SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Danskin, Inc.
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(Exact name of registrant as specified in its charter)
May 19, 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. Changes in Control of Registrant.
On May 19, 1997, Danskin, Inc. (the "Company") entered into an
agreement (the "Agreement") with Danskin Investors, LLC (the "Investor"),
pursuant to which, under certain circumstances, the Investor will make an
investment of $10,000,000 in the Company (the "Investment"). Pursuant to the
Agreement, the Company and the Investor agreed, among other things, to the
following:
I. Structure of the Transaction.
(i) The Company will issue to the Investor and the Investor will
purchase from the Company 26,315,790 shares of common stock of the Company based
on a per share purchase price of $.38 per share (the "Per Share Purchase
Price"), and an aggregate purchase price of $10,000,000. The number of shares of
common stock to be purchased by the Investor and the per share purchase price
therefor is based on there being no more than 45,609,545 shares of common stock
outstanding on a fully-diluted basis following the Closing (defined below).
(ii) The Company, with the participation and assistance of the
Investor, will enter into negotiations with the Company's principal lender (the
"Bank") to acquire for the Investor an irrevocable and unconditional (except for
the occurrence of the closing of the Investment (the "Closing")) option (the
"Option") to restructure the obligations of the Company under the Amended and
Restated Loan and Security Agreement with the Bank, as agent, dated as of June
22, 1995, as amended to date (the "Loan Agreement"). The Company has received no
assurance from the Bank that it is willing to grant an option to the Investor or
the Company.
(iii) As soon as practicable after the Closing, the Company shall
offer to all of its stockholders, on a pro rata basis, the right to invest up to
an aggregate of $3,000,000 for shares of common stock of the Company, based upon
the per share purchase price paid by the Investor. The Investor will enter into
a standby arrangement with the Company to purchase any shares of common stock
not taken by other stockholders of the Company in such rights offering.
(iv) The Company will enter into negotiations with its landlord at
111 West 40th Street regarding the lease of the Company's New York showroom, and
simultaneous with the Closing, the Company will enter into a modification of
such lease in form and substance satisfactory to the Investor.
(v) The Company will enter into negotiations with each of Mary Ann
Domuracki and Beverly Eichel, the President and the Chief Financial Officer of
the Company, respectively, regarding (a) a waiver of her rights under the
change-of-control provisions of her employment agreement, and (b) an agreement
to continue to work for the Company on terms
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satisfactory to the Investor. The Company will also enter into negotiations with
Edwin Dean regarding a modification of the terms of any payments due to Mr. Dean
under his employment agreement upon consummation of the Investment.
(vi) The Company will enter into negotiations with Donald Schupak,
the Chairman of the Board of the Company, regarding (a) an agreement to continue
to work for the Company on terms satisfactory to the Investor, and (b) amending
option grants provided to Mr. Schupak, to provide as follows: (1) upon the
occurrence of the Closing, Mr. Schupak shall receive (1) options to purchase
shares of common stock of the Company equal to 4% of the Company on a fully
diluted basis at the per share purchase price paid by the Investor, plus (2)
options to purchase an additional number of shares of common stock equal to 3%
of the Company on a fully diluted basis at the per share purchase price paid by
the Investor, plus (3) options to purchase additional shares of common stock
equal to 3% of the Company on a fully diluted basis at a per share purchase
price of $.76. All of the options granted to Mr. Schupak shall expire on a date
to be mutually agreed upon by the Investor and Mr. Schupak, which date shall be
not less than five nor more than seven years after the Closing.
(vii) The Company will enter into negotiations with each of Givenchy
Corporation and Anne Klein & Company regarding (a) waiver by each of the
change-of-control rights in its license agreement, and (b) an agreement by each
to continue its license agreement on its current terms.
II. Negotiation of Definitive Agreement.
The closing of the Investment will be subject to, among other
things, the negotiation of a definitive agreement between the Company and the
Investor. Conditions to the Closing to be set forth in such agreement will
include, among other conditions, that, (i) the Bank will have issued the Option
and will have renegotiated the Loan Agreement on terms satisfactory to the
Investor, (ii) the Investor shall be satisfied that, for federal income tax
purposes, the net operating losses of the Company are available to shelter
cancellation of indebtedness income, if any, arising from restructuring of the
terms of the Loan Agreement, (iii) a fairness opinion from an investment bank of
national reputation shall have been obtained to the effect that the per share
purchase price paid by the Investor is fair to the Company from a financial
point of view, (iv) the Company's lease of its New York showroom shall have been
revised on terms satisfactory to the Investor, (v) certain agreements shall have
been reached with senior management of the Company, (vi) the license agreements
with Givenchy Corporation and Anne Klein & Company shall have been revised upon
terms satisfactory to the Investor, (vii) SunAmerica Life Insurance Company
shall have waived its right to designate members of the Board of Directors of
the Company, (viii) the Investor shall have negotiated a satisfactory agreement
with the holder of the preferred stock of the Company, (ix) the Rights Agreement
dated as of June 5, 1996 between the Company and First Union Bank of North
Carolina shall have been amended to provide that the Investor shall not
constitute an "Acquiring Person" as defined therein, or the rights issued
thereunder shall have been redeemed, (x) the obligations of the Company to the
Bank shall have been restructured pursuant to the Option, (xi) an agreement
shall have been reached with Donald
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Schupak, and (xii) all action required to establish the post-closing Board of
Directors of the Company shall have been taken and all required resignations of
directors shall have been recieved.
The Agreement also provides that the definitive agreement will
contain reasonable corporate governance provisions agreed between the Company
and the Investor to ensure that, for a period of two years from the Closing,
transactions between the Company and the Investor, any recapitalization
transaction other than the Investment, any "going private" transaction, and any
changes to such corporate governance provisions, shall require the approval of a
majority of the independent directors or approval by the stockholders of the
Company other than the Investor, and the Board of Directors of the Company shall
be as described in paragraph VI, below.
III. Pre-Closing Agreement.
The Investor has agreed that, if the Option has been obtained and
the Company determines that it requires additional capital to continue to
operate its business through the Closing, upon written request for such
additional capital in an amount of either $2,000,000 or $4,000,000 and
satisfaction of certain conditions to the Closing including those described
above, the Investor will purchase from the Company a new series of preferred
stock, the terms of which will entitle the Investor to designate a majority of
the Board of Directors of the Company. The Company has agreed to pay a fee of
$250,000 (the "Pre-Closing Equity Fee") to the Investor to make such equity
investment prior to the Closing. Such preferred stock will be convertible into
common stock at a per share price of $.38, will accrue a cash dividend at an
initial rate of 6% per annum commencing twelve months after purchase thereof and
increasing at the rate of an additional .5% every six months, and will be
redeemable in certain specified circumstances. Such preferred stock shall be
automatically converted at a per share price of $.38 upon receipt of the
stockholder approvals necessary to amend the certificate of incorporation of the
Company to increase its authorized capital stock. Such preferred stock will also
be entitled to a liquidation preference equal to the amount of the purchase
price therefor, plus all accrued and unpaid dividends, and shall have a maturity
of five years from the date of issuance at which time it shall be redeemed at
100% of the principal amount then outstanding plus all accrued and unpaid
dividends. Such preferred stock will also be entitled to vote on an as converted
basis with the common stock of the Company. Until the Closing, if a majority of
the stockholders of the Company who are disinterested in respect of a competing
transaction shall have voted their shares in favor of such competing
transaction, then the holder of such preferred stock shall vote such preferred
stock with such majority. If the Company consummates a competing transaction at
a price per share of common stock at least $.10 per share greater than the per
share price proposed to be paid by the Investor, then the Company may redeem, at
a redemption price of 105% of the principal amount of the preferred stock being
so redeemed, within 30 days of consummation of such competing transaction,
one-half of the preferred stock issued to the Investor. The Investor, at its
option, may convert the other one-half of such preferred stock into common stock
at the conversion price therefor proposed to be paid by the Investor, or put
such preferred stock to the Company at the redemption price of 100% of the
principal amount of such preferred stock. If the competing transaction is at a
price per share less than $.10 per share greater than the per share
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purchase price proposed to be paid by the Investor, then the Company shall not
have the right to redeem such preferred stock for one year after the date of
consummation of the competing transaction. Thereafter, for the 30-day period
commencing upon the anniversary of consummation of the competing transaction,
the Company may redeem, at a redemption price of 105% of the principal amount of
investor preferred stock being redeemed, such outstanding preferred stock held
by the Investor, subject to the right of the Investor to convert such preferred
stock into common stock at the agreed conversion price. The Agreement provides
that the Investor will have the option in its discretion to purchase up to an
aggregate maximum of $10,000,000 of such new series of preferred stock and
thereby to effect the Closing of the Investment, at which time the rights of the
Company to redeem such preferred stock shall cease. The Investor shall have the
right to transfer the preferred stock purchased under such provisions, provided
that in the case of any transfer to a non-affiliate of the Investor, the Company
shall have a right of first refusal to purchase such preferred stock on the same
terms as such transfer was to have been effected.
IV. Termination.
(i) The definitive agreement will contain customary termination
events, including failure to consummate the Investment by June 30, 1997,
provided that the term of such agreement will be extended as necessary for the
Company to fulfill the conditions to Closing specified therein but in no event
will the term of such agreement be extended past December 31, 1997. If the
Closing shall not have occured by August 31, 1997, and if the three most senior
officers of the Company shall have delivered to the Investor written
certification to the effect that the Company has used its best efforts to
fultill all the conditions precedent to Closing, then the Investor shall have a
period of fifteen days to (a) waive the unfulfilled conditions and consummate
the Investment or (b) agree to the expiration of the Exclusivity Period (defined
below) in which case the Exclusivity shall expire and, except for the reduction
of the $2,500,000 fee described below to $1,250,000, the other provisions of the
Agreement shall remain in effect.
(ii) The Company has agreed to pay the Investor $1,000,000 plus the
Investor's costs and expenses upon the Company's participation in, or agreement
to participate in, a transaction in which the Company raises capital through an
investment or borrowing (other than borrowings pursuant to the revolving credit
facility under the Loan Agreement), whether pursuant to a corporate
reorganization or recapitalization or other transaction or by any other means,
if such transaction, or agreement to participate therein, occurs prior to the
Investor obtaining the Option and prior to expiration of the Exclusivity Period.
(iii) If the Closing does not occur, for any reason other than the
termination by the Company of the definitive agreement solely due to a breach of
such agreement by the Investor (at a time which the Company is not in breach of
any provision of such agreement) and, prior to the expiration of the Option, the
Company participates or agrees to participate with any person or entity in which
the Company raises capital through an investment or a borrowing (other than
borrowings pursuant to the revolbing credit facility under the Loan Agreement),
whether pursuant
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to a corporate reorganization or recapitalization or other transaction or by any
other means (a "Competing Transaction"), then the Investor shall receive the
following:
(a) If (x) the Per Share Purchase Price agreed to by the Company and
the Investor immediately prior to the termination of the Agreement
or the definitive agreement was equal to the Per Share Price stated
in the Agreement, and (y) the Company agrees to enter into a
Competing Transaction, then the Company shall offer the Investor the
opportunity for a period of three business days to commit to
consummate an investment in the Company on the same terms as
proposed in such Competing Transaction and immediately upon the
expiration of such three business day period (or earlier is the
Investor has notified the Company that it does not intend to
exercise its right of first refusal), the Company shall pay to the
Investor, in cash, (A) the Option Price, plus (B) $2,500,000, plus
(C) the Pre-Closing Equity Fee, plus (D) the Investor's costs and
expenses and the Investor shall transfer the Option to the Company.
(b) If the Investor shall determine that it is unwilling to pay the
Per Share Price set forth in the Agreement and shall offer (which
offer is rejected by the Company) to consummate the Investment at a
reduced per share purchase price (and, following such rejection, the
Investor has advised the Company that it will not consummate the
Investment at the Per Share Purchase Price set forth in the
Agreement, then, subject to the following, the Company shall be free
to consummate a Competing Transaction : (A) the Company shall offer
the Investor the opportunity for a period of three business days to
commit to consummate an investment in the Company on the same terms
as proposed in any third party offer, unless the per share purchase
price offered by the third party is in excess of 15% greater than
the Per Share Purchase Price at which the Investor has informed the
Company it would be willing to consummate the Investment, and (B) if
the Investor does not commit to consummate an investment on such
terms or if the Competing Transaction is at a price at which the
Company is not required to offer the Investor the opportunity to
make such investment, then, at the time the Company consummates a
Competing Transaction, the Company shall pay the Investor (x) the
Option Price, plus (y) the Investor's costs and expenses and the
Investor shall transfer the Option to the Company.
V. Registration Rights.
The Company and the Investor have agreed to enter into a
registration rights agreement at the Closing under which the Investor will be
granted two demand registration rights on Form S-1, unlimited demand
registration rights (up to two each year) on Form S-3 with a minimum offered
amount of $500,000 and unlimited piggyback registration rights, with respect to
the common stock purchased at the Closing.
VI. Post-Closing Board of Directors.
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The Company and the Investor have agreed, in connection with the
Closing, that the Certificate of Incorporation and By-Laws of the Company will
be amended to eliminate provision for a classified Board and to establish the
size of the Board at nine directors. After the Closing, the Board is to consist
of nine directors comprised of the following persons and designees: (a) five
members designated by the Investor, (b) one member designated by the present
holder of the outstanding preferred stock of the Company, (c) one member
designated by the Board of the Company prior to the Closing, (d) Donald Schupak
and (e) Mary Ann Domuracki.
VII. Expenses.
The Company has agreed to pay all reasonable legal fees and expenses
of the parties with respect to the transactions contemplated by the Agreement,
including the fees and expenses of an advisor retained by the Investor to
provide advice to the Investor in respect of the potential tax consequences to
the Company of the consummation of the transactions contemplated by the Option.
In addition, the Company will pay the out-of-pocket costs of the Investor and
Onyx Partners, Inc. up to a maximum of $50,000 in the aggregate.
VIII. Exclusivity.
Except to the extent that the performance of the Company's directors
of their fiduciary duties otherwise requires, the Company has agreed not to
solicit, encourage or negotiate with other persons concerning an investment of
funds except as contemplated by the Agreement, or for the sale, merger or other
disposition of the Company or any significant portion of its assets or business
except as expressly permitted by the Agreement, until after June 30, 1997, which
period may be extended for two weeks upon request of the Investor if the
Investor is proceeding in good faith to complete the Investment. The definitive
agreement will also provide that such period of exclusivity will extend until
termination thereof.
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Item 7. (c) Exhibits.
99.1 Press Release dated May 20, 1997
Signature
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: June 4, 1997 By:
---------------------------------
Name:
Title:
DANSKIN, INC. ANNOUNCES AGREEMENT FOR INVESTMENT
NEW YORK -- May 20, 1997 -- Danskin, Inc. (NASDAQ:DANS) today announced that it
has entered into an agreement (the "Agreement") with Danskin Investors, LLC (the
"Investor"), pursuant to which, under certain circumstances, the Investor will
make an equity investment of $10,000,000 in common stock of the Company at a
purchase price of $.38 per share. Danskin Investors, LLC is a company
newly-formed by an investment group led by Onyx Partners, Inc. The transaction
is subject to the satisfaction of substantial conditions, including the
negotiation of a definitive stock purchase agreement and the conclusion of
certain agreements with the Company's principal bank lender and other parties.
Danskin and the Investor will seek to negotiate a substantial restructuring of
the Company's obligations under its loan and security agreement with its
principal lender. The Company intends to review the Agreement with its principal
lender as soon as possible.
The Agreement further provides that, if an agreement can be reached with the
Company's principal lender and certain other conditions can be satisfied, at the
request of the Company, the Investor will purchase up to $4,000,000 of a new
series of convertible preferred stock of the Company. The new preferred stock
will be convertible into Danskin common stock at a per share price of $.38. The
issuance of additional common stock requires an increase in the amount of common
stock presently authorized for issuance under Danskin's charter. The conversion
of the new preferred stock into common stock will occur automatically upon
approval by Danskin's stockholders of the increase in the amount of Danskin
common stock authorized for issuance.
The Agreement also provides for an offer to all stockholders, on a pro rata
basis, after closing of the transaction with the Investor, of rights to
subscribe for $3,000,000 of shares of its common stock at the same per share
price paid by the Investor. The Investor has agreed to stand by to purchase any
shares of common stock not taken up by other stockholders of Danskin.
<PAGE>
Donald Schupak, Chairman of the Board, said, "Danskin has been laboring under an
inflexible capital structure and working capital shortage for several years. It
was not feasible to go on without a significant reduction in leverage and a
significant increase in working capital. In addition, under its present loan
agreement with its principal lender, the Company is required to raise at least
$6,000,000 in equity by the end of August. Consummation of the Agreement with
the Investor will satisfy this requirement, and will create a meaningful
reduction in debt with a corresponding increase in working capital, coupled with
a reasonable opportunity, under the circumstances, for current equity to
participate in the future of Danskin."
"Safe Harbor" statement under the Private Securities Litigation Reform Act of
1995: Certain statements in this news release are forward-looking and subject to
certain risks and uncertainties that could cause actual results to differ
materially from those projected in the forward-looking statements.
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
Chief Financial Officer
(212) 930-9157
