note when paid, without premium or penalty, and all
payments made thereafter will be appropriately applied to interest and principal
to give effect to such maximum rate, and after such application any excess shall
be immediately refunded to the Company.
If the maximum rate of interest, if any, now permitted by law to be
charged for this transaction is increased, then for so long as the increase is
in effect, the applicable maximum rate permitted to be charged as referred to in
the paragraph immediately preceding will be
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<PAGE>
deemed to be such increased rate. If the maximum rate of interest, if any, now
permitted by law to be charged for this transaction should be eliminated so that
there would be no maximum rate, then interest on this Note shall thereafter be
paid at the rate provided in this Note.
13. Waiver. The obligations of the Company under this Note are
absolute and unconditional, and are not subject to any counterclaim, set-off,
deduction or defense that the Company may have against the Payee. Time is of the
essence of this Note. To the fullest extent permitted by applicable law, the
Company, for itself and its legal representatives, successors and assigns,
expressly waives presentment, demand, protest, notice of dishonor, notice of
non-payment, notice of maturity, notice of protest, presentment for the purpose
of accelerating maturity, diligence in collection, and the benefit of any
exemption or insolvency laws.
14. Interpretation. Wherever possible each provision of this Note
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Note shall be prohibited or invalid
under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or remaining provisions of this Note. No delay or failure on the part of Payee
in the exercise of any right or remedy hereunder shall operate as a waiver
thereof, nor as an acquiescence in any default, nor shall any single or partial
exercise by Payee of any right or remedy preclude any other right or remedy.
Payee, at its option, may enforce its rights against any collateral securing
this Note without enforcing its rights against the Company, any guarantor of the
indebtedness evidenced hereby or any other property or indebtedness due or to
become due to the Company. The Company agrees that, without releasing or
impairing the Company's liability hereunder, Payee may at any time release,
surrender, substitute or exchange any collateral securing this Note and may at
any time release any party primarily or secondarily liable for the indebtedness
evidenced by this Note. The rights and remedies herein provided are cumulative
and not exclusive of any rights or remedies provided by law.
DANSKIN, INC.
By:
------------------------------
Name:
Title:
ATTEST:
By:
------------------------------
Secretary
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