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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 2, 1996
or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File No. 0-22102
CYGNE DESIGNS, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 04-2843286
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1372 BROADWAY, NEW YORK, NEW YORK 10018
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(212) 354-6474
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(Registrant's telephone number, including area code)
NOT APPLICABLE
____________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $.01 par value, 12,438,038 shares as of December 12, 1996.
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<PAGE>
CYGNE DESIGNS, INC. AND SUBSIDIARIES
Index to Form 10-Q
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
----
Condensed Consolidated Balance Sheets at November 2, 1996
and February 3, 1996 .......................................... 3
Condensed Consolidated Statements of Operations for the
three and nine months ended November 2, 1996 and
October 28, 1995 .............................................. 4
Condensed Consolidated Statement of Stockholders' Equity
for the nine months ended November 2, 1996..................... 5
Condensed Consolidated Statements of Cash Flows for the
nine months ended November 2, 1996 and October 28, 1995 ....... 6
Notes to Condensed Consolidated Financial Statements ............ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................... 14
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ............. 21
Item 5. Other Information ............................................... 21
Item 6. Exhibits and Reports on Form 8-K ................................ 21
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<PAGE>
Part I. Financial Information
CYGNE DESIGNS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands, except share amounts)
(Unaudited)
November 2, February 3,
1996 1996
---------- ----------
ASSETS
Current assets:
Cash .......................................... $ 3,434 $ 5,487
Ann Taylor Common Stock ....................... 34,254 --
Trade accounts receivable, net ................ 14,535 35,117
Receivable from sale of Ann Taylor Common
Stock ...................................... 5,028 --
Inventory ..................................... 7,298 29,999
Other receivables and prepaid expenses ........ 3,022 8,150
Assets held for sale .......................... -- 15,200
Deferred income taxes ......................... -- 4,066
------- ---------
Total current assets ............................. 67,571 98,019
Fixed assets, net ................................ 8,149 13,533
Other assets ..................................... 479 803
Deferred income taxes ............................ -- 2,000
Goodwill, net .................................... 2,517 2,790
------- ---------
Total assets ..................................... $78,716 $ 117,145
======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings ......................... $ 9,116 $ 37,453
Accounts payable .............................. 6,067 32,928
Trade credit facilities outstanding ........... 9,542 8,945
Accrued expenses .............................. 11,248 14,083
Income taxes payable .......................... 5,965 5,677
Current portion of long-term debt ............. 1,854 2,047
------- ---------
Total current liabilities ........................ 43,792 101,133
Long-term debt ................................... 684 1,562
Deferred rent credits ............................ 760 1,386
------- ---------
Total liabilities ................................ 45,236 104,081
Minority interests in subsidiaries ............... -- 4,018
Stockholders' equity:
Preferred stock, $0.01 par value;
4,000,000 shares authorized, none
issued and outstanding
Common stock, $0.01 par value;
75,000,000 shares authorized;
12,438,038 shares issued and outstanding .... 124 124
Paid-in capital ............................... 120,918 120,918
Accumulated deficit ........................... (92,085) (111,999)
Unrealized gain on marketable securities ...... 4,368 --
Foreign currency translation adjustment ....... 155 3
------- ---------
Total stockholders' equity ....................... 33,480 9,046
------- ---------
Total liabilities and stockholders' equity ....... $78,716 $ 117,145
======= =========
See accompanying notes.
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<PAGE>
<TABLE>
CYGNE DESIGNS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- ---------------------------
November 2, October 28, November 2, October 28,
1996 1995 1996 1995
---------- ---------- ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales .................................................. $ 80,709 $160,080 $240,351 $420,514
Cost of goods sold ......................................... 72,013 149,146 211,269 385,776
-------- -------- -------- --------
Gross profit ............................................... 8,696 10,934 29,082 34,738
Selling, general and administrative expenses ............... 6,566 16,187 23,903 50,530
Gain from sale of Ann Taylor Woven
Division and CAT ......................................... (29,588) -- (29,588) --
Gain from sale of subsidiary, net .......................... -- -- -- (4,742)
Reorganization expense ..................................... 4,813 -- 4,813 --
Bad debt expense ........................................... -- -- -- 1,030
Amortization of intangibles ................................ 91 957 273 2,868
Write-off of goodwill ...................................... -- 37,206 -- 37,206
-------- -------- -------- --------
Income (loss) from operations .............................. 26,814 (43,416) 29,681 (52,154)
Other income ............................................... 739 -- 1,293 --
Interest expense ........................................... 1,045 1,984 2,975 6,574
-------- -------- -------- --------
Income (loss) before provision for
income taxes and minority interests ...................... 26,508 (45,400) 27,999 (58,728)
Provision (benefit) for income taxes ....................... 6,307 (2,712) 7,124 (7,126)
-------- -------- -------- --------
Income (loss) before minority interests .................... 20,201 (42,688) 20,875 (51,602)
Income attributable to minority interests .................. 230 578 961 1,399
-------- -------- -------- --------
Net income (loss) .......................................... $ 19,971 $(43,266) $ 19,914 $(53,001)
======== ======== ======== ========
Net income (loss) per share ................................ $ 1.61 $ (3.48) $ 1.60 $ (4.21)
======== ======== ======== ========
Weighted average number of common and common
equivalent shares outstanding ............................ 12,442 12,438 12,439 12,587
======== ======== ======== ========
</TABLE>
See accompanying notes.
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<PAGE>
<TABLE>
CYGNE DESIGNS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands)
<CAPTION>
Common Stock Unrealized Foreign
------------------- gain on Currency
Number marketable Paid-in Translation Accumulated
of Shares Amount securities Capital Adjustment Deficit Total
--------- ------ ---------- ------- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at February 3, 1996 ............ 12,438 $124 -- $120,918 $ 3 $(111,999) $ 9,046
Unrealized gain on marketable
securities ........................... -- -- $4,368 -- -- -- 4,368
Foreign currency translation
adjustment ........................... -- -- -- -- 152 -- 152
Net income for the nine months
ended November 2, 1996 ............... -- -- -- -- -- 19,914 19,914
------ ---- ------ -------- ---- --------- -------
Balance at November 2, 1996 ............ 12,438 $124 $4,368 $120,918 $155 $ (92,085) $33,480
====== ==== ====== ======== ==== ========= =======
</TABLE>
See accompanying notes.
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<PAGE>
CYGNE DESIGNS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
--------------------------
November 2, October 28,
1996 1995
----------- -----------
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) .......................................................................... $ 19,914 $(53,001)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Write-off of goodwill ................................................................. -- 37,206
Depreciation and amortization ......................................................... 1,436 2,758
Write-off of fixed assets ............................................................. 1,231 --
Gain from sale of Ann Taylor Woven Division and CAT ................................... (29,588) --
Gain on sale of Ann Taylor Common Stock ............................................... (739) --
Gain from sale of subsidiary, net ..................................................... -- (4,742)
Bad debt expense ...................................................................... -- 1,030
Rent expense not currently payable .................................................... 173 664
Amortization of intangibles ........................................................... 273 2,868
Income attributable to minority interests ............................................. 961 1,399
Deferred income taxes ................................................................. 5,868 (4,963)
Interest on credit facility outstanding ............................................... 597 --
Changes in operating assets and liabilities:
Trade accounts receivable ........................................................... (688) (35,675)
Inventory ........................................................................... 15,274 13,196
Other receivables and prepaid expenses .............................................. 5,078 6,345
Accounts payable .................................................................... (14,658) 15,938
Accrued expenses .................................................................... (1,062) (276)
Income taxes payable ................................................................ 2,126 (2,686)
-------- --------
Net cash provided by (used in) operating activities ........................................ 6,196 (19,939)
-------- --------
INVESTING ACTIVITIES
Purchase of fixed assets ................................................................... (849) (6,084)
Other assets ............................................................................... (47) 28
Cash proceeds from sale of Ann Taylor Woven Division and CAT ............................... 3,162 --
Cash proceeds from sale of Ann Taylor Common Stock ......................................... 3,982 --
Sale of business ........................................................................... 12,500 (464)
Purchase of businesses, net of cash acquired ............................................... -- (3,207)
-------- --------
Net cash provided by (used in) investing activities 18,748 (9,727)
-------- --------
FINANCING ACTIVITIES
Short-term borrowing, net .................................................................. (26,741) 22,770
Credit facility outstanding, net ........................................................... -- 7,569
Repayments of long-term debt, net .......................................................... (476) 499
Net proceeds from issuance of common stock ................................................. -- 24
Investment in subsidiary by minority shareholder ........................................... -- 32
-------- --------
Net cash (used in) provided by financing activities ........................................ (27,217) 30,894
-------- --------
Effect of exchange rate changes on cash .................................................... 220 74
-------- --------
Net (decrease) increase in cash ............................................................ (2,053) 1,302
Cash at beginning of period ................................................................ 5,487 14,202
-------- --------
Cash at end of period ...................................................................... $ 3,434 $ 15,504
======== ========
SUPPLEMENTAL DISCLOSURES
Income taxes paid .......................................................................... $ 326 $ 732
Interest paid .............................................................................. 2,394 6,144
Exchange of Company common stock for acquisitions .......................................... -- 675
Retirement of Company common stock from sale of subsidiary ................................. -- 7,500
See accompanying notes.
</TABLE>
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<PAGE>
CYGNE DESIGNS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Cygne Designs, Inc. ("Cygne") and its subsidiaries (collectively the "Company")
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine months
ended November 2, 1996 are not necessarily indicative of the results that may be
expected for the fiscal year ended February 1, 1997. For further information,
refer to the financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended February 3, 1996. The
balance sheet at February 3, 1996 has been derived from the audited financial
statements at that date.
The Company's fiscal year ends on the Saturday nearest to January 31.
Earnings per share are based on the weighted average number of shares of
common stock outstanding during the periods and, for the three and nine months
ended November 2, 1996, the common stock equivalents outstanding during the
period. For the three and nine months ended October 28, 1995, common stock
equivalents are excluded as the effect of their inclusion would be antidilutive.
2. PURCHASES AND SALES OF COMPANIES
CAT US, Inc. and C.A.T. (Far East) Limited, collectively "CAT," which began
operations in June 1992, were originally owned by the stockholders of Cygne
(80%) and AnnTaylor, Inc. (20%). Effective April 30, 1993, CAT became a 60%
owned subsidiary of Cygne with AnnTaylor, Inc. owning the remaining 40%
interest.
On May 2, 1993, the Company purchased 66% of the capital stock of JMB
Internacionale S.A. ("JMB"), a company formed to supervise manufacturing of
products in Guatemala, from an affiliate of a director of the Company. At May 2,
1993, JMB owned 50% of Modas Cisne, S.A., a manufacturing company located in
Guatemala. On October 29, 1993, JMB purchased the remaining 50% of the
outstanding stock of Modas Cisne, S.A. On October 18, 1995, the Company
purchased the remaining 34% of the capital stock of JMB.
During 1993, in two transactions, the Company acquired T. Wear
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<PAGE>
CYGNE DESIGNS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Company S.r.l. and M.T.G.I. Textile Manufacturers Group (Israel) Limited in
exchange for an aggregate of $500,000 and 150,000 shares of the Company's common
stock. These companies design, merchandise, manufacture and sell women's apparel
to customers principally in the United States. The fair market value of the
assets acquired approximated their book value and the excess of the purchase
price over the fair value of the net assets acquired was recorded as goodwill
and is being amortized over a ten year period.
In April 1994, the Company acquired Fenn, Wright and Manson, Incorporated
("FWM"), a designer, merchandiser and manufacturer principally of private label
women's and men's apparel (the "FWM Acquisition"). The purchase price for FWM
was $44,000,000, consisting of 2,000,000 unregistered shares of the Company's
common stock and $10,000 in cash. Additional costs related to this acquisition
approximated $1,400,000. The excess of the purchase price over the fair value of
the net assets acquired of approximately $47,848,000 was recorded as goodwill,
and was being amortized over a twenty-five year period.
On April 7, 1995, the Company sold the United Kingdom subsidiary of FWM and
certain brand name rights to Fenn Wright and Manson (Antilles) N.V. (a group led
by Colin Fenn) in exchange for 600,000 shares of Cygne common stock previously
issued. In the quarter ended April 29, 1995, Cygne recorded a gain of $4,742,000
on the sale, which is net of certain restructuring expenses of $2,800,000
(consisting primarily of severance to former FWM employees and costs associated
with closing certain of FWM's facilities) pertaining to the related integration
of FWM's operations with the Company's operations. During 1995, management also
took various actions to reverse a decline in FWM's remaining business. However,
management determined that such actions were not having the desired results and
eliminated all of the operations of FWM. The unamortized goodwill recorded in
connection with the acquisition of FWM ($44,530,000) exceeded the undiscounted
anticipated future operating cash flows over the remaining goodwill amortization
period. Therefore, the FWM goodwill was written off in the third and fourth
quarters of 1995.
In October 1994, Cygne acquired the business operations of G.J.M.
International Limited ("GJM"), a Hong Kong-based designer, merchandiser and
manufacturer of women's intimate apparel (the "GJM Acquisition"). The purchase
price for GJM was $15,200,000, consisting of 650,000 unregistered shares of the
Company's common stock, $10,000 in cash and the assumption of approximately
$1,900,000 of indebtedness owed to The Limited, Inc. The excess of the purchase
price over the fair value of the net assets acquired of approximately
$27,659,000 was recorded as goodwill and was being amortized over a twenty-five
year period.
In February 1996, the Company sold substantially all of the assets of its
-8-
<PAGE>
CYGNE DESIGNS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
GJM intimate apparel and sleepwear business (the "GJM Business") to Warnaco Inc.
(the "GJM Disposition"). In the transaction, Warnaco paid Cygne $12,500,000 in
cash and assumed certain liabilities of the GJM business. The Company is
obligated to indemnify Warnaco for any claims for taxes arising out of the
operation of the GJM Business prior to the sale of the GJM Business to Warnaco.
The Company used all the proceeds from the sale to repay outstanding senior bank
indebtedness. GJM accounted for approximately 39.4% and 16.1% of the Company's
net sales for the quarter and nine months ended October 28, 1995, respectively.
In February 1995, Cygne acquired Tralee S.A. ("TSA"), a Uruguayan
corporation that sourced products in Brazil for export, primarily to the U.S.
The purchase price for TSA was approximately $3,800,000, consisting of 53,038
unregistered shares of the Company's common stock and $3,100,000 in cash (the
"TSA Acquisition"). Additional costs related to this acquisition approximated
$730,000. The excess of the purchase price over the fair value of the net assets
acquired of approximately $4,500,000 was recorded as goodwill and was amortized
over a twenty-five year period. Cygne also issued options to purchase an
aggregate of 55,000 shares of the Company's common stock to the two former
shareholders of TSA in connection with their entering into consulting agreements
with TSA. In January 1996, the Company determined to close TSA. As a result, the
Company recorded a loss of approximately $6.4 million in fiscal 1995, primarily
resulting from the write-off of goodwill associated with the acquisition. The
Company terminated these operations during the third quarter of 1996.
The FWM Acquisition, the GJM Acquisition and the TSA Acquisition were
accounted for under the purchase method and, accordingly, the operating results
of FWM, GJM and TSA were included in the consolidated operating results since
their respective dates of acquisition.
The Company completed on September 20, 1996 a transaction with AnnTaylor
Stores Corporation whereby it sold to Ann Taylor Cygne's 60% interest in CAT,
Cygne's former sourcing joint venture arrangement with Ann Taylor, and the
assets of Cygne's Ann Taylor Woven Division that were used in sourcing
merchandise for Ann Taylor (the "Ann Taylor Disposition"). On the closing of the
transaction, Cygne received 2,348,145 shares (the "Ann Taylor Common Stock") of
common stock, par value $.0068 per share, of AnnTaylor Stores Corporation
(determined by dividing $36 million by $15.33125 (the average of the high and
low sale prices of the AnnTaylor Common Stock on each of the 10 consecutive
trading days ending on the trading day immediately prior to the closing of the
transaction)), and $3,200,000 in cash (based on the net book value of the
inventory of the Division (less related payables and advances and certain other
assumed liabilities)) and fixed assets of the Division, subject to post-closing
adjustments. Ann Taylor also assumed certain liabilities of the Ann Taylor Woven
Division and paid to Cygne $6,500,000 in payment of accounts receivable for
-9-
<PAGE>
CYGNE DESIGNS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
merchandise delivered by Cygne prior to the closing. The Company used the
$9,700,000 of cash received upon closing of the transaction to repay a portion
of its outstanding senior bank indebtedness. The Company has granted a security
interest in the shares of Ann Taylor Common Stock owned by it to its senior and
subordinated lenders and pledged such shares to its senior lender. As a result
of the sale, the Company realized a pre-tax gain of $29,588,000.
In addition, the consummation of the Ann Taylor Disposition constituted a
"change in control of the Company" for purposes of employment agreements with
the Company's executive officers and the Company's stock option plans. As a
result, if the Company fails to renew the employment agreement of any executive
officer for a period of two years following the closing of the Ann Taylor
Disposition, such executive will be entitled to certain specified severance
payments. In addition, all then outstanding stock options became immediately
exercisable upon consummation of the Ann Taylor Disposition.
Between October 23 and December 13, 1996, the Company sold an aggregate of
1,988,000 shares of the Ann Taylor Common Stock received upon the closing of the
transaction at various prices resulting in aggregate gross proceeds of
approximately $38,336,000 before brokerage commissions and transaction expenses.
The Company has used and intends to continue to use a substantial portion of
such proceeds to pay down its outstanding indebtedness, and expects to use the
balance of such proceeds for working capital purposes, including costs
associated with the start-up of its business to manufacture and distribute brand
name apparel bearing the KENZO JEANS and KENZO STUDIO labels.
With respect to such sales of Ann Taylor Common Stock, an aggregate of
509,000 shares were sold during the third quarter, resulting in the Company's
realization of a pre-tax gain of $739,000. The Company also had an unrealized
gain of $4,368,000 based on the closing price of the Ann Taylor Common Stock at
the balance sheet date, which is reflected in the equity section of the balance
sheet.
In connection with the Ann Taylor Disposition, the Company entered into two
3-year consulting agreements with Ann Taylor for the services of Mr. Bernard
Manuel, the Company's Chairman of the Board and Chief Executive Officer, and Mr.
Irving Benson, the Company's then President and a director, to facilitate the
integration of CAT and the Division into Ann Taylor's operations. These
agreements, which provide for an annual fee of $225,000 for the services of each
of Messrs. Benson and Manuel, will automatically be assigned to the consultant
if his employment with the Company is terminated for any reason. Mr. Benson's
consulting agreement was assigned to him in connection with the termination of
his employment with the Company on November 29, 1996.
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<PAGE>
CYGNE DESIGNS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Ann Taylor Disposition was part of the Company's previously disclosed
intention to restructure its operations and reduce liquidity pressures.
CAT and the Ann Taylor Woven Division accounted for approximately 65.0% and
70.5% of the Company's net sales for the third quarter and nine months ended
November 2, 1996, respectively. If the sale of CAT and the Ann Taylor Woven
Division had been consummated on February 4, 1996 and after giving effect to the
GJM Disposition, the Company would have had pro forma net sales of $28,249,000
and $70,794,000 for the third quarter and nine months of 1996, respectively. Pro
forma gross profit for the third quarter and nine months of 1996 would have been
$2,684,000 and $7,414,000, respectively. Pro forma loss from operations for the
third quarter and nine months of 1996 would have been $6,954,000 and
$10,839,000, respectively. Pro forma net loss for the third quarter and nine
months of 1996 would have been $7,200,000 and $10,863,000, respectively. The pro
forma net loss per share for the third quarter and nine months would have been
$0.58 and $0.87, respectively.
3. INVENTORY
Inventory is stated at the lower of cost (determined on a first-in,
first-out basis) or market.
Inventory consists of the following:
November 2, February 3,
1996 1996
----------- -----------
(In thousands)
Raw materials ................................ $6,699 $21,748
Finished goods ............................... 599 2,972
Finished goods-in-transit .................... -- 5,279
------ -------
$7,298 $29,999
====== =======
4. CREDIT FACILITIES
The Company has historically financed its operations primarily through
financing from lending institutions, financing from customers and third party
trade credit facilities, cash from operations and the issuance of debt and
equity securities.
On September 20, 1996, the Company entered into an amended and restated
credit agreement with The Hongkong and Shanghai Banking Corporation Limited, New
York Branch ("HS Bank") which replaced the Company's prior facility. The amended
facility provided a committed facility of up to $17,500,000 until October 30,
1996, which thereafter reduced to $12,500,000 at October 31, 1996 and to
-11-
<PAGE>
CYGNE DESIGNS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
$7,500,000 at November 30, 1996. This facility, which matures on January 31,
1997, further reduces to $5,000,000 at December 30, 1996. Borrowings under this
facility are subject to borrowing base limitations and a requirement to comply
with certain financial covenants as well as various other restrictions. The
Company pledged substantially all of its assets, including the Ann Taylor Common
Stock, as security for its obligations under the credit facility. As of November
2, 1996 there were direct borrowings of $5,218,000 and letters of credit of
$4,501,000 outstanding under this facility.
Certain foreign subsidiaries have credit facilities aggregating $3,898,000
at November 2, 1996. Borrowings under these facilities, which are payable on
demand, are secured by a lien on certain assets of these subsidiaries.
Cygne has agreements with two-third parties not affiliated with the
Company, but affiliated with each other, whereby these parties made available to
the Company a trade credit facility. The trade credit facility has been
suspended. At November 2, 1996, $9,542,000 of this facility was outstanding.
5. DEBT
The Company has existing mortgages aggregating $894,000 at November 2, 1996
relating to a foreign office and manufacturing facility which bear interest at
LIBOR plus 2% and are payable quarterly in equal payments of $52,600.
At November 2, 1996, the Company also has a $1,258,000 unsecured note
payable and accrued interest of $253,000 to The Limited, Inc., the Company's
principal customer. The principal amount outstanding, which was currently
payable at November 2, 1996, bore interest at prime plus 2% and was originally
due on December 31, 1995. These amounts were paid to The Limited, Inc. on
November 6, 1996.
At November 2, 1996, the balance outstanding on other debt was $133,000,
all of which is short-term.
6. REORGANIZATION EXPENSE
The reorganization expense of $4,813,000 was the result of the downsizing
of the Company and the redeployment of assets necessary to meet changes in
continuing customer needs. The major components of this expense are: costs in
connection with early termination of leases for excess space, disposition of
related fixed assets, and severance costs related to Irving Benson's resignation
as an officer and employee of the Company.
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<PAGE>
CYGNE DESIGNS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. LITIGATION
On December 11, 1995, a class action complaint was filed against the
Company, certain of the Company's officers and directors, Ernst & Young LLP, the
underwriters of the Company's June 1994 secondary public offering of stock and
certain financial analysts who followed the Company, in the United States
District Court, Southern District of New York. The action was purportedly filed
on behalf of a class of purchasers of the Company's stock during the period
September 28, 1993 through April 28, 1995. The complaint seeks unspecified money
damages and alleges that the Company and the other defendants violated federal
securities laws in connection with various public statements made by the Company
and certain of its officers and directors during the putative class period. On
April 9, 1996, all of the defendants filed motions to dismiss the complaint.
Pursuant to a scheduling order entered by the court, the plaintiff filed
oppositions to the motions to dismiss in May 1996 and defendants filed their
reply memoranda in June 1996.
In December 1996, the Company and certain other defendants withdrew without
prejudice their motions to dismiss. The Company and these other defendants have
had discussions with plaintiffs regarding the possibility of resolving the
lawsuit by settlement. In order to explore the possibility of settlement, the
parties are engaging in informal discovery. There can be no assurance that these
discussions will result in settlement of the litigation. The Company continues
to believe that the allegations in the complaint are without merit. An adverse
decision in the action could have a material adverse effect on the Company's
financial condition and results of operations.
The Company is involved in various other legal proceedings that are
incidental to the conduct of its business, none of which the Company believes
could reasonably be expected to have a material adverse effect on the Company's
financial condition or results of operations.
-13-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Unless otherwise noted, all references to a year are to the fiscal year of
the Company commencing in that calendar year and ending on the Saturday nearest
January 31 of the following year.
On April 7, 1995, Cygne sold the United Kingdom subsidiary of FWM and
certain brand name rights which were acquired in the FWM Acquisition. On
February 9, 1996, the Company sold substantially all of the assets relating to
its GJM Business. On September 20, 1996, the Company sold its 60% interest in
its joint venture arrangement with Ann Taylor and the assets of Cygne's Ann
Taylor Woven Division.
Since the consummation of the Ann Taylor Disposition, the Company has not
had and does not anticipate that it will have sales to Ann Taylor. The Company
is continuing in three principal segments of the women's apparel market: career
sportswear, casual sportswear and dresses. The Company has been dependent on its
key customers (The Limited, Inc. and Ann Taylor) and, with the loss of Ann
Taylor as a customer, its business is dependent upon maintaining its
relationship with The Limited, Inc. and its ability to attract new customers.
However, there can be no assurance that the Company will be able to do so. This
Report contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in this
report and the Company's other filings with the Securities and Exchange
Commission.
General
- -------
In June 1992, the Company and certain of its stockholders formed CAT, a
joint venture arrangement with Ann Taylor to source products exclusively for Ann
Taylor. During 1992 and the first quarter of 1993, Ann Taylor owned a 20%
interest in CAT. Effective May 1, 1993, Ann Taylor's interest in CAT increased
to 40%. As a result of such change in ownership, Ann Taylor had, prior to the
consummation of the Ann Taylor Disposition, a 40% interest in the net income of
CAT, which interest is reflected in Cygne's consolidated statements of income as
"income attributable to minority interests."
On April 6, 1994, Cygne acquired FWM for a purchase price of $44.0 million,
consisting of 2,000,000 unregistered shares of the Company's common stock and
$10,000 in cash. Additional costs related to this acquisition approximated $1.4
million. The excess of the purchase price over the fair value of the net assets
acquired of $47.8 million was recorded as goodwill and was being amortized over
a twenty-five year period. In April 1995, the Company sold FWM's U.K. subsidiary
to FWM N.V. for 600,000 shares of the Company's common stock. During 1995,
management took various actions to reverse a decline in FWM's business. However,
management determined that such actions were not having the desired results and
eliminated all of the operations of FWM. In connection with the elimination of
the FWM operations, the
-14-
<PAGE>
Company wrote-off the remaining $44.5 million of goodwill in fiscal 1995.
On October 7, 1994, Cygne acquired GJM for a purchase price of $15.2
million, consisting of 650,000 unregistered shares of common stock, $10,000 in
cash and the assumption of approximately $1.9 million of debt owed by GJM
International to The Limited, Inc., as well as non-compete payments aggregating
$3.2 million. Additional costs related to this acquisition approximated $1.7
million. The excess of the purchase price over the fair value of the net assets
acquired of approximately $27.7 million was recorded as goodwill and was being
amortized over a twenty-five year period.
In February 1996, the Company sold the GJM Business to Warnaco. In the
transaction, Warnaco paid Cygne $12.5 million in cash and assumed certain
liabilities of the GJM Business. The Company is obligated to indemnify Warnaco
for any claims for taxes arising out of the operation of the GJM Business prior
to the sale of the GJM Business to Warnaco. The Company used all the proceeds of
the sale to repay outstanding senior bank indebtedness.
In February 1995, Cygne acquired Tralee S.A. ("TSA"), a Uruguayan
corporation that sources products in Brazil for export, primarily to the United
States. The purchase price for TSA was approximately $3.8 million, consisting of
53,038 unregistered shares of common stock and $3.1 million in cash. Additional
costs related to this acquisition approximated $730,000. The excess of the
purchase price over the fair value of the net assets acquired of approximately
$4.5 million was recorded as goodwill and was being amortized over a twenty-five
year period. In January 1996, the Company determined to close TSA. As a result,
the Company recorded a loss of approximately $6.4 million in fiscal 1995,
primarily resulting from the write-off of goodwill associated with the
acquisition. The Company terminated these operations during the third quarter of
1996.
During 1993, 1994, 1995 and the nine months of 1996, Ann Taylor accounted
for 55.3%, 37.5%, 42.9% and 70.5% of Cygne's net sales, respectively, and The
Limited, Inc. (consisting primarily of The Limited Stores, Lerner and, in 1993,
Express) accounted for 38.6%, 36.8% and 34.1% and 21.6% of Cygne's net sales,
respectively (38.6%, 36.0% and 26.2% during 1993, 1994 and 1995, respectively,
excluding sales made by the GJM Business). Net sales in 1995 include sales to
The Limited, Inc. by the Company's FWM division, which operations were
discontinued in 1995, and by the GJM Business, which was sold in February 1996.
The Limited, Inc. beneficially owns through an affiliated partnership 6.9% of
the outstanding Cygne Common Stock. In addition, the Company was overdue on
payment of an approximately $1,258,000 unsecured note payable and accrued
interest of $253,000 to The Limited, Inc. assumed in connection with the
acquisition of the GJM Business. This note was repaid on November 6, 1996.
If the Ann Taylor Disposition had been consummated on February 4, 1996 and
after giving effect to the GJM Disposition, the Company would have had pro forma
net sales of $28.2 million and $70.8 million for the third quarter and nine
months of
-15-
<PAGE>
1996, respectively. Pro forma gross profit for the third quarter and nine
months of 1996 would have been $2.7 million and $7.4 million, respectively. Pro
forma loss from operations for the third quarter and nine months of 1996 would
have been $7.0 million and $10.8 million, respectively. Pro forma net loss for
the third quarter and nine months of 1996 would have been $7.2 million and $10.9
million, respectively. The pro forma net loss per share for the third quarter
and nine months would have been $0.58 and $0.87, respectively.
Although Cygne has long established relationships with its key customers,
Cygne does not have long-term contracts with any of its customers, including The
Limited, Inc. Since the consummation of the Ann Taylor Disposition, the Company
has not had and does not anticipate that it will have sales to Ann Taylor. The
Company has been dependent on its key customers and with the loss of Ann Taylor
as a customer, its future success will be dependent upon its ability to attract
new customers. There can be no assurance that The Limited, Inc. will continue to
purchase merchandise from the Company at the same rate in the future, or that
the Company will be able to attract new customers. In addition, as a result of
the Company's dependence on The Limited, Inc., particularly after the Ann Taylor
Disposition, The Limited, Inc. has the ability to exert significant control over
the Company's business decisions, including prices. Furthermore, The Limited,
Inc. procures directly a substantial portion, but not a majority, of its product
requirements through its sourcing subsidiary, and such subsidiary will continue
to be a major competitor of the Company with respect to the Company's business
with The Limited, Inc. In addition, each of the divisions of The Limited, Inc.
has formed an internal design and product development group as well as added a
direct sourcing department. During 1995, sales to certain divisions of The
Limited, Inc. decreased significantly and, although sales to certain divisions
of The Limited, Inc. with which the Company continues to do business increased
in the first nine months of 1996, the Company anticipates that total sales to
The Limited, Inc. will continue to decrease in 1996.
The apparel industry is highly competitive and historically has been
subject to substantial cyclical variation, with purchases of apparel and related
goods tending to decline during recessionary periods when disposable income is
low. This could have a material adverse effect on the Company's business. The
Company believes that the weakness in retail sales of women's apparel in 1994
and 1995 adversely affected its operating results. In addition, various
retailers, including some of Cygne's customers, have experienced financial
difficulties during recent years which have increased the risk of extending
credit to such retailers. The effect of these factors has been increased
competition and reduced operating margins for both the retailers and their
suppliers. Retailers, including customers of the Company, are increasingly
designing and sourcing private label products themselves rather than utilizing
outside vendors like the Company.
-16-
<PAGE>
RESULTS OF OPERATIONS
Financial Summary
- -----------------
Certain captions of the Condensed Consolidated Statements of Operations for
the three and nine months ended November 2, 1996 and October 28, 1995 expressed
as a percentage of net sales are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- ---------------------------
November 2, October 28, November 2, October 28,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales ......................................... 100.0% 100.0% 100.0% 100.0%
Gross profit ...................................... 10.8 6.8 12.1 8.3
Selling, general and administrative
expenses ........................................ 8.1 10.1 9.9 12.0
Gain from sale of Ann Taylor Woven
Division and CAT ................................ (36.7) -- (12.3) --
Gain from sale of subsidiary, net ................. -- -- -- (1.1)
Reorganization expense ............................ 6.0 -- 2.0 --
Amortization of intangibles ....................... 0.1 0.6 0.1 0.7
Write-off of goodwill ............................. -- 23.2 -- 8.8
Income (loss) from operations ..................... 33.2 (27.1) 12.3 (12.4)
Interest expense .................................. 1.3 1.2 1.2 1.6
Net income (loss) ................................. 24.7 (27.0) 8.3 (12.6)
</TABLE>
Net Sales
- ---------
Net sales for the third quarter of 1996 were $80.7 million, a decrease of
$79.4 million or 49.6% from the comparable period in 1995. Net sales for the
nine months of 1996 were $240.4 million, a decrease of $180.2 million or 42.8%
from the comparable period in 1995. The decreases in net sales for the third
quarter and nine months were primarily attributable to the sale of the GJM
Business on February 9, 1996, which generated sales of $31.8 million and $67.8
million, respectively, in the comparable 1995 periods, discontinued customers
and product lines, which generated sales of $33.9 million and $100.4 million,
respectively, in the comparable 1995 periods and decreases in sales to Ann
Taylor of $19.4 million and $14.7 million, respectively, from the comparable
1995 period as a result of the Ann Taylor Disposition. These decreases were
partially offset by increases in sales to those divisions of The Limited, Inc.
with which the Company continues to do business of $5.2 million and $0.4
million, respectively, and increases in sales to other customers.
For the third quarter and nine months of 1996 CAT and the Ann Taylor Woven
Division had combined net sales to Ann Taylor of $52.5 million and $169.6
million, or 65.0% and 70.5% of the Company's net sales, respectively, and
Cygne's share
-17-
<PAGE>
of the combined net income of CAT and the Ann Taylor Woven Division for
these periods was $2.3 million and $5.5 million, respectively. Since the
consummation of the Ann Taylor Disposition, the Company has not had and does not
anticipate that it will have sales to Ann Taylor.
Gross Profit
- ------------
Gross profit for the third quarter of 1996 was $8.7 million, a decrease of
$2.2 million or 20.5% from the comparable period in 1995. Gross profit for the
nine months of 1996 was $29.1 million, a decrease of $5.7 million or 16.3% from
the comparable period in 1995. Gross margins as a percentage of net sales for
the third quarter and nine months of 1996 increased over the comparable prior
periods due to lower margins on sales to discontinued and GJM customers in 1995.
Certain of the Company's products inherently carry lower gross margins than the
woven products. The Company expects that gross profit as a percentage of net
sales will vary from quarter to quarter depending on the mix of products sold.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses for the third quarter of 1996
were $6.6 million, representing a decrease of 59.4% over the third quarter of
1995. Selling, general and administrative expenses for the nine months of 1996
were $23.9 million, representing a decrease of 52.7% over the comparable prior
year period. The decrease in these expenses was primarily attributable to
reductions in the Company's overhead as well as the elimination of the FWM
operations, the disposition of the GJM Business and the Ann Taylor Disposition.
Gain from Sale of Ann Taylor Woven Division and CAT
- ---------------------------------------------------
The Company realized a pretax gain from the sale of the Ann Taylor Woven
Division and CAT of $29.6 million after transaction costs.
Reorganization Expense
- ----------------------
The reorganization expense of $4.8 million was the result of the downsizing
of the Company and the redeployment of assets necessary to meet changes in
continuing customer needs. The major components of this expense are: costs in
connection with early termination of leases for excess space, disposition of
related fixed assets, and severance costs related to Irving Benson's resignation
as an officer and employee of the Company.
Bad Debt Expense
- ----------------
Bad debt expense of $1.0 million in the first quarter of 1995 resulted from
the bankruptcy filing of a customer.
-18-
<PAGE>
Amortization of Intangibles
- ---------------------------
The amortization of intangibles for the third quarter of 1996 was $91,000,
a decrease of $866,000 over the third quarter of 1995. The amortization for the
nine months of 1996 was $273,000, a decrease of $2.6 million over the nine
months of 1995. The decrease was primarily attributable to the write-off
subsequent to the first quarter of 1995 of intangibles recorded in connection
with the FWM Acquisition and to the sale of the GJM Business.
Interest Expense
- ----------------
Interest expense for the third quarter of 1996 was $1.0 million, a decrease
of $0.9 million or 47.3% over the comparable prior year period. Interest expense
for the nine months of 1996 was $3.0 million, a decrease of $3.6 million or
54.7% over the comparable prior year period. The decrease in the interest
expense is primarily attributable to the reduction in bank borrowings as a
result of the sale of the GJM Business and downsizing of the remaining
operations.
Provision for Income Taxes
- --------------------------
The provision for income taxes in the third quarter and nine months of 1996
primarily represents tax on CAT's income and the utilization of the net deferred
tax assets in connection with the Ann Taylor Disposition. At November 2, 1996
the Company had provided a full valuation allowance for its net deferred tax
assets as the realization of such assets is uncertain. At February 3, 1996, the
Company had net operating loss carryforwards of approximately $84 million, which
may be used to offset future taxable income.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations primarily through
financing from lending institutions, financing from customers and third party
trade credit facilities, cash from operations and the issuance of debt and
equity securities.
On September 20, 1996, the Company entered into an amended and restated
credit agreement with HS Bank which replaced the Company's prior facility. The
amended facility provided a committed facility of up to $17.5 million until
October 30, 1996, which thereafter reduced to $12.5 million at October 31, 1996
and to $7.5 million at November 30, 1996. This facility, which matures on
January 31, 1997, further reduces to $5.0 million at December 30, 1996.
Borrowings under this facility are subject to borrowing base limitations and a
requirement to comply with certain financial covenants as well as various other
restrictions. The Company pledged substantially all of its assets, including the
Ann Taylor Common Stock received at the closing of the Ann Taylor Disposition,
as security for its obligations under the credit facility. As of November 2,
1996 there were direct borrowings of $5.2 million and letters of credit of $4.5
million outstanding under this facility.
-19-
<PAGE>
Between October 23 and December 13, 1996, the Company sold an aggregate of
1,988,000 shares of the Ann Taylor Common Stock at various prices resulting in
aggregate gross proceeds of approximately $38.3 million before brokerage
commissions and transaction expenses. The Company has used and intends to
continue to use a substantial portion of such proceeds to pay down its
outstanding indebtedness, and expects to use the balance of such proceeds for
working capital purposes, including costs associated with the start-up of its
business to manufacture and distribute brand name apparel bearing the KENZO
JEANS and KENZO STUDIO labels. With respect to these stock sales, 509,000 shares
were sold during the third quarter.
Certain foreign subsidiaries have credit facilities aggregating $3.9
million at November 2, 1996. Borrowings under these facilities, which are
payable on demand, are secured by a lien on certain assets of these
subsidiaries.
Cygne has agreements with two-third parties not affiliated with the
Company, but affiliated with each other, whereby these parties made available to
the Company a trade credit facility. The trade credit facility has been
suspended. At November 2, 1996, $9.5 million of this facility was outstanding.
The Company anticipates that this facility will be repaid by January 31, 1997.
In addition, from time to time customers finance the purchase of raw
materials on behalf of the Company, although there can be no assurance of this.
Net cash provided by operating activities for the nine months ended
November 2, 1996 was $6.2 million. The net cash provided resulted primarily from
a decrease in inventory partially offset by a decrease in accounts payable. Net
purchases of fixed assets aggregated approximately $0.8 million for the nine
months of 1996.
During 1995 the Company experienced liquidity pressures primarily as a
result of the negative cash flow caused by the Company's operating losses. The
Company believes that its current financing arrangement with the HS Bank and the
proceeds from the Ann Taylor Disposition have alleviated the liquidity pressures
faced by the Company during 1995 and in 1996 prior to the consummation of the
Ann Taylor Disposition. No assurance can be given, however, that the Company
will not experience liquidity pressures again in the future.
Tax Audits
- ----------
The Company is subject to ongoing tax audits in several jurisdictions.
Although there can be no assurances, the Company believes any adjustments that
may arise as a result of these audits will not have a material adverse effect on
the Company's financial position.
-20-
<PAGE>
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
a. The Annual Meeting of Stockholders of Cygne Designs, Inc. was held on
September 19, 1996.
c. The following persons, comprising the entire board of directors, were
elected at the Annual Meeting pursuant to the following vote tabulation:
Name Votes For Votes Withheld
- ---- --------- --------------
Irving Benson 6,549,256 1,146,791
James G. Groninger 6,549,256 1,146,791
Stuart B. Katz 6,549,256 1,146,791
Bernard M. Manuel 6,549,731 1,146,316
Trevor J. Wright 6,549,731 1,146,316
In addition to the election of directors, the proposal to approve the Ann
Taylor Disposition was approved, with 6,888,241 shares voted in favor, 18,880
shares voted against, 7,945 shares abstained and 780,981 broker nonvotes.
Item 5. Other Information
As previously announced, Irving Benson resigned as President and Vice
Chairman of the Company effective November 29, 1996. Mr. Benson, who founded the
Company in 1975, will continue to serve on the Board of Directors of the
Company. The Company and Mr. Benson, who resigned his officer positions to
pursue other interests, entered into a consulting agreement pursuant to which
Mr. Benson will provide services to Cygne with respect to design, development
and merchandising matters and special projects. In addition, the consulting
agreement entered into by the Company, Ann Taylor and Mr. Benson in connection
with the Ann Taylor Disposition was in accordance with its terms automatically
assigned to Mr. Benson in connection with the termination of his employment with
the Company.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Amended and Restated Credit Agreement, dated as of September
20, 1996 by and between Cygne Designs, Inc. and the
Hongkong and Shanghai Banking Corporation Limited, New
York Branch.
10.2 Escrow Agreement, dated September 20, 1996, by and among Cygne
Designs, Inc., Cygne Group (F.E.) Limited, The Hongkong
and Shanghai Banking Corporation Limited and Marine Midland
Bank.
10.3 Amended and Restated Security Agreement, dated as of September
20, 1996, between Cygne Designs, Inc. and the Hongkong and
Shagnhai Banking Corporation Limited.
10.4 Option Agreement, dated as of September 20, 1996, between
Cygne Designs, Inc., Cygne Group (F.E.) Limited and The
Hongkong and Shanghai Banking Corporation Limited.
10.5 Stockholders Agreement, dated September 20, 1996 by and among
AnnTaylor Stores Corporation, Cygne Designs, Inc. and Cygne
Group (F.E.) Limited.
10.6 Consulting Agreement, dated as of September 20, 1996,
between AnnTaylor Stores Corporation, AnnTaylor, Inc., Cygne
Designs, Inc. and Mr. Bernard M. Manuel.
10.7 Consulting Agreement, dated as of September 20, 1996,
between AnnTaylor Stores Corporation, AnnTaylor, Inc., Cygne
Designs, Inc. and Mr. Irving Benson.
10.8 Consulting and Severance Agreement dated as of November 27,
1996 between Cygne Designs, Inc. and Irving Benson.
-21-
<PAGE>
27 Financial Data Schedule (for SEC use only)
b. Reports on Form 8-K
Current report on Form 8-K dated September 20, 1996 relating to
the Ann Taylor Disposition.
-22-
<PAGE>
SIGNATURES
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.
CYGNE DESIGNS, INC.
(Registrant)
December 16, 1996 By: /s/ Bernard M. Manuel
----------------------------------
Bernard M. Manuel, Chairman of the
Board and Chief Executive Officer
December 16, 1996 By: /s/ Roy E. Green
----------------------------------
Roy E. Green, Senior Vice President,
Chief Financial Officer and Treasurer
-23-
- --------------------------------------------------------------------------------
CYGNE DESIGNS, INC.
----------
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of September 20, 1996
----------
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED,
NEW YORK BRANCH
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION 1. DEFINITIONS AND ACCOUNTING MATTERS............................. 1
1.01 Certain Defined Terms....................................... 1
1.02 Accounting Terms and Determinations.........................14
SECTION 2. THE CREDIT FACILITIES..........................................14
2.01 Facilities..................................................14
2.02 Letters of Credit...........................................15
2.03 Loans.......................................................16
2.04 Changes of Commitments......................................17
2.05 Certain Fees................................................17
2.06 Credit Offices..............................................17
SECTION 3. PAYMENTS OF PRINCIPAL AND INTEREST.............................17
3.01 Repayments of Reimbursement Obligations and Loans...........17
3.02 Interest....................................................18
3.03 Optional Prepayments of Loans...............................18
3.04 Mandatory Prepayments of Loans..............................18
SECTION 4. PAYMENTS; COMPUTATIONS; ETC....................................19
4.01 Payments....................................................19
4.02 Computations................................................19
4.03 Setoff......................................................19
4.04 Minimum Amounts.............................................20
4.05 Certain Notices.............................................20
SECTION 5. YIELD PROTECTION...............................................20
SECTION 6. CONDITIONS PRECEDENT...........................................22
6.01 Initial Credits.............................................22
6.02 Subsequent Credits..........................................24
SECTION 7. REPRESENTATIONS AND WARRANTIES.................................25
7.01 Corporate Existence.........................................25
7.02 Financial Condition.........................................25
7.03 Litigation..................................................26
7.04 No Breach...................................................26
7.05 Corporate Action............................................26
7.06 Approvals...................................................26
7.07 Use of Credits..............................................26
7.08 ERISA.......................................................27
7.09 Taxes.......................................................27
7.10 Investment Company Act......................................27
7.11 Public Utility Holding Company Act..........................27
7.12 Credit Agreements...........................................27
7.13 Hazardous Materials.........................................27
7.14 Subsidiaries................................................27
SECTION 8. COVENANTS OF THE COMPANY.......................................28
8.01 Financial Statements........................................28
8.02 Litigation..................................................30
8.03 Corporate Existence, Etc....................................30
8.04 Insurance...................................................31
8.05 Prohibition of Fundamental Changes..........................33
8.06 Limitation on Liens.........................................33
8.07 Indebtedness................................................35
CREDIT AGREEMENT
<PAGE>
- ii -
8.08 Investments.................................................35
8.09 Dividend Payments...........................................35
8.10 Leverage Ratio..............................................35
8.11 Tangible Net Worth..........................................35
8.12 Current Ratio...............................................36
8.13 Subordinated Indebtedness...................................36
8.14 Lines of Business...........................................36
8.15 Transactions with Affiliates................................36
8.16 Use of Proceeds.............................................37
8.17 Amendments to Other Documents...............................37
8.18 Audit of Inventory and Accounts Receivable..................37
8.19 Bank Accounts...............................................37
8.20 CAT Transaction.............................................37
8.21 Sale of ATSC Shares.........................................38
8.22 Sale of Florence Property...................................38
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.................................38
9.01 Events of Default...........................................38
9.02 Collateral Account..........................................40
SECTION 10. MISCELLANEOUS.................................................41
10.01 Waiver.....................................................41
10.02 Notices....................................................41
10.03 Expenses, Etc..............................................43
10.04 Amendments, Etc............................................43
10.05 Successors and Assigns; Assignment.........................43
10.06 Assignments and Participations.............................43
10.07 Survival...................................................44
10.08 Captions...................................................44
10.09 Counterparts...............................................44
10.10 Governing Law; Submission to Jurisdiction..................44
10.11 Waiver of Jury Trial.......................................44
10.12 Severability...............................................45
10.13 Effectiveness..............................................45
10.14 Effect of Amendment and Restatement........................45
Signature Page
Schedule 2.01 - Existing Letters of Credit
Schedule 7.12 - Credit Agreements
Schedule 7.14 - Subsidiaries
Schedule 8.07 - Indebtedness
Schedule 8.08 - Investments
Exhibit A-1 - Form of LAI Note
Exhibit A-2 - Form of Revolving Note
Exhibit A-3 - Form of Export Loan Note
Exhibit B - Security Agreement
Exhibit C-1 - ACS Guarantee
Exhibit C-2 - CTW Guarantee
Exhibit C-3 - Knits Guarantee
Exhibit D - Letter of Negative Pledge
Exhibit E - Escrow Agreement
Exhibit F - Assignment of Registration Rights
CREDIT AGREEMENT
<PAGE>
- iii -
Exhibit G - Borrowing Base Certificate
Exhibit H - Form of Opinion of Company Counsel
Exhibit I - Commitment Letter
CREDIT AGREEMENT
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 20, 1996
between CYGNE DESIGNS, INC., a Delaware corporation (the "Company"), and THE
HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, a foreign banking corporation
acting through its New York Branch (the "Bank"). Unless otherwise defined in
this heading or in the recitals to this Agreement, all terms used in this
heading and in such recitals have the respective meanings set forth in Section
1.01 of this Agreement.
W I T N E S S E T H :
WHEREAS, on the date hereof, there exists a credit facility between the
Bank and the Company, which facility is evidenced by a related credit agreement
(the "Existing Credit Agreement");
WHEREAS, the Company has requested the amendment and modification of
certain provisions of the Existing Credit Agreement; and
WHEREAS, the Company has requested that the Existing Credit Agreement, as
amended prior to the date hereof and as amended and modified hereby, be restated
in its entirety to reflect such amendment and modification;
NOW THEREFORE, the parties hereto agree that the Existing Credit Agreement
is hereby amended and restated in its entirety as follows:
SECTION 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.01 Certain Defined Terms. As used herein, the following terms shall have
the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
"ACS" shall mean AC Services, Inc., a Delaware corporation.
"ACS Guarantee" shall mean the guarantee agreement substantially in the
form of Exhibit C-1 hereto, pursuant to which ACS shall guarantee the Guaranteed
Obligations referred to therein, as amended, supplemented or otherwise modified
and in effect from time to time.
"Affiliate" shall mean, as to any Person, any other Person which directly
or indirectly controls, or is under common control with, or is controlled by,
such Person and, if such Person is an individual, any member of the immediate
family (including parents, spouse and children) of such individual and any trust
whose principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
As used in this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise). Notwithstanding the foregoing,
no individual shall be deemed to be an Affiliate of a corporation solely by
reason of his or her being an officer or director of such corporation and a
Person and its subsidiaries shall not be deemed to be Affiliates of each other.
"AT" shall mean AnnTaylor, Inc., a Delaware corporation.
CREDIT AGREEMENT
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"Alternative Credit Office" shall mean any office of the Bank other than
the Bank's New York Office.
"ATSC" shall mean AnnTaylor Stores Corporation, a Delaware corporation.
"ATSC Shares" shall mean all of the validly issued, fully paid and
nonassessable shares of common stock, par value $0.0068 per share, of ATSC
acquired by the Company pursuant to the Stock and Asset Purchase Agreement and
pledged by the Company to the Bank.
"Applicable Credit Office" shall mean, with respect to each type of Credit,
the Bank's New York Office or such other office of the Bank as the Bank may from
time to time designate as the office at which its Credits of such type are to be
extended and maintained.
"Applicable Margin" shall mean 1.00%, provided that, in any event, the
Applicable Margin shall mean 1.75% during any period after the Effective Date if
either (x) there is an excess with respect to the aggregate outstanding
principal amount of Loans as described under Section 3.04(b) hereof, or (y) the
Company defaults in the performance of its obligations under Sections 8.10, 8.11
or 8.12 hereof.
"Available Facility" shall mean, as at any date of determination thereof,
the amount equal to the excess of the Total Facility at said date over the
aggregate sum of (i) the outstanding amount of all Reimbursement Obligations at
said date, (ii) the undrawn face amount of all issued Letters of Credit and
Standby Letters of Credit at said date, and (iii) the outstanding principal
amount of all Loans at said date.
"Bank's New York Office" shall mean the New York City office of the Bank,
presently located at 140 Broadway, New York, New York 10005.
"Basle Accord" shall mean the proposals for a risked-based capital
framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988, as modified and
supplemented and in effect from time to time.
"Borrowing Base" shall mean, as at any day of determination thereof, the
sum of (i) 80% of the aggregate amount of Eligible Receivables at said date plus
(ii) 50% of the aggregate amount of Eligible Inventory at said date, which
Eligible Inventory shall in no event exceed $7,000,000 in the aggregate prior to
such fractional reduction, plus (iii) 50% of the aggregate face amount of all
undrawn Letters of Credit at said date plus (iv) 50% of the value of the ATSC
Shares then held by the Bank, the value of which ATSC Shares shall in no event
exceed $12,000,000 in the aggregate subsequent to such fractional reduction plus
(v) any balance in the Collateral Account minus (vi) an amount equal to two
times the average monthly commissions or processing fees (to the extent such are
included in the value of Inventory) paid to bailees, warehousemen, terminal
operators, Processors (as defined in the definition of "Eligible Inventory" set
forth in this Section 1.01) or other third parties with whom the Company has
lodged Inventory during the period of two fiscal quarters most recently ended on
or before such
CREDIT AGREEMENT
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date, provided that, the Bank may from time to time in its sole and absolute
discretion modify the respective components of the Borrowing Base set forth
herein.
"Borrowing Base Certificate" shall mean a certificate of the chief
financial officer of the Company, in substantially the form of Exhibit G hereto
and appropriately completed.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in New York City.
"Cash Proceeds" shall mean, with respect to any sale, assignment, transfer
or other disposition of any property, the aggregate cash payments received
(directly or indirectly), including any cash payments received by way of
deferred payment of principal pursuant to a note or installment receivable or
otherwise, therefrom, but only as and when received.
"CAT Group" shall mean, collectively, CAT US, Inc., a Delaware corporation,
C.A.T. (Far East) Limited, a Hong Kong corporation, and CAT Italy S.r.l., an
Italian corporation.
"CAT Transaction" shall mean, collectively, the transactions contemplated
by the Stock and Asset Purchase Agreement.
"CAT Transaction Documents" shall mean the Stock and Asset Purchase
Agreement and all other documents to which the Company is party delivered in
connection therewith.
"CAT Transfer Date" shall mean the date on which the transactions
contemplated by the Stock and Asset Purchase Agreement are consummated.
"CGFE" shall mean Cygne Group (F.E.) Limited, a Hong Kong corporation.
"CTW" shall mean Cygne TW, Inc., a Delaware corporation.
"CTW Guarantee" shall mean the guarantee agreement substantially in the
form of Exhibit C-2 hereto, pursuant to which CTW shall guarantee the Guaranteed
Obligations referred to therein, as amended, supplemented or otherwise modified
and in effect from time to time.
"Capital Lease Obligations" shall mean, as to any Person, the obligations
of such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP (including Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board) and, for purposes
of this Agreement, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP (including such Statement No.
13).
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
CREDIT AGREEMENT
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"Collateral Account" shall mean the collateral account established by the
Company with the Bank as provided in Section 9.02 hereof.
"Commitment Letter" shall mean that certain commitment letter from the Bank
to the Company dated May 15, 1996, a copy of which is attached hereto as Exhibit
I. The terms of the Commitment Letter are incorporated herein by reference and
such terms and conditions as set forth therein shall survive until the Notes
have been repaid in full and this Agreement has been terminated. In the event of
a conflict between the terms of the Commitment Letter and the terms of this
Agreement, the terms of this Agreement shall prevail.
"Commitments" shall mean, collectively, the Letter of Credit Commitment,
the Revolving Loan Commitment, the LAI Commitment, the Export Loan Commitment
and the Standby Letter of Credit Commitment.
"Consolidated Subsidiary" shall mean, as to any Person, each Subsidiary of
such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of such Person in accordance with GAAP.
"Credit" shall mean a Loan, a Letter of Credit or a Standby Letter of
Credit.
"Credit Documents" shall mean, collectively, this Agreement, the Notes, the
Letter of Credit Documents, the Standby Letter of Credit Documents and the
Security Documents.
"Default" shall mean an Event of Default or an event which with notice or
lapse of time or both would become an Event of Default.
"Dividend Payment" shall mean dividends (in cash, property or obligations)
on, or other payments or distributions on account of, or the setting apart of
money for a sinking or other analogous fund for, the purchase, redemption,
retirement or other acquisition of, any shares of any class of stock of the
Company, but excluding dividends payable solely in shares of common stock of the
Company.
"Dollars" and "$" shall mean lawful money of the United States of America.
"Effective Date" shall have the meaning assigned to such term in Section
10.13 hereof.
"Eligible Inventory" shall mean, as at any date of determination thereof,
the sum of the following (determined without duplication):
(a) the value (determined at the lower of cost or market in accordance with
GAAP, except that cost shall be determined on a first-in-first-out basis) of all
Inventory owned by (and in the possession or under the control of) the Company
and its Subsidiaries (other than with respect to the CAT Group for purposes
hereof) and located in a jurisdiction in the United States of America as to
which appropriate Uniform Commercial Code financing statements have been filed
naming the Company or such Subsidiary, as "debtor" and the Bank as "secured
party"
CREDIT AGREEMENT
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(excluding however, except to the extent that the Bank otherwise agrees with
respect to any specific customer or Processor, any such Inventory which has been
shipped to a customer of the Company or such Subsidiary, including Processors
referred to below, even if on a consignment or "sale or return" basis) and which
is in good condition, meets all standards imposed by any governmental agency or
department or division thereof having regulatory authority over such Inventory,
its use or sale and which is either currently useable or currently saleable in
the normal course of the business of the Company and its Subsidiaries without
any notice to, or consent of, any governmental agency or department or division
thereof, plus
(b) the value (determined as described in clause (a) above) of all
Inventory being processed by third parties on behalf of the Company (any such
third party being herein called a "Processor"), but only to the extent that the
Company shall have filed an appropriate uniform commercial code financing
statement in the respective jurisdiction in which such Inventory is located
naming the respective Processor as "debtor", the Company as "secured party" and
the Bank as the "assignee" and delivered to the Bank an opinion of counsel
satisfactory to the Bank to the effect that to the extent such arrangement
constitutes a consignment or security interest under applicable law, the Company
has a valid perfected first priority security interest in such Inventory and
that, by virtue of the Security Agreement, such security interest has been
validly assigned to the Bank and accordingly the Bank has a valid and perfected
security interest in such Inventory under the Security Agreement.
"Eligible Letter of Credit Transaction" shall mean Reimbursement
Obligations arising in connection with trade transactions relating to the
importation of apparel products.
"Eligible Receivables" shall mean, as at any date of determination thereof,
the aggregate of all Receivables at said date due to the Company, other than the
following (determined without duplication):
(a) any Receivable not payable in Dollars,
(b) any Receivable which, at the date of issuance of the respective invoice
therefor, was payable more than ninety days after shipment of the related
Inventory,
(c) any Receivable due from an Affiliate or a Subsidiary of the Company,
(d) any Receivable due from an account debtor whose principal place of
business is located outside of the United States of America unless the Bank has
agreed in writing that such Receivable shall be treated as "Eligible" or backed
by U.S. Government insurance or a letter of credit issued or confirmed by a bank
organized under the laws of the United States of America or a State thereof and
having capital and surplus in excess of $500,000,000 (so long as such letter of
credit has been delivered to the Bank as additional collateral under the
Security Agreement),
(e) any Receivable due from an account debtor which the Bank has notified
the Company does not have a satisfactory credit standing (as determined in the
sole discretion of the Bank),
CREDIT AGREEMENT
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(f) any Receivable which remains unpaid for more than ninety days (measured
from the date of the original issuance of the invoice thereof),
(g) all Receivables of any account debtor if more than 20% of the aggregate
amount of the Receivables of such account debtor have at the time remained
unpaid for more than ninety days (measured from the date of the original
issuance of the invoice thereof),
(h) any Receivable as to which there is any unresolved dispute with the
respective account debtor (but only to the extent of the amount thereof in
dispute),
(i) any Receivable evidenced by an Instrument (as defined in the Security
Agreement) not in the possession of the Bank,
(j) any Receivable representing an obligation for goods sold on
consignment, or approval or on a sale-or-return basis or subject to any other
repurchase or return arrangement, except to the extent the Bank shall have
otherwise agreed in writing, and
(k) any Receivable due from an account debtor if such account debtor is
operating under the protection of any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts.
"Environmental Laws" shall mean any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean any (a) corporation or trade or business which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company, (b) any entity which is under common
control (within the meaning of Section 414(c) of the Code) with the Company, (c)
any member of an affiliated service group (within the meaning of Section 414(m)
of the Code) in which the Company is also a member, and (d) any other entity
affiliated with the Company under Section 414(o) of the Code.
"Escrow Account" shall mean the escrow account established by the Company
with the Escrow Agent as provided in Section 8.19 hereof.
CREDIT AGREEMENT
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"Escrow Agent" shall mean Marine Midland Bank, in its capacity as an escrow
agent, under the Escrow Agreement.
"Escrow Agreement" shall mean the escrow agreement substantially in the
form of Exhibit E hereto, pursuant to which the Bank shall retain the ATSC
Shares, as amended, supplemented or otherwise modified and in effect from time
to time.
"Event of Default" shall have the meaning assigned to such term in Section
9.01 hereof.
"Existing Letter of Credit" shall mean each letter of credit set forth in
Schedule 2.01 hereto.
"Existing Standby Letter of Credit" shall mean each standby letter of
credit set forth in Schedule 2.01 hereto.
"Export Loan" shall have the meaning assigned to that term in Section
2.01(d) hereof.
"Export Loan Commitment" shall mean the obligation of the Bank to make
Export Loans up to an aggregate principal amount for all Export Loans at any one
time outstanding up to $3,000,000 (as the same shall be reduced and terminated
from time to time as provided for by Section 2.04 hereof).
"Export Loan Note" shall mean the promissory note provided for by Section
2.03(d) hereof, substantially in the form of Exhibit A-3 hereto.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (i) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (ii) if such rate is not so published for any day,
the Federal Funds Rate for such day shall be the average rate charged to the
Bank on such day on such transactions.
"GAAP" shall mean generally accepted accounting principles as in effect at
the time of application to the provisions hereof.
"GJM" shall mean H.K.N. (H.K.) Purchasing Limited (formerly known as G.J.M.
(H.K.) Purchasing Limited), a Hong Kong corporation.
"Guarantee" shall mean a guarantee, an endorsement, a contingent agreement
to purchase or to furnish funds for the payment or maintenance of, or otherwise
to be or become contingently liable under or with respect to, the Indebtedness,
other obligations, net worth,
CREDIT AGREEMENT
<PAGE>
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working capital or earnings of any Person, or a guarantee of the payment of
dividends or other distributions upon the stock of any corporation, or an
agreement to purchase, sell or lease (as lessee or lessor) property, products,
materials, supplies or services primarily for the purpose of enabling a debtor
to make payment of his, her or its obligations or an agreement to assure a
creditor against loss, and including without limitation, causing a bank to open
a letter of credit for the benefit of another Person, but excluding endorsements
for collection or deposit in the ordinary course of business. The terms
"Guarantee" and "Guaranteed" used as a verb shall have a correlative meaning.
"Inactive Subsidiary" shall mean on any date a Subsidiary having assets on
such date with a book value of less than $10,000 and no operating business.
"Indebtedness" shall mean, as to any Person: (a) indebtedness created,
issued or incurred by such Person for borrowed money (whether by loan or the
issuance and sale of debt securities); (b) obligations of such Person to pay the
deferred purchase or acquisition price of property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 180 days of the date the respective goods are
delivered or respective services rendered; (c) Indebtedness of others secured by
a Lien on the property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; (d) obligations of such
Person in respect of letters of credit or similar instruments issued or accepted
by banks and other financial institutions for the account of such Person; (e)
Capital Lease Obligations of such Person; and (f) Indebtedness of others
guaranteed by such Person.
"Interest Rate" shall mean the Prime Rate plus the Applicable Margin.
"Inventory" shall mean apparel and related products, and other readily
marketable materials of a type purchased, produced, manufactured or consumed by
the Company and its Subsidiaries in the ordinary course of business as presently
conducted.
"Investment" in any Person shall mean: (a) the acquisition (whether for
cash, property, services or securities or otherwise) of capital stock, bonds,
notes, debentures, partnership or other ownership interests or other securities
of such Person; and (b) any deposit with, or advance, loan or other extension of
credit to, such Person (other than any such advance, loan or extension of credit
having a term not exceeding 90 days representing the purchase price of inventory
or supplies purchased in the ordinary course of business) or guarantee of, or
other contingent obligation with respect to, Indebtedness or other liability of
such Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person.
"Knits" shall mean Cygne Knits Limited, a Delaware corporation.
"Knits Guarantee" shall mean the guarantee agreement substantially in the
form of Exhibit C-3 hereto, pursuant to which Knits shall guarantee the
Guaranteed Obligations referred to therein, as amended, supplemented or
otherwise modified and in effect from time to time.
CREDIT AGREEMENT
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"LAI Commitment" shall mean the obligation of the Bank to make LAI Loans up
to an aggregate principal amount for all LAI Loans at any one time outstanding
up to $17,500,000 (as the same shall be reduced and terminated from time to time
as provided for by Section 2.04 hereof).
"LAI Loan" shall have the meaning assigned to that term in Section 2.01(b)
hereof.
"LAI Note" shall mean the promissory note provided for by Section 2.03(b)
hereof, substantially in the form of Exhibit A-1 hereto.
"Letter of Credit" shall have the meaning assigned to such term in Section
2.01(a) hereof and include each Existing Letter of Credit.
"Letter of Credit Commitment" shall mean, respectively and without
duplication, the obligation of the Bank to issue Letters of Credit up to an
aggregate face amount for all Letters of Credit at any one time outstanding up
to (i) $17,500,000 for the period commencing on the Effective Date and ending on
October 30, 1996; (ii) $12,500,000 for the period commencing on October 31, 1996
and ending on November 29, 1996; (iv) $7,500,000 for the period commencing on
November 30, 1996 and ending on December 30, 1996; and (v) $5,000,000 for the
period commencing an December 31, 1996 and ending on the Termination Date (as
the same shall be reduced and terminated from time to time as provided for by
Section 2.04 hereof).
"Letter of Credit Documents" shall mean, with respect to any Letter of
Credit, collectively, such Letter of Credit, any amendments thereto, any
documents delivered thereunder, any application therefor, and any other
agreements, instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or providing
for (i) the rights and obligations of the parties concerned or at risk or (ii)
any collateral security for such obligations.
"Letter of Negative Pledge" shall mean the agreement substantially in the
form of Exhibit D hereto, pursuant to which each of the parties thereto shall
agree to the effect set forth therein, as amended, supplemented or otherwise
modified and in effect from time to time.
"Leverage Ratio" shall mean, at any time, the ratio of Total Liabilities
(less Subordinated Indebtedness) to Tangible Net Worth (plus Subordinated
Indebtedness) at such time.
"Lien" shall mean, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For purposes of this Agreement, the Company shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Loan" shall mean an LAI Loan, a Revolving Loan and an Export Loan.
CREDIT AGREEMENT
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"Lock-Box Account" shall mean the lock-box account established by the
Company with the Bank as provided in Section 8.19 hereof.
"Margin Stock" shall mean margin stock within the meaning of Regulations U
and X.
"Material Adverse Effect" shall mean a material adverse effect upon (a) the
financial conditions, operations, business or prospects of the Company and its
Consolidated Subsidiaries taken as a whole, (b) the ability of the Company to
repay any Loan, Reimbursement Obligation or any other amount payable by the
Company hereunder, or (c) the rights and remedies of the Bank under this
Agreement and the other Credit Documents.
"Maturity Date" shall have the meaning assigned to that term in Section
2.01(f) hereof.
"Multiemployer Plan" shall mean a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the Company or
any ERISA Affiliate and which is covered by Title IV of ERISA.
"Note" and "Notes" shall have the respective meanings assigned to such
terms in Section 2.03(d) hereof.
"Obligor" shall mean each of the Company, ACS, CTW and Knits.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Penalty Rate" shall mean, in respect of any principal of any Loan, any
Reimbursement Obligation or any other amount payable by the Company under this
Agreement or any Note that is not paid when due (whether at stated maturity, by
acceleration or otherwise), a rate per annum during the period from and
including the due date to but excluding the date on which such amount is paid in
full equal to 2% above the interest rate otherwise in effect.
"Permitted Investments" of any Person shall mean: (a) direct obligations of
the United States of America, or of any agency thereof, or obligations
guaranteed as to principal and interest by the United States of America, or of
any agency thereof, in any case maturing not more than 90 days from the date of
acquisition thereof by such Person; (b) certificates of deposit issued by any
bank or trust company organized under the laws of the United States of America
(or any state thereof) and having capital, surplus and undivided profits of at
least $500,000,000, maturing not more than 90 days from the date of acquisition
thereof by such Person; and (c) commercial paper rated A-1 or better or P-1 by
Standard & Poor's Corporation or Moody's Investors Services, Inc., respectively,
maturing not more than 90 days from the date of acquisition thereof by such
Person.
CREDIT AGREEMENT
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"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and which is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Prime Rate" shall mean the rate of interest from time to time announced by
Marine Midland Bank in New York City as its prime commercial lending rate. Each
change in any interest rate provided for herein based upon the Prime Rate
resulting from a change in the Prime Rate shall take effect at the time of such
change in the Prime Rate.
"Property" shall mean the land and improvements owned by T-Wear and located
in Florence, Italy, which land and improvements are to be sold, assigned and
transferred in accordance with Section 8.22 hereof.
"Receivables" shall mean, as at any date of determination thereof, the
unpaid portion of the obligation owed to the Company, as stated on the
respective invoice, of a customer of the Company, CTW or Knits in respect of
Inventory purchased and shipped, net of any credits, rebates or offsets owed to
the respective customer and also net of any commissions payable to third parties
(and for purposes hereof, a credit or rebate paid by check or draft of the
Company shall be deemed to be outstanding until such check or draft shall have
been debited to the respective account of the Company on which such check or
draft was drawn).
"Regulations D, G, T, U and X" shall mean, respectively, Regulations D, G,
T, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be amended or supplemented from time to time.
"Regulatory Change" shall mean any change after the date of this Agreement
in United States Federal, state or foreign law or regulations or the adoption or
making after such date of any interpretation, directive or request applying to a
class of banks including the Bank of or under any United States Federal, state
or foreign law or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Reimbursement Obligation" shall mean at any time, the obligation of the
Company to reimburse the Bank on demand for amounts theretofore paid by the Bank
pursuant to a drawing under a Letter of Credit or Standby Letter of Credit.
"Revolving Loan Commitment" shall mean the obligation of the Bank to make
Revolving Loans up to an aggregate principal amount for all Revolving Loans at
any one time outstanding up to $10,000,000 (as the same shall be reduced and
terminated from time to time as provided for by Section 2.04 hereof).
CREDIT AGREEMENT
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"Revolving Loans" shall have the meaning assigned to that term in Section
2.01(c) hereof.
"Revolving Note" shall mean the promissory note provided for by Section
2.03(c) hereof, substantially in the form of Exhibit A-2 hereto.
"Security Documents" shall mean, collectively, the ACS Guarantee, the CTW
Guarantee, the Knits Guarantee, the Letter of Negative Pledge, the Escrow
Agreement, the Security Agreement and all Uniform Commercial Code financing
statements required by this Agreement and the Security Agreement to be filed
with respect to the security interests in personal property created pursuant to
the Security Agreement.
"Security Agreement" shall mean the amended and restated security agreement
substantially in the form of Exhibit B hereto, pursuant to which the Company
shall provide collateral security for the Secured Obligations referred to
therein, as amended, supplemented or otherwise modified and in effect from time
to time.
"Standby Letter of Credit" shall have the meaning assigned to such term in
Section 2.01(e) hereof and include each Existing Standby Letter of Credit.
"Standby Letter of Credit Commitment" shall mean the obligation of the Bank
to issue Standby Letters of Credit up to an aggregate face amount for all
Standby Letters of Credit at any one time outstanding up to $2,000,000 (as the
same shall be reduced and terminated from time to time as provided for by
Section 2.04 hereof).
"Standby Letter of Credit Documents" shall mean, with respect to any
Standby Letter of Credit, collectively, such Standby Letter of Credit, any
amendments thereto, any documents delivered thereunder, any application
therefor, and any other agreements, instruments, guarantees or other documents
(whether general in application or applicable only to such Standby Letter of
Credit) governing or providing for (i) the rights and obligations of the parties
concerned or at risk or (ii) any collateral security for such obligations.
"Stock and Asset Purchase Agreement" shall mean that certain Stock and
Asset Purchase Agreement dated as of June 7, 1996 by and between CDI, CGFE, ATSC
and AT, pursuant to which AT shall acquire from the Company and CGFE the
business relating to the CAT Group and other assets referred to therein, as
amended, supplemented or otherwise modified and in effect from time to time.
"Stockholders Agreement" shall mean that certain Stockholders Agreement
dated as of September 20, 1996 by and between ATSC, the Company and CGFE,
delivered in connection with the Stock and Asset Purchase Agreement, pursuant to
which the Company and ATSC shall agree to regulate their relationship with
respect to the ATSC Shares, as amended, supplemented or otherwise modified and
in effect from time to time.
"Subordinated Indebtedness" shall mean, collectively, Indebtedness for
which the Company and/or its Consolidated Subsidiaries are directly and
primarily liable and which is
CREDIT AGREEMENT
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subordinated to the obligation of the Company to pay principal of and interest
on the Loans and any Note, any Reimbursement Obligation and any other amount
payable hereunder on terms, and which contains other terms (including interest,
amortization and financial and other covenants), in form and substance
satisfactory to the Bank.
"Subsidiary" shall mean any corporation of which at least a majority of the
outstanding shares of stock having by the terms thereof ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
the Company.
"T-Wear" shall mean T. Wear Company S.r.l., an Italian corporation.
"Tangible Net Worth" shall mean, as at any date of determination thereof,
the sum of the following for the Company and its Consolidated Subsidiaries
(other than with respect to the CAT Group for purposes hereof) determined
(without duplication) in accordance with GAAP:
(a) the amount of the capital stock account, plus
(b) the amount of paid-in surplus and retained earnings (or, in the
case of a surplus or retained earnings deficit, minus the amount of such
deficit), minus
(c) the sum of the following: cost of treasury shares and the book
value of all assets of the Company and its Consolidated Subsidiaries which
should be classified as intangibles (without duplication of deductions in
respect of items already deducted in arriving at surplus and retained
earnings) but in any event including good-will, research and development
costs, trade-marks, trade names, copyrights, patents and franchises,
unamortized debt discount and expense, and all reserves.
"Termination Date" shall mean January 31, 1997.
"Total Facility" shall mean, respectively and without duplication, the
aggregate face or principal amount, as to all Credits hereunder, of (i)
$17,500,000 for the period commencing on the Effective Date and ending on
October 30, 1996; (ii) $12,500,000 for the period commencing on October 31, 1996
and ending on November 29, 1996; (iv) $7,500,000 for the period commencing on
November 30, 1996 and ending on December 30, 1996; and (v) $5,000,000 for the
period commencing on December 31, 1996 and ending on the Termination Date.
"Total Liabilities" shall mean, as at any date of determination thereof,
the sum, for the Company and its Consolidated Subsidiaries (other than with
respect to the CAT Group for purposes hereof) determined (without duplication)
in accordance with GAAP, of all Indebtedness of the Company and its Consolidated
Subsidiaries and all other liabilities of the Company and its Consolidated
Subsidiaries which should be classified as liabilities on a balance sheet of the
Company and its Consolidated Subsidiaries prepared in accordance with GAAP and
in any event
CREDIT AGREEMENT
<PAGE>
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including all reserves (other than general contingency reserves) and all
deferred taxes and other deferred items.
1.02 Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Bank hereunder shall be prepared, in accordance
with GAAP. To enable the ready and consistent determination of compliance with
the covenants set forth in Section 8 hereof, the Company will not change the
last day of its fiscal year from the Saturday nearest January 31.
SECTION 2. THE CREDIT FACILITIES.
2.01 Facilities. Subject to the terms and conditions of this Agreement:
(a) The Bank agrees to issue from time to time for the account of the
Company sight letters of credit (each, a "Letter of Credit") in support of
Eligible Letter of Credit Transactions during the period commencing on the
Effective Date and ending on the day falling 30 days before the Termination
Date in an aggregate undrawn face amount (as to all Letters of Credit
issued for account of the Company) not exceeding at any one time
outstanding an amount equal to the excess of the amount of the Letter of
Credit Commitment, as then in effect, over the aggregate outstanding amount
of the Reimbursement Obligations; provided that (i) the Letter of Credit
Commitment shall not at any time exceed the Available Facility, and (ii)
the stated expiry date of each Letter of Credit shall be a Business Day
falling no more than 60 days after the related issuance date and on or
before the Termination Date.
(b) The Bank agrees to make a loan or loans (each, an "LAI Loan") to
the Company during the period commencing on the Effective Date and ending
on the day falling 30 days before the Termination Date to finance
Reimbursement Obligations owed hereunder, in an aggregate principal amount
(as to all LAI Loans) not exceeding at any one time outstanding the LAI
Commitment; provided that the LAI Commitment shall not at any time exceed
the Available Facility.
(c) The Bank agrees to make a loan or loans (each, a "Revolving Loan")
to the Company during the period commencing on the Effective Date and
ending on the day falling 30 days before the Termination Date to finance
general operating expenses, fabric purchases and charges relating to
freight, duty and insurance, in an aggregate principal amount (as to all
Revolving Loans) not exceeding at any one time outstanding the Revolving
Loan Commitment; provided that the Revolving Loan Commitment shall not at
any time exceed the Available Facility.
(d) The Bank agrees to make a loan or loans (each, an "Export Loan")
to the Company during the period commencing on the Effective Date and
ending on the day falling 30 days before the Termination Date, in an
aggregate principal amount (as to all Export Loans) not exceeding at any
one time outstanding the Export Loan Commitment;
CREDIT AGREEMENT
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provided that (i) the Export Loan Commitment shall not at any time exceed
the Available Facility, and (ii) on the date of each Export Loan, the
principal amount of such Export Loan shall not exceed 45% of the face
amount value of the underlying letter of credit.
(e) The Bank agrees to issue from time to time for the account of the
Company standby letters of credit (each, a "Standby Letter of Credit") in
support of customs guarantees and related matters during the period
commencing on the Effective Date and ending on the day falling 30 days
before the Termination Date in an aggregate undrawn face amount (as to all
Standby Letters of Credit issued for account of the Company) not exceeding
at any one time outstanding an amount equal to the excess of the amount of
the Standby Letter of Credit Commitment over the aggregate outstanding
amount of the Reimbursement Obligations relating to Standby Letters of
Credit; provided that (i) the Standby Letter of Credit Commitment shall not
at any time exceed the Available Facility, and (ii) the stated expiry date
of each Standby Letter of Credit shall be a Business Day falling no more
than one year after the related issuance date and on or before the
Termination Date.
(f) Each Loan shall mature on the date (the "Maturity Date") falling
the following respective number of days after the funds in connection with
such Loan are made available as provided in Section 2.03 hereof (unless
otherwise indicated): (i) in the case of each LAI Loan, 60 days; (ii) in
the case of each Revolving Loan, 60 days; and (iii) in the case of each
Export Loan, 90 days; provided, the Maturity Date of each Loan shall in any
event fall on or before the Termination Date. Subject to the terms of this
Agreement, the Company may borrow, prepay and reborrow the amount of the
Letter of Credit Commitment, the LAI Commitment, the Revolving Loan
Commitment, the Export Loan Commitment and the Standby Letter of Credit
Commitment.
(g) During the period commencing on the Termination Date, the Company
shall secure any Credit, either then outstanding or to be extended
hereunder, by providing to the Bank, in an amount equal to the face or
principal amount of the related Credit, either (i) a deposit to the
Collateral Account, evidenced by a wire transfer of Federal or other
immediately available funds, or (ii) a standby letter of credit issued on
behalf of the Company in favor of the Bank by a financial institution
acceptable to the Bank in its sole and absolute discretion.
2.02 Letters of Credit.
(a) The Company shall give the Bank notice of each Letter of Credit to
be issued for account of the Company as provided in Section 4.05 hereof
(unless such Letter of Credit is opened through the Bank's Hexagon System).
(b) The issuance by the Bank of each Letter of Credit shall, in
addition to the conditions precedent set forth in Sections 6.01 and 6.02
hereof, be subject to the conditions that such Letter of Credit be in such
form, contain such terms and support such transactions or obligations
(which shall be Eligible Letter of Credit Transactions with respect to
which the Company shall be the primary obligor) as shall be reasonably
CREDIT AGREEMENT
<PAGE>
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satisfactory to the Bank consistent with its then current practices and
procedures with respect to similar letters of credit and that the
Company shall have executed and delivered such other instruments and
agreements relating to such Letter of Credit as the Bank shall have
reasonably requested consistent with such practices and procedures.
(c) Without duplication of Section 10.03 hereof, the Company hereby
indemnifies and holds harmless the Bank from and against any and all
claims, damages, losses, liabilities, costs or expenses which the Bank may
incur (or which may be claimed against the Bank) by any Person by reason of
or in connection with the issuance or transfer of or payment or failure to
pay under any Letter of Credit; provided that the Company shall not be
required to indemnify the Bank for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, (i)
caused by the willful misconduct or gross negligence of the Bank in
determining whether a request presented under any Letter of Credit complied
with the terms of such Letter of Credit, or (ii) caused by the Bank's
failure to pay under any Letter of Credit after the presentation to it of a
request strictly complying with the terms and conditions of such Letter of
Credit, unless such payment is prohibited by any law, regulation, court
order or decree.
2.03 Loans.
(a) The Company shall give the Bank notice of each Loan to be made to
the Company as provided in Section 4.05 hereof. On the date specified for
the making of each Loan, the Bank shall make available the amount of such
Loan to the Company by depositing the same, in immediately available funds,
in an account of the Company maintained with the Bank's New York Office.
(b) The LAI Loans shall be evidenced by a single promissory note of
the Company in substantially the form of Exhibit A-1 hereto (the "LAI
Note"), payable to the Bank in a principal amount equal to the amount of
the LAI Commitment as originally in effect or such lesser amount as may
then be applicable.
(c) The Revolving Loans shall be evidenced by a single promissory note
of the Company in substantially the form of Exhibit A-2 hereto (the
"Revolving Note"), payable to the Bank in a principal amount equal to the
amount of the Revolving Loan Commitment as originally in effect or such
lesser amount as may then be applicable.
(d) The Export Loans shall be evidenced by a single promissory note of
the Company in substantially the form of Exhibit A-3 hereto (the "Export
Loan Note"), payable to the Bank in a principal amount equal to the amount
of the Export Loan Commitment as originally in effect or such lesser amount
as may then be applicable (collectively, the LAI Note, the Revolving Note
and the Export Loan Note are herein referred to as the "Notes" and,
individually, as a "Note").
(e) Each Note shall be dated the date of the delivery of such Note to
the Bank. The date, amount and interest rate of the Loans made by the Bank
to the Company, and each payment made on account of the principal thereof,
shall be recorded by the Bank on
CREDIT AGREEMENT
<PAGE>
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its books; provided that the failure by the Bank so to record such Loans
shall not affect the obligations of the Company hereunder or under any
Note.
2.04 Changes of Commitments.
(a) The Letter of Credit Commitment, the LAI Commitment and the
Revolving Loan Commitment shall each automatically (i) to the extent any
such Commitment exceeds the Total Facility, reduce to the maximum amount of
the Total Facility, and (ii) terminate on the Termination Date. The Export
Loan Commitment and the Standby Letter of Credit Commitment shall each
automatically terminate on the Termination Date.
(b) Commitments once reduced or terminated in accordance with this
Section 2.04 may not be reinstated.
2.05 Certain Fees.
(a) The Company has paid to the Bank a commitment fee equal to 0.50%
of the aggregate amount of the Commitments (without duplication) upon
execution of the Commitment Letter.
(b) The Company shall pay to the Bank from time to time at then
prevailing rates unless otherwise indicated, in respect of each Letter of
Credit issued for account of the Company, all charges, costs and expenses
customarily charged by the Bank in like circumstances with respect to
similar letters of credit.
(c) The Company shall have paid to the Bank from time to time at then
prevailing rates unless otherwise indicated, in respect of each Standby
Letter of Credit issued for account of the Company, all charges, costs and
expenses customarily charged by the Bank in like circumstances with respect
to similar letters of credit including, on the date of issuance of such
Standby Letter of Credit, a non-refundable issuance fee equal to 0.125% per
month of the face amount thereof for the period from the date of issuance
thereof until the stated expiration date thereof.
2.06 Credit Offices. The Credits shall be extended and maintained at the
Bank's New York Office or an Alternative Credit Office in the United States of
America.
SECTION 3. PAYMENTS OF PRINCIPAL AND INTEREST.
3.01 Repayments of Reimbursement Obligations and Loans.
(a) The Company shall pay to the Bank the amount paid by the Bank in
respect of any drawing under any Letter of Credit issued for account of the
Company, such payment to be made by the Company on demand by the Bank (or,
in the absence of demand, on the same Business Day of such payment by the
Bank).
CREDIT AGREEMENT
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(b) The Company shall pay to the Bank the outstanding principal amount
of each Loan on the respective Maturity Date.
3.02 Interest.
(a) The Company will pay to the Bank interest on the unpaid principal
amount of each Loan for the period from and including the date of such Loan
to but excluding the date such Loan shall be paid in full at the Interest
Rate (as in effect from time to time).
(b) Notwithstanding the provisions of clause (a) above, the Company
will pay to the Bank interest at the Penalty Rate on any principal of any
Loan, on any Reimbursement Obligation owing to the Bank and (to the fullest
extent permitted by law) on any other amount payable hereunder or under any
Note, which shall not be paid in full when due (whether at stated maturity,
by acceleration or otherwise), for the period from and including the due
date thereof to but excluding the date the same is paid in full.
(c) Accrued interest on each Loan shall, subject to the following
sentence, be payable on the first Business Day of each month such Loan
remains outstanding, and upon the payment or prepayment thereof. Interest
payable at the Penalty Rate shall be payable in arrears on the first
Business Day of each month and from time to time on demand of the Bank.
(d) Promptly after the determination of any interest rate provided for
herein or any change therein, the Bank shall give notice thereof to the
Company.
3.03 Optional Prepayments of Loans. Subject to Section 4.04 hereof, the
Company shall have the right to prepay the Loans, at any time from time to time,
provided that the Company shall give the Bank notice of each such prepayment, as
provided in Section 4.05 hereof.
3.04 Mandatory Prepayments of Loans.
(a) If the outstanding principal amount of any Loan exceeds on any
date the applicable Commitment on such date (as each such Commitment is
reduced or terminated in accordance with Section 2.04 hereof), the Company
shall cause the applicable Loans to be prepaid on such date in an aggregate
principal amount at least equal to such excess.
(b) If the outstanding principal amount of the Loans exceeds on any
date the amount equal to (i) the Borrowing Base at said date minus (ii) the
amount equal to the sum of (x) the aggregate undrawn face amount of all
issued Letters of Credit and Standby Letters of Credit at said date, and
(y) the outstanding principal amount of Reimbursement Obligations at said
date, the Company shall cause the Loans to be prepaid on such date in an
aggregate principal amount at least equal to such excess.
CREDIT AGREEMENT
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(c) Upon the consummation of the CAT Transaction, the Company shall
prepay the Loans or cause the Loans to be prepaid, as the case may be,
immediately upon the receipt of Cash Proceeds therefrom in an aggregate
principal amount equal to such Cash Proceeds, provided that, such
prepayment by the Company of the Loans in connection with the CAT
Transaction shall in no event be for an aggregate principal amount less
than $9,400,000.
SECTION 4. PAYMENTS; COMPUTATIONS; ETC.
4.01 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by each Obligor under this
Agreement and any Note shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Bank's New York
Office, not later than 11:00 a.m. New York time on the date on which such
payment shall become due (each such payment made after such time on such
due date to be deemed to have been made on the next succeeding Business
Day).
(b) The Bank may (but shall not be obligated to) debit the amount of
any such payment which is not made by such time to any ordinary deposit
account of the Company with the Bank.
(c) Each Obligor shall, at the time of making each payment under this
Agreement or any Note, specify to the Bank the Loan, Reimbursement
Obligation or other amounts payable by such Obligor hereunder to which such
payment is to be applied (and in the event that it fails to so specify, or
if an Event of Default has occurred and is continuing, the Bank may apply
such payment in such manner as it may determine to be appropriate).
(d) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day which is not a Business Day and such date is
extended to the next succeeding Business Day in accordance with the terms
and conditions hereof, interest shall be payable on any payment amount so
extended for the period of such extension.
4.02 Computations. Interest shall be computed on the basis of a year of 360
days and actual days elapsed (including the first day but excluding the last
day) occurring in the period for which payable.
4.03 Setoff. Each Obligor agrees that, in addition to (and without
limitation of) any right of set-off, bankers' lien or counterclaim the Bank may
otherwise have, the Bank shall be entitled, at its option, to offset balances
held by it for account of such Obligor at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any of the Loans,
any Reimbursement Obligation or any other amount payable to the Bank hereunder
for which such Obligor is liable hereunder which is not paid when due, in which
case it shall
CREDIT AGREEMENT
<PAGE>
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promptly notify such Obligor thereof, provided that the Bank's failure to give
such notice shall not affect the validity thereof.
4.04 Minimum Amounts. Each borrowing and prepayment of principal of Loans
shall be in an amount at least equal to $20,000.
4.05 Certain Notices. Notices to the Bank of borrowings and prepayments of
Loans and of issuances and extensions of Letters of Credit shall be irrevocable
and shall be effective only if received by the Bank not later than 11:00 a.m.
New York time on the number of Business Days prior to the date of the relevant
borrowing, prepayment, issuance or extension specified below:
Number of
Business
Notice Days Prior
------ ----------
Borrowing or prepayment of Loans .................. 1
Issuance or extension of Letters of Credit ........ 3
Each such notice of borrowing or prepayment shall specify the amount (subject to
Section 4.04 hereof) and date (which shall be a Business Day) such Loan is to be
borrowed or prepaid. Each such notice of issuance or extension shall specify the
date (which shall be a Business Day) such Letter of Credit is to be issued, the
amount thereof, the beneficiary thereof, the expiry date thereof (which shall be
a Business Day) and, in reasonable detail, the other terms of such Letter of
Credit and the nature of the transaction (which shall be an Eligible Letter of
Credit Transaction) to be supported thereby. Each such request for an extension
of a Letter of Credit shall specify the new expiry date thereof (which shall be
a Business Day).
SECTION 5. YIELD PROTECTION.
(a) The Company shall pay directly to the Bank from time to time such
amounts as the Bank may reasonably determine to be necessary to compensate
it for any costs which the Bank determines are attributable to its making
or maintaining any Credit or its obligation to make any Credit hereunder,
or any reduction in any amount receivable by the Bank hereunder in respect
of any such Credit or obligation (such increases in costs and reductions in
amounts receivable being herein called "Additional Costs"), resulting from
any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to the
Bank under this Agreement or its Notes in respect of any such Credit
(other than taxes imposed on or measured by the overall net income of
the Bank or its Applicable
CREDIT AGREEMENT
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Credit Office for any of such Credits by the jurisdiction in which
such Applicable Credit Office is located); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements relating to any extensions of credit or other assets of,
or any deposits with or other liabilities of, the Bank, or any
Commitment of the Bank available for the Company; or
(iii) imposes any other condition affecting this Agreement or any
Note of the Bank (or any of such extensions of credit or liabilities)
or any Commitment of the Bank available for the Company.
(b) Without limiting the effect of the foregoing provisions of this
Section 5 (but without duplication), the Company shall pay to the Bank from
time to time on request such amounts as the Bank may reasonably determine
to be necessary to compensate the Bank for any costs which it determines
are attributable to the maintenance by the Bank (or any Applicable Credit
Office), pursuant to any law or regulation or any interpretation, directive
or request (whether or not having the force of law) of any court or
governmental or monetary authority following any Regulatory Change, or
pursuant to any risk-based capital guideline or other requirement (whether
or not having the force of law and whether or not the failure to comply
therewith would be unlawful) heretofore or hereafter issued by any
government or governmental or supervisory authority, including any
implementation at the Federal level of the Basle Accord (including, without
limitation, the Final Risk-Based Capital Guidelines of the Board of
Governors of the Federal Reserve System (12 CFR Part 208, Appendix A; 12
CFR Part 225, Appendix A) and the Final Risk-Based Capital Guidelines of
the Office of the Comptroller of the Currency (12 CFR Part 3, Appendix A),
of capital in respect of any Commitment of the Bank available for the
Company, any Loan made by the Bank to the Company, any Letter of Credit or
Standby Letter of Credit issued for account of the Company (such
compensation to include, without limitation, an amount equal to any
reduction of the rate of return on assets or equity of the Bank (or any
Applicable Credit Office) to a level below that which the Bank (or any
Applicable Credit Office) could have achieved but for such law, regulation,
interpretation, directive or request).
(c) The Bank will notify the Company of any event occurring after the
date of this Agreement that will entitle the Bank to compensation under
paragraph (a) or (b) of this Section 5 as promptly as practicable, but in
any event within 45 days, after the Bank obtains actual knowledge thereof;
provided, however, that if the Bank fails to give such notice within 45
days after it obtains actual knowledge of such an event, the Bank shall,
with respect to compensation payable pursuant to this Section 5 in respect
of any costs resulting from such event, only be entitled to payment under
this Section 5 for costs incurred from and after the date 45 days prior to
the date that the Bank does give such notice. The Bank will furnish to the
Company a certificate setting forth the basis and amount of each request by
the Bank for compensation under paragraph (a) or (b) of this Section 5.
Determinations and allocations by the Bank for purposes of this Section 5
of the effect of any Regulatory Change pursuant to this Section 5, or of
the effect of capital
CREDIT AGREEMENT
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maintained pursuant to the preceding paragraph, on its costs or rate of
return of maintaining Credits or its obligation to make Credits, or on
amounts receivable by it in respect of Credits, and of the amounts required
to compensate the Bank under this Section 5, shall be conclusive, provided
that such determinations and allocations are made on a reasonable basis.
SECTION 6. CONDITIONS PRECEDENT.
6.01 Initial Credits. The obligations of the Bank to extend Credits
hereunder are subject to the conditions precedent that all matters relating to
this Agreement and the transactions contemplated hereby shall be reasonably
satisfactory to the Bank and its counsel, and that:
(a) The Bank shall have received the following, each of which shall be
in form and substance satisfactory to the Bank:
(i) The LAI Note, the Revolving Note and the Export Loan Note,
each duly executed and delivered by the Company;
(ii) The Security Agreement, duly executed and delivered by the
Company, together with evidence of the delivery to the Bank of (x) the
certificates evidencing the shares of capital stock of its
Subsidiaries pledged thereunder and (y) the executed, undated stock
powers referred to therein (which certificates and stock powers shall
be held either by the Bank or in the Escrow Account in the name and
under the control of the Bank);
(iii) The ACS Guarantee, duly executed and delivered by ACS;
(iv) The CTW Guarantee, duly executed and delivered by CTW;
(v) The Knits Guarantee, duly executed and delivered by Knits;
(vi) The Letter of Negative Pledge, duly executed and delivered
by the Company;
(vii) Evidence of authorization from the respective beneficiary
named therein to cancel the Existing Standby Letters of Credit issued
for the account of GJM in an aggregate undrawn face amount of
$300,000;
(viii) Certified copies of the charter or certificate of
incorporation (as the case may be) and by-laws (or equivalent
documents) of each Obligor and of the resolutions of its Board of
Directors authorizing its entering into and performance of its
obligations under the Credit Documents to which it is party and the
transactions contemplated hereby and thereby;
CREDIT AGREEMENT
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(ix) Certificate of the secretary or an assistant secretary of
each Obligor in respect of each of the officers (i) who is authorized
to sign on its behalf the Credit Documents to which it is party and
(ii) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the
purposes of signing documents and giving notices and other
communications in connection with this Agreement and the transactions
contemplated hereby (and the Bank may conclusively rely on such
certificate until it receives notice in writing from such Obligor to
the contrary);
(x) Certificate of the president or a vice president of each
Obligor to the effect that (i) such Obligor has complied and is then
in compliance with all of the terms, conditions and covenants of the
Credit Documents to which it is party, (ii) no Default or Event of
Default has occurred hereunder or thereunder, either before or after
giving effect to the extension of any Credit, (iii) the
representations and warranties of such Obligor contained in the Credit
Documents to which it is party are true in all respects as if such
representations and warranties had been made on such date, and (iv)
there shall have been no material adverse change in the financial
condition, business or property of such Obligor since August 3, 1996;
(xi) Copies of duly completed and executed Uniform Commercial
Code Financing Statements covering the collateral security described
in the Security Agreement, together with evidence satisfactory to the
Bank that such financing statements have been duly filed in all
jurisdictions in which such filing is necessary or appropriate;
(xii) The results of Uniform Commercial Code, tax and judgment
searches as may be requested by the Bank;
(xiii) A Borrowing Base Certificate, certified by the chief
financial officer of the Company;
(xiv) A detailed aged accounts receivable schedule, which shall
be in form and substance satisfactory to the Bank, certified by the
chief financial officer of the Company;
(xv) A detailed inventory schedule, which shall be in form and
substance satisfactory to the Bank, certified by the chief financial
officer of the Company;
(xvi) Results relating to an audit of accounts receivable and
inventory of the Company;
(xvii) Evidence of life insurance policy relating to Bernard
Manuel with an aggregate face value equal to no less than $5,000,000,
which policy shall name the Bank as its sole beneficiary;
CREDIT AGREEMENT
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(xviii) Evidence of a marine cargo insurance policy in form and
substance satisfactory to the Bank, which policy shall name the Bank
as loss payee;
(xix) Evidence of a Lock-Box Account with Marine Midland Bank in
New York City;
(xx) Evidence of the Collateral Account with the Bank;
(xxi) Evidence of an Escrow Account with Marine Midland Bank in
New York City, together with the Escrow Agreement, duly executed and
delivered by each of the parties thereto;
(xxii) An opinion of Fulbright & Jaworski L.L.P., counsel to the
Company, substantially in the form of Exhibit H hereto; and
(xxiii) Such other documents, approvals and opinions relating to
the transactions contemplated hereby as the Bank or its counsel may
reasonably request;
(b) The Bank shall not have determined in its good faith judgment that
either a Material Adverse Effect shall have occurred since August 3, 1996
or a significant possibility of a Material Adverse Effect since August 3,
1996 shall exist based upon then current conditions and circumstances;
(c) Other than with respect to the CAT Transaction, neither the
Company nor any of its Subsidiaries shall, after the date of this
Agreement, have (i) disposed of any assets or created any Liens on assets
other than in the ordinary course of its business or entered into any
agreement to do any of the foregoing, (ii) made any change in its
capitalization or corporate structure or entered into any agreement to do
any of the foregoing or (iii) announced an intention to take any of the
steps referred to in clauses (i) and (ii) above; and
(d) No injunction or other restraining order shall have been issued or
filed or a hearing therefor be pending or noticed with respect to the
making of any of the Loans or any of the other transactions contemplated
hereby which the Bank determines, in the reasonable exercise of its
judgment, is or would be materially adverse to the interests of the Bank.
6.02 Subsequent Credits. The extension of Credits by the Bank to the
Company subsequent to the date hereof is subject to the further conditions
precedent that:
(a) the Bank shall not have terminated the applicable Commitment in
accordance with Section 2.04 hereof; and
(b) both immediately prior to the extension of such Credit and also
after giving effect thereto (i) no Default shall have occurred and be
continuing and (ii) the
CREDIT AGREEMENT
<PAGE>
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representations and warranties made by the Company in Section 7 hereof
shall be true and complete on and as of the date of the extension of such
Credit with the same force and effect as if made on and as of such date.
Each notice by the Company hereunder with respect to the extension of any Credit
shall constitute a certification by the Company to the effect set forth in
Section 6.02(b) above (both as of the date of such notice and, unless the
Company otherwise notifies the Bank prior thereto, as of the date of the
extension of such Credit).
SECTION 7. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Bank that:
7.01 Corporate Existence. Each of the Company and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation; has all requisite corporate power and
all material governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted; and is qualified to do business in all jurisdictions
in which the nature of the business conducted by it makes such qualification
necessary and where failure so to qualify would have a material adverse effect
on the financial condition, business, operations or prospects taken as a whole
of the Company and its Consolidated Subsidiaries.
7.02 Financial Condition. The consolidated and consolidating balance sheets
of the Company and its Consolidated Subsidiaries as at February 3, 1996 and the
related consolidated and consolidating statements of income, retained earnings
and changes in financial position (or of cash flow, as the case may be) of the
Company and its Consolidated Subsidiaries for the fiscal year ended on said
date, with the opinion thereon (in the case of said consolidated balance sheet
and statements) of Ernst & Young LLP, and the unaudited consolidated balance
sheets of the Company and its Consolidated Subsidiaries as at August 3, 1996 and
the related consolidated statements of income, retained earnings and changes in
financial position (or of cash flow, as the case may be) of the Company and its
Consolidated Subsidiaries for the six-month period ended on such date,
heretofore furnished to the Bank, are complete and correct and fairly present
the consolidated and consolidating financial condition, as the case may be, of
the Company and its Consolidated Subsidiaries as at said dates and the
consolidated and consolidating results, as the case may be, of their operations
for the fiscal year and six-month period ended on said dates (subject, in the
case of such financial statements as at August 3, 1996, to normal year-end audit
adjustments), all in accordance with generally accepted accounting principles
and practices applied on a consistent basis. Neither the Company nor any of its
Subsidiaries had on said dates any material contingent liabilities, liabilities
for taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments, except as referred to or reflected or
provided for in said balance sheets as at said dates. Since August 3, 1996,
other than with respect to the CAT Transaction, there has been no material
adverse change in the consolidated financial condition, operations, business or
prospects taken as a whole of the Company and its Consolidated Subsidiaries from
that set forth in said financial statements as at said date.
CREDIT AGREEMENT
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7.03 Litigation. Except as set forth in periodic reports filed by the
Company with the Securities and Exchange Commission, (a) there are no actions,
suits or proceedings (whether or not purportedly on behalf of the Company or any
of its Subsidiaries) pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries at law or in equity
or before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
involve any of the transactions contemplated herein or which, if adversely
determined against the Company or any of its Subsidiaries, would result in a
Material Adverse Effect; and (b) to the knowledge of the Company, neither the
Company nor any of its Subsidiaries is in default with respect to any judgment,
writ, injunction, decree, rule or regulation of any court or Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would have a Material Adverse
Effect.
7.04 No Breach. The execution and delivery of the Credit Documents, the
consummation of the transactions herein and therein contemplated and compliance
with the terms and provisions hereof and thereof, will not conflict with or
result in a breach of, or require any consent under, the charter or by-laws of
the Company, or any applicable law or regulation, or any order, writ, injunction
or decree of any court or governmental authority or agency, or any agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which any of them is bound or to which any of them is subject, or constitute a
default under any such agreement or instrument, or result in the creation or
imposition of any Lien upon any of the revenues or assets of the Company or any
of its Subsidiaries pursuant to the terms of any such agreement or instrument.
7.05 Corporate Action. The Company has all necessary corporate power and
authority to execute, deliver and perform its obligations under the Credit
Documents to which it is party; the execution, delivery and performance by the
Company of the Credit Documents to which it is party have been duly authorized
by all necessary corporate action on its part; and this Agreement and the
Security Agreement have been duly and validly executed and delivered by the
Company and constitute, and each Note when executed and delivered for value will
constitute, its legal, valid and binding obligation, enforceable in accordance
with their respective terms, except to the extent that enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally, and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
7.06 Approvals. No authorizations, approvals or consents of, and no filings
or registrations with, any governmental or regulatory authority or agency are
necessary for the execution, delivery or performance by the Company of the
Credit Documents to which it is party or for the validity or enforceability
thereof.
7.07 Use of Credits. Neither the Company nor any of its Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose, whether immediate, incidental or ultimate, of
buying or carrying Margin Stock and no part of the proceeds of any Credit
hereunder will be used to buy or carry any Margin Stock.
CREDIT AGREEMENT
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7.08 ERISA. The Company and its ERISA Affiliates have fulfilled their
respective obligations under the minimum funding standards of ERISA and the Code
with respect to each Plan and are in compliance in all material respects with
the presently applicable provisions of ERISA and the Code, and have not incurred
any liability to the PBGC or any Plan or Multiemployer Plan (other than to make
contributions in the ordinary course of business, each of which has been made on
a timely basis). The total benefit liabilities under each Plan do not exceed the
fair market value of the assets of such Plan by an amount in excess of $50,000,
based on actuarial assumptions which are reasonable, both individually and in
the aggregate.
7.09 Taxes. The Company and its Subsidiaries have filed all United States
Federal income tax returns and all other material tax returns which are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by the Company or any of its Subsidiaries.
The charges, accruals and reserves on the books of the Company and its
Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Company, adequate.
7.10 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
7.11 Public Utility Holding Company Act. Neither the Company nor any of its
Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or
a "subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
7.12 Credit Agreements. Schedule 7.12 hereto is a complete and correct
list, as of the date of this Agreement, of each credit agreement, loan
agreement, indenture, purchase agreement, guarantee or other arrangement
providing for or otherwise relating to any Indebtedness or any extension of
credit (or commitment for any Indebtedness or any extension of credit) to, or
guarantee by, the Company or any of its Subsidiaries the aggregate principal or
face amount of which equals or exceeds (or may equal or exceed) $500,000 and the
aggregate principal or face amount outstanding or which may become outstanding
under each such arrangement is correctly described in said Schedule 7.12.
7.13 Hazardous Materials. The Company and its Subsidiaries have obtained
all permits, licenses and other authorizations which are required under all
applicable Environmental Laws, except to the extent failure to have any such
permit, license or authorization would not have a Material Adverse Effect. The
Company and its Subsidiaries are in material compliance with the terms and
conditions of all such permits, licenses and authorizations, and is also in
material compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Environmental Law or in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder.
7.14 Subsidiaries. Set forth in Schedule 7.14 hereto is a complete and
correct list, as of the date of this Agreement, of all Subsidiaries (and the
respective jurisdiction of
CREDIT AGREEMENT
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incorporation of each such Subsidiary) reported by the Company in its Form 10-K
pursuant to Item 601(b)(21) of Regulation S-K under the Securities Exchange Act
of 1934, as amended, and of all Investments held by the Company or any of its
Subsidiaries in any joint venture or other Person. Except as disclosed in
Schedule 7.14 hereto the Company owns, free and clear of Liens, all outstanding
shares of such Subsidiaries (and each such Subsidiary owns, free and clear of
Liens, all outstanding shares of its Subsidiaries) and all such shares are
validly issued, fully paid and non-assessable and the Company (or the respective
Subsidiary) also owns, free and clear of Liens, all such Investments.
SECTION 8. COVENANTS OF THE COMPANY. The Company agrees that, so long as
any of the Commitments are in effect and until payment in full of the principal
of and interest on the Loans, the Reimbursement Obligations and all other
amounts payable by the Company hereunder:
8.01 Financial Statements. The Company shall deliver to the Bank:
(a) as soon as available and in any event within 45 days after the end
of each of the first three fiscal quarterly periods of each fiscal year of
the Company, consolidated and consolidating statements of income, retained
earnings and changes in financial position (or of cash flow, as the case
may be) of the Company and its Consolidated Subsidiaries for such period
and for the period from the beginning of the respective fiscal year to the
end of such period, and the related consolidated and consolidating balance
sheets as at the end of such period, setting forth in each case in
comparative form the corresponding consolidated and consolidating figures
for the corresponding period in the preceding fiscal year, accompanied by a
certificate of the chief financial officer of the Company, which
certificate shall state that said financial statements fairly present the
consolidated and consolidating financial condition and results of
operations, as the case may be, of the Company and its Consolidated
Subsidiaries in accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments, none of which shall be material);
(b) as soon as available and in any event within 120 days after the
end of each fiscal year of the Company, consolidated and consolidating
statements of income, retained earnings and changes in financial position
(or of cash flow, as the case may be) of the Company and its Consolidated
Subsidiaries for such year and the related consolidated and consolidating
balance sheets as at the end of such year, setting forth in each case in
comparative form the corresponding consolidated and consolidating figures
for the preceding fiscal year, and accompanied (i) in the case of said
consolidated statements and balance sheet, by an opinion thereon of
independent certified public accountants of recognized national standing,
which opinion shall state that said consolidated financial statements
fairly present the consolidated financial condition and results of
operations of the Company and its Consolidated Subsidiaries as at the end
of, and for, such fiscal year, and a certificate of such accountants
stating that, in making the examination necessary for their opinion, they
obtained no knowledge, except as specifically stated, of any Default, (ii)
in the case of said consolidating statements and balance sheet, by a
certificate of the chief financial officer of the Company, which
certificate shall state that said consolidating
CREDIT AGREEMENT
<PAGE>
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financial statements fairly present the consolidating financial condition
and results of operations of the Company and its Consolidated Subsidiaries
in accordance with generally accepted accounting principles, consistently
applied, as at the end of, and for, such fiscal year and (iii) by
projections of sales and profits of the Company and its Consolidated
Subsidiaries for the succeeding fiscal year;
(c) as soon as available and in any event within 30 days after the end
of each of the fiscal quarterly periods of each fiscal year of the Company,
an updated aged accounts receivable schedule and inventory schedule, which
schedules shall be in form and substance satisfactory to the Bank and
certified by the chief financial officer of the Company;
(d) as soon as available and in any event within 7 days after the end
of each calendar week of each fiscal year of the Company, an updated
Borrowing Base Certificate, which certificate shall be in form and
substance satisfactory to the Bank and certified by the chief financial
officer of the Company;
(e) as soon as available and in any event within 10 days after the end
of each calendar month of each fiscal year of the Company, an updated
Borrowing Base Certificate, which certificate shall be in form and
substance satisfactory to the Bank and certified by the chief financial
officer of the Company;
(f) promptly upon their becoming available, copies of all registration
statements and regular periodic reports, if any, which the Company shall
have filed with the Securities and Exchange Commission (or any governmental
agency substituted therefor) or any national securities exchange;
(g) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(h) as soon as possible, and in any event within 10 days after the
Company knows or has reason to know that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan have
occurred or exist, a statement signed by the chief financial officer of the
Company setting forth details respecting such event or condition and the
action, if any, which the Company or its ERISA Affiliate proposes to take
with respect thereto (and a copy of any report or notice required to be
filed with or given to PBGC by the Company or an ERISA Affiliate with
respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA
and the regulations issued thereunder, as to which PBGC has not by
regulation waived the requirement of Section 4043(a) of ERISA that it
be notified within 30 days of the occurrence of such event (provided
that a failure to meet the minimum funding standard of Section 412 of
the Code or Section 302 of ERISA shall be a reportable event
regardless of the issuance of any waivers in accordance with Section
412(d) of the Code);
CREDIT AGREEMENT
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(ii) the filing under Section 4041 of ERISA of a notice of intent
to terminate any Plan or the termination of any Plan;
(iii) the institution by PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal by the Company or any
ERISA Affiliate under Section 4201 or 4204 of ERISA from a
Multiemployer Plan, or the receipt by the Company or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA
or that it intends to terminate or has terminated under Section 4041A
of ERISA; and
(v) the institution of a proceeding against the Company or any
ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is
not dismissed within 30 days;
(i) promptly after the Company knows or has reason to know that any
Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Company has taken and
proposes to take with respect thereto; and
(j) from time to time such other information regarding the business,
affairs or financial condition of the Company or any of its Subsidiaries
(including, without limitation, any Plan or Multiemployer Plan and any
reports or other information required to be filed under ERISA) as the Bank
may reasonably request.
The Company will furnish to the Bank, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of
the chief financial officer of the Company to the effect that no Default has
occurred and is continuing (or, if any Default has occurred and is continuing,
describing the same in reasonable detail and describing the action that the
Company has taken and proposes to take with respect thereto).
8.02 Litigation. The Company will promptly give to the Bank notice of all
legal or arbitral proceedings, and of all proceedings by or before any
governmental or regulatory authority or agency, and any material development in
respect of such legal or other proceeding affecting the Company or any
Subsidiary, except proceedings which, if adversely determined, would not have a
Material Adverse Effect.
8.03 Corporate Existence, Etc. The Company will, and will cause each of its
Subsidiaries to, preserve and maintain its corporate existence and all of its
material rights, privileges and franchises (provided that nothing in this
Section 8.03 shall prohibit any transaction expressly permitted under Section
8.05 hereof); comply with the requirements of all applicable
CREDIT AGREEMENT
<PAGE>
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laws, rules, regulations and orders of governmental or regulatory authorities if
failure to comply with such requirements would have a Material Adverse Effect;
pay and discharge all taxes, assessments and governmental charges or levies
imposed on it or on its income or profits or on any of its property prior to the
date on which penalties attach thereto, except for any such tax, assessment,
charge or levy the payment of which is being contested in good faith and by
proper proceedings and against which adequate reserves are being maintained;
maintain all of its properties used or useful in its business in good working
order and condition, ordinary wear and tear excepted; and permit representatives
of the Bank, during normal business hours, to examine, copy and make extracts
from its books and records, to inspect its properties, and to discuss its
business and affairs with its officers, all to the extent reasonably requested
by the Bank; provided, however, the Company may dissolve any Inactive Subsidiary
set forth in Schedule 7.14 hereto.
8.04 Insurance.
(a) The Company will, and will cause each of its Subsidiaries to, keep
insured by financially sound and reputable insurers all property of a
character usually insured by corporations engaged in the same or similar
business similarly situated against loss or damage of the kinds and in the
amounts customarily insured against by such corporations and carry such
other insurance as is usually carried by such corporations, provided that,
in any event, the Company shall maintain:
(i) Casualty Insurance -- insurance against loss or damage
covering all of the tangible real and personal property and
improvements of the Company and its Subsidiaries by reason of any
Peril (as defined below) in such amounts (subject to such deductibles
as shall be satisfactory to the Bank) as shall be reasonable and
customary and sufficient to avoid the insured named therein from
becoming a coinsurer of any loss under such policy but in any event in
an amount (A) in the case of fixed assets and equipment (including
vehicles), at least equal to 100% of the actual replacement cost of
such assets (including foundation, footings and excavation costs),
subject to deductibles as aforesaid and (B) in the case of inventory,
not less than the fair market value thereof, subject to deductibles as
aforesaid;
(ii) Automobile Liability Insurance -- insurance in respect of
all vehicles (whether owned, hired or rented by the Company and its
Subsidiaries) at any time located at, or used in connection with, its
properties or operations against liability for bodily injury and
property damage in such amounts as are then customary for vehicles
used in connection with similar properties and businesses, but in any
event to the extent required by applicable law;
(iii) Comprehensive General Liability Insurance -- insurance
against claims for bodily injury, death or property damage occurring
on, in or about the properties (and adjoining streets, sidewalks and
waterways) of the Company and its Subsidiaries, in such amounts as are
then customary for property similar in use in the jurisdictions where
such properties are located;
CREDIT AGREEMENT
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(iv) Workers' Compensation Insurance -- insurance (including
Employers' Liability Insurance) to the extent required by applicable
law;
(v) Product Liability Insurance -- insurance against claims for
bodily injury, death or property damage resulting from the use of
products sold by the Company and its Subsidiaries in such amounts as
are then customarily maintained by responsible persons engaged in
businesses similar to that of the Company and its Subsidiaries;
(vi) Business Interruption Insurance -- insurance against loss of
operating income by reason of any Peril in such amounts as are then
customarily maintained by responsible persons engaged in businesses
similar to that of the Company and its Subsidiaries;
(vii) Environmental Insurance -- insurance covering claims
arising out of the sudden and accidental release or spillage of toxic
wastes or substances in such amounts as are then customary for similar
operations and properties in similar locations; and
(viii) Other Insurance -- such other insurance, including
War-Risk Insurance when and to the extent obtainable from the United
States Government, in each case as generally carried by owners of
similar properties in the jurisdictions where such properties are
located, in such amounts and against such risks as are then customary
for property similar in use.
(b) Such insurance shall be written by financially responsible
companies selected by the Company and having an A.M. Best rating of "A+" or
better and being in a financial size category of XIV or larger, or by other
companies acceptable to the Bank, and (other than workers' compensation)
shall name the Bank as additional insured, or loss payee, as its interests
may appear. Each policy referred to in this Section 8.04 shall provide that
it will not be canceled or reduced, or allowed to lapse without renewal,
except after not less than 30 days' written notice to the Bank and shall
also provide that the interests of the Bank shall not be invalidated by any
act or negligence of the Company or any Person having an interest in any of
the properties nor by occupancy or use of any such property for purposes
more hazardous than permitted by such policy nor by any foreclosure or
other proceedings relating to such property. The Company will advise the
Bank promptly of any policy cancellation, reduction or amendment.
(c) The Company will deliver to the Bank certificates of insurance
satisfactory to the Bank evidencing the existence of all insurance required
to be maintained by the Company hereunder setting forth the respective
coverages, limits of liability, carrier, policy number and period of
coverage and showing that such insurance will be in effect through December
31, 1996, subject only to the payment of premiums as they become due (and
attaching original copies of any policies with respect to casualty
insurance). On each November 15 in each year (commencing with November 15,
1996) prior to the Termination Date, the Company will deliver to the Bank
certificates of insurance
CREDIT AGREEMENT
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evidencing that all insurance required to be maintained by the Company
hereunder will be in effect through the December 31 of the calendar year
following the calendar year of the then current November 15, subject only
to the payment of premiums as they become due. In addition, without the
prior written consent of the Bank, the Company will not modify any of the
provisions of any policy with respect to casualty insurance. The Company
will not obtain or carry separate insurance concurrent in form or
contributing in the event of loss with that required by this Section 8.04
unless the Bank is the named insured thereunder, with loss payable as
provided herein. The Company will immediately notify the Bank whenever any
such separate insurance is obtained and shall deliver to the Bank the
certificates evidencing the same.
(d) Without limiting the obligations of the Company under the
foregoing provisions of this Section 8.04, in the event the Company shall
fail to maintain in full force and effect insurance as required by the
foregoing provisions of this Section 8.04, then the Bank may, but shall
have no obligation so to do, procure insurance covering the interests of
the Bank in such amounts and against such risks as the Bank shall deem
appropriate and the Company shall reimburse the Bank in respect of any
premiums paid by the Bank in respect thereof.
For purposes hereof, the term "Peril" shall mean, collectively, fire,
lightning, flood, windstorm, hail, earthquake, explosion, riot and civil
commotion, vandalism and malicious mischief, damage from aircraft, vehicles and
smoke and all other perils covered by the "all-risk" endorsement then in use in
the jurisdictions where the properties of the Company are located.
8.05 Prohibition of Fundamental Changes. The Company will not, nor will it
permit any of its Subsidiaries to, enter into any transaction of merger or
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution). The Company will not, nor will it permit
any of its Subsidiaries to, acquire any business or assets from, or capital
stock of, or be a party to any acquisition of, any Person except for purchases
of inventory and other assets to be sold or used in the ordinary course of
business. The Company will not, nor will it permit any of its Subsidiaries to,
convey, sell, lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or a substantial part of its business or assets,
whether now owned or hereafter acquired (including, without limitation,
receivables and leasehold interests, but excluding (i) any inventory or other
assets sold or disposed of in the ordinary course of business and (ii) obsolete
or worn-out property, tools or equipment no longer used or useful in its
business). The Company will not, nor will it permit any of its Subsidiaries to,
amend its certificate of incorporation or by-laws in any manner adverse to the
interests of the Bank hereunder. Notwithstanding the foregoing provisions of
this Section 8.05, the Company may engage in the transactions contemplated by
the Stock and Asset Purchase Agreement.
8.06 Limitation on Liens. The Company will not, nor will it permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any
of its property, assets or revenues, whether now owned or hereafter acquired,
except:
(a) Liens imposed by any governmental authority for taxes, assessments
or charges not yet due or which are being contested in good faith and by
appropriate
CREDIT AGREEMENT
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proceedings if adequate reserves with respect thereto are maintained on the
books of the Company or any of its Subsidiaries, as the case may be, in
accordance with GAAP;
(b) carriers', warehousemen's, mechanics', material-men's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 30 days or which are being contested
in good faith and by appropriate proceedings;
(c) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of property or minor imperfections in title thereto which, in the
aggregate, are not material in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Company or any
of its Subsidiaries;
(f) Liens on assets of corporations which become Subsidiaries of the
Company after the date of this Agreement, provided that such Liens are in
existence at the time the respective corporations become Subsidiaries of
the Company and were not created in anticipation thereof;
(g) Liens upon real and/or tangible personal property acquired after
the date hereof (by purchase, construction or otherwise) by the Company or
any of its Subsidiaries, each of which Liens either (A) existed on such
property before the time of its acquisition and was not created in
anticipation thereof, or (B) was created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the
cost (including the cost of construction) of the respective property;
provided that no such Lien shall extend to or cover any property of the
Company or such Subsidiary other than the respective property so acquired
and improvements thereon; and provided further that the principal amount of
Indebtedness secured by any such Lien shall at no time exceed 80% of the
fair market value (as determined in good faith by the chief financial
officer of the Company) of the respective property at the time it was
acquired (by purchase, construction or otherwise);
(h) Liens relating to the Indebtedness of the Company listed in
Schedule 8.07 hereto, or in existence on the date hereof and included in
the financial statements provided by the Company under Section 7.02 hereof;
and
CREDIT AGREEMENT
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(i) any extension, renewal or replacement of the foregoing, provided,
however, that the Liens permitted hereunder shall not be spread to cover
any additional Indebtedness or property (other than a substitution of like
property).
8.07 Indebtedness. The Company will not, and will not permit any of its
Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Bank hereunder or heretofore outstanding;
(b) Indebtedness outstanding on the date hereof and set forth in
Schedule 8.07 hereto;
(c) Indebtedness of the Company secured by Liens permitted under
Section 8.06(g) hereof up to such amount as is permitted by the Bank in its
sole discretion;
(d) Subordinated Indebtedness as permitted by the Bank in its sole
discretion; and
(e) additional Indebtedness of the Company up to such amount as is
permitted by the Bank in its sole discretion.
8.08 Investments. The Company will not make or permit to remain outstanding
any Investments except:
(a) operating deposit accounts with banks;
(b) Permitted Investments;
(c) Investments outstanding on the date hereof and identified in
Schedule 8.08 hereto; and
(d) such other Investments as permitted by the Bank in its sole
discretion.
8.09 Dividend Payments. The Company will not, and will not permit any of
its Subsidiaries to, declare or make any Dividend Payment at any time.
8.10 Leverage Ratio. The Company will not permit the Leverage Ratio to
exceed the following respective amounts at any time during the following
respective periods:
Period Ratio
------ -----
From the Effective Date
and at all times thereafter .......................... 1.50 to 1
CREDIT AGREEMENT
<PAGE>
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8.11 Tangible Net Worth. The Company will not permit Tangible Net Worth to
be less than the following respective amounts at any time during the following
respective periods:
Period Amount
------ ------
From the Effective Date
and at all times thereafter .......................... $31,000,000
For purposes hereof, "Tangible Net Worth" shall be calculated to include
Subordinated Indebtedness of the Company and its Consolidated Subsidiaries.
8.12 Current Ratio. The Company will not permit the ratio of current assets
of the Company and its Consolidated Subsidiaries to current liabilities of the
Company and its Consolidated Subsidiaries to be less than the following
respective amounts at any time during the following respective periods:
Period Ratio
------ -----
From the Effective Date
and at all times thereafter .......................... 1.50 to 1
For purposes hereof, the terms "current assets" and "current liabilities" shall
(i) have the respective meanings, determined without duplication, assigned to
them by GAAP, and (ii) be calculated without including the CAT Group.
8.13 Subordinated Indebtedness. Neither the Company nor any of its
Subsidiaries shall purchase, redeem, retire or otherwise acquire for value, set
apart any money for a sinking, defeasance or other analogous fund for, the
purchase, redemption, retirement or other acquisition of, or make any voluntary
payment or prepayment of the principal of or interest on, or any other amount
owing in respect of, any Subordinated Indebtedness, except for regularly
scheduled payments of principal and interest in respect thereof required
pursuant to the instruments evidencing such Subordinated Indebtedness.
8.14 Lines of Business. Without the prior written consent of the Bank,
neither the Company nor any of its Subsidiaries shall engage to any substantial
extent in any line or lines of business activity other than the business of
design, manufacturing, merchandising, importation and wholesale distribution of
apparel and related products.
8.15 Transactions with Affiliates. Except as expressly permitted by this
Agreement, the Company will not, nor will it permit any of its Subsidiaries to,
directly or indirectly: (a) make any Investment in an Affiliate; (b) transfer,
sell, lease, assign or otherwise dispose of any assets to an Affiliate; (c)
merge into or consolidate with or purchase or acquire assets from an Affiliate;
or (d) enter into any other transaction directly or indirectly with or for the
benefit of an Affiliate (including, without limitation, guarantees and
assumptions of obligations of an Affiliate); provided that (x) any Affiliate who
is an individual may serve as a
CREDIT AGREEMENT
<PAGE>
- 37 -
director, officer or employee of the Company or its Subsidiaries and receive
reasonable compensation for his or her services in such capacity and (y) the
Company and its Subsidiaries may enter into transactions with Affiliates (other
than extensions of credit by the Company or any of its Subsidiaries to an
Affiliate) providing for the leasing of property, the rendering or receipt of
services or the purchase or sale of inventory and other assets in the ordinary
course of business if the monetary or business consideration arising therefrom
would be substantially as advantageous to the Company and its Subsidiaries as
the monetary or business consideration which would obtain in a comparable
transaction with a Person not an Affiliate.
8.16 Use of Proceeds. The Company will use the proceeds of the Credits
hereunder solely in connection with the importation and wholesale distribution
of apparel products (in compliance with all applicable legal and regulatory
requirements, including, without limitation, Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System and the Securities Act of 1933
and the Securities Exchange Act of 1934 and the regulations thereunder);
provided, that the Bank shall not have any responsibility as to the use of any
of such proceeds.
8.17 Amendments to Other Documents. The Company shall not amend, supplement
or otherwise modify (i) the Stock and Asset Purchase Agreement, the Stockholders
Agreement or any of the other CAT Transaction Documents, or (ii) any of the
documents or instruments evidencing, constituting, governing, Guaranteeing or
securing the payment of any Subordinated Indebtedness.
8.18 Audit of Inventory and Accounts Receivable. At the request of the
Bank, the Company shall permit the Bank to conduct from time to time an audit
(in scope reasonably satisfactory to the Bank) of the inventory and the accounts
receivable of the Company and its Subsidiaries, at the expense of the Company
(provided that the costs of such audit are in accordance with normal industry
practice for similar audits).
8.19 Bank Accounts. The Company shall (i) maintain all of its principal
bank accounts with the Bank and (ii) establish both a lock-box account and an
escrow account with Marine Midland Bank. The Company shall pay to the Bank or
Marine Midland Bank, as the case may be, from time to time all charges, costs
and expenses customarily charged by financial institutions in like circumstances
with respect to similiar accounts.
8.20 CAT Transaction. On the CAT Transfer Date, the Company shall cause the
delivery to the Bank of the following items in connection with the consummation
of the CAT Transaction, each of which shall be in form and substance
satisfactory to the Bank: (i) the certificate or certificates evidencing the
ATSC Shares received in exchange for Stock Collateral (as defined in the
Security Agreement) pledged under the Security Agreement, together with the
executed, undated stock powers referred to therein; (ii) an instrument of
assignment in favor of the Bank with respect to the registration rights of the
Company relating to the ATSC Shares as provided in the Stockholders Agreement,
substantially in the form of Exhibit F hereto; (iii) the Cash Proceeds received
by the Company in connection with the CAT Transaction in accordance with Section
3.04(c) hereof; (iv) evidence of the release by each of Mitsubishi Corporation
and Mitsubishi International Corporation of Liens relating to the assets subject
to the CAT
CREDIT AGREEMENT
<PAGE>
- 38 -
Transaction; and (v) such other documents, approvals and opinions relating to
the CAT Transaction as the Bank or its counsel may reasonably request.
8.21 Sale of ATSC Shares. The Company shall from to time effect a sale,
assignment and transfer of ATSC Shares so as to comply with the mandatory
prepayment obligations of the Company under Sections 3.04(a) and (b) hereof. The
sale, assignment and transfer of ATSC Shares shall be effected by the Escrow
Agent on behalf of the Company through the Escrow Account. The Escrow Agent
shall on behalf of the Company cause the Cash Proceeds from the sale, assignment
and transfer of such ATSC Shares to be remitted directly to the Collateral
Account.
8.22 Sale of Florence Property. The Company shall promptly effect, in a
commercially reasonable manner, through T-Wear, a sale, assignment and transfer
of the Property and hereby assigns to the Bank all proceeds to be received by
the Company or T-Wear in connection therewith.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
9.01 Events of Default. If one or more of the following events (herein
called "Events of Default") shall occur and be continuing:
(a) The Company shall default in the payment when due of any principal
of or interest on any Loan, any Reimbursement Obligation or any other
amount payable by it hereunder; or
(b) Any Obligor shall default in the payment when due of any principal
of or interest on any Indebtedness other than its obligations hereunder; or
any event specified in any note, agreement, indenture or other document
evidencing or relating to any such Indebtedness shall occur if the effect
of such event is to cause, or (with the giving of any notice or the lapse
of time or both) to permit the holder or holders of such Indebtedness (or a
trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase or otherwise), prior to its stated maturity; or
(c) Any representation, warranty or certification made or deemed made
herein (or in any modification or supplement hereto) by the Company, or any
certificate furnished to the Bank pursuant to the provisions hereof (or
thereof), shall prove to have been false or misleading as of the time made
or furnished in any material respect and, unless the Bank reasonably
determines that circumstances rendering such representation, warranty
certification or certificate false or misleading are not reasonably
susceptible of remedy within 15 days after notice thereof, such
circumstances shall continue unremedied for a period of 15 days after
notice thereof to the Company by the Bank; or
(d) The Company shall default in the performance of any of its
obligations under Section 8.01(i) hereof; or any Obligor shall default in
the performance of any of its obligations in this Agreement or the other
Credit Documents to which it is party and
CREDIT AGREEMENT
<PAGE>
- 39 -
such default shall continue unremedied for a period of 15 days after
notice thereof to such Obligor by the Bank; or
(e) Any Obligor shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) Any Obligor shall (i) apply for or consent 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 any applicable bankruptcy law, (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) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary
case under any applicable bankruptcy law, or (vi) take any corporate action
for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of any Obligor, 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 Obligor of all
or any substantial part of its assets, or (iii) similar relief in respect
of such Obligor 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 60 or more days; or an
order for relief against such Obligor shall be entered in an involuntary
case under any applicable bankruptcy law; or
(h) A final judgment or a series of related final judgments for the
payment of money in excess of $150,000 in the aggregate (net of related
insurance proceeds) shall be rendered by a court or courts against any
Obligor and the same shall not be discharged (or provision shall not be
made for such discharge), or a stay of execution thereof shall not be
procured, within 30 days from the date of entry thereof and such Obligor
shall not, within said period of 30 days, or such longer period during
which execution of the same shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal; or
(i) An event or condition specified in Section 8.01(h) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Company or any of its ERISA Affiliates shall incur a
liability to a Plan, a Multiemployer Plan or PBGC (or any combination of
the foregoing) in excess of $100,000 in the aggregate for the Company and
all ERISA Affiliates; or
(j) Any of the Security Documents shall cease to be in full force and
effect, or shall cease in any material respect to grant to the Bank the
Liens, rights, powers and
CREDIT AGREEMENT
<PAGE>
- 40 -
privileges purported to be created thereby (including, without limitation,
a perfected security interest in, and Lien on, all of the collateral
subject thereto superior and prior to the rights of all third Persons and
subject to no other Liens (except to the extent expressly permitted herein
or therein)); or
(k) Consummation of the CAT Transaction shall not occur on or prior to
September 30, 1996;
THEREUPON: (i) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9.01 with respect to any Obligor, the Bank
may, by notice to the Company, cancel the Commitments and/or declare the
principal amount then outstanding of, and the accrued interest on, the Loans,
any Reimbursement Obligations and all other amounts payable by the Company
hereunder and under any Note (including, without limitation, any amounts payable
under Section 5 hereof) to be forthwith due and payable, whereupon such amounts
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; and (ii) in the case of the occurrence of an Event of Default referred
to in clause (f) or (g) of this Section 9.01 with respect to any Obligor, the
Commitments shall automatically be canceled and the principal amount then
outstanding of, and the accrued interest on, the Loans, any Reimbursement
Obligations and all other amounts payable by the Company hereunder and under any
Note (including, without limitation, any amounts payable under Section 5 hereof)
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. In addition, the Company shall, upon the
occurrence and during the continuance of any Event of Default, if requested by
the Bank (and, in case of any Event of Default referred to in clause (f) or (g)
of this Section 9.01, forthwith, without any demand or the taking of any other
action by the Bank), pay to the Bank (to be held by the Bank in the Collateral
Account subject to and in accordance with Section 9.02 hereof) an amount equal
to the aggregate amount of the undrawn face amounts of all Letters of Credit
then issued and outstanding.
9.02 Collateral Account.
(a) The Company hereby establishes with the Bank a cash collateral
account in the name and under the control of the Bank into which there
shall be deposited from time to time certain amounts required or
contemplated to be paid to the Bank as provided in Section 2.01(g) hereof,
Section 8.21 hereof, the last sentence of Section 9.01 hereof and as may
otherwise be provided under this Agreement and the other Credit Documents.
(b) As collateral security for the prompt payment in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration or
otherwise) of the obligations of the Company hereunder and under the Notes
(whether or not then outstanding or due and payable), the Company hereby
pledges and grants to the Bank a security interest in all of its right,
title and interest in and to the Collateral Account and the balances from
time to time in such Collateral Account. The balance in the Collateral
Account, however, shall not constitute payment of any obligations of the
Company
CREDIT AGREEMENT
<PAGE>
- 41 -
hereunder until so applied as hereinafter provided. Anything in this
Agreement to the contrary notwithstanding, funds held in the Collateral
Account shall be subject to withdrawal by the Company only as provided in
this Section 9.02.
(c) If an Event of Default has occurred and is continuing, the Bank
may in its sole discretion at any time and from time to time apply or cause
to be applied any balance in the Collateral Account to the payment of any
of the obligations of the Company then due and payable.
(d) When all of the obligations of the Company hereunder and under the
Notes have been paid in full and the Commitments and all Letters of Credit
have expired or been terminated, the Bank shall deliver to the Company,
against receipt but without any recourse, warranty or representation
whatsoever, the balance remaining in the Collateral Account; provided,
however, for the period of 90 days immediately prior to such date, the
aggregate face or principal amount of the obligations of the Company
hereunder and under the Notes shall not have exceeded the value of the
collateral security provided by the Company in connection therewith.
(e) The Company shall pay to the Bank from time to time such fees as
the Bank normally charges for similar services in connection with the
Bank's administration of the Collateral Account.
SECTION 10. MISCELLANEOUS.
10.01 Waiver. No failure on the part of the Bank to exercise and no delay
in exercising, and no course of dealing with respect to, any right, power or
privilege under this Agreement or any Note shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege under
this Agreement or any Note preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law.
10.02 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made in writing and telecopied,
telegraphed, cabled, mailed or delivered, addressed as follows:
CREDIT AGREEMENT
<PAGE>
- 42 -
if to the Company:
Cygne Designs, Inc.
1372 Broadway - 2nd Floor
New York, NY 10018
Attention: Chief Financial Officer
Telecopier No.: (212) 245-7724
Telephone No.: (212) 354-6474
with a copy to each of:
Cygne Designs, Inc.
1372 Broadway - 2nd Floor
New York, NY 10018
Attention: General Counsel
and
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, NY 10103
Attention: Paul Jacobs, Esq.
if to the Bank:
The Hongkong and Shanghai Banking
Corporation Limited, New York Branch
140 Broadway
New York, NY 10005
Attention: NYK CBU TRS
Telecopier No.: (212) 658-2813
Telephone No.: (212) 658-2888
with a copy to:
Moon & Ikeda
555 Madison Avenue
New York, NY 10022
Attention: Alexander P. Moon, Esq.
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be
CREDIT AGREEMENT
<PAGE>
- 43 -
deemed to have been duly given when transmitted by telecopier, delivered to the
telegraph or cable office or personally delivered or, in the case of a mailed
notice, 5 Business Days after the date deposited in the mails, postage prepaid,
in each case given or addressed as aforesaid.
10.03 Expenses, Etc. The Company agrees, upon demand, to pay or reimburse
the Bank for paying: (a) all reasonable out-of-pocket expenses of the Bank
(including, without limitation, the reasonable fees and expenses of Messrs. Moon
& Ikeda, counsel to the Bank), in connection with (i) the negotiation,
preparation, execution and delivery of this Agreement and the other Credit
Documents and (ii) any amendment, modification or waiver of any of the terms of
this Agreement or the other Credit Documents; (b) all reasonable costs and
expenses of the Bank (including reasonable counsels' fees) in connection with
any Default and any enforcement or collection proceedings resulting therefrom;
and (c) all transfer, stamp, documentary or other similar taxes, assessments or
charges levied by any governmental or revenue authority in respect of this
Agreement, any Note or any other document referred to herein and all costs,
expenses, taxes, assessments and other charges incurred in connection with any
filing, registration, recording or perfection of any security interest
contemplated by this Agreement or any document referred to herein.
10.04 Amendments, Etc. Any provision of this Agreement may be amended or
modified only by any instrument in writing signed by the Company and the Bank.
10.05 Successors and Assigns; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
10.06 Assignments and Participations.
(a) The Company may not assign its rights or obligations hereunder or
under the Notes without the prior consent of the Bank.
(b) The Bank may sell or agree to sell to one or more other Persons
("participants") a participation in all or any part of the Loans, the
Notes, the Commitments, the Letters of Credit or the Standby Letters of
Credit, provided that no participant shall have any rights under any Credit
Document (a participant's rights against the Bank in respect of such
participation to be those set forth in the agreement (the "Participation
Agreement") executed by the Bank in favor of the participant).
Notwithstanding any such sale, this Agreement shall continue in full force
and effect in all respects as if the Bank were maintaining and funding each
Commitment and Credit in which participations have been sold in the same
way that it is maintaining and funding the portion of such Commitment and
Credit in which no participations have been sold. All amounts payable by
the Company to the Bank under Section 5 hereof shall be determined as if
the Bank had not sold or agreed to sell any participations in such Loan and
as if the Bank were funding all of such Loan in the same way that it is
funding the portion of such Loan in which no participations have been sold.
In no event shall the Bank be obligated to the participant under the
Participation Agreement to take or refrain from taking any action under the
Credit Document (including without limitation granting
CREDIT AGREEMENT
<PAGE>
- 44 -
approval of any amendment or waiver) except that the Bank may agree in the
Participation Agreement that it will not, without the consent of the
participant, agree to (i) the extension of any date fixed for the payment
of principal of or interest on the related Credit, (ii) the reduction of
any payment of principal thereof, (iii) the reduction of the rate at which
either interest is payable thereon or (if the participant is entitled to
any part thereof) fees are payable hereunder to a level below the rate at
which the participant is entitled to receive interest or fees (as the case
may be) in respect of such participation or (iv) the release of any
guarantee or collateral security.
(c) The Bank may furnish any information concerning the Company or any
of its Subsidiaries in the possession of the Bank from time to time to
assignees and participants (including prospective assignees and
participants).
10.07 Survival. The obligations of the Company under Sections 5 and 10.03
hereof shall survive the repayment of the Loans and the Reimbursement
Obligations, and the termination of the Commitments. In addition, each
representation and warranty made, or deemed to be made by a notice of any
extension of Credit, hereunder shall survive the extension of such Credit and
the Bank shall not be deemed to have waived, by reason of extension of such
Credit, any Default or Event of Default which may arise by reason of such
representation or warranty proving to have been false or misleading,
notwithstanding that the Bank may have had notice or knowledge or reason to know
that such representation or warranty was false or misleading at the time of such
extension of Credit.
10.08 Captions. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
10.09 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
10.10 Governing Law; Submission to Jurisdiction. THIS AGREEMENT AND EACH
NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK. The Company hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
any New York State Court sitting in New York City for the purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. The Company irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum.
10.11 Waiver of Jury Trial. Each of the Company and the Bank hereby
irrevocably waives, to the fullest extent permitted by law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.
CREDIT AGREEMENT
<PAGE>
- 45 -
10.12 Severability. If any provision hereof is invalid and unenforceable in
any applicable jurisdiction, then, to the fullest extent permitted by law, (i)
the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Bank in order to
carry out the intentions of the parties hereto as nearly as may be possible and
(ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
10.13 Effectiveness. This Agreement shall become effective on the date (the
"Effective Date") on which each of the Company and the Bank shall have signed a
counterpart hereof (whether the same or different counterparts) and shall have
delivered the same to each other.
10.14 Effect of Amendment and Restatement. On the Effective Date, the
Existing Credit Agreement shall be amended, restated and superseded in its
entirety. The parties hereto acknowledge and agree that (a) this Agreement and
the other Credit Documents, whether executed and delivered in connection
herewith or otherwise, do not constitute a novation, payment and reborrowing, or
termination of the obligations of the Obligors under the Existing Credit
Agreement as in effect prior to the Effective Date; (b) such obligations are in
all respects continuing (as amended and restated hereby) with only the terms
thereof being modified as provided in this Agreement; (c) the Liens, guarantees
and security interests as granted in connection with the Existing Credit
Agreement securing payment of such obligations are in all respects continuing
and in full force and effect and secure the payment of the obligations of the
Obligors under this Agreement and the other Credit Documents; and (d) upon the
effectiveness of this Agreement, all Loans outstanding under the Existing Credit
Agreement immediately before the effectiveness of this Agreement will be
continued as Loans hereunder, all Existing Letters of Credit under the Existing
Credit Agreement will be continued as Letters of Credit hereunder, and all
Existing Standby Letters of Credit will be continued as Standby Letters of
Credit hereunder, in each case on the terms and conditions set forth in this
Agreement.
----------
CREDIT AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
CYGNE DESIGNS, INC.
By ROY E. GREEN
------------------------
Name: Roy E. Green
Title: Vice President - Finance
Address for Notices:
1372 Broadway - 2nd Floor
New York, NY 10018
Telecopy: (212) 245-7724
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, NEW YORK BRANCH
By IAN WRIGHT
------------------------
Name: Ian Wright
Title: Vice President
Address for Notices:
140 Broadway
New York, NY 10005
Attention: NYK CBU TRS
Telecopy: (212) 658-2813
<PAGE>
SCHEDULE 2.01
Existing Letters of Credit
DC Numbers Issuance Date Maturity Date Dollar Amount Reference Number
- ---------- ------------- ------------- ------------- ----------------
Bills Receivable
- ----------------
NYK962108 12AUG1996 44,712.00 968412
NYK962108 19AUG1996 12,490.20 968412
NYK962109 20AUG1996 28,200.00 968413
NYK962102 27AUG1996 80,245.44 968409
NYK962102 06SEP1996 71,260.20 968409
NYK962234 09SEP1996 3,925.60 968490
NYK961849 13SEP1996 12,448.15 968245
NYK961849 13SEP1996 48,155.25 968245
NYK961849 13SEP1996 11,857.56 968245
NYK961849 13SEP1996 42,001.96 968245
NYK961540 13SEP1996 50,150.00 968089
NYK961540 13SEP1996 52,510.00 968089
NYK962234 16SEP1996 5,031.30 968490
Documentary Credit
- ------------------
NYK962346 23AUG1996 15DEC1996 637,273.00 968559
NYK962344 23AUG1996 20OCT1996 141,808.80 968561
NYK962343 23AUG1996 04NOV1996 244,880.00 968560
1
<PAGE>
DC Numbers Issuance Date Maturity Date Dollar Amount Reference Number
- ---------- ------------- ------------- ------------- ----------------
NYK962345 23AUG1996 15OCT1996 165,760.00 968562
NYK961540 09APR1996 05OCT1996 345,115.70 968089
NYK962389 04SEP1996 05OCT1996 190,575.00 968571
NYK962398 06SEP1996 05OCT1996 57,613.50 968587
NYK962262 12AUG1996 01OCT1996 126,367.50 968508
NYK962102 11JUL1996 30SEP1996 108,733.62 968409
NYK962399 06SEP1996 30SEP1996 188,570.24 968588
NYK962400 06SEP1996 30SEP1996 442,356.92 968586
NYK961966 19JUN1996 20SEP1996 76,954.50 968312
NYK962308 19AUG1996 20SEP1996 117,768.00 968532
NYK961917 07JUN1996 07SEP1996 367,500.00 968274
NYK961838 30MAY1996 31AUG1996 11,848.33 968244
NYK962234 07AUG1996 30AUG1996 1,653.35 968490
NYK961539 09APR1996 24AUG1996 17,208.26 968091
NYK962108 12JUL1996 18AUG1996 5,863.59 968412
NYK962109 12JUL1996 18AUG1996 7,151.25 968413
NYK968646 18SEP1996 15OCT1996 39,312.00
Standby DC
- ----------
NYK957043 19APR1995 31AUG1997 152,113.50
NYK900488 300,000.00
2
<PAGE>
DC Numbers Issuance Date Maturity Date Dollar Amount Reference Number
- ---------- ------------- ------------- ------------- ----------------
NYK943077 214,148.44
NYK882451 50,000.00
NYK920184 250,000.00
3
<PAGE>
SCHEDULE 7.12/8.07
Credit Agreements/Indebtedness
----------
CYGNE DESIGNS, INC.
SCHEDULE OF INDEBTEDNESS
SEPTEMBER 20, 1996
Amount Total
Outstanding Facility
----------- --------
CYGNE:
Mitsubishi International Corporation
and Mitsubishi Corporation ............... $ 9,423,000 $10,173,000
The Limited, Inc. .......................... $ 1,488,643 $ 1,607,245
The Hongkong and Shanghai
Banking Corporation Limited .............. $18,445,852 $30,000,000
C.I.T. Financial Corp. ..................... $ 150,673 $ 150,673
Citibank ................................... $ 4,171 $ 4,171
FENN, WRIGHT & MANSON:
The Hongkong and Shanghai
Banking Corporation Limited
(Standby letter of credit) ............... $ 514,148 $ 514,148
GJM:
The Hongkong and Shanghai
Banking Corporation Limited
(Standby letter of credit) ............... $ 300,000 $ 300,000
CYGNE DESIGN ITALY:
Banca Toscana .............................. $ 54,309 $ 54,309
T WEAR:
Casa Di Rispamio Di Firenze ................ $ 946,800 $ 946,800
Casa Di Rispamio Di Firenze ................ $ 982,725 $ 2,500,000
Casa Di Rispamio Di Prato .................. $ 176,981 $ 1,000,000
Monte Dei Paschi ........................... $ 0 $ 1,000,000
Banca Nationale Di Lavoro .................. $ 0 $ 500,000
M.T.G.I.:
First International Bank Of Israel ......... $ 3,456,327 $ 3,500,000
----------- -----------
TOTAL CYGNE DESIGNS, INC ..................... $35,943,629 $52,250,346
=========== ===========
<PAGE>
<TABLE>
SCHEDULE 7.14
Subsidiaries
<CAPTION>
Jurisdiction of % of Stock Nature of
Organization or Beneficially Beneficial
Subsidiary Incorporation Owned Ownership Remarks
- ---------- --------------- ------------ ---------- -------
<S> <C> <C> <C> <C>
ACTIVE
- ------
Cygne TW, Inc. -- to be renamed
T.Wear International, Inc. ............ Delaware 100 direct
Cygne Group (F.E.) Limited .............. Hong Kong 100 direct
Cygne Guatemala, S.A. ................... Guatemala 100 indirect
JMB Internacional, S.A. ................. Guatemala 100 direct
T. Wear Company, S.r.l. ................. Italy 100 50% direct
50% indirect
M.T.G.I. -- Textile Manufacturers
Group (Israel) Ltd. ................... Israel 100 50% direct 3
50% indirect
C.M. Israel Sewing Houses Ltd. .......... Israel 100 50% direct
50% indirect
INACTIVE -- TO BE LIQUIDATED
- ----------------------------
AC Services, Inc. ....................... Delaware 100 direct
CDK Inc. ................................ Delaware 100 direct
Cygne Knits Limited ..................... Delaware 100 direct
Cygne Design Italy, S.r.l. .............. Italy 80 indirect 2
HKN (Sales) Inc. ........................ Delaware 100 direct
Fenn, Wright and Manson, Incorporated ... New York 100 direct
HKN (US) Inc. ........................... New York 100 indirect
Fenn, Wright and Manson (F.E.) Limited .. Hong Kong 100 indirect
HKN (HK) Purchasing Ltd. ................ Hong Kong 100 indirect
HKN (HK) Sales Ltd. ..................... Hong Kong 100 indirect
HKN (Sri Lanka) Limited ................. Hong Kong 100 indirect
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of % of Stock Nature of
Organization or Beneficially Beneficial
Subsidiary Incorporation Owned Ownership Remarks
- ---------- --------------- ------------ ---------- -------
<S> <C> <C> <C> <C>
Magnus Fine Sewing Ltd. ................. Philippines 100 indirect
Cygne Group International Ltd. .......... South Korea 66.67 indirect 1
HKN (UK) Sales Ltd. ..................... United Kingdom 100 indirect
HKN (Honduras) Manufacturing ............
Limited, S.DE R.L. Honduras 100 indirect
Tralee S.A. ............................. Uruguay 100 direct
Cygne GJM Ltd. .......................... British Virgin Islands 100 direct
HKN Purchasing Ltd. ..................... British Virgin Islands 100 indirect
Dangel Trading Ltd. ..................... British Virgin Islands 100 indirect
Remarks
- -------
1. 33.33% owned by Albert Kim.
2. 20% owned by Daniela Corrado.
3. Subject to the right of Jonathan Kafri under certain circumstances, upon
consummation of a public offering of stock of MTGI in Israel, to acquire
20% of the stock of MTGI for a purchase price of $200,000.
Note: Excludes liens in favor of The Hongkong and Shanghai Banking Corporation
Limited and Mitsubishi Corporation.
Regarding Investment in Subsidiaries -- see Schedule 8.08.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE 8.08
SCHEDULE OF INVESTMENTS--1 of 2
CYGNE DESIGNS, INC.
INTERCOMPANY BALANCES
SEPTEMBER 20, 1996
<CAPTION>
Payable:
CDI CY-ITALY CGI CGFE ACS KNITS TWEAR-US TWSRL MTGI
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Receivable ........
- ------------------------------------------------------------------------------------------------------------------------------
CDI ............... 275,602 155,643 3,804,823 24,585 1,065,902 3,100,911 1,971,999
- ------------------------------------------------------------------------------------------------------------------------------
CGFE .............. 80,434
- ------------------------------------------------------------------------------------------------------------------------------
KNITS ............. 1,098,057
- ------------------------------------------------------------------------------------------------------------------------------
TWSRL ............. 44,610 163,314 1,263,072
- ------------------------------------------------------------------------------------------------------------------------------
MTGI .............. 807,500
- ------------------------------------------------------------------------------------------------------------------------------
CFE ............... 1,312 1,023,723 120,167
- ------------------------------------------------------------------------------------------------------------------------------
CYG-GUA ...........
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL PAYABLE ... 1,098,057 400,646 156,955 5,636,046 24,585 120,167 1,229,216 3,100,911 3,235,071
==============================================================================================================================
TOTAL
CM SEWING JMB CYG-GUA TRALEE FWM-US FWM-HK GJM RECEIVABLE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Receivable ........
- -------------------------------------------------------------------------------------------------------------------------
CDI ............... 4,249,489 222,211 1,408,222 739,448 3,297,085 9,834,852 50,150,732
- -------------------------------------------------------------------------------------------------------------------------
CGFE .............. 1,065,895 2,380,320 3,506.649
- -------------------------------------------------------------------------------------------------------------------------
KNITS ............. 1,098,057
- -------------------------------------------------------------------------------------------------------------------------
TWSRL ............. 1,470,998
- -------------------------------------------------------------------------------------------------------------------------
MTGI .............. 336,100 1,145,600
- -------------------------------------------------------------------------------------------------------------------------
CFE ............... 1,145,222
- -------------------------------------------------------------------------------------------------------------------------
CYG-GUA ........... 196,949 196,949
- -------------------------------------------------------------------------------------------------------------------------
TOTAL PAYABLE ... 336,100 4,448,438 1,208,106 1,408,222 739,448 5,657,365 9,834,852 0
=========================================================================================================================
</TABLE>
<PAGE>
<TABLE>
SCHEDULE 8.08
SCHEDULE--2 of 2
CYGNE DESIGNS, INC.
INVESTMENT IN SUBSIDIARIES
SEPTEMBER 20, 1996
<CAPTION>
Investment in:
CY-ITALY CGI (KOREA) CGFE ACS CKL CTW TWEAR MTGI CM-SEWING JMB CY-GUA TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CDI ........ -- 420,000 8,897 1,000 368,612 2,243,289 240,515 1,045,241 -- 57,000 -- 4,384,554
CGFE ....... 290,135 -- -- -- -- -- 175,000 282,500 100 -- 875 748,610
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ... 290,135 420,000 8,897 1,000 368,612 2,243,289 415,515 1,327,741 100 57,000 875 5,133,164
====================================================================================================================================
</TABLE>
<PAGE>
EXHIBIT A-1
LAI NOTE
$17,500,000 September 20, 1996
New York, New York
FOR VALUE RECEIVED, CYGNE DESIGNS, INC., a Delaware corporation (the
"Company"), hereby promises to pay to THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, NEW YORK BRANCH (the "Bank"), at its office located at 140
Broadway, New York, NY 10005, on or before the Termination Date the principal
sum of Seventeen Million Five Hundred Thousand Dollars ($17,500,000) or such
lesser amount as shall equal the aggregate unpaid principal amount of the LAI
Loans made by the Bank to the Company under the Amended and Restated Credit
Agreement dated as of September 20, 1996 between the Company and the Bank (as
modified and supplemented and in effect from time to time, the "Credit
Agreement"), in lawful money of the United States of America and in immediately
available funds, and to pay interest on the unpaid principal amount of each such
LAI Loan, at such office, in like money and funds, for the period commencing on
the date of such LAI Loan until such LAI Loan shall be paid in full, at the
rates per annum and on the dates provided in the Credit Agreement. In no event
shall interest hereunder exceed the maximum rate allowed under New York law.
The date, amount and interest rate of each LAI Loan made by the Bank to the
Company, and each payment made on account of the principal thereof, shall be
recorded by the Bank on its books; provided that the failure by the Bank so to
record such LAI Loans shall not affect the obligations of the Company hereunder.
This Note is the LAI Note referred to in Section 2.03(b) of the Credit
Agreement and evidences LAI Loans made by the Bank thereunder. This Note
modifies that certain note dated as of September 28, 1995 (the "Existing LAI
Note") made by the Company in favor of the Bank in the principal amount of Fifty
Million Dollars ($50,000,000) and is hereby delivered in substitution for the
Existing LAI Note, but not in payment, satisfaction or cancellation of the
outstanding obligations evidenced by the Existing LAI Note. This Note is subject
to the terms and conditions set forth in the Credit Agreement, which terms and
conditions are incorporated herein by reference. Capitalized terms used but not
defined herein have the respective meanings assigned to them in the Credit
Agreement.
The payment of this Note is supported by collateral security provided under
the Security Documents referred to in the Credit Agreement.
<PAGE>
The Credit Agreement provides for the acceleration of the maturity of this
Note upon the occurrence of certain events and for prepayments of LAI Loans upon
the terms and conditions specified therein.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO NOTES MADE AND TO BE
PERFORMED THEREIN.
CYGNE DESIGNS, INC.
By
---------------------------
Name:
Title:
<PAGE>
SCHEDULE
This LAI Note evidences LAI Loans made under the Credit Agreement to the
Company, on the dates, in the principal amounts and bearing interest at the
rates set forth below, subject to the payments and prepayments of principal set
forth below.
Principal Amount Unpaid
Date Amount of Interest Paid or Principal Notation
Made LAI Loan Rate Prepaid Amount Made By
- ---- -------- ---- ------- ------ -------
<PAGE>
EXHIBIT A-2
REVOLVING NOTE
$10,000,000 September 20, 1996
New York, New York
FOR VALUE RECEIVED, CYGNE DESIGNS, INC., a Delaware corporation (the
"Company"), hereby promises to pay to THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, NEW YORK BRANCH (the "Bank"), at its office located at 140
Broadway, New York, NY 10005, on or before the Termination Date the principal
sum of Ten Million Dollars ($10,000,000) or such lesser amount as shall equal
the aggregate unpaid principal amount of the Revolving Loans made by the Bank to
the Company under the Amended and Restated Credit Agreement dated as of
September 20, 1996 between the Company and the Bank (as modified and
supplemented and in effect from time to time, the "Credit Agreement"), in lawful
money of the United States of America and in immediately available funds, and to
pay interest on the unpaid principal amount of each such Revolving Loan, at such
office, in like money and funds, for the period commencing on the date of such
Revolving Loan until such Revolving Loan shall be paid in full, at the rates per
annum and on the dates provided in the Credit Agreement. In no event shall
interest hereunder exceed the maximum rate allowed under New York law.
The date, amount and interest rate of each Revolving Loan made by the Bank
to the Company, and each payment made on account of the principal thereof, shall
be recorded by the Bank on its books; provided that the failure by the Bank so
to record such Revolving Loans shall not affect the obligations of the Company
hereunder.
This Note is the Revolving Note referred to in Section 2.03(c) of the
Credit Agreement and evidences Revolving Loans made by the Bank thereunder. This
Note modifies that certain note dated as of September 28, 1995 (the "Existing
Revolving Note") made by the Company in favor of the Bank in the principal
amount of Eleven Million Dollars ($11,000,000) and is hereby delivered in
substitution for the Existing Revolving Note, but not in payment, satisfaction
or cancellation of the outstanding obligations evidenced by the Existing
Revolving Note. This Note is subject to the terms and conditions set forth in
the Credit Agreement, which terms and conditions are incorporated herein by
reference. Capitalized terms used but not defined herein have the respective
meanings assigned to them in the Credit Agreement.
The payment of this Note is supported by collateral security provided under
the Security Documents referred to in the Credit Agreement.
<PAGE>
The Credit Agreement provides for the acceleration of the maturity of this
Note upon the occurrence of certain events and for prepayments of Revolving
Loans upon the terms and conditions specified therein.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO NOTES MADE AND TO BE
PERFORMED THEREIN.
CYGNE DESIGNS, INC.
By
---------------------------
Name:
Title:
<PAGE>
SCHEDULE
This Revolving Note evidences Revolving Loans made under the Credit
Agreement to the Company, on the dates, in the principal amounts and bearing
interest at the rates set forth below, subject to the payments and prepayments
of principal set forth below.
Principal Amount Unpaid
Date Amount of Interest Paid or Principal Notation
Made Revolging Loan Rate Prepaid Amount Made By
- ---- -------------- -------- ------- --------- --------
<PAGE>
EXHIBIT A-3
EXPORT LOAN NOTE
$3,000,000 September 20, 1996
New York, New York
FOR VALUE RECEIVED, CYGNE DESIGNS, INC., a Delaware corporation (the
"Company"), hereby promises to pay to THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, NEW YORK BRANCH (the "Bank"), at its office located at 140
Broadway, New York, NY 10005, on or before the Termination Date the principal
sum of Three Million Dollars ($3,000,000) or such lesser amount as shall equal
the aggregate unpaid principal amount of the Export Loans made by the Bank to
the Company under the Amended and Restated Credit Agreement dated as of
September 20, 1996 between the Company and the Bank (as modified and
supplemented and in effect from time to time, the "Credit Agreement"), in lawful
money of the United States of America and in immediately available funds, and to
pay interest on the unpaid principal amount of each such Export Loan, at such
office, in like money and funds, for the period commencing on the date of such
Export Loan until such Export Loan shall be paid in full, at the rates per annum
and on the dates provided in the Credit Agreement. In no event shall interest
hereunder exceed the maximum rate allowed under New York law.
The date, amount and interest rate of each Export Loan made by the Bank to
the Company, and each payment made on account of the principal thereof, shall be
recorded by the Bank on its books; provided that the failure by the Bank so to
record such Export Loans shall not affect the obligations of the Company
hereunder.
This Note is the Export Loan Note referred to in Section 2.03(d) of the
Credit Agreement and evidences Export Loans made by the Bank thereunder. This
Note modifies that certain note dated as of September 28, 1995 (the "Existing
Export Loan Note") made by the Company in favor of the Bank in the principal
amount of Seven Million Five Hundred Thousand Dollars ($7,500,000) and is hereby
delivered in substitution for the Existing Export Loan Note, but not in payment,
satisfaction or cancellation of the outstanding obligations evidenced by the
Existing Export Loan Note. This Note is subject to the terms and conditions set
forth in the Credit Agreement, which terms and conditions are incorporated
herein by reference. Capitalized terms used but not defined herein have the
respective meanings assigned to them in the Credit Agreement.
The payment of this Note is supported by collateral security provided under
the Security Documents referred to in the Credit Agreement.
<PAGE>
The Credit Agreement provides for the acceleration of the maturity of this
Note upon the occurrence of certain events and for prepayments of Export Loans
upon the terms and conditions specified therein.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO NOTES MADE AND TO BE
PERFORMED THEREIN.
CYGNE DESIGNS, INC.
By
---------------------------
Name:
Title:
<PAGE>
SCHEDULE
This Export Loan Note evidences Export Loans made under the Credit
Agreement to the Company, on the dates, in the principal amounts and bearing
interest at the rates set forth below, subject to the payments and prepayments
of principal set forth below.
Principal Amount Unpaid
Date Amount of Interest Paid or Principal Notation
Made Export Loan Rate Prepaid Amount Made By
- ---- ----------- -------- ------- --------- --------
<PAGE>
EXHIBIT B
AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT dated as of September 20, 1996
between CYGNE DESIGNS, INC., a Delaware corporation having an office at 1372
Broadway, New York, NY 10018 (the "Company"), and THE HONGKONG AND SHANGHAI
BANKING CORPORATION LIMITED, a foreign banking corporation acting through its
New York Branch (the "Bank").
W I T N E S S E T H :
WHEREAS, the Company has provided a security interest to the Bank under a
Security Agreement dated as of September 28, 1995 (as modified and supplemented
and in effect from time to time, the "Existing Agreement");
WHEREAS, the Company has requested that the Existing Agreement, as amended
prior to the date hereof and as amended and modified hereby, be restated in its
entirety to reflect the amendment of certain provisions thereof; and
WHEREAS, the Company and the Bank are parties to an Amended and Restated
Credit Agreement dated as of September 20, 1996 (as modified and supplemented
and in effect from time to time, the "Credit Agreement"), providing, subject to
the terms and conditions thereof, for extensions of credit (by issuing letters
of credit and making loans) to be made by the Bank to the Company in an
aggregate face or principal amount not exceeding $17,500,000;
NOW, THEREFORE, to induce the Bank to enter into the Credit Agreement, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company has agreed to continue to pledge and grant
a security interest in the Collateral (as hereinafter defined) as security for
the Secured Obligations (as hereinafter defined). Accordingly, the parties
hereto agree that the Original Agreement is hereby amended and restated in its
entirety as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are used
herein as defined therein. In addition, as used herein:
"Accounts" shall have the meaning ascribed thereto in Section 3(e)
hereof.
"CAT Shares" shall mean the 6,000 validly issued, fully paid and
nonassessable shares of common stock, par value $0.01 per share, of CAT US,
Inc., a Delaware corporation, as set forth on Annex I hereto.
<PAGE>
- 2 -
"Collateral" shall have the meaning ascribed thereto in Section 3
hereof.
"Documents" shall have the meaning ascribed thereto in Section 3(j)
hereof.
"Equipment" shall have the meaning ascribed thereto in Section 3(h)
hereof.
"Instruments" shall have the meaning ascribed thereto in Section 3(f)
hereof.
"Inventory" shall have the meaning ascribed thereto in Section 3(g)
hereof.
"Issuers" shall mean, collectively, the respective corporations
identified in Annex 1 hereto under the caption "Issuers".
"Lockbox Account" shall have the meaning ascribed thereto in Section
4(a) hereof.
"Pledged Stock" shall have the meaning ascribed thereto in Section
3(b) hereof.
"Secured Obligations" shall mean, collectively, (a) the principal of
and interest on the Loans made by the Bank to, and the Notes held by the
Bank of, the Company, and all other amounts from time to time owing to the
Bank by the Company under the Credit Agreement or the Notes, (b) all
obligations of the Company to the Bank hereunder, and (c) all obligations
of the Company under any other Credit Document to which it is party.
"Stock Collateral" shall mean, collectively, the Collateral
described in clauses (a) through (d) of Section 3 hereof and the proceeds
of and to any such property and, to the extent related to any such property
or such proceeds, all books, correspondence, credit files, records,
invoices and other papers.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect in the State of New York from time to time.
Section 2. Representations and Warranties. The Company represents and
warrants to the Bank that:
(a) the Company is the sole beneficial owner of the Collateral and no
Lien exists or will exist upon any Collateral at any time (and, with
respect to the Stock Collateral, no right or option to acquire the same
exists in favor of any other Person), except for (i) Liens permitted under
Section 8.06 of the Credit Agreement and (ii) the pledge and security
interest in favor of the Bank created or provided for herein which pledge
and security interest constitutes a first priority perfected pledge and
security interest in and to all of the Collateral;
SECURITY AGREEMENT
<PAGE>
- 3 -
(b) the Pledged Stock evidenced by the certificates identified in
Annex 1 hereto and the ATSC Shares are, and all other Pledged Stock will
be, duly authorized, validly issued, fully paid and nonassessable and none
of such Pledged Stock is or will be subject to any contractual restriction,
or any restriction under the charter or by-laws of the respective Issuers
of such Pledged Stock, upon the transfer of such Pledged Stock (except for
any such restriction contained herein or in the Credit Agreement or, with
respect to the ATSC Shares, in the Stockholders Agreement or under Federal
and state securities law);
(c) the Pledged Stock evidenced by the certificates identified in
Annex 1 hereto constitutes the indicated percentage of the total issued and
outstanding shares of capital stock of any class of the Issuers
beneficially owned by the Company on the date hereof (whether or not
registered in the name of the Company) and said Annex 1 correctly
identifies, as at the date hereof, the respective Issuers of such Pledged
Stock, the respective class and par value of the shares comprising such
Pledged Stock and the respective number of shares (and registered owner
thereof) evidenced by each such certificate; and
(d) any goods now or hereafter produced by the Company or any of its
Subsidiaries included in the Collateral have been and will be produced in
compliance with the requirements of the Fair Labor Standards Act, as
amended.
Section 3. Collateral. As collateral security for the prompt payment in
full when due (whether at stated maturity, by acceleration or otherwise) of the
Secured Obligations, the Company hereby continues to pledge and grant to the
Bank a security interest in all of the Company's right, title and interest in
the following property, whether now owned by the Company or hereafter acquired
and whether now existing or hereafter coming into existence, and wherever
located (all being collectively referred to herein as "Collateral"):
(a) all of the ATSC Shares received by the Company in exchange for the
sale of the CAT Shares in connection with the CAT Transaction, which shares
of common stock, and certain other assets of the Company, the Company has
previously pledged to the Bank pursuant to the Existing Agreement;
(b) the respective shares of common/preferred stock of the Issuers
evidenced by the certificates identified in Annex 1 hereto and all other
shares of capital stock of whatever class of the Issuers, now or hereafter
owned by the Company, together with in each case the certificates
evidencing the same (collectively, together with the ATSC Shares, the
"Pledged Stock");
(c) all shares, securities, moneys or property representing a dividend
on any of the Pledged Stock, or representing a distribution or return of
capital upon or in respect of the
SECURITY AGREEMENT
<PAGE>
- 4 -
Pledged Stock, or resulting from a split-up, revision, reclassification or
other like change of the Pledged Stock or otherwise received in exchange
therefor, and any subscription warrants, rights or options issued to the
holders of, or otherwise in respect of, the Pledged Stock;
(d) without affecting the obligations of the Company under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger in which any Issuer is not the
surviving corporation, all shares of each class of the capital stock of the
successor corporation (unless such successor corporation is the Company
itself) formed by or resulting from such consolidation or merger;
(e) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of the Company constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to the Company in respect of any loans or advances for the
purchase price of Inventory or Equipment or other goods sold or leased or
for services rendered, all moneys due and to become due to the Company
under any guarantee (including a letter of credit) of the purchase price of
Inventory or Equipment sold by the Company and all tax refunds (such
accounts, general intangibles and moneys due and to become due being herein
called collectively "Accounts");
(f) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of the Company evidencing,
representing, arising from or existing in respect of, relating to, securing
or otherwise supporting the payment of, any of the Accounts, including (but
not limited to) promissory notes, drafts, bills of exchange and trade
acceptances (herein collectively called "Instruments");
(g) all inventory (as defined in the Uniform Commercial Code) of the
Company, all goods obtained by the Company in exchange for such inventory,
and any products made or processed from such inventory including all
substances, if any, commingled therewith or added thereto (herein
collectively called "Inventory");
(h) all equipment (as defined in the Uniform Commercial Code) of the
Company (herein collectively called "Equipment");
(i) each contract and other agreement of the Company relating to the
sale or other disposition of Inventory or Equipment;
(j) all documents of title (as defined in the Uniform Commercial Code)
or other receipts of the Company covering, evidencing or representing
Inventory or Equipment (herein collectively called "Documents");
SECURITY AGREEMENT
<PAGE>
- 5 -
(k) all rights, claims and benefits of the Company against any Person
arising out of, relating to or in connection with Inventory or Equipment
purchased by the Company, including, without limitation, any such rights,
claims or benefits against any Person storing or transporting such
Inventory or Equipment;
(l) the balance from time to time in the Lockbox Account;
(m) the balance from time to time in the Collateral Account;
(n) the balance from time to time in the Escrow Account; and
(o) all other tangible or intangible property of the Company,
including, without limitation, all proceeds, products and accessions of and
to any of the property of the Company described in clauses (a) through (n)
above in this Section 3 (including, without limitation, any proceeds of
insurance thereon), and, to the extent related to any property described in
said clauses or such proceeds, products and accessions, all books,
correspondence, credit files, records, invoices and other papers, including
without limitation all tapes, cards, computer runs and other papers and
documents in the possession or under the control of the Company or any
computer bureau or service company from time to time acting for the
Company.
Section 4. Lockbox Account.
(a) The Company shall maintain a lockbox account (the "Lockbox
Account") with Marine Midland Bank (the "Lockbox Bank") in New York City,
and shall instruct debtors relating to the Accounts to make all remittances
directly to the Lockbox Account, which account (together with any related
disbursement account) shall be subject to the exclusive control of the
Bank; provided, however, unless and until an Event of Default shall have
occurred and be continuing, the Company shall have access to the proceeds
of such bank accounts. Upon the occurrence of an Event of Default, the
Company shall cease to have access to such bank accounts and the Bank shall
have sole access. The Company shall promptly deposit in the Lockbox Account
all payments relating to the Accounts received directly by the Company.
Without the prior written consent of the Bank, the Company shall not
provide debtors relating to the Accounts with payment instructions other
than as set forth above.
(b) The Lockbox Bank shall serve as the agent of the Bank with respect
to (i) the depositing of items comprising collections on Accounts and (ii)
the disbursements to be paid from any disbursement account relating to the
Lockbox Account. The rights, duties and obligations of the Lockbox Bank,
including, without limitation, its fees, shall be as such are
SECURITY AGREEMENT
<PAGE>
- 6 -
set forth in the related agreement between the Bank and the Lockbox Bank.
The Company shall pay all fees in connection with the Lockbox Account.
Section 5. Further Assurances; Remedies. In furtherance of the grant of the
pledge and security interest pursuant to Section 3 hereof, the Company hereby
agrees with the Bank as follows:
5.01 Delivery and Other Perfection. The Company shall:
(a) if any of the above-described shares, securities, monies or
property required to be pledged by the Company under clauses (a), (b), (c)
and (d) of Section 3 hereof are received by the Company, forthwith either
(x) transfer and deliver to the Bank such shares or securities so received
by the Company (together with the certificates for any such shares and
securities duly endorsed in blank or accompanied by undated stock powers
duly executed in blank) all of which thereafter shall be held by the Bank,
pursuant to the terms of this Agreement, as part of the Collateral or (y)
take such other action as the Bank shall deem necessary or appropriate to
duly record the Lien created hereunder in such shares, securities, monies
or property referred to in said clauses (a), (b), (c) and (d);
(b) deliver and pledge to the Bank any and all Instruments, endorsed
and/or accompanied by such instruments of assignment and transfer in such
form and substance as the Bank may request; provided, that so long as no
Default shall have occurred and be continuing, the Company may retain for
collection in the ordinary course any Instruments received by it in the
ordinary course of business and the Bank shall, promptly upon request of
the Company, make appropriate arrangements for making any other Instrument
pledged by the Company available to it for purposes of presentation,
collection or renewal (any such arrangement to be effected, to the extent
deemed appropriate by the Bank, against trust receipt or like document);
(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of the Bank) to create,
preserve, perfect or validate any security interest granted pursuant hereto
or to enable the Bank to exercise and enforce its rights hereunder with
respect to such security interest, including, without limitation, causing
any or all of the Stock Collateral to be transferred of record into the
name of the Bank or its nominee (and the Bank agrees that if any Stock
Collateral is transferred into its name or the name of its nominee, the
Bank will thereafter promptly give to the Company copies of any notices and
communications received by it with respect to the Stock Collateral),
provided that notices to account debtors in respect of any Accounts or
Instruments shall be subject to the provisions of clause (g) below;
SECURITY AGREEMENT
<PAGE>
- 7 -
(d) upon the acquisition after the date hereof by the Company of any
Equipment covered by a certificate of title or ownership, cause the Bank to
be listed as the lienholder on such certificate of title and within 120
days of the acquisition thereof deliver evidence of the same to the Bank;
(e) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Bank may reasonably require in order to reflect the security
interests granted by this Agreement;
(f) permit representatives of the Bank, upon reasonable notice, at any
time during normal business hours to inspect and make abstracts from its
books and records pertaining to the Collateral, and permit representatives
of the Bank to be present at the Company's place of business to receive
copies of all communications and remittances relating to the Collateral,
and forward copies of any notices or communications by the Company with
respect to the Collateral, all in such manner as the Bank may require; and
(g) upon the occurrence and during the continuance of any Default,
upon request of the Bank, promptly notify (and the Company hereby
authorizes the Bank so to notify) each account debtor in respect of any
Accounts or Instruments that such Collateral has been assigned to the Bank
hereunder, and that any payments due or to become due in respect of such
Collateral are to be made directly to the Bank.
5.02 Other Financing Statements and Liens. Without the prior written
consent of the Bank, the Company shall not file or suffer to be on file, or
authorize or permit to be filed or to be on file, in any jurisdiction, any
financing statement or like instrument with respect to the Collateral in which
the Bank is not named as the sole secured party.
5.03 Preservation of Rights. The Bank shall not be required to take steps
necessary to preserve any rights against prior parties to any of the Collateral.
5.04 Special Provisions Relating to Stock Collateral.
(a) The Company will cause the Stock Collateral to constitute at all
times the percentage indicated on Annex 1 hereto of the total number of
shares of each class of capital stock of each Issuer then outstanding, but
in no event shall such percentage exceed 65% with respect to any class of
capital stock of a Foreign Subsidiary; provided, however, the ATSC Shares
may constitute a decreasing percentage of the capital stock of the related
Issuer in accordance with the terms and conditions of the Credit Agreement.
SECURITY AGREEMENT
<PAGE>
- 8 -
(b) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Stock Collateral
for all purposes not inconsistent with the terms of this Agreement, the
Credit Agreement, the Notes or any other instrument or agreement referred
to herein or therein, provided that the Company agrees that it will not
vote the Stock Collateral in any manner that is inconsistent with the terms
of this Agreement, the Credit Agreement, the Notes or any such other
instrument or agreement (as determined by the Bank in its reasonable
judgment); and the Bank shall execute and deliver to the Company or cause
to be executed and delivered to the Company all such proxies, powers of
attorney, dividend and other orders, and all such instruments, without
recourse, as the Company may reasonably request for the purpose of enabling
the Company to exercise the rights and powers which it is entitled to
exercise pursuant to this Section 5.04(b).
(c) All shares, securities, moneys or other property representing
stock which are payable in connection with dividends or liquidating
dividends (including without limitation in connection with the liquidation
of any Issuer on or after such liquidation) and (ii) all additional
Collateral described in clauses (a), (b), (c) and (d) of Section 3 hereof
constituting a distribution or return of capital upon or in respect of any
Pledged Stock, or resulting from a conversion, split-up, revision,
reclassification or other like change of any Pledged Stock or received in
exchange therefor as a result of a merger, consolidation or otherwise,
shall be paid or transferred directly to the Bank (or its agent or nominee,
as the case may be), as part of the Collateral subject to this Agreement.
(d) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Bank exercises any
available right to declare any Secured Obligation due and payable or seeks
or pursues any other relief or remedy available to it under applicable law
or under this Agreement, the Credit Agreement, the Notes or any other
agreement relating to such Secured Obligation, all dividends and other
distributions on the Stock Collateral shall be paid directly to the Bank
and retained by it in the Custodial Trust Account as part of the Stock
Collateral, subject to the terms of this Agreement, and, if the Bank shall
so request in writing, the Company agrees to execute and deliver to the
Bank appropriate additional dividend, distribution and other orders and
documents to that end, provided that if such Event of Default is cured, any
such dividend or distribution theretofore paid to the Bank shall, upon
request of the Company (except to the extent theretofore applied to the
Secured Obligations) be returned by the Bank to the Company.
5.05 Events of Default, etc. During the period during which an Event of
Default shall have occurred and be continuing:
SECURITY AGREEMENT
<PAGE>
- 9 -
(i) the Company shall, at the request of the Bank, assemble the
Collateral owned by it at such place or places, reasonably convenient to
both the Bank and the Company, designated in its request;
(ii) the Bank may make any reasonable compromise or settlement deemed
desirable with respect to any of the Collateral and may extend the time of
payment, arrange for payment in installments, or otherwise modify the terms
of, any of the Collateral;
(iii) the Bank shall have all of the rights and remedies with respect
to the Collateral of a secured party under the Uniform Commercial Code
(whether or not said Code is in effect in the jurisdiction where the rights
and remedies are asserted) and such additional rights and remedies to which
a secured party is entitled under the laws in effect in any jurisdiction
where any rights and remedies hereunder may be asserted, including, without
limitation, the right, to the maximum extent permitted by law, to exercise
all voting, consensual and other powers of ownership pertaining to the
Collateral (in the case of the ATSC Shares, subject to the Stockholders
Agreement) as if the Bank were the sole and absolute owner thereof (and the
Company agrees to take all such action as may be appropriate to give effect
to such right);
(iv) the Bank in its discretion may, in its name or in the name of the
Company or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so; and
(v) the Bank may (in the case of the ATSC Shares, subject to the
Stockholders Agreement), upon 10 Business Days' prior written notice to the
Company of the time and place, with respect to the Collateral or any part
thereof which shall then be or shall thereafter come into the possession,
custody or control of the Bank, or any of its agents, sell, lease, assign
or otherwise dispose of all or any of such Collateral, at such place or
places as the Bank deems best, and for cash or on credit or for future
delivery (without thereby assuming any credit risk), at public or private
sale, without demand of performance or notice of intention to effect any
such disposition or of time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived) and the Bank
or anyone else may be the purchaser, lessee, assignee or recipient of any
or all of the Collateral so disposed of at any public sale (or, to the
extent permitted by law, at any private sale), and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of the Company,
SECURITY AGREEMENT
<PAGE>
- 10 -
any such demand, notice or right and equity being hereby expressly waived
and released. The Bank may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time
by announcement at the time and place fixed for the sale, and such sale may
be made at any time or place to which the same may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05 shall be applied in accordance with Section 5.09 hereof.
The Company recognizes that, by reason of certain prohibitions contained in
the Securities Act of 1933, as amended, and applicable state securities laws,
the Bank may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. The Company acknowledges that any such
private sales may be at prices and on terms less favorable to the Bank than
those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that the Bank
shall have no obligation to engage in public sales and no obligation to delay
the sale of any Collateral for the period of time necessary to permit the
respective Issuer thereof to register it for public sale.
5.06 Deficiency. If the proceeds of sale, collection or other realization
of or upon the Collateral pursuant to Section 5.05 hereof are insufficient to
cover the costs and expenses of such realization and the payment in full of the
Secured Obligations, the Company shall remain liable for any deficiency.
5.07 Removals, etc. Without at least 30 days prior written notice to the
Bank, the Company shall not (i) maintain any of its books or records with
respect to the Collateral at any office or maintain its chief executive office
or its principal place of business at any place, or permit any Inventory or
Equipment to be located anywhere other than at the address indicated beneath the
signature of the Company to the Credit Agreement or at one of the locations
identified in Annex 2 hereto or in transit from one of such locations to another
(or, with respect to Inventory, in transit from one of such locations to a
customer of the Company) or (ii) change its corporate name, or the name under
which it does business, from the name shown on the signature page hereto.
5.08 Private Sale. The Bank shall incur no liability as a result of the
sale of the Collateral, or any part thereof, at any private sale pursuant to
Section 5.05 hereof conducted in a commercially reasonable manner. The Company
hereby waives any claims against the Bank arising by reason of the fact that the
price at which the Collateral may have been sold at such a
SECURITY AGREEMENT
<PAGE>
- 11 -
private sale was less than the price which might have been obtained at a public
sale or was less than the aggregate amount of the Secured Obligations, even if
the Bank accepts the first offer received and does not offer the Collateral to
more than one offeree.
5.09 Application of Proceeds. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other realization of all or
any part of the Collateral pursuant hereto, and any other cash at the time held
by the Bank under Section 4 hereof or this Section 5, shall be applied by the
Bank:
First, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Bank and the fees and expenses of its agents and counsel,
and all expenses and advances made or incurred by the Bank in connection
therewith;
Next, to the payment in full of the Secured Obligations then due and
payable, ratably in accordance with the respective outstanding amounts
thereof then due and payable; and
Finally, to the payment to the Company, or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus then
remaining.
As used in this Section 5, "proceeds" of Collateral shall mean cash, securities
and other property realized in respect of, and distributions in kind of,
Collateral, including any thereof received under any reorganization, liquidation
or adjustment of debt of the Company or any issuer of or obligor on any of the
Collateral.
5.10 Attorney-in-Fact. Without limiting any rights or powers granted by
this Agreement to the Bank while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default the Bank is hereby appointed the attorney-in-fact of the Company for the
purpose of carrying out the provisions of this Section 5 and taking any action
and executing any instruments which the Bank may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, so long as the Bank shall be entitled under this Section 5 to make
collections in respect of the Collateral, the Bank shall have the right and
power to receive, endorse and collect all checks made payable to the order of
the Company representing any dividend, payment, or other distribution in respect
of the Collateral or any part thereof and to give full discharge for the same.
5.11 Perfection. Prior to or concurrently with the execution and delivery
of this Agreement, the Company shall (i) file such financing statements and
other documents in such offices as the Bank may request to perfect the security
interests granted by Section 3 of this
SECURITY AGREEMENT
<PAGE>
- 12 -
Agreement, and (ii) deliver to the Bank all certificates identified in Annex 1
hereto, accompanied by undated stock powers duly executed in blank.
5.12 Termination. When all Secured Obligations shall have been paid in full
and the Facilities of the Bank under the Credit Agreement and all liabilities of
the Bank relating to issued Letters of Credit shall have expired or been
terminated, this Agreement shall terminate, and the Bank shall forthwith cause
to be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining Collateral and
money received in respect thereof, to or on the order of the Company. The Bank
shall also execute and deliver to the Company upon such termination such Uniform
Commercial Code termination statements and such other documentation as shall be
reasonably requested by the Company to effect the termination and release of the
Liens on the Collateral.
5.13 Expenses. The Company agrees to pay to the Bank all out-of-pocket
expenses (including reasonable expenses for legal services of every kind) of, or
incident to, the enforcement of any of the provisions of this Section 5, or
performance by the Bank of any obligations of the Company in respect of the
Collateral which the Company has failed or refused to perform, or any actual or
attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the Bank in respect
thereof, by litigation or otherwise, including expenses of insurance, and all
such expenses shall be Secured Obligations to the Bank secured under Section 3
hereof.
5.14 Further Assurances. The Company agrees that, from time to time upon
the written request of the Bank, the Company will execute and deliver such
further documents and do such other acts and things as the Bank may reasonably
request in order fully to effect the purposes of this Agreement.
5.15 Collateral Audit. The Company shall permit representatives of the Bank
to undertake an annual audit of the Collateral, and the Company agrees to pay
all reasonable expenses of the Bank incurred in connection therewith.
Section 6. Miscellaneous.
6.01 No Waiver. No failure on the part of the Bank or any of its agents to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Bank or any of its agents of any
right, power or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies herein are
cumulative and are not exclusive of any remedies provided by law.
SECURITY AGREEMENT
<PAGE>
- 13 -
6.02 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York.
6.03 Notices. All notices, requests, consents and demands hereunder shall
be in writing and telexed, telecopied, telegraphed, cabled or delivered to the
intended recipient at its address or telex number specified pursuant to Section
10.02 of the Credit Agreement and shall be deemed to have been given at the
times specified in said Section 10.02.
6.04 Waivers, etc. The terms of this Agreement may be waived, altered or
amended only by an instrument in writing duly executed by the Company and the
Bank. Any such amendment or waiver shall be binding upon the Bank, each holder
of any Secured Obligation and the Company.
6.05 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of the Company, the
Bank, and each holder of the Secured Obligations (provided, however, that the
Company shall not assign or transfer its rights hereunder without the prior
written consent of the Bank).
6.06 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one and the same instrument
and any of the parties hereto may execute this Agreement by signing any such
counterpart.
6.07 Banks. The Bank may employ agents and attorneys-in-fact in connection
herewith and shall not be responsible for the negligence or misconduct of any
such agents or attorneys-in-fact selected by it in good faith.
6.08 Severability. If any provision hereof is invalid and unenforceable in
any applicable jurisdiction, then, to the fullest extent permitted by law, (i)
the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Bank in order to
carry out the intentions of the parties hereto as nearly as may be possible and
(ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
SECURITY AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed as of the day and year first above written.
CYGNE DESIGNS, INC.
By
---------------------------------
Name:
Title:
Address for Notices:
1372 Broadway - 2nd Floor
New York, NY 10018
Telecopy: (212) 245-7724
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, NEW YORK BRANCH
By
---------------------------------
Name:
Title:
Address for Notices:
140 Broadway
New York, NY 10005
Attention: NYK CBU TRS
Telecopy: (212) 658-2813
<PAGE>
ANNEX 1
<TABLE>
LIST OF PLEDGED STOCK
<CAPTION>
Certificate Registered
Issuer Nos. Owner Number of Shares
------ ----------- ---------- ----------------
<S> <C> <C> <C>
1. CAT US, Inc. #9 Cygne Designs, Inc. 6,000 shares of
common stock having
a par value of
$0.01 per share
(60% of outstanding
capital stock)
2. Cygne Group (F.E.) Limited #7 Cygne Designs, Inc. 65 shares of 99 shares
(formerly known as of common stock
Cygne Design F.E. Limited) having a par value of
HK$1,000 per share
(65% of outstanding
capital stock)
3. M.T.G.I. Textile Manufacturers N/A Cygne Designs, Inc. 109,050 ordinary shares
Group (Israel) Ltd. having a nominal value
of NIS 1.00 each (50%
of outstanding capital
stock)
4. T. Wear Company S.r.l. N/A Cygne Designs, Inc. Shares for lire 150,000,000
(50% of share capital)
5. JMB International, S.A. #18-49 Cygne Designs, Inc. 32 shares of stock having
a par value of Q100.00 each
(64% of outstanding capital
stock)
</TABLE>
<PAGE>
ANNEX 2
LIST OF LOCATIONS
<PAGE>
EXHIBIT C-1
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT dated as of September 20, 1996 between AC SERVICES,
INC., a Delaware corporation (the "Guarantor"), and THE HONGKONG AND SHANGHAI
BANKING CORPORATION LIMITED, a foreign banking corporation acting through its
New York Branch (the "Bank").
Cygne Designs, Inc., a Delaware corporation (the "Company"), and the Bank
are parties to that certain Amended and Restated Credit Agreement dated as of
September 20, 1996 (as modified and supplemented and in effect from time to
time, the "Credit Agreement"), providing, subject to the terms and conditions
thereof, for extensions of credit (by issuing letters of credit and making
loans) to be made by the Bank to the Company in an aggregate face or principal
amount not exceeding $17,500,000.
To induce the Bank to enter into the Credit Agreement and to extend credit
thereunder, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantor has agreed (to the
extent hereinafter provided) to guarantee the Guaranteed Obligations (as
hereinafter defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. Unless otherwise defined, terms defined in the
Credit Agreement are used herein as defined therein. In addition, as used
herein:
"Guaranteed Obligations" shall mean the obligations of the Company
(including obligations to pay principal of and interest on Loans and to pay
Reimbursement Obligations), whenever arising, under the Credit Agreement, the
Notes and the Security Documents.
Section 2. The Guarantee.
2.01 Guarantee. The Guarantor hereby guarantees to the Bank and its
successors and assigns the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the Guaranteed Obligations, in each
case strictly in accordance with the terms thereof. The Guarantor hereby further
agrees that if any of the Guaranteed Obligations are not paid in full when due
(whether at stated maturity, by acceleration or otherwise), the Guarantor will
promptly pay the same, without any demand or notice whatsoever, and that in the
case of any extension of time of payment or renewal of any of the Guaranteed
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, by acceleration or otherwise) in accordance with the terms of
such extension or renewal.
<PAGE>
- 2 -
2.02 Obligations Unconditional. The obligations of the Guarantor under
Section 2.01 hereof are absolute and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of the Credit Agreement, the
Notes or any other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever which might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 2.02 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and all
circumstances. Without limiting the generality of the foregoing, it is agreed
that the occurrence of any one or more of the following shall not affect the
liability of the Guarantor hereunder:
(i) at any time or from time to time, without notice to the Guarantor,
the time for any performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the provisions of the Credit
Agreement, any Note or any other agreement or instrument referred to herein
or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Credit
Agreement, any Note or any other agreement or instrument referred to herein
or therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of, the
Bank as security for any of the Guaranteed Obligations shall fail to be
perfected.
The Guarantor hereby expressly waives diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Bank exhaust
any right, power or remedy or proceed against any Person under the Credit
Agreement, any Note or any other agreement or instrument referred to herein or
therein, or against any other Person under any other guarantee of, or security
for, any of the Guaranteed Obligations.
2.03 Reinstatement. The obligations of the Guarantor under this Section 2
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of any Person in respect of the Guaranteed Obligations
is rescinded or must be otherwise restored by any holder of any of the
Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise and the Guarantor agrees that it will indemnify the
ACS GUARANTEE
<PAGE>
- 3 -
Bank on demand for all reasonable costs and expenses (including, without
limitation, fees of counsel) incurred by the Bank in connection with such
rescission or restoration.
2.04 Subrogation. The Guarantor hereby agrees that until the payment and
satisfaction in full of all Guaranteed Obligations it shall not exercise any
right or remedy arising by reason of any performance by it of its guarantee in
Section 2.01 hereof, whether by subrogation or otherwise, against any Person or
any other guarantor of any of the Guaranteed Obligations or any security for any
of the Guaranteed Obligations.
2.05 Remedies. The Guarantor agrees that, as between the Guarantor and the
Bank, the Guaranteed Obligations may be declared to be forthwith due and payable
as provided in Section 9 of the Credit Agreement (and shall be deemed to have
become automatically due and payable in the circumstances provided in said
Section 9) for purposes of Section 2.01 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such obligations
from becoming automatically due and payable) as against any Person and that, in
the event of such declaration (or such obligations being deemed to have become
automatically due and payable), such Guaranteed Obligations (whether or not due
and payable by any Person) shall forthwith become due and payable by the
Guarantor for purposes of said Section 2.01.
2.06 Continuing Guarantee. The guarantee in this Section 2 is a continuing
guarantee, and shall apply to all Guaranteed Obligations whenever arising.
Section 3. Representations and Warranties. The Guarantor represents and
warrants to the Bank that:
3.01 Corporate Existence. The Guarantor is a corporation duly organized and
validly existing under the laws of the jurisdiction of its incorporation; has
all requisite corporate power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; and is qualified to do
business in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify would have
a material adverse effect on its financial condition, operations, business or
prospects.
3.02 Litigation. Except as disclosed to the Bank in writing prior to the
date of this Agreement, there are no legal or arbitral proceedings or any
proceedings by or before any governmental or regulatory authority or agency, now
pending or (to the knowledge of the Guarantor) threatened against the Guarantor
which, if adversely determined, could have a material adverse effect on the
financial condition, operations, business or prospects of the Guarantor.
3.03 No Breach. None of the execution and delivery of this Agreement, the
consummation of the transactions herein contemplated or compliance with the
terms and
ACS GUARANTEE
<PAGE>
- 4 -
provisions hereof will conflict with or result in a breach of, or require any
consent under, the charter or by-laws of the Guarantor, or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which the
Guarantor is a party or by which it is bound or to which it is subject, or
constitute a default under any such agreement or instrument, or result in the
creation or imposition of any Lien upon any of the revenues or assets of the
Guarantor pursuant to the terms of any such agreement or instrument.
3.04 Corporate Action. The Guarantor has all necessary corporate power and
authority to execute, deliver and perform its obligations under this Agreement;
the execution, delivery and performance by the Guarantor of this Agreement have
been duly authorized by all necessary corporate action on its part; and this
Agreement has been duly and validly executed and delivered by the Guarantor and
constitutes its legal, valid and binding obligation, enforceable in accordance
with its terms, except to the extent that enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally, and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
3.05 Approvals. No authorizations, approvals and consents of, and no
filings and registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by the Guarantor
of this Agreement or for the validity or enforceability hereof.
Section 4. Covenants. The Guarantor agrees that, until the payment and
satisfaction in full of the Guaranteed Obligations:
4.01 Litigation. The Guarantor will promptly give to the Bank notice of all
legal or arbitral proceedings, and of all proceedings by or before any
governmental or regulatory authority or agency, affecting the Guarantor, except
proceedings which, if adversely determined, would not have a material adverse
effect on the financial condition, operations, business or prospects of the
Guarantor.
4.02 Corporate Existence, Etc. The Guarantor will preserve and maintain its
corporate existence and all of its material rights, privileges and franchises;
comply with the requirements of all applicable laws, rules, regulations and
orders of governmental or regulatory authorities if failure to comply with such
requirements would materially and adversely affect the financial condition,
operations, business or prospects taken as a whole of the Guarantor; pay and
discharge all taxes, assessments and governmental charges or levies imposed on
it or on its income or profits or on any of its property prior to the date on
which penalties attach thereto, except for any such tax, assessment, charge or
levy the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained;
ACS GUARANTEE
<PAGE>
- 5 -
maintain all of its properties used or useful in its business in good working
order and condition, ordinary wear and tear excepted; permit representatives of
the Bank, during normal business hours, to examine, copy and make extracts from
its books and records, to inspect its properties, and to discuss its business
and affairs with its officers, all to the extent reasonably requested by the
Bank; and keep insured by financially sound and reputable insurers all property
of a character usually insured by corporations engaged in the same or similar
business similarly situated against loss or damage of the kinds and in the
amounts customarily insured against by such corporations and carry such other
insurance as is usually carried by such corporations.
Section 5. Miscellaneous.
5.01 No Waiver. No failure on the part of the Bank or any of its agents to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Bank or any of its agents of any
right, power or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies herein are
cumulative and are not exclusive of any remedies provided by law.
5.02 Governing Law; Submission to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
The Guarantor hereby submits to the nonexclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New York
State Court sitting in New York City for the purposes of all legal proceedings
arising out of or relating to this Agreement or the transactions contemplated
hereby. The Guarantor irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
5.03 Notices. All notices, requests, consents and demands hereunder shall
be in writing and telexed, telecopied, telegraphed, cabled or delivered to the
intended recipient at its or their address or telex number specified beneath its
or their signature hereto or, at such other telex number or address as shall be
designated by either party in a notice to the other party, and shall be deemed
to have been given when transmitted by telex or telecopier, delivered to the
telegraph or cable office or personally delivered or, in the case of a mailed
notice, 5 Business Days after the date deposited in the mails, postage prepaid,
in each case given or addressed as aforesaid.
5.04 Amendments, etc. The terms of this Agreement may be waived, altered or
amended only by an instrument in writing duly executed by the Guarantor and the
Bank. Any such amendment or waiver shall be binding upon the Bank, each holder
of any of the Guaranteed Obligations and the Guarantor.
ACS GUARANTEE
<PAGE>
- 6 -
5.05 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of the Guarantor, the
Bank and each holder of any of the Guaranteed Obligations (provided, however,
that the Guarantor shall not assign or transfer its rights hereunder without the
prior written consent of the Bank).
5.06 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one and the same instrument
and any of the parties hereto may execute this Agreement by signing any such
counterpart.
----------
ACS GUARANTEE
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Guarantee Agreement
to be duly executed as of the day and year first above written.
AC SERVICES, INC.
By
-----------------------------------
Name:
Title:
Address for Notices:
1372 Broadway - 2nd Floor
New York, NY 10018
Telecopy: (212) 245-7724
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, NEW YORK BRANCH
By
-----------------------------------
Name:
Title:
Address for Notices:
140 Broadway
New York, NY 10005
Telecopy: (212) 658-2813
<PAGE>
EXHIBIT C-2
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT dated as of September 20, 1996 between CYGNE TW INC., a
Delaware corporation (the "Guarantor"), and THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, a foreign banking corporation acting through its New York
Branch (the "Bank").
Cygne Designs, Inc., a Delaware corporation (the "Company"), and the Bank
are parties to that certain Amended and Restated Credit Agreement dated as of
September 20, 1996 (as modified and supplemented and in effect from time to
time, the "Credit Agreement"), providing, subject to the terms and conditions
thereof, for extensions of credit (by issuing letters of credit and making
loans) to be made by the Bank to the Company in an aggregate face or principal
amount not exceeding $17,500,000.
To induce the Bank to enter into the Credit Agreement and to extend credit
thereunder, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantor has agreed (to the
extent hereinafter provided) to guarantee the Guaranteed Obligations (as
hereinafter defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. Unless otherwise defined, terms defined in the
Credit Agreement are used herein as defined therein. In addition, as used
herein:
"Guaranteed Obligations" shall mean the obligations of the Company
(including obligations to pay principal of and interest on Loans and to pay
Reimbursement Obligations), whenever arising, under the Credit Agreement, the
Notes and the Security Documents.
Section 2. The Guarantee.
2.01 Guarantee. The Guarantor hereby guarantees to the Bank and its
successors and assigns the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the Guaranteed Obligations, in each
case strictly in accordance with the terms thereof. The Guarantor hereby further
agrees that if any of the Guaranteed Obligations are not paid in full when due
(whether at stated maturity, by acceleration or otherwise), the Guarantor will
promptly pay the same, without any demand or notice whatsoever, and that in the
case of any extension of time of payment or renewal of any of the Guaranteed
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, by acceleration or otherwise) in accordance with the terms of
such extension or renewal.
<PAGE>
- 2 -
2.02 Obligations Unconditional. The obligations of the Guarantor under
Section 2.01 hereof are absolute and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of the Credit Agreement, the
Notes or any other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever which might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 2.02 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and all
circumstances. Without limiting the generality of the foregoing, it is agreed
that the occurrence of any one or more of the following shall not affect the
liability of the Guarantor hereunder:
(i) at any time or from time to time, without notice to the Guarantor,
the time for any performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the provisions of the Credit
Agreement, any Note or any other agreement or instrument referred to herein
or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Credit
Agreement, any Note or any other agreement or instrument referred to herein
or therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of, the
Bank as security for any of the Guaranteed Obligations shall fail to be
perfected.
The Guarantor hereby expressly waives diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Bank exhaust
any right, power or remedy or proceed against any Person under the Credit
Agreement, any Note or any other agreement or instrument referred to herein or
therein, or against any other Person under any other guarantee of, or security
for, any of the Guaranteed Obligations.
2.03 Reinstatement. The obligations of the Guarantor under this Section 2
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of any Person in respect of the Guaranteed Obligations
is rescinded or must be otherwise restored by any holder of any of the
Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise and the Guarantor agrees that it will indemnify the
CTW GUARANTEE
<PAGE>
- 3 -
Bank on demand for all reasonable costs and expenses (including, without
limitation, fees of counsel) incurred by the Bank in connection with such
rescission or restoration.
2.04 Subrogation. The Guarantor hereby agrees that until the payment and
satisfaction in full of all Guaranteed Obligations it shall not exercise any
right or remedy arising by reason of any performance by it of its guarantee in
Section 2.01 hereof, whether by subrogation or otherwise, against any Person or
any other guarantor of any of the Guaranteed Obligations or any security for any
of the Guaranteed Obligations.
2.05 Remedies. The Guarantor agrees that, as between the Guarantor and the
Bank, the Guaranteed Obligations may be declared to be forthwith due and payable
as provided in Section 9 of the Credit Agreement (and shall be deemed to have
become automatically due and payable in the circumstances provided in said
Section 9) for purposes of Section 2.01 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such obligations
from becoming automatically due and payable) as against any Person and that, in
the event of such declaration (or such obligations being deemed to have become
automatically due and payable), such Guaranteed Obligations (whether or not due
and payable by any Person) shall forthwith become due and payable by the
Guarantor for purposes of said Section 2.01.
2.06 Continuing Guarantee. The guarantee in this Section 2 is a continuing
guarantee, and shall apply to all Guaranteed Obligations whenever arising.
Section 3. Representations and Warranties. The Guarantor represents and
warrants to the Bank that:
3.01 Corporate Existence. The Guarantor is a corporation duly organized and
validly existing under the laws of the jurisdiction of its incorporation; has
all requisite corporate power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; and is qualified to do
business in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify would have
a material adverse effect on its financial condition, operations, business or
prospects.
3.02 Litigation. Except as disclosed to the Bank in writing prior to the
date of this Agreement, there are no legal or arbitral proceedings or any
proceedings by or before any governmental or regulatory authority or agency, now
pending or (to the knowledge of the Guarantor) threatened against the Guarantor
which, if adversely determined, could have a material adverse effect on the
financial condition, operations, business or prospects of the Guarantor.
3.02 No Breach. None of the execution and delivery of this Agreement, the
consummation of the transactions herein contemplated or compliance with the
terms and
CTW GUARANTEE
<PAGE>
- 4 -
provisions hereof will conflict with or result in a breach of, or require any
consent under, the charter or by-laws of the Guarantor, or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which the
Guarantor is a party or by which it is bound or to which it is subject, or
constitute a default under any such agreement or instrument, or result in the
creation or imposition of any Lien upon any of the revenues or assets of the
Guarantor pursuant to the terms of any such agreement or instrument.
3.04 Corporate Action. The Guarantor has all necessary corporate power and
authority to execute, deliver and perform its obligations under this Agreement;
the execution, delivery and performance by the Guarantor of this Agreement have
been duly authorized by all necessary corporate action on its part; and this
Agreement has been duly and validly executed and delivered by the Guarantor and
constitutes its legal, valid and binding obligation, enforceable in accordance
with its terms, except to the extent that enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally, and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
3.05 Approvals. No authorizations, approvals and consents of, and no
filings and registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by the Guarantor
of this Agreement or for the validity or enforceability hereof.
Section 4. Covenants. The Guarantor agrees that, until the payment and
satisfaction in full of the Guaranteed Obligations:
4.01 Litigation. The Guarantor will promptly give to the Bank notice of all
legal or arbitral proceedings, and of all proceedings by or before any
governmental or regulatory authority or agency, affecting the Guarantor, except
proceedings which, if adversely determined, would not have a material adverse
effect on the financial condition, operations, business or prospects of the
Guarantor.
4.02 Corporate Existence, Etc. The Guarantor will preserve and maintain its
corporate existence and all of its material rights, privileges and franchises;
comply with the requirements of all applicable laws, rules, regulations and
orders of governmental or regulatory authorities if failure to comply with such
requirements would materially and adversely affect the financial condition,
operations, business or prospects taken as a whole of the Guarantor; pay and
discharge all taxes, assessments and governmental charges or levies imposed on
it or on its income or profits or on any of its property prior to the date on
which penalties attach thereto, except for any such tax, assessment, charge or
levy the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained;
CTW GUARANTEE
<PAGE>
- 5 -
maintain all of its properties used or useful in its business in good working
order and condition, ordinary wear and tear excepted; permit representatives of
the Bank, during normal business hours, to examine, copy and make extracts from
its books and records, to inspect its properties, and to discuss its business
and affairs with its officers, all to the extent reasonably requested by the
Bank; and keep insured by financially sound and reputable insurers all property
of a character usually insured by corporations engaged in the same or similar
business similarly situated against loss or damage of the kinds and in the
amounts customarily insured against by such corporations and carry such other
insurance as is usually carried by such corporations.
Section 5. Miscellaneous.
5.01 No Waiver. No failure on the part of the Bank or any of its agents to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Bank or any of its agents of any
right, power or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies herein are
cumulative and are not exclusive of any remedies provided by law.
5.02 Governing Law; Submission to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
The Guarantor hereby submits to the nonexclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New York
State Court sitting in New York City for the purposes of all legal proceedings
arising out of or relating to this Agreement or the transactions contemplated
hereby. The Guarantor irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
5.03 Notices. All notices, requests, consents and demands hereunder shall
be in writing and telexed, telecopied, telegraphed, cabled or delivered to the
intended recipient at its or their address or telex number specified beneath its
or their signature hereto or, at such other telex number or address as shall be
designated by either party in a notice to the other party, and shall be deemed
to have been given when transmitted by telex or telecopier, delivered to the
telegraph or cable office or personally delivered or, in the case of a mailed
notice, 5 Business Days after the date deposited in the mails, postage prepaid,
in each case given or addressed as aforesaid.
5.04 Amendments, etc. The terms of this Agreement may be waived, altered or
amended only by an instrument in writing duly executed by the Guarantor and the
Bank. Any such amendment or waiver shall be binding upon the Bank, each holder
of any of the Guaranteed Obligations and the Guarantor.
CTW GUARANTEE
<PAGE>
- 6 -
5.05 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of the Guarantor, the
Bank and each holder of any of the Guaranteed Obligations (provided, however,
that the Guarantor shall not assign or transfer its rights hereunder without the
prior written consent of the Bank).
5.06 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one and the same instrument
and any of the parties hereto may execute this Agreement by signing any such
counterpart.
----------
CTW GUARANTEE
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Guarantee Agreement
to be duly executed as of the day and year first above written.
CYGNE TW INC.
By
-----------------------------------
Name:
Title:
Address for Notices:
1372 Broadway - 2nd Floor
New York, NY 10018
Telecopy: (212) 245-7724
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, NEW YORK BRANCH
By
-----------------------------------
Name:
Title:
Address for Notices:
140 Broadway
New York, NY 10005
Telecopy: (212) 658-2813
<PAGE>
EXHIBIT C-3
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT dated as of September 20, 1996 between CYGNE KNITS
LIMITED, a Delaware corporation (the "Guarantor"), and THE HONGKONG AND SHANGHAI
BANKING CORPORATION LIMITED, a foreign banking corporation acting through its
New York Branch (the "Bank").
Cygne Designs, Inc., a Delaware corporation (the "Company"), and the Bank
are parties to that certain Amended and Restated Credit Agreement dated as of
September 20, 1996 (as modified and supplemented and in effect from time to
time, the "Credit Agreement"), providing, subject to the terms and conditions
thereof, for extensions of credit (by issuing letters of credit and making
loans) to be made by the Bank to the Company in an aggregate face or principal
amount not exceeding $17,500,000.
To induce the Bank to enter into the Credit Agreement and to extend credit
thereunder, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantor has agreed (to the
extent hereinafter provided) to guarantee the Guaranteed Obligations (as
hereinafter defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. Unless otherwise defined, terms defined in the
Credit Agreement are used herein as defined therein. In addition, as used
herein:
"Guaranteed Obligations" shall mean the obligations of the Company
(including obligations to pay principal of and interest on Loans and to pay
Reimbursement Obligations), whenever arising, under the Credit Agreement, the
Notes and the Security Documents.
Section 2. The Guarantee.
2.01 Guarantee. The Guarantor hereby guarantees to the Bank and its
successors and assigns the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the Guaranteed Obligations, in each
case strictly in accordance with the terms thereof. The Guarantor hereby further
agrees that if any of the Guaranteed Obligations are not paid in full when due
(whether at stated maturity, by acceleration or otherwise), the Guarantor will
promptly pay the same, without any demand or notice whatsoever, and that in the
case of any extension of time of payment or renewal of any of the Guaranteed
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, by acceleration or otherwise) in accordance with the terms of
such extension or renewal.
<PAGE>
- 2 -
2.02 Obligations Unconditional. The obligations of the Guarantor under
Section 2.01 hereof are absolute and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of the Credit Agreement, the
Notes or any other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever which might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 2.02 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and all
circumstances. Without limiting the generality of the foregoing, it is agreed
that the occurrence of any one or more of the following shall not affect the
liability of the Guarantor hereunder:
(i) at any time or from time to time, without notice to the Guarantor,
the time for any performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the provisions of the Credit
Agreement, any Note or any other agreement or instrument referred to herein
or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Credit
Agreement, any Note or any other agreement or instrument referred to herein
or therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of, the
Bank as security for any of the Guaranteed Obligations shall fail to be
perfected.
The Guarantor hereby expressly waives diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Bank exhaust
any right, power or remedy or proceed against any Person under the Credit
Agreement, any Note or any other agreement or instrument referred to herein or
therein, or against any other Person under any other guarantee of, or security
for, any of the Guaranteed Obligations.
2.03 Reinstatement. The obligations of the Guarantor under this Section 2
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of any Person in respect of the Guaranteed Obligations
is rescinded or must be otherwise restored by any holder of any of the
Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise and the Guarantor agrees that it will indemnify the
KNITS GUARANTEE
<PAGE>
- 3 -
Bank on demand for all reasonable costs and expenses (including, without
limitation, fees of counsel) incurred by the Bank in connection with such
rescission or restoration.
2.04 Subrogation. The Guarantor hereby agrees that until the payment and
satisfaction in full of all Guaranteed Obligations it shall not exercise any
right or remedy arising by reason of any performance by it of its guarantee in
Section 2.01 hereof, whether by subrogation or otherwise, against any Person or
any other guarantor of any of the Guaranteed Obligations or any security for any
of the Guaranteed Obligations.
2.05 Remedies. The Guarantor agrees that, as between the Guarantor and the
Bank, the Guaranteed Obligations may be declared to be forthwith due and payable
as provided in Section 9 of the Credit Agreement (and shall be deemed to have
become automatically due and payable in the circumstances provided in said
Section 9) for purposes of Section 2.01 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such obligations
from becoming automatically due and payable) as against any Person and that, in
the event of such declaration (or such obligations being deemed to have become
automatically due and payable), such Guaranteed Obligations (whether or not due
and payable by any Person) shall forthwith become due and payable by the
Guarantor for purposes of said Section 2.01.
2.06 Continuing Guarantee. The guarantee in this Section 2 is a continuing
guarantee, and shall apply to all Guaranteed Obligations whenever arising.
Section 3. Representations and Warranties. The Guarantor represents and
warrants to the Bank that:
3.01 Corporate Existence. The Guarantor is a corporation duly organized and
validly existing under the laws of the jurisdiction of its incorporation; has
all requisite corporate power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; and is qualified to do
business in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify would have
a material adverse effect on its financial condition, operations, business or
prospects.
3.02 Litigation. Except as disclosed to the Bank in writing prior to the
date of this Agreement, there are no legal or arbitral proceedings or any
proceedings by or before any governmental or regulatory authority or agency, now
pending or (to the knowledge of the Guarantor) threatened against the Guarantor
which, if adversely determined, could have a material adverse effect on the
financial condition, operations, business or prospects of the Guarantor.
3.03 No Breach. None of the execution and delivery of this Agreement, the
consummation of the transactions herein contemplated or compliance with the
terms and
KNITS GUARANTEE
<PAGE>
- 4 -
provisions hereof will conflict with or result in a breach of, or require any
consent under, the charter or by-laws of the Guarantor, or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which the
Guarantor is a party or by which it is bound or to which it is subject, or
constitute a default under any such agreement or instrument, or result in the
creation or imposition of any Lien upon any of the revenues or assets of the
Guarantor pursuant to the terms of any such agreement or instrument.
3.04 Corporate Action. The Guarantor has all necessary corporate power and
authority to execute, deliver and perform its obligations under this Agreement;
the execution, delivery and performance by the Guarantor of this Agreement have
been duly authorized by all necessary corporate action on its part; and this
Agreement has been duly and validly executed and delivered by the Guarantor and
constitutes its legal, valid and binding obligation, enforceable in accordance
with its terms, except to the extent that enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally, and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
3.05 Approvals. No authorizations, approvals and consents of, and no
filings and registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by the Guarantor
of this Agreement or for the validity or enforceability hereof.
Section 4. Covenants. The Guarantor agrees that, until the payment and
satisfaction in full of the Guaranteed Obligations:
4.01 Litigation. The Guarantor will promptly give to the Bank notice of all
legal or arbitral proceedings, and of all proceedings by or before any
governmental or regulatory authority or agency, affecting the Guarantor, except
proceedings which, if adversely determined, would not have a material adverse
effect on the financial condition, operations, business or prospects of the
Guarantor.
4.02 Corporate Existence, Etc. The Guarantor will preserve and maintain its
corporate existence and all of its material rights, privileges and franchises;
comply with the requirements of all applicable laws, rules, regulations and
orders of governmental or regulatory authorities if failure to comply with such
requirements would materially and adversely affect the financial condition,
operations, business or prospects taken as a whole of the Guarantor; pay and
discharge all taxes, assessments and governmental charges or levies imposed on
it or on its income or profits or on any of its property prior to the date on
which penalties attach thereto, except for any such tax, assessment, charge or
levy the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained;
KNITS GUARANTEE
<PAGE>
- 5 -
maintain all of its properties used or useful in its business in good working
order and condition, ordinary wear and tear excepted; permit representatives of
the Bank, during normal business hours, to examine, copy and make extracts from
its books and records, to inspect its properties, and to discuss its business
and affairs with its officers, all to the extent reasonably requested by the
Bank; and keep insured by financially sound and reputable insurers all property
of a character usually insured by corporations engaged in the same or similar
business similarly situated against loss or damage of the kinds and in the
amounts customarily insured against by such corporations and carry such other
insurance as is usually carried by such corporations.
Section 5 Miscellaneous.
5.01 No Waiver. No failure on the part of the Bank or any of its agents to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Bank or any of its agents of any
right, power or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies herein are
cumulative and are not exclusive of any remedies provided by law.
5.02 Governing Law; Submission to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
The Guarantor hereby submits to the nonexclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New York
State Court sitting in New York City for the purposes of all legal proceedings
arising out of or relating to this Agreement or the transactions contemplated
hereby. The Guarantor irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
5.03 Notices. All notices, requests, consents and demands hereunder shall
be in writing and telexed, telecopied, telegraphed, cabled or delivered to the
intended recipient at its or their address or telex number specified beneath its
or their signature hereto or, at such other telex number or address as shall be
designated by either party in a notice to the other party, and shall be deemed
to have been given when transmitted by telex or telecopier, delivered to the
telegraph or cable office or personally delivered or, in the case of a mailed
notice, 5 Business Days after the date deposited in the mails, postage prepaid,
in each case given or addressed as aforesaid.
5.04 Amendments, etc. The terms of this Agreement may be waived, altered or
amended only by an instrument in writing duly executed by the Guarantor and the
Bank. Any such amendment or waiver shall be binding upon the Bank, each holder
of any of the Guaranteed Obligations and the Guarantor.
KNITS GUARANTEE
<PAGE>
- 6 -
5.05 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of the Guarantor, the
Bank and each holder of any of the Guaranteed Obligations (provided, however,
that the Guarantor shall not assign or transfer its rights hereunder without the
prior written consent of the Bank).
5.06 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one and the same instrument
and any of the parties hereto may execute this Agreement by signing any such
counterpart.
----------
KNITS GUARANTEE
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Guarantee Agreement
to be duly executed as of the day and year first above written.
CYGNE KNITS LIMITED
By
-----------------------------------
Name:
Title:
Address for Notices:
1372 Broadway - 2nd Floor
New York, NY 10018
Telecopy:
Telex:
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, NEW YORK BRANCH
By
-----------------------------------
Name:
Title:
Address for Notices:
140 Broadway
New York, NY 10005
Telecopy:
Telex:
<PAGE>
EXHIBIT D
LETTER OF NEGATIVE PLEDGE
The Hongkong and Shanghai Banking Corporation Limited
140 Broadway
New York, NY 10005-1196
Re: Credit Agreement dated as of September 20, 1996
with Cygne Designs, Inc. (the "Company") up to an
aggregate amount of $17,500,000
-------------------------------------------------
Dear Sir/Madam:
In consideration of your agreeing to grant, continue and/or further extend
credit facilities and other financial accommodation to the Company, the Company
hereby irrevocably and unconditionally covenants and undertakes with you as
follows:
1. The Company shall not, nor will it permit any of its Subsidiaries to:
a. Create or attempt to create, assume or permit to subsist any mortgage,
security interest, charge, pledge, lien, or other encumbrance upon, or
permit any lien, security interest or other encumbrance (except for
statutory or constitutional liens arising in the ordinary course of
business with respect to any obligation or indebtedness which is not
yet due and payable) to arise on or affect, the whole or any part of
its respective undertaking, property, assets and rights, other than
pledges created over goods and/or services acquired pursuant to
documentary credits opened in the ordinary course of business for the
purpose of financing the acquisition or provision of such goods and
services; or
b. Transfer, sell or otherwise dispose of or attempt or agree to
transfer, sell or dispose of the whole or any part of its respective
undertaking, property, assets and rights, except by way of sale at
full value in the usual and ordinary course of business as now
conducted and for the purpose of carrying on the relevant business; or
c. Grant, issue or extend any guarantee or indemnity or enter into any
other form of contractual undertaking or arrangement of similar effect
in respect of any indebtedness or obligations, actual or continent, of
any other Person whatsoever except in the usual and ordinary course of
business as now conducted by the Company and its Subsidiaries and for
the purpose of the carrying on by the Company or the relevant
Subsidiary of its business.
<PAGE>
Letter of Negative Pledge
Page 2
2. The undertakings set out herein shall not be deemed breached by reason only
of the existence of any mortgage, security interest, charge, pledge, lien
or other encumbrance or guarantee or indemnity which has been created,
assumed or which subsists or has arisen prior to the date hereof, provided,
that any further or additional encumbrance over or affecting the relevant
asset, or increase in the amount secured by or other variation of the
relevant encumbrance or guarantee or indemnity of similar effect, shall
constitute such a breach.
3. The Company further authorizes you, in your absolute discretion, at any
time and from time to time to notify any creditors of the Company and its
Subsidiaries of the terms of the undertakings set out herein in the event
that you receive notice of proposals which, if implemented, would or might
be in breach of such undertakings.
Yours faithfully,
CYGNE DESIGNS, INC.
By
---------------------------------
Name:
Title:
Date: As of September 20, 1996
<PAGE>
EXHIBIT E
ESCROW AGREEMENT
ESCROW AGREEMENT dated as of September 20, 1996 by and among CYGNE DESIGNS,
INC., a Delaware corporation ("CDI"), and Cygne Group (F.E.) Limited, a Hong
Kong corporation ("CGFE" and, together with CDI, the "Company"), THE HONGKONG
AND SHANGHAI BANKING CORPORATION LIMITED, a foreign banking corporation acting
through its New York Branch (the "Bank"), and MARINE MIDLAND BANK, a banking
corporation and trust company organized and existing under the laws of the State
of New York, as the escrow agent hereunder (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company and the Bank are parties to an Amended and Restated
Credit Agreement dated as of September 20, 1996 (as modified and supplemented
and in effect from time to time, the "Credit Agreement"), providing, subject to
the terms and conditions thereof, for extensions of credit (by issuing letters
of credit and making loans) to be made by the Bank to the Company in an
aggregate face or principal amount not exceeding $17,500,000;
WHEREAS, the Credit Agreement provides for the Company (i) to grant a first
priority perfected pledge and security interest to the Bank under the Security
Agreement (as defined in the Credit Agreement) with respect to all of the
validly issued, fully paid and nonassessable shares of common stock of AnnTaylor
Stores Corporation ("ATSC"), par value $0.0068 per share (the "ATSC Shares"),
received by the Company in connection with the Stock and Asset Purchase
Agreement (as defined in the Credit Agreement), (ii) to effect the sale,
assignment and transfer from time to time of the ATSC Shares through an escrow
account maintained with the Escrow Agent in accordance with the terms and
conditions thereof and (iii) to cause the Escrow Agent to remit all proceeds
relating to each such sale, assignment and transfer of ATSC Shares (the
"Proceeds") directly to the Collateral Account (as defined in the Credit
Agreement); and
WHEREAS, the Company and the Bank desire to appoint Marine Midland Bank as
the Escrow Agent, and Marine Midland Bank is willing to act as the Escrow Agent
hereunder, in accordance with the terms and conditions hereof;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
Section 1. Definitions. Unless otherwise defined herein, terms defined in
the Credit Agreement are used herein as defined therein.
Section 2. Establishment of Escrow Account. The ATSC Shares delivered by
the Bank shall be accepted by the Escrow Agent and placed into an account with
the Escrow
<PAGE>
- 2 -
Agent in the name of the Bank (the "Escrow Account") to be held and administered
in accordance with the terms and conditions hereof.
Section 3. Establishment of Brokerage Account. The ATSC Shares shall be
sold, assigned and transferred pursuant to instructions delivered by the Bank to
the Escrow Agent from time to time in accordance with the terms and conditions
hereof through an account in the name of the Escrow Agent (the "Brokerage
Account") at a Specified Broker (as defined below). The instructions delivered
by the Bank to the Escrow Agent shall be based upon instructions provided to the
Bank by the Company, which instructions shall specify the number of shares to be
sold, the Specified Broker through which the shares are to be sold and any
pricing limitations. The Escrow Agent shall deliver a certificate or
certificates representing the appropriate number of ATSC Shares to be sold,
assigned and transferred to the Specified Broker set forth in the sale
instructions of the Company provided to the Bank, against payment on the
settlement date of each respective sale, assignment and transfer. For purposes
hereof, "Specified Broker" shall mean Bear, Stearns & Co, Inc., Donaldson Lufkin
& Jenrette Securities Corporation, J.P. Morgan & Co. and Lehman Brothers Inc.
Section 4. Notice of Pledge and Assignment. The Company and the Bank hereby
notify the Escrow Agent that (i) the Company has pledged and granted to the Bank
under the Security Agreement a first priority perfected pledge and security
interest in all of the ATSC Shares owned by the Company and the proceeds thereof
and (ii) the Company has assigned to the Bank the Registration Rights (as
defined in the Assignment dated as of September 20, 1996 made by the Company in
favor of the Bank) of the Company relating to the ATSC Shares as provided in the
Stockholders Agreement. The Escrow Agent hereby acknowledges such pledge and
security interest and such assignment, and shall, at the request of the Bank,
deliver to the Bank the certificate or certificates evidencing the number of
ATSC Shares than remaining in the Escrow Account.
Section 5. Sale of ATSC Shares; Proceeds. The Company hereby requests the
Bank to instruct the Escrow Agent to sell, assign and transfer the ATSC Shares,
and remit the Proceeds, in accordance with the provisions set forth below:
(a) The Company shall deliver notice to the Escrow Agent and the Bank
that the shelf registration filed by ATSC with the Securities Exchange
Commission with respect to the ATSC Shares shall have been declared
effective, which notice shall include the effective date of such
registration (the "Effective Date");
(b) On the day the Company delivers the notice of the Effective Date,
and in the case of clause (z) of this Section 5(b), at such other times as
it deems appropriate (but in no case more than once a week), and on each
day every two (2) weeks thereafter during the term of this Agreement, the
Company shall deliver to the Bank a report, certified by the chief
financial officer of the Company (the "Obligations Report"), setting forth
(i) the obligations of the Company under the Credit Agreement, either then
outstanding or to become due and payable within the immediately succeeding
two (2) week period, and (ii) the number of ATSC Shares, if any, to be
sold, assigned and transferred hereunder to
ESCROW AGREEMENT
<PAGE>
- 3 -
permit the Company (x) to pay to the Bank, and to provide to the Bank
collateral security therefor, the face or principal amount of such
obligations, including any interest thereon, described in clause (i) above,
(y) to comply with the mandatory prepayment obligations of the Company
under the Credit Agreement (together with the amount described in clause
(x) above, the "Required Collateral Balance"), and (z) to increase the
balance in the Collateral Account (the "Cash Collateral Balance");
(c) After the receipt by the Bank of the notice of the Effective Date,
and upon receipt of each Obligations Report, the Bank shall instruct the
Escrow Agent, in accordance with Section 3 hereof, (i) to deliver to the
Specified Broker such certificate or certificates evidencing the number of
ATSC Shares equal to or greater than, after disposition and net of related
costs, (A) the difference between the Required Collateral Balance and the
Cash Collateral Balance pursuant to Sections 5(b)(x) and (y) above, and (B)
the amount of the increase, if any, in the Cash Collateral Balance pursuant
to Section 5(b)(z) above, but in no event shall the number of shares or
clauses (A) and (B) be in excess of two percent (2%) of the then
outstanding shares of common stock of ATSC with respect to any two (2) week
period, and (ii) to instruct the Specified Broker to execute through the
Brokerage Account from time to time the sale, assignment and transfer of
such ATSC Shares at the best market price then available;
(d) Upon receipt thereof from the Specified Broker, the Escrow Agent
shall remit all Proceeds directly to the Collateral Account; and
(e) If the Company shall fail in any event to notify the Escrow Agent
in a timely fashion with respect to any notice required hereunder, the Bank
shall effect such notice.
Section 6. Instructions as to Certain Conditions. With respect to each
sale, assignment and transfer of ATSC Shares hereunder, the Escrow Agent is
hereby instructed to instruct the Specified Broker, that (i) no sale, assignment
and transfer of ATSC Shares may knowingly be made to any person who beneficially
owns in excess of five percent (5%) of the then outstanding shares of common
stock of ATSC and (ii) no sale, assignment and transfer of more than two percent
(2%) of the then outstanding shares of common stock of ATSC may knowingly be
made to a single purchaser (or group of related purchasers).
Section 7. Termination of Escrow Agreement. Upon the receipt of written
notice from the Bank that the obligations of the Company to the Bank under the
Credit Agreement and the Notes have been paid in full, the Commitments have
expired or been terminated, and the Letters of Credit and the Standby Letters of
Credit have expired or been terminated, (i) the Escrow Agent shall deliver to
the Bank the certificate or certificates evidencing the number of ATSC Shares
then remaining in the Escrow Account, and (ii) the Escrow Account shall be
deemed dissolved and this Escrow Agreement terminated.
Section 8. Commercially Reasonable Manner. The Company acknowledges that
the sale, assignment and transfer of ATSC Shares hereunder may or may not be
made at the highest possible price available during the term of this Agreement,
but agrees that any such
ESCROW AGREEMENT
<PAGE>
- 4 -
transaction and the actions of the parties hereunder shall be deemed to have
been made in a commercially reasonable manner.
Section 9. Escrow Agent. The Company agrees to pay the Escrow Agent the
compensation, pursuant to separate letter agreement between them, promptly upon
request therefor, and to reimburse the Escrow Agent for all reasonable expenses
or disbursements incurred by the Escrow Agent in the performance of its duties
hereunder, including reasonable fees, expenses and disbursements of counsel to
the Escrow Agent. The Escrow Agent shall have a lien upon the Escrow Account for
its costs, expenses and fees which may arise hereunder and may retain that
portion of the Escrow Account equal to such unpaid amounts, until all such
costs, expenses and fees have been paid.
Section 10. Rights, Duties and Immunities of Escrow Agent. Acceptance by
the Escrow Agent of its duties under this Escrow Agreement is subject to the
following terms and conditions, which all parties hereto hereby agree shall
govern and control the rights, duties and immunities of the Escrow Agent.
(a) The duties and obligations of the Escrow Agent shall be determined
solely by the express provisions hereof and the Escrow Agent shall not be
liable except for the performance of such duties and obligations as are
specifically set out herein. This Escrow Agreement shall not be deemed to
create a fiduciary relationship between the parties hereto under state or
federal law.
(b) The Escrow Agent shall not be responsible in any manner for the
validity or sufficiency of any property delivered hereunder, or for the
value or collectability of any note, check or other instrument so
delivered, or for any representations made or obligations assumed by any
party other than the Escrow Agent. Nothing herein contained shall be deemed
to obligate the Escrow Agent to deliver any cash, instruments, documents or
any other property referred to herein, unless the same shall have first
been received by the Escrow Agent pursuant to this Escrow Agreement.
(c) The Company shall reimburse and indemnify the Escrow Agent for,
and hold it harmless against, any loss, liability or expense, including but
not limited to counsel fees, incurred without bad faith or willful
misconduct on the part of the Escrow Agent arising out of or in conjunction
with its acceptance, or the performance, of its duties and obligations
hereunder as well as the costs and expenses of defending against any claim
or liability arising out of or relating to this Escrow Agreement.
(d) The Escrow Agent shall be fully protected in acting on and relying
upon any written notice, direction, request, waiver, consent, receipt or
other paper or document which the Escrow Agent in good faith believes to
have been signed and presented by the proper party or parties.
ESCROW AGREEMENT
<PAGE>
- 5 -
(e) The Escrow Agent shall not be liable for any (i) error of
judgment, (ii) act done or step taken or omitted by it in good faith, (iii)
mistake in act or law, or (iv) action taken or refrained from in connection
herewith, except its own willful misconduct.
(f) The Escrow Agent may seek the advice of legal counsel in the event
of any dispute or question as to the construction of any provision hereof
or its duties hereunder, and it shall incur no liability and shall be fully
protected in respect of any action taken, omitted or suffered by it in good
faith in accordance with the opinion of such counsel.
(g) The agreements set forth in this Section 10 shall survive the
termination hereof and the payment of all amounts hereunder.
Section 11. Resignation of Escrow Agent. The Escrow Agent shall have the
right to resign upon thirty (30) days written notice to the Company and the
Bank. In the event of such resignation, the Bank shall appoint a successor
escrow agent hereunder by delivering to the Escrow Agent a written notice of
such appointment. Upon receipt of such notice, the Escrow Agent shall deliver to
the designated successor escrow agent all money and other property held
hereunder and shall thereupon be released and discharged from any and all
further responsibilities whatsoever hereunder; provided, however, that the
Escrow Agent shall not be deprived of its compensation earned prior to such
time. If no successor escrow agent shall have been designated by the date
specified in the notice of the Escrow Agent, all obligations of the Escrow Agent
hereunder shall nevertheless cease and terminate. Its sole responsibility
thereafter shall be to keep safely all property then held by it and to deliver
the same to the Bank.
Section 12. Notices. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made in writing and
telecopied, telegraphed, cabled, mailed or delivered, addressed to the parties
at the addresses set forth herein or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopier, delivered to the telegraph
or cable office or personally delivered or, in the case of a mailed notice, 5
Business Days after the date deposited in the mails, postage prepaid, in each
case given or addressed as aforesaid.
Section 13. Successors and Assigns; Assignment. This Escrow Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Section 14. Amendments, Etc. Any provision hereof may be amended or
modified only by an instrument in writing signed by each of the parties hereto.
Section 15. Governing Law; Submission to Jurisdiction. This Escrow
Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York applicable to contracts to be performed
entirely within the State of New York, without reference to or application of
rules or principles of conflicts of law. Each of the parties hereto
ESCROW AGREEMENT
<PAGE>
- 6 -
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York State Court
sitting in New York City for the purposes of all legal proceedings arising out
of or relating to this Agreement or the transactions contemplated hereby. Each
of the parties hereto irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
Section 16. Captions. The captions and section headings contained in this
Escrow Agreement are included solely for convenience or reference and shall not
affect the meaning or interpretation of any provision hereof.
Section 17. Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Escrow
Agreement.
Section 18. Counterparts. This Escrow Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Escrow Agreement
by signing any such counterpart.
Section 19. Severability. If any provision hereof is invalid and
unenforceable in any applicable jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in favor of the
Bank in order to carry out the intentions of the parties hereto as nearly as may
be possible and (ii) the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
----------
ESCROW AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be duly executed as of the day and year first above written.
CYGNE DESIGNS, INC.
By
-----------------------------------
Name:
Title:
Address for Notices:
1372 Broadway - 2nd Floor
New York, NY 10018
CYGNE GROUP (F.E.) LIMITED
By
-----------------------------------
Name:
Title:
Address for Notices:
1372 Broadway - 2nd Floor
New York, NY 10018
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, NEW YORK BRANCH
By
-----------------------------------
Name:
Title:
Address for Notices:
140 Broadway
New York, NY 10005
Attention: NYK CBU TRS
MARINE MIDLAND BANK, as Escrow Agent
By
-----------------------------------
Name:
Title:
Address for Notices:
Corporate Trust Services
140 Broadway - 12th Floor
New York, NY 10005-1180
<PAGE>
ESCROW AGREEMENT
EXHIBIT F
ASSIGNMENT OF REGISTRATION RIGHTS
ASSIGNMENT dated as of September 20, 1996 between CYGNE DESIGNS, INC., a
Delaware corporation having an office at 1372 Broadway, New York, NY 10018
("CDI"), and CYGNE GROUP (F.E.) LIMITED, a Hong Kong corporation ("CGFE" and,
together with CDI, hereinafter referred to as the "Assignor"), and THE HONGKONG
AND SHANGHAI BANKING CORPORATION LIMITED, a foreign banking corporation acting
through its New York Branch (the "Assignee").
W I T N E S S E T H :
WHEREAS, the Assignor and the Assignee are parties to an Amended and
Restated Credit Agreement dated as of September 20, 1996 (as modified and
supplemented and in effect from time to time, the "Credit Agreement"),
providing, subject to the terms and conditions thereof, for extensions of credit
(by issuing letters of credit and making loans) to be made by the Assignee to
the Assignor in an aggregate face or principal amount not exceeding $17,500,000;
WHEREAS, the Credit Agreement provides for the Assignor (i) to grant a
first priority perfected pledge and security interest under the Security
Agreement (as defined in the Credit Agreement) with respect to all of the
validly issued, fully paid and nonassessable shares of common stock of AnnTaylor
Stores Corporation ("ATSC"), par value $0.0068 per share (the "ATSC Shares"),
received by the Assignor in connection with the Stock and Asset Purchase
Agreement (as defined in the Credit Agreement), and (ii) to assign to the
Assignee all rights relating to the registration by ATSC of the ATSC Shares with
the Securities and Exchange Commission as provided in the Stockholders Agreement
(as defined in the Credit Agreement);
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
Section 1. Definitions. Unless otherwise defined herein, terms defined in
the Credit Agreement are used herein as defined therein.
Section 2. Assignment. The Assignor does hereby assign, transfer and set
over unto the Assignee all the Assignor's rights and interests, but not any of
its obligations, with respect to the registration by ATSC of the ATSC Shares
with the Securities and Exchange Commission under the Stockholders Agreement
(the "Registration Rights"), including without limitation, the rights of the
Assignor to cause ATSC to file a registration statement under the Securities Act
of 1933, as amended; provided, the Assignee shall comply with applicable
transfer
<PAGE>
- 2 -
restrictions set forth in the Stockholders Agreement. The Assignee hereby
accepts such assignment.
Section 3. (a) Liabilities of the Assignor. It is expressly agreed that,
anything herein contained to the contrary notwithstanding:
(1) The Assignor shall at all times remain liable to ATSC under the
Stockholders Agreement to perform all duties and obligations of the Holder
(as defined in the Stockholders Agreement) thereunder to the same extent as
if this Assignment had not been executed, including, without limitation,
the Assignor's obligations with respect to compliance with applicable
Federal and state securities law and the indemnification provisions set
forth in Section 2.06(b) of the Stockholders Agreement.
(2) The exercise by the Assignee of any right assigned hereunder shall
not release the Assignor from any of its duties or obligations to ATSC
under the Stockholders Agreement.
(3) The Assignee shall have no obligation or liability under the
Stockholders Agreement by reason of or arising out of this Assignment nor
shall the Assignee be obligated to perform any of the obligations or duties
of the Assignor under the Stockholders Agreement or to present or file any
claim or to take any other action to collect or enforce any claim with
respect to any rights assigned hereunder.
(b) Indemnification Limitation. It is expressly agreed that, anything
herein contained to the contrary notwithstanding, Assignee shall have no right
to indemnification from Assignor in respect of the failure of Assignee to meet
its obligations under applicable Federal and state securities law.
Section 4. Further Assurances. The Assignor agrees that at any time and
from time to time upon the written request of the Assignee, the Assignor will
promptly and duly execute and deliver such further documents and take such
further actions as the Assignee may reasonably request in order to obtain the
full benefits of this Assignment and of the rights and powers granted herein.
Section 5. Events of Default. Effective from and after the time, if any,
that an Event of Default shall occur or be continuing, and until such time as
such Event of Default shall no longer be continuing, the Assignor does hereby
constitute the Assignee, its successors and assigns, the Assignor's true and
lawful attorney-in-fact irrevocably, with full power (in the name of the
Assignor or otherwise), at the sole cost and expense of the Assignor, to assert
and enforce whatever claims and rights the Assignee may have under or arising
out of the
ASSIGNMENT
<PAGE>
- 3 -
Stockholders Agreement with respect to the Registration Rights and, for such
period as the Assignee may exercise rights with respect thereto under this
Assignment, to file any claims or take any actions or institute (or, if
previously commenced, assume control of) any proceedings and to obtain any
recovery in connection therewith which the Assignee may deem to be necessary or
advisable with respect to such claims and rights.
Section 6. Representations and Warranties. The Assignor hereby represents
and warrants to the Assignee that:
(a) The Stockholders Agreement is in full force and effect and is
enforceable in accordance with its terms, except as such enforceability may
be limited by (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general applicability affecting the enforcement of
creditors' rights and (ii) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(b) The Assignor is not in default under the Stockholders Agreement.
(c) The Assignor has received all necessary consents to the assignment
and transfer contemplated herein and such consents are in full force and
effect.
(d) The Assignor has not assigned or pledged, and hereby covenants
that, so long as this Assignment shall remain in effect, it will not assign
or pledge the whole or any part of the rights assigned hereby to anyone
other than the Assignee.
Section 7. Notices. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made in writing and
telecopied, telegraphed, cabled, mailed or delivered, addressed to the parties
at the addresses set forth herein or, as to either party, at such other address
as shall be designated by such party in a notice to the other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopier, delivered to the telegraph
or cable office or personally delivered or, in the case of a mailed notice, five
(5) Business Days after the date deposited in the mails, postage prepaid, in
each case given or addressed as aforesaid.
Section 8. Successors and Assigns; Assignment. This Assignment shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 9. Amendments, Etc. Any provision hereof may be amended or modified
only by an instrument in writing signed by each of the parties hereto.
ASSIGNMENT
<PAGE>
- 4 -
Section 10. Governing Law; Submission to Jurisdiction. This Assignment
shall be governed by, and construed and enforced in accordance with, the laws of
the State of New York applicable to contracts to be performed entirely within
the State of New York, without reference to or application of rules or
principles of conflicts of law. Each of the parties hereto hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State Court sitting in New York City
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each of the parties hereto
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
Section 11. Captions. The captions and section headings contained in this
Assignment are included solely for convenience or reference and shall not affect
the meaning or interpretation of any provision hereof.
Section 12. Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Assignment.
Section 13. Counterparts. This Assignment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Assignment by signing
any such counterpart.
Section 14. Severability. If any provision hereof is invalid and
unenforceable in any applicable jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in favor of the
Bank in order to carry out the intentions of the parties hereto as nearly as may
be possible and (ii) the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
----------
ASSIGNMENT
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be
duly executed as of the day and year first above written.
CYGNE DESIGNS, INC.
By_____________________
Name:
Title:
Address for Notices:
1372 Broadway - 2nd Floor
New York, NY 10018
CYGNE GROUP (F.E.) LIMITED
By_____________________
Name:
Title:
Address for Notices:
c/o Cygne Designs, Inc.
1372 Broadway - 2nd Floor
New York, NY 10018
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, NEW YORK BRANCH
By_____________________
Name:
Title:
Address for Notices:
140 Broadway
New York, NY 10005
Attention: NYK CBU TRS
Acknowledged by:
ANNTAYLOR STORES CORPORATION
By_____________________
Name:
Title:
ASSIGNMENT
<PAGE>
EXHIBIT G
[Form of Borrowing Base Certificate]
BORROWING BASE CERTIFICATE
Monthly accounting period ended ___________, 19__
Reference is made to the Credit Agreement dated as of September 20, 1996
(as modified and supplemented and in effect from time to time, the "Credit
Agreement") between CYGNE DESIGNS, INC., a Delaware corporation, and THE
HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, a foreign banking corporation
acting through its New York Branch. Terms defined in the Credit Agreement are
used herein as defined therein.
Pursuant to Section [6.01(a)(xiii)/8.01(d)] of the Credit Agreement, the
undersigned, the Chief Financial Officer/Controller of the Company, hereby
certifies that, to the best of [his/her] knowledge, attached hereto as Annex 1
is a true and accurate calculation of the Borrowing Base as at the end of the
monthly accounting period ended ___________, 19___ determined in accordance with
the requirements of the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be duly
executed as of the ____ day of _______, 19___.
--------------------------------
Name:
Title:
<PAGE>
Annex 1
CYGNE DESIGNS, INC.
Borrowing Base Certificate
Omitted (000's)
Receivables (determined net of credits)
-- beginning balance period ended
______________, 19 _____ ............................. ______
Plus: total sales for period .......................... ______
Less: total cash receipts for period .................. ______
total other adjustments for period
(+/-) (details attached) including
rebates, offsets and commissions .............. ______
Receivables (determined net of credits)
-- ending balance period ending
_____________, 19 _____ .............................. ______
Less: ineligible Receivables at period end
(determined without duplication):
Receivables not payable in Dollars ..................... ______
Receivables over 90 days original terms ................ ______
Receivables due from an Affiliate or a Subsidiary ...... ______
Export Receivables, letters of credit or
U.S. Government Insurance ............................ ______
Receivables from creditors with
unsatisfactory credit standing (as
determined by the Bank) .............................. ______
Receivables over 90 days from invoice date ............. ______
Receivables with excess of 20% of balances
past 90 days from invoice date ....................... ______
Receivables subject to dispute ......................... ______
Receivables evidenced by Instruments
not in the possession of the Bank .................... ______
Receivables arising out of sale or
return transactions .................................. ______
Receivables from DIP creditors ......................... ______
Total ineligible Receivables ........................... ______
Total Eligible Receivables ............................. ______
- --------------------------
Inventory at lower of cost or market
covered by appropriate filings
(from attached schedule): ............................ ______
Beginning period Inventory Balance
____________, 19 _____ ............................... ______
Ending period Inventory Balance
____________, 19 _____ ............................... ______
Plus: Inventory held by Processors covered
by appropriate UCC filings .................... ______
Less: Inventory held more than ___ days ............... ______
Total Eligible Inventory ............................... ______
- -----------------------
<PAGE>
Borrowing Base Certificate (continued)
80% of Eligible Receivables ............................ ______
Plus: 50% of Eligible Inventory ....................... ______
(no more than $3,500,000)
Plus: 50% of the aggregate face amount of
all undrawn Letters of Credit ................... ______
Plus: 50% of the value of the ATSC Shares ............. ______
(no more than $12,000,000)
Less: 2 times average monthly commissions
to bailees, Processors, etc. .................... ______
Borrowing Base: ........................................ ______
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Loan Balance: Period begin ___________, 19 ___ ........ ______
advances for period ..................... ______
reductions for period ................... ______
other adjustments (+/-) ................. ______
Loan Balance: Period end __________, 19 ___ ........... ______
Plus: [Describe other obligations] .................... ______
Total outstanding ...................................... ______
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Availability (overadvance) ............................. ______
<PAGE>
CYGNE DESIGNS, INC.
Inventory Schedule
Unit
Cost
Quantity Cents/ Value Eligible
M Units Unit M$ M$
-------- ------ ----- -------
Finished Product Inventory
- --------------------------
Location/product/unit ..............
Total fin. prod. inv. ..............
Raw Material Inventory
- ----------------------
Location/product/unit ..............
Total raw material inv. ............
Inventory Value -- M$
- ---------------------
Finished product inventory .........
Raw materials inventory ............
<PAGE>
EXHIBIT H
[Form of Opinion of Counsel to the Obligors]
September __, 1996
The Hongkong and Shanghai Banking
Corporation Limited, New York Branch
140 Broadway
New York, NY 10005
Gentlemen:
We have acted as counsel to Cygne Designs, Inc. (the "Company") in
connection with the Credit Agreement (the "Credit Agreement") dated as of
September 20, 1996 between the Company and The Hongkong and Shanghai Banking
Corporation Limited, New York Branch (the "Bank"), providing for letters of
credit to be issued and loans to be made by the Bank in an aggregate face or
principal amount not exceeding $17,500,000. Terms defined in the Credit
Agreement are used herein as defined therein.
In rendering the opinion expressed below, we have examined the originals or
conformed copies of such corporate records, agreements and instruments of the
Company and its Subsidiaries, certificates of public officials and of officers
of the Company and its Subsidiaries, and such other documents and records, and
such matters of law, as we have deemed appropriate as a basis for the opinions
hereinafter expressed.
Based upon the foregoing, we are of the opinion that:
1. Each Obligor is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its organization
and has the necessary corporate power to execute, perform and deliver its
obligations under the Credit Documents to which it is a party. Further, the
Company has the necessary corporate power to open Letters of Credit for its
account, borrow Loans and refinance certain existing indebtedness under the
Credit Agreement. Each Obligor is duly qualified to transact business in
such jurisdictions where failure so to qualify would have a material
adverse effect on the financial condition, operations, business or
prospects of such Obligor.
<PAGE>
September 20, 1996
Page 2
2. The execution, delivery and performance by each Obligor of the
Credit Documents to which it is a party, and the borrowings by the Company
under the Credit Agreement, have been duly authorized by all necessary
corporate action, and do not and will not violate and provision of law or
regulation or any provision of the charter or by-laws of any Obligor or
result in the breach of, or constitute a default or require any consent
under, or (except for the Liens created pursuant to the Security Documents)
result in the creation of any lien upon any of the properties, revenues or
assets of any Obligor pursuant to, any indenture or other agreement or
instrument to which the Company or any Subsidiary is a party or by which
the Company or any Subsidiary or its assets may be bound.
3. The Credit Agreement and Security Documents (in the case of each
Obligor) constitute, and any Notes when executed and delivered for value
will constitute, legal, valid and binding obligations of the Company
enforceable in accordance with their respective terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law.)
4. There are no legal or arbitral proceedings, and no proceedings by
or before any governmental or regulatory authority or agency, pending or
(to our knowledge) threatened against or affecting the Company or any of
its Subsidiaries, or any properties or rights of the Company or any of its
Subsidiaries, which, if adversely determined, would have a material adverse
effect on the consolidated financial condition, operations, business or
prospects taken as a whole of the Company and its Consolidated
Subsidiaries.
5. No authorizations, consents, approvals, licenses, filings or
registrations with, any governmental or regulatory authority or agency are
required in connection with the execution, delivery or performance by any
Obligor of the Credit Documents to which it is a party, except the filings
and recordings of Liens to be created pursuant to the Security Documents.
6. The Security Agreement creates, in favor of the Bank, valid
security interests (to the extent the Uniform Commercial Code is applicable
thereto) in all Collateral (as defined therein) in which the Company has
rights, in each case as collateral security for the payment of the Secured
Obligations described in the Security Agreement. All such security
interests which can be perfected by a Uniform Commercial Code filing in the
United States of America will have been, upon such filings being completed,
so perfected.
<PAGE>
September 20, 1996
Page 3
7. The issued and outstanding shares of capital stock of each Issuer
under and as defined in the Security Agreement is correctly described in
Annex 1 thereto, and evidenced by the certificates therein identified. The
security interest in the Pledged Stock under and as defined in the Security
Agreement evidenced by each such certificate constitutes a valid, perfected
security interest, subject to no equal or prior liens, encumbrances,
charges or other security interests as security for the Secured Obligations
(as defined in the Security Agreement), so long as the Bank holds such
certificates.
Very truly yours,
Fulbright & Jaworski, L.L.P.
<PAGE>
EXHIBIT I
HSBC Corporate Banking
The Hongkong and Shanghai Banking Corporation Limited
New York Branch: 140 Broadway, New York, NY 10005-1196
PRIVATE & CONFIDENTIAL
Cygne Designs, Inc.
1372 Broadway
New York, NY 10018
Attention: Mr. Roy E. Green
Vice President Finance,
Chief Financial Officer
Dear Roy,
BANKING FACILITIES:
We are pleased to advise you that The Kongkong and Shanghai Banking Corporation
Limited, New York Branch is willing to make available to your company
USD30,000,000.- in committed facilities until 31 January 1997 on the following
terms and conditions:
Borrower: Cygne Designs, Inc. ("CDI" or "the Company"),
Lender: The Hongkong and Shanghai Banking Corporation
Limited, New York Branch ("the Bank")
To the earlier of 31 August 1996 or the sale
of CDI's 60% interest in CAT to AnnTaylor
Inc. ("CAT/ATI transaction"):
Facility/Amount: Import Facility (IMP) USD30,000,000.-
For sight DC's within which:
Technical T/R (IMC01) (USD30,000,000.-)
(Where Bank does not control
title to the goods)
Loans Against Imports (IMC02) (USD30,000,000.-)
(up to 60 days)
Revolving Loan (RLN) (USDl0,100,000.-)
(up to 60 days)
Export Loans (EXC) (USD 3,500,000.-)
(up to 90 day)
Standby LIC's (SLC) (USD 2,000,000.-)
(up to one year)
Hold Cover (HLD0l) (to be determined)
---------------
Total USD30,000,000.-
<PAGE>
I
15 May 1996 Page 2 of 8
Cygne Designs, Inc.
Effective the earlier of closing of the
CAT/ATI transaction or 31 August 1996
facilities will reduce as follows:
Import Facility (IMP) * USD22,500,000.-
For sight DC's within which:
Technical T/R (IMC01) *(USD22,500,000.-)
(Where Bank does not control
title to the goods)
Loans Against Imports **(USD17,500,000.-)
(1MC02) (up to 60 days)
Revolving Loan (RLN) **(USD10,000,000.-)
(Up to 60 days)
Export Loans (EXC) **(USD 3,000,000.-)
(Up to 90 days)
Standby Letters of Credit (USD 2,000,000.-)
(SLC) (Up to one year)
----------------
Total USD22,500,000.-
* The IMP and IMC shall be reduced to USD15,000,000.00
at 31 October 1996, USD10,000,000.00 at 30 November
1996, and USD5,000,000.00 at 31 December 1996. Any
remaining obligations outstanding as at 31 January
1997 must be secured by cash or a standby letter of
credit from a bank or financial institution approved in
advance by the Bank.
** on a reducing basis at the earlier of the CAT/ATI
transaction or 31 August 1996.
Borrowing Base: Availability under these limits will be based on 80% of
Eligible Accounts Receivable (A/R). Eligible A/R to
exclude - Returns, discounts, claims, credits and
allowances of any nature at any time issued, owing,
granted, outstanding, available or claimed and accounts
and credit balances over 90 days from invoice date
(including ATI); total account balance where excess 20%
over 90 days past invoice date; non-approved foreign
accounts; any other uncollectible items (including
companies with debtor in possession financing, Chapter
7 and 11 bankruptcy filings, and any chargebacks).
50% of Eligible Inventory (Maximum contribution not to
exceed UBD14.0M, reducing to USD7.0M effective the
earlier of closing of the CAT/ATI transaction or 31
August 1996, and thereafter reducing in line with the
Customers
<PAGE>
15 May 1996 Page 3 of 8
Cygne Designs, Inc.
projections.) Eligible inventory to exclude - obsolete,
damaged, not fit for traditional resale and work in
process; Foreign inventory not covered by Bank's lien;
(Note: Inventory in transit is eligible.)
50% of outstanding DC's issued.
50% of market value of AnnTaylor Stock pledged to the
Bank (Maximum contribution not to exceed USD12.0M).
Continuing standards of eligibility may be fixed and
revised from time to time solely by the Bank in its
exclusive judgement.
Purpose: For working capital and to facilitate the manufacture
and importation of apparel goods.
Availability: Upon receipt of all duly executed documentation
required by the Bank and the Borrower's compliance with
the terms and conditions of this Offer Letter.
Commission on All Bank charges will be applied according to the
Letters of credit: Bank's standard Tariff Structure and are subject to
changes at the Bank's discretion.
Commission on 0.125% per month.
Standby LC's:
Interest on IMC Interest will be calculated at a rate equal to 1.75%
and RLN: p.a. above prime rate, subject to fluctuation, and
commencing on the date of each advance, reducing at the
earlier of 31 August 1996 or the close of the CAT/ATI
transaction to 1.00% p.a. above prime rate, subject to
compliance with financial covenants and elimination of
any borrowing base overadvance.
"Prime Rate" means the rate per annum announced from
time to time by Marine Midland Bank, at its principal
office in New York City as its prime rate, and is a
base rate for calculating interest on certain loans.
All payments of interest will be automatically debited
from the Borrower's current account with the Bank upon
maturity.
<PAGE>
15 May 1996 Page 4 of 8
Cygne Designs, Inc.
Commitment Fee: 1/2% (USD150,000.00) Payable upon acceptance of this
Facility letter.
Penalty Interest: 2% p.a. over the rate of interest otherwise applicable
to these advances.
Prepayment: There will be no penalty for prepayments; however the
Bank must be made whole for any expenses related to
break funding costs.
Payments: On the earlier of (i) the maturity date for each
advance specified on or before the time such advance or
extension or credit is made, or (ii) expiry of the
line.
DC: at sight.
RLN/IMC: for up to 60 days.
EXC: for up to 90 days.
All payments will be automatically debited to the
Borrower's current account with the Bank.
Security and The Bank shall require.
Other Collateral
Documentation: 1. Uniform Commercial Code filings providing
a first lien over all accounts receivable and
inventory of the Company and its US subsidiaries.
The Bank shall also require control over the
disposition of any tax refund.
2. Intercreditor and subordination agreement with
Mitsubishi International Corporation (MIC) and
Mitsubishi Corporation (MC) acknowledging proposed
interest only payments restriction.
3. Cross Corporate Guarantees among the Company and
its US subsidiaries.
4. Letters of Negative Pledge over all assets of
CDI, including those of any Controlled Foreign
Corporations (CFC's):
5. Pledge of 65% of the stock of the Company's CFC's
6. Pledge of 100% of the Company's stock in AnnTaylor
Stores corporation, and assignment of registration
rights thereto.
<PAGE>
15 May 1996 Page 5 of 8
Cygne Designs, Inc.
7. Pledge of the shares of the Company held by
Messrs. Manuel and Benson (approximately 1,691,437
shares and 1,119,423 shares respectively.)
8. Collateral mortgage, second position, on
office/warehouse near Florence, Italy.
9. Key Man Life insurance on principals up to a value
of USD5.0M, assigned to the Bank.
10. Marine Cargo Insurance Policy with the Bank named
as loss payee.
11. Where any advances are made for Loans Against
Imports (IMC), Clean Import Loans (CIL) or Trust
Receipts (TR) loans, borrower's indebtedness will
be evidenced by an Optional Advance Time Note (Time
Note). Any time period set by the Bank for maturity
of drawings under the Time Note shall be inclusive
of any usance periods provided under letters of
credit or by the terms of sale of Borrower's
suppliers.
12. The execution or the Bank's General Security
Agreement.
Financial The granting of this facility is also subject to receipt
Reporting: of the following items duly certified by an authorized
officer of the Company, as having been prepared in
accordance with GAAP where appropriate.
Annually (Within 120 days)
Latest consolidated audited financial statements,
internal consolidating financial statements and
projections of sales and profits for the coming year.
Ouarterly (Within 45 days)
Consolidated financial statements with a summary
explanation of results, and internal consolidating
financial statements.
Quarterly (Within 30 days)
Inventory and Accounts receivable aging
<PAGE>
15 May 1996 Page 6 of 8
Cygne Designs, Inc.
reports.
Monthly (within 10 days)
Signed Borrowing Base Certificate.
Weekly (Within 7 days)
Signed Borrowing Base Certificate
Affirmative The company must maintain the following:
Covenants:
1. Min. current ratio of 0.75X, increasing to 1.5X at
the earlier of the CAT/ATI transaction or 31 August
1996.
2. Min. Tangible Net Worth plus subordinated debt of
USDl4M increasing to USD34.5M at the earlier of the
CAT/ATI transaction or 31 August 1996.
3. Max. Leverage Ratio (total liabilities less
subordinated debt/tangible net worth plus
subordinated debt) shall not exceed 4.0X, decreasing
to l.5X at the earlier of the CAT/ATI transaction or
31 August 1996.
Conditions
Precedent: 1. USD7M Borrowing Base overadvance available upon
pledge/delivery of CDI shares owned by Messrs Manuel
and Benson.
2. Satisfactory legal review of registration rights
accruing to the restricted AnnTaylor shares to be
pledged.
3. Satisfactory updated collateral audit.
4. MIC and MC must release their second position lien on
any assets being sold by CDI in the CAT/ATI
transaction.
Miscellaneous: The proceeds of all accounts receivable must be paid
directly to the Bank through a lock box established with
Marine Midland Bank. Wire transfers directly to CDI's
account with the Bank are also acceptable.
No downstreaming of funds without the Bank's prior
approval, except in the normal course of business.
<PAGE>
15 May 1996 Page 7 of 8
Cygne Designs, Inc.
The Bank reserves the right, at the Borrower's expense,
to appoint its agent to undertake a collateral audit.
This commitment is conditional upon (i) the preparation,
execution and delivery of legal documentation in form
and substance satisfactory to the Bank and to our
counsel incorporating substantially the terms and
conditions outlined or referred to above and (ii) the
absence of a material adverse change in the financial
condition or operations of the Customer as submitted in
projection 5.2 dated 14 May 1996.
All costs, legal fees, and other out-of-pocket expenses
will be for the account of the Borrower. All other
costs, including but not limited to UCC charges and
costs incurred by the Bank in performing credit checks,
will be paid by the Borrower.
Taxation: All payments of principal, interest, fees and other
expenses shall be made by the Customer free and clear of
taxes, levies, imposts, duties, charges or withholdings
of any nature whatsoever.
Governing Law: The laws of the State of New York, without regard to
principles of conflict of laws, with non-exclusive
courts of jurisdiction.
Please be advised that your relationship officers are:
Ian Wright (212) 658-2845
Adriana Collins 5115
Should you have any matters of an operational nature to discuss, however, we
suggest that you contact either of the following:
Trade Finance Syed Ahmad . (212) 658-2918
Kam Yeung 2930
Customer Service Barry Zabell (212) 656-2949
Diane Glock 2953
<PAGE>
15 May 1996 Page 8 of 8
Cygne Designs, Inc.
Please arrange for authorized signatories of your company, in accordance with
the terms of the mandate given to the Bank, to sign and return to us the
duplicate copy of this letter to signify your understanding and acceptance of
the terms and conditions under which the above facility is granted.
The above commitment will expire at 5:00 pm (Eastern) Daylight Time on 23 May
1996, unless we have received a fully executed copy of this letter from your
company by such time. Upon acceptance of this commitment letter, all defaults
under our Credit Agreement dated 28 September 1995 are permanently waived.
We are pleased to be of further assistance.
Yours sincerely,
/s/ J L PEANICK /s/ IAN WRIGHT
- -------------------------------- ------------------------------
J L Peanick Ian Wright
Senior Vice President Vice President
Corporate Banking Corporate Banking
ACCEPTED AND AGREED TO:
Cygne DESIGNS, INC.
By /s/ BERNARD M. MANUEL
- -----------------------------------------
Name: Bernard M. Manuel
Title: Chairman - Chief Executive Officer
Date: May 17, 1996
ESCROW AGREEMENT
ESCROW AGREEMENT dated as of September 20, 1996 by and among CYGNE DESIGNS,
INC., a Delaware corporation ("CDI"), and Cygne Group (F.E.) Limited, a Hong
Kong corporation ("CGFE" and, together with CDI, the "Company"), THE HONGKONG
AND SHANGHAI BANKING CORPORATION LIMITED, a foreign banking corporation acting
through its New York Branch (the "Bank"), and MARINE MIDLAND BANK, a banking
corporation and trust company organized and existing under the laws of the State
of New York, as the escrow agent hereunder (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company and the Bank are parties to an Amended and Restated
Credit Agreement dated as of September 20, 1996 (as modified and supplemented
and in effect from time to time, the "Credit Agreement"), providing, subject to
the terms and conditions thereof, for extensions of credit (by issuing letters
of credit and making loans) to be made by the Bank to the Company in an
aggregate face or principal amount not exceeding $17,500,000;
WHEREAS, the Credit Agreement provides for the Company (i) to grant a first
priority perfected pledge and security interest to the Bank under the Security
Agreement (as defined in the Credit Agreement) with respect to all of the
validly issued, fully paid and nonassessable shares of common stock of AnnTaylor
stores Corporation ("ATSC"), par value $0.0068 per share (the "ATSC Shares"),
received by the company in connection with the Stock and Asset Purchase
Agreement (as defined in the Credit Agreement), (ii) to effect the sale,
assignment and transfer from time to time of the ATSC Shares through an escrow
account maintained with the Escrow Agent in accordance with the terms and
conditions thereof and (iii) to cause the Escrow Agent to remit all proceeds
relating to each such sale, assignment and transfer of ATSC Shares (the
"Proceeds") directly to the Collateral Account (as defined in the Credit
Agreement); and
WHEREAS, the Company and the Bank desire to appoint Marine Midland Bank as
the Escrow Agent, and Marine Midland Bank is willing to act as the Escrow Agent
hereunder, in accordance with the terms and conditions hereof;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
Section 1. Definitions. Unless otherwise defined herein, terms defined in
the Credit Agreement are used herein as defined therein.
Section 2. Establishment of Escrow Account. The ATSC Shares delivered by
the Bank shall be accepted by the Escrow Agent and placed into an account with
the Escrow
<PAGE>
-2-
Agent in the name of the Bank (the "Escrow Account") to be held and administered
in accordance with the terms and conditions hereof.
Section 3. Establishment of Brokerage Account. The ATSC Shares shall be
sold, assigned and transferred pursuant to instructions delivered by the Bank to
the Escrow Agent from time to time in accordance with the terms and conditions
hereof through an account in the name of the Escrow Agent (the "Brokerage
Account") at a Specified Broker (as defined below). The instructions delivered
by the Bank to the Escrow Agent shall be based upon instructions provided to the
Bank by the Company, which instructions shall specify the number of shares to be
sold, the Specified Broker through which the shares are to be sold and any
pricing limitations. The Escrow Agent shall deliver a certificate or
certificates representing the appropriate number of ATSC Shares to be sold,
assigned and transferred to the Specified Broker set forth in the sale
instructions of the Company provided to the Bank, against payment on the
settlement date of each respective sale, assignment and transfer. For purposes
hereof, "Specified Broker" shall mean Bear, Stearns & Co, Inc., Donaldson Lufkin
& Jenrette Securities Corporation, J.P. Morgan & Co. and Lehman Brothers Inc.
Section 4. Notice of Pledge and Assignment. The Company and the Bank hereby
notify the Escrow Agent that (i) the Company has pledged and granted to the Bank
under the Security Agreement a first priority perfected pledge and security
interest in all of the ATSC Shares owned by the Company and the proceeds thereof
and (ii) the Company has assigned to the Bank the Registration Rights (as
defined in the Assignment dated as of September 20, 1996 made by the Company in
favor of the Bank) of the Company relating to the ATSC Shares as provided in the
Stockholders Agreement. The Escrow Agent hereby acknowledges such pledge and
security interest and such assignment, and shall, at the request of the Bank,
deliver to the Bank the certificate or certificates evidencing the number of
ATSC Shares than remaining in the Escrow Account.
Section 5. Sale of ATSC Shares; Proceeds. The Company hereby requests the
Bank to instruct the Escrow Agent to sell, assign and transfer the ATSC Shares,
and remit the Proceeds, in accordance with the provisions set forth below:
(a) The Company shall deliver notice to the Escrow Agent and the Bank
that the shelf registration filed by ATSC with the Securities Exchange
Commission with respect to the ATSC Shares shall have been declared
effective, which notice shall include the effective date of such
registration (the "Effective Date");
(b) On the day the Company delivers the notice of the Effective Date,
and in the case of clause (z) of this Section 5(b), at such other times as
it deems appropriate (but in no case more than once a week), and on each
day every two (2) weeks thereafter during the term of this Agreement, the
Company shall deliver to the Bank a report, certified by the chief
financial officer of the Company (the "Obligations Report"), setting forth
(i) the obligations of the Company under the Credit Agreement, either then
outstanding or to become due and payable within the immediately succeeding
two (2) week period, and (ii) the number of ATSC Shares, if any, to be
sold, assigned and transferred hereunder to
ESCROW AGREEMENT
<PAGE>
3
permit the Company (x) to pay to the Bank, and to provide to the Bank
collateral security therefor, the face or principal amount of such
obligations, including any interest thereon, described in clause (i) above,
(y) to comply with the mandatory prepayment obligations of the Company
under the Credit Agreement (together with the amount described in clause
(x) above, the "Required Collateral Balance"), and (z) to increase the
balance in the Collateral Account (the "Cash Collateral Balance");
(c) After the receipt by the Bank of the notice of the Effective Date,
and upon receipt of each Obligations Report, the Bank shall instruct the
Escrow Agent, in accordance with Section 3 hereof, (i) to deliver to the
Specified Broker such certificate or certificates evidencing the number of
ATSC Shares equal to or greater than, after disposition and net of related
costs, (A) the difference between the Required Collateral Balance and the
Cash Collateral Balance pursuant to Sections 5(b)(x) and (y) above, and (B)
the amount of the increase, if any, in the Cash Collateral Balance pursuant
to Section 5(b)(z) above, but in no event shall the number of shares or
clauses (A) and (B) be in excess of two percent (2%) of the then
outstanding shares of common stock of ATSC with respect to any two (2) week
period, and (ii) to instruct the Specified Broker to execute through the
Brokerage Account from time to time the sale, assignment and transfer of
such ATSC Shares at the best market price then available;
(d) Upon receipt thereof from the Specified Broker, the Escrow Agent
shall remit all Proceeds directly to the Collateral Account; and
(e) If the Company shall fail in any event to notify the Escrow Agent
in a timely fashion with respect to any notice required hereunder, the Bank
shall effect such notice.
Section 6. Instructions as to Certain Conditions. With respect to each
sale, assignment and transfer of ATSC Shares hereunder, the Escrow Agent is
hereby instructed to instruct the Specified Broker, that (i) no sale, assignment
and transfer of ATSC Shares may knowingly be made to any person who beneficially
owns in excess of five percent (5%) of the then outstanding shares of common
stock of ATSC and (ii) no sale, assignment and transfer of more than two percent
(2%) of the then outstanding shares of common stock of ATSC may knowingly be
made to a single purchaser (or group of related purchasers).
Section 7. Termination of Escrow Agreement. Upon the receipt of written
notice from the Bank that the obligations of the Company to the Bank under the
Credit Agreement and the Notes have been paid in full, the Commitments have
expired or been terminated, and the Letters of Credit and the Standby Letters of
Credit have expired or been terminated, (i) the Escrow Agent shall deliver to
the Bank the certificate or certificates evidencing the number of ATSC Shares
then remaining in the Escrow Account, and (ii) the Escrow Account shall be
deemed dissolved and this Escrow Agreement terminated.
Section 8. Commercially Reasonable Manner. The Company acknowledges that
the sale, assignment and transfer of ATSC Shares hereunder may or may not be
made at the
ESCROW AGREEMENT
<PAGE>
4
highest possible price available during the term of this Agreement, but agrees
that any such transaction and the actions of the parties hereunder shall be
deemed to have been made in a commercially reasonable manner.
Section 9. Escrow Agent. The Company agrees to pay the Escrow Agent the
compensation, pursuant to separate letter agreement between them, promptly upon
request therefor, and to reimburse the Escrow Agent for all reasonable expenses
or disbursements incurred by the Escrow Agent in the performance of its duties
hereunder, including reasonable fees, expenses and disbursements of counsel to
the Escrow Agent. The Escrow Agent shall have a lien upon the Escrow Account for
its costs, expenses and fees which may arise hereunder and may retain that
portion of the Escrow Account equal to such unpaid amounts, until all such
costs, expenses and fees have been paid.
Ssection 10. Rights, Duties and Immunities of Escrow Agent. Acceptance by
the Escrow Agent of its duties under this Escrow Agreement is subject to the
following terms and conditions, which all parties hereto hereby agree shall
govern and control the rights, duties and immunities of the Escrow Agent.
(a) The duties and obligations of the Escrow Agent shall be determined
solely by the express provisions hereof and the Escrow Agent shall not be
liable except for the performance of such duties and obligations as are
specifically set out herein. This Escrow Agreement shall not be deemed to
create a fiduciary relationship between the parties hereto under state or
federal law.
(b) The Escrow Agent shall not be responsible in any manner for the
validity or sufficiency of any property delivered hereunder, or for the
value or collectability of any note, check or other instrument so
delivered, or for any representations made or obligations assumed by any
party other than the Escrow Agent. Nothing herein contained shall be deemed
to obligate the Escrow Agent to deliver any cash, instruments, documents or
any other property referred to herein, unless the same shall have first
been received by the Escrow Agent pursuant to this Escrow Agreement.
(c) The Company shall reimburse and indemnify the Escrow Agent for,
and hold it harmless against, any loss, liability or expense, including but
not limited to counsel fees, incurred without bad faith or willful
misconduct on the part of the Escrow Agent arising out of or in conjunction
with its acceptance, or the performance, of its duties and obligations
hereunder as well as the costs and expenses of defending against any claim
or liability arising out of or relating to this Escrow Agreement.
(d) The Escrow Agent shall be fully protected in acting on and relying
upon any written notice, direction, request, waiver, consent, receipt or
other paper or document which the Escrow Agent in good faith believes to
have been signed and presented by the proper party or parties.
ESCROW AGREEMENT
<PAGE>
5
(e) The Escrow Agent shall not be liable for any (i) error of
judgment, (ii) act done or step taken or omitted by it in good faith, (iii)
mistake in act or law, or (iv) action taken or refrained from in connection
herewith, except its own willful misconduct.
(f) The Escrow Agent may seek the advice of legal counsel in the event
of any dispute or question as to the construction of any provision hereof
or its duties hereunder, and it shall incur no liability and shall be fully
protected in respect of any action taken, omitted or suffered by it in good
faith in accordance with the opinion of such counsel.
(g) The agreements set forth in this Section 10 shall survive the
termination hereof and the payment of all amounts hereunder.
Section 11. Resignation of Escrow Agent. The Escrow Agent shall have the
right to resign upon thirty (30) days written notice to the Company and the
Bank. In the event of such resignation, the Bank shall appoint a successor
escrow agent hereunder by delivering to the Escrow Agent a written notice of
such appointment. Upon receipt of such notice, the Escrow Agent shall deliver to
the designated successor escrow agent all money and other property held
hereunder and shall thereupon be released and discharged from any and all
further responsibilities whatsoever hereunder; provided, however, that the
Escrow Agent shall not be deprived of its compensation earned prior to such
time. If no successor Escrow Agent shall have been designated by the date
specified in the notice of the Escrow Agent, all obligations of the Escrow Agent
hereunder shall nevertheless cease and terminate. Its sole responsibility
thereafter shall be to keep safely all property then held by it and to deliver
the same to the Bank.
Section 12. Notices. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made in writing and
telecopied, telegraphed, cabled, mailed or delivered, addressed to the parties
at the addresses set forth herein or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopier, delivered to the telegraph
or cable office or personally delivered or, in the case of a mailed notice, 5
Business Days after the date deposited in the mails, postage prepaid, in each
case given or addressed as aforesaid.
Section 13. Successors and Assigns; Assignment. This Escrow Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Section 14. Amendments, Etc. Any provision hereof may be amended or
modified only by an instrument in writing signed by each of the parties hereto.
Section 15. Governing Law; Submission to Jurisdiction. This Escrow
Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York applicable to contracts to be performed
entirely within the State of New York, without reference to or application of
rules or principles of conflicts of law. Each of the parties hereto
ESCROW AGREEMENT
<PAGE>
6
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York State Court
sitting in New York City for the purposes of all legal proceedings arising out
of or relating to this agreement or the transactions contemplated hereby. Each
of the parties hereto irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
Section 16. Captions. The captions and section headings contained in this
Escrow Agreement are included solely for convenience or reference and shall not
affect the meaning or interpretation of any provision hereof.
Section 17. Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Escrow
Agreement.
Section 18. Counterparts. This Escrow Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Escrow Agreement
by signing any such counterpart.
Section 19. Severability. If any provision hereof is invalid and
unenforceable in any applicable jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in favor of the
Bank in order to carry out the intentions of the parties hereto as nearly as may
be possible and (ii) the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
-------------------------------------
ESCROW AGREEMENT
<PAGE>
7
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be duly executed as of the day and year first above written.
CYGNE DESIGNS, INC.
By /s/ ROY E. GREEN
------------------------------
Name: Roy E. Green
Title: Vice President--Finance
Address for Notices:
1372 Broadway - 2nd Floor
New York, NY 10018
CYGNE GROUP (F.E.) LIMITED
By /s/ ROY E. GREEN
------------------------------
Name: Roy E. Green
Title: Director
Address for Notices:
1372 Broadway - 2nd Floor
New York, NY 10018
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, NEW YORK BRANCH
By /s/ IAN WRIGHT
------------------------------
Name: Ian Wright
Title: Vice President
Address for Notices:
140 Broadway
New York, NY 10005
Attention: NYK CBU TRS
MARINE MIDLAND BANK, as Escrow Agent
By /s/ PETER WALPERT
------------------------------
Name: Peter Walpert
Title: Vice President
Address for Notices:
Corporate Trust Services
140 Broadway - 12th Floor
New York, NY 10005-1180
ESCROW AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT dated as of September 20, 1996
between CYGNE DESIGNS, INC., a Delaware corporation having an office at 1372
Broadway, New York, NY 10018 (the "Company"), and THE HONGKONG AND SHANGHAI
BANKING CORPORATION LIMITED, a foreign banking corporation acting through its
New York Branch (the "Bank").
W I T N E S S E T H :
WHEREAS, the Company has provided a security interest to the Bank under a
Security Agreement dated as of September 28, 1995 (as modified and supplemented
and in effect from time to time, the "Existing Agreement");
WHEREAS, the Company has requested that the Existing Agreement, as amended
prior to the date hereof and as amended and modified hereby, be restated in its
entirety to reflect the amendment of certain provisions thereof; and
WHEREAS, the Company and the Bank are parties to an Amended and Restated
Credit Agreement dated as of September 20, 1996 (as modified and supplemented
and in effect from time to time, the "Credit Agreement"), providing, subject to
the terms and conditions thereof, for extensions of credit (by issuing letters
of credit and making loans) to be made by the Bank to the Company in an
aggregate face or principal amount not exceeding $17,500,000;
NOW, THEREFORE, to induce the Bank to enter into the Credit Agreement, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company has agreed to continue to pledge and grant
a security interest in the Collateral (as hereinafter defined) as security for
the Secured Obligations (as hereinafter defined). Accordingly, the parties
hereto agree that the Original Agreement is hereby amended and restated in its
entirety as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are used
herein as defined therein. In addition, as used herein:
"Accounts" shall have the meaning ascribed thereto in Section 3(e) hereof.
"CAT Shares" shall mean the 6,000 validly issued, fully paid and
nonassessable shares of common stock, par value $0.01 per share, of CAT US,
Inc., a Delaware corporation, as set forth on Annex I hereto.
"Collateral" shall have the meaning ascribed thereto in Section 3 hereof.
"Documents" shall have the meaning ascribed thereto in Section 3(j) hereof.
<PAGE>
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"Equipment" shall have the meaning ascribed thereto in Section 3(h)
hereof.
"Instruments" shall have the meaning ascribed thereto in Section 3(f)
hereof.
"Inventory" shall have the meaning ascribed thereto in Section 3(g) hereof.
"Issuers" shall mean, collectively, the respective corporations identified
in Annex 1 hereto under the caption "Issuers".
"Lockbox Account" shall have the meaning ascribed thereto in Section 4(a)
hereof.
"Pledged Stock" shall have the meaning ascribed thereto in Section 3(b)
hereof.
"Secured Obligations" shall mean, collectively, (a) the principal of and
interest on the Loans made by the Bank to, and the Notes held by the Bank of,
the Company, and all other amounts from time to time owing to the Bank by the
Company under the Credit Agreement or the Notes, (b) all obligations of the
Company to the Bank hereunder, and (c) all obligations of the Company under any
other Credit Document to which it is party.
"Stock Collateral" shall mean, collectively, the Collateral described in
clauses (a) through (d) of Section 3 hereof and the proceeds of and to any such
property and, to the extent related to any such property or such proceeds, all
books, correspondence, credit files, records, invoices and other papers.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect in the State of New York from time to time.
Section 2. Representations and Warranties. The Company represents and
warrants to the Bank that:
(a) the Company is the sole beneficial owner of the Collateral and no
Lien exists or will exist upon any Collateral at any time (and, with
respect to the Stock Collateral, no right or option to acquire the same
exists in favor of any other Person), except for (i) Liens permitted under
Section 8.06 of the Credit Agreement and (ii) the pledge and security
interest in favor of the Bank created or provided for herein which pledge
and security interest constitutes a first priority perfected pledge and
security interest in and to all of the Collateral;
(b) the Pledged Stock evidenced by the certificates identified in
Annex 1 hereto and the ATSC Shares are, and all other Pledged Stock will
be, duly authorized, validly issued, fully paid and nonassessable and none
of such Pledged Stock is or will be subject to
SECURITY AGREEMENT
<PAGE>
-3-
any contractual restriction, or any restriction under the charter or
by-laws of the respective Issuers of such Pledged Stock, upon the transfer
of such Pledged Stock (except for any such restriction contained herein or
in the Credit Agreement or, with respect to the ATSC Shares, in the
Stockholders Agreement or under Federal and state securities law);
(c) the Pledged Stock evidenced by the certificates identified in
Annex 1 hereto constitutes the indicated percentage of the total issued and
outstanding shares of capital stock of any class of the Issuers
beneficially owned by the Company on the date hereof (whether or not
registered in the name of the Company) and said Annex 1 correctly
identifies, as at the date hereof; the respective Issuers of such Pledged
Stock, the respective class and par value of the shares comprising such
Pledged Stock and the respective number of shares (and registered owner
thereof) evidenced by each such certificate; and
(d) any goods now or hereafter produced by the Company or any of its
Subsidiaries included in the Collateral have been and will be produced in
compliance with the requirements of the Fair Labor Standards Act, as
amended.
Section 3. Collateral. As collateral security for the prompt payment in
full when due (whether at stated maturity, by acceleration or otherwise) of the
Secured Obligations, the Company hereby continues to pledge and grant to the
Bank a security interest in all of the Company's right, title and interest in
the following property, whether now owned by the Company or hereafter acquired
and whether now existing or hereafter coming into existence, and wherever
located (all being collectively referred to herein as "Collateral"):
(a) all of the ATSC Shares received by the Company in exchange for the
sale of the CAT Shares in connection with the CAT Transaction, which shares
of common stock, and certain other assets of the Company, the Company has
previously pledged to the Bank pursuant to the Existing Agreement;
(b) the respective shares of common/preferred stock of the Issuers
evidenced by the certificates identified in Annex 1 hereto and all other
shares of capital stock of whatever class of the Issuers, now or hereafter
owned by the Company, together with in each case the certificates
evidencing the same (collectively, together with the ATSC Shares, the
"Pledged Stock");
(c) all shares, securities, moneys or property representing a dividend
on any of the Pledged Stock, or representing a distribution or return of
capital upon or in respect of the Pledged Stock, or resulting from a
split-up, revision, reclassification or other like change of the Pledged
Stock or otherwise received in exchange therefor, and any subscription
warrants, rights or options issued to the holders of, or otherwise in
respect of, the Pledged Stock;
SECURTTY AGREEMENT
<PAGE>
-4-
(d) without affecting the obligations of the Company under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger in which any Issuer is not the
surviving corporation, all shares of each class of the capital stock of the
successor corporation (unless such successor corporation is the Company
itself) formed by or resulting from such consolidation or merger;
(e) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of the Company constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to the Company in respect of any loans or advances for the
purchase price of Inventory or Equipment or other goods sold or leased or
for services rendered, all moneys due and to become due to the Company
under any guarantee (including a letter of credit) of the purchase price of
Inventory or Equipment sold by the Company and all tax refunds (such
accounts, general intangibles and moneys due and to become due being herein
called collectively "Accounts");
(f) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of the Company evidencing,
representing, arising from or existing in respect of, relating to, securing
or otherwise supporting the payment of, any of the Accounts, including (but
not limited to) promissory notes, drafts, bills of exchange and trade
acceptances (herein collectively called "Instruments");
(g) all inventory (as defined in the Uniform Commercial Code) of the
Company, all goods obtained by the Company in exchange for such inventory,
and any products made or processed from such inventory including all
substances, if any, commingled therewith or added thereto (herein
collectively called "Inventory");
(h) all equipment (as defined in the Uniform Commercial Code) of the
Company (herein collectively called "Equipment");
(i) each contract and other agreement of the Company relating to the
sale or other disposition of Inventory or Equipment;
(j) all documents of title (as defined in the Uniform Commercial Code)
or other receipts of the Company covering, evidencing or representing
Inventory or Equipment (herein collectively called "Documents");
(k) all rights, claims and benefits of the Company against any Person
arising out of, relating to or in connection with Inventory or Equipment
purchased by the Company, including, without limitation, any such rights,
claims or benefits against any Person storing or transporting such
Inventory or Equipment;
SECURITY AGREEMENT
<PAGE>
-5-
(1) the balance from time to time in the Lockbox Account;
(m) the balance from time to time in the Collateral Account;
(n) the balance from time to time in the Escrow Account; and
(o) all other tangible or intangible property of the Company,
including, without limitation, all proceeds, products and accessions of and
to any of the property of the Company described in clauses (a) through (n)
above in this Section 3 (including, without limitation, any proceeds of
insurance thereon), and, to the extent related to any property described in
said clauses or such proceeds, products and accessions, all books,
correspondence, credit files, records, invoices and other papers, including
without limitation all tapes, cards, computer runs and other papers and
documents in the possession or under the control of the Company or any
computer bureau or service company from time to time acting for the
Company.
Section 4. Lockbox Account.
(a) The Company shall maintain a lockbox account (the "Lockbox
Account") with Marine Midland Bank (the "Lockbox Bank") in New York City,
and shall instruct debtors relating to the Accounts to make all remittances
directly to the Lockbox Account, which account (together with any related
disbursement account) shall be subject to the exclusive control of the
Bank; provided, however, unless and until an Event of Default shall have
occurred and be continuing, the Company shall have access to the proceeds
of such bank accounts. Upon the occurrence of an Event of Default, the
Company shall cease to have access to such bank accounts and the Bank shall
have sole access. The Company shall promptly deposit in the Lockbox Account
all payments relating to the Accounts received directly by the Company.
Without the prior written consent of the Bank, the Company shall not
provide debtors relating to the Accounts with payment instructions other
than as set forth above.
(b) The Lockbox Bank shall serve as the agent of the Bank with respect
to (i) the depositing of items comprising collections on Accounts and (ii)
the disbursements to be paid from any disbursement account relating to the
Lockbox Account. The rights, duties and obligations of the Lockbox Bank,
including, without limitation, its fees, shall be as such are set forth in
the related agreement between the Bank and the Lockbox Bank. The Company
shall pay all fees in connection with the Lockbox Account.
SECURITY AGREEMENT
<PAGE>
-6-
Section 5. Further Assurances; Remedies. In furtherance of the grant of the
pledge and security interest pursuant to Section 3 hereof, the Company hereby
agrees with the Bank as follows:
5.01 Delivery and Other Perfection. The Company shall:
(a) if any of the above-described shares, securities, monies or
property required to be pledged by the Company under clauses (a), (b), (c)
and (d) of Section 3 hereof are received by the Company, forthwith either
(x) transfer and deliver to the Bank such shares or securities so received
by the Company (together with the certificates for any such shares and
securities duly endorsed in blank or accompanied by undated stock powers
duly executed in blank) all of which thereafter shall be held by the Bank,
pursuant to the terms of this Agreement, as part of the Collateral or (y)
take such other action as the Bank shall deem necessary or appropriate to
duly record the Lien created hereunder in such shares, securities, monies
or property referred to in said clauses (a), (b), (c) and (d);
(b) deliver and pledge to the Bank any and all Instruments, endorsed
and/or accompanied by such instruments of assignment and transfer in such
form and substance as the Bank may request; provided, that so long as no
Default shall have occurred and be continuing, the Company may retain for
collection in the ordinary course any Instruments received by it in the
ordinary course of business and the Bank shall, promptly upon request of
the Company, make appropriate arrangements for making any other Instrument
pledged by the Company available to it for purposes of presentation,
collection or renewal (any such arrangement to be effected, to the extent
deemed appropriate by the Bank, against trust receipt or like document);
(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of the Bank) to create,
preserve, perfect or validate any security interest granted pursuant hereto
or to enable the Bank to exercise and enforce its rights hereunder with
respect to such security interest, including, without limitation, causing
any or all of the Stock Collateral to be transferred of record into the
name of the Bank or its nominee (and the Bank agrees that if any Stock
Collateral is transferred into its name or the name of its nominee, the
Bank will thereafter promptly give to the Company copies of any notices and
communications received by it with respect to the Stock Collateral),
provided that notices to account debtors in respect of any Accounts or
Instruments shall be subject to the provisions of clause (g) below;
(d) upon the acquisition after the date hereof by the Company of any
Equipment covered by a certificate of title or ownership, cause the Bank to
be listed as the lienholder
SECURITY AGREEMENT
<PAGE>
-7-
on such certificate of title and within 120 days of the acquisition
thereof deliver evidence of the same to the Bank;
(e) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Bank may reasonably require in order to reflect the security
interests granted by this Agreement;
(f) permit representatives of the Bank, upon reasonable notice, at any
time during normal business hours to inspect and make abstracts from its
books and records pertaining to the Collateral, and permit representatives
of the Bank to be present at the Company's place of business to receive
copies of all communications and remittances relating to the Collateral,
and forward copies of any notices or communications by the Company with
respect to the Collateral, all in such manner as the Bank may require; and
(g) upon the occurrence and during the continuance of any Default,
upon request of the Bank, promptly notify (and the Company hereby
authorizes the Bank so to notify) each account debtor in respect of any
Accounts or Instruments that such Collateral has been assigned to the Bank
hereunder, and that any payments due or to become due in respect of such
Collateral are to be made directly to the Bank.
5.02 Other Financing Statements and Liens. Without the prior written
consent of the Bank, the Company shall not file or suffer to be on file, or
authorize or permit to be filed or to be on file, in any jurisdiction, any
financing statement or like instrument with respect to the Collateral in which
the Bank is not named as the sole secured party.
5.03 Preservation of Rights. The Bank shall not be required to take steps
necessary to preserve any rights against prior parties to any of the Collateral.
5.04 Special Provisions Relating to Stock Collateral.
(a) The Company will cause the Stock Collateral to constitute at all
times the percentage indicated on Annex 1 hereto of the total number of
shares of each class of capital stock of each Issuer then outstanding, but
in no event shall such percentage exceed 65% with respect to any class of
capital stock of a Foreign Subsidiary; provided, however, the ATSC Shares
may constitute a decreasing percentage of the capital stock of the related
Issuer in accordance with the terms and conditions of the Credit Agreement.
(b) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Stock Collateral
for all purposes not inconsistent with the terms
SECURITY AGREEMENT
<PAGE>
-8-
of this Agreement, the Credit Agreement, the Notes or any other
instrument or agreement referred to herein or therein, provided that the
Company agrees that it will not vote the Stock Collateral in any manner
that is inconsistent with the terms of this Agreement, the Credit
Agreement, the Notes or any such other instrument or agreement (as
determined by the Bank in its reasonable judgment); and the Bank shall
execute and deliver to the Company or cause to be executed and delivered to
the Company all such proxies, powers of attorney, dividend and other
orders, and all such instruments, without recourse, as the Company may
reasonably request for the purpose of enabling the Company to exercise the
rights and powers which it is entitled to exercise pursuant to this Section
5.04(b).
(c) All shares, securities, moneys or other property representing
stock which are payable in connection with dividends or liquidating
dividends (including without limitation in connection with the liquidation
of any Issuer on or after such liquidation) and (ii) all additional
Collateral described in clauses (a), (b), (c) and (d) of Section 3 hereof
constituting a distribution or return of capital upon or in respect of any
Pledged Stock, or resulting from a conversion, split-up, revision,
reclassification or other like change of any Pledged Stock or received in
exchange therefor as a result of a merger, consolidation or otherwise,
shall be paid or transferred directly to the Bank (or its agent or nominee,
as the case may be), as part of the Collateral subject to this Agreement.
(d) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Bank exercises any
available right to declare any Secured Obligation due and payable or seeks
or pursues any other relief or remedy available to it under applicable law
or under this Agreement, the Credit Agreement, the Notes or any other
agreement relating to such Secured Obligation, all dividends and other
distributions on the Stock Collateral shall be paid directly to the Bank
and retained by it in the Custodial Trust Account as part of the Stock
Collateral, subject to the terms of this Agreement, and, if the Bank shall
so request in writing, the Company agrees to execute and deliver to the
Bank appropriate additional dividend, distribution and other orders and
documents to that end, provided that if such Event of Default is cured, any
such dividend or distribution theretofore paid to the Bank shall, upon
request of the Company (except to the extent theretofore applied to the
Secured Obligations) be returned by the Bank to the Company.
5.05 Events of Default etc. During the period during which an Event of
Default shall have occurred and be continuing:
(i) the Company shall, at the request of the Bank, assemble the
Collateral owned by it at such place or places, reasonably convenient
to both the Bank and the Company, designated in its request;
SECURITY AGREEMENT
<PAGE>
-9-
(ii) the Bank may make any reasonable compromise or settlement
deemed desirable with respect to any of the Collateral and may extend
the time of payment, arrange for payment in installments, or otherwise
modify the terms of, any of the Collateral;
(iii) the Bank shall have all of the rights and remedies with
respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted, including, without limitation, the
right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral
(in the case of the ATSC Shares, subject to the Stockholders
Agreement) as if the Bank were the sole and absolute owner thereof
(and the Company agrees to take all such action as may be appropriate
to give effect to such right);
(iv) the Bank in its discretion may, in its name or in the name
of the Company or otherwise, demand, sue for, collect or receive any
money or property at any time payable or receivable on account of or
in exchange for any of the Collateral, but shall be under no
obligation to do so; and
(v) the Bank may (in the case of the ATSC Shares, subject to the
Stockholders Agreement), upon 10 Business Days' prior written notice
to the Company of the time and place, with respect to the Collateral
or any part thereof which shall then be or shall thereafter come into
the possession, custody or control of the Bank, or any of its agents,
sell, lease, assign or otherwise dispose of all or any of such
Collateral, at such place or places as the Bank deems best, and for
cash or on credit or for future delivery (without thereby assuming any
credit risk), at public or private sale, without demand of performance
or notice of intention to effect any such disposition or of time or
place thereof (except such notice as is required above or by
applicable statute and cannot be waived) and the Bank or anyone else
may be the purchaser, lessee, assignee or recipient of any or all of
the Collateral so disposed of at any public sale (or, to the extent
permitted by law, at any private sale), and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including
any right or equity of redemption (statutory or otherwise), of the
Company, any such demand, notice or right and equity being hereby
expressly waived and released. The Bank may, without notice or
publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time
SECURITY AGREEMENT
<PAGE>
-10-
and place fixed for the sale, and such sale may be made at any
time or place to which the same may be so adjourned.
The proceeds of each collection, sale or other disposition under this
Section 5.05 shall be applied in accordance with Section 5.09 hereof.
The Company recognizes that, by reason of certain prohibitions contained in
the Securities Act of 1933, as amended, and applicable state securities laws,
the Bank may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. The Company acknowledges that any such
private sales may be at prices and on terms less favorable to the Bank than
those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that the Bank
shall have no obligation to engage in public sales and no obligation to delay
the sale of any Collateral for the period of time necessary to permit the
respective Issuer thereof to register it for public sale.
5.06 Deficiency. If the proceeds of sale, collection or other realization
of or upon the Collateral pursuant to Section 5.05 hereof are insufficient to
cover the costs and expenses of such realization and the payment in full of the
Secured Obligations, the Company shall remain liable for any deficiency.
5.07 Removals, etc. Without at least 30 days prior written notice to the
Bank, the Company shall not (i) maintain any of its books or records with
respect to the Collateral at any office or maintain its chief executive office
or its principal place of business at any place, or permit any Inventory or
Equipment to be located anywhere other than at the address indicated beneath the
signature of the Company to the Credit Agreement or at one of the locations
identified in Annex 2 hereto or in transit from one of such locations to another
(or, with respect to Inventory, in transit from one of such locations to a
customer of the Company) or (ii) change its corporate name, or the name under
which it does business, from the name shown on the signature page hereto.
5.08 Private Sale. The Bank shall incur no liability as a result of the
sale of the Collateral, or any part thereof, at any private sale pursuant to
Section 5.05 hereof conducted in a commercially reasonable manner. The Company
hereby waives any claims against the Bank arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if the Bank accepts the
first offer received and does not offer the Collateral to more than one offeree.
SECURITY AGREEMENT
<PAGE>
-11-
5.09 Application of Proceeds. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other realization of all or
any part of the Collateral pursuant hereto, and any other cash at the time held
by the Bank under Section 4 hereof or this Section 5, shall be applied by the
Bank:
First, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Bank and the fees and expenses of its agents and counsel,
and all expenses and advances made or incurred by the Bank in connection
therewith;
Next, to the payment in full of the Secured Obligations then due and
payable, ratably in accordance with the respective outstanding amounts
thereof then due and payable; and
Finally, to the payment to the Company, or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus then
remaining.
As used in this Section 5, "proceeds" of Collateral shall mean cash, securities
and other property realized in respect of, and distributions in kind of,
Collateral, including any thereof received under any reorganization, liquidation
or adjustment of debt of the Company or any issuer of or obligor on any of the
Collateral.
5.10 Attorney-in-Fact. Without limiting any rights or powers granted by
this Agreement to the Bank while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default the Bank is hereby appointed the attorney-in-fact of the Company for the
purpose of carrying out the provisions of this Section 5 and taking any action
and executing any instruments which the Bank may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, so long as the Bank shall be entitled under this Section 5 to make
collections in respect of the Collateral, the Bank shall have the right and
power to receive, endorse and collect all checks made payable to the order of
the Company representing any dividend, payment, or other distribution in respect
of the Collateral or any part thereof and to give full discharge for the same.
5.11 Perfection. Prior to or concurrently with the execution and delivery
of this Agreement, the Company shall (i) file such financing statements and
other documents in such offices as the Bank may request to perfect the security
interests granted by Section 3 of this Agreement, and (ii) deliver to the Bank
all certificates identified in Annex 1 hereto, accompanied by undated stock
powers duly executed in blank.
SECURITY AGREEMENT
<PAGE>
-12-
5.12 Termination. When all Secured Obligations shall have been paid in full
and the Facilities of the Bank under the Credit Agreement and all liabilities of
the Bank relating to issued Letters of Credit shall have expired or been
terminated, this Agreement shall terminate, and the Bank shall forthwith cause
to be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining Collateral and
money received in respect thereof, to or on the order of the Company. The Bank
shall also execute and deliver to the Company upon such termination such Uniform
Commercial Code termination statements and such other documentation as shall be
reasonably requested by the Company to effect the termination and release of the
Liens on the Collateral.
5.13 Expenses. The Company agrees to pay to the Bank all out-of-pocket
expenses (including reasonable expenses for legal services of every kind) of, or
incident to, the enforcement of any of the provisions of this Section 5, or
performance by the Bank of any obligations of the Company in respect of the
Collateral which the Company has failed or refused to perform, or any actual or
attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the Bank in respect
thereof, by litigation or otherwise, including expenses of insurance, and all
such expenses shall be Secured Obligations to the Bank secured under Section 3
hereof.
5.14 Further Assurances. The Company agrees that, from time to time upon
the written request of the Bank, the Company will execute and deliver such
further documents and do such other acts and things as the Bank may reasonably
request in order fully to effect the purposes of this Agreement.
5.15 Collateral Audit. The Company shall permit representatives of the Bank
to undertake an annual audit of the Collateral, and the Company agrees to pay
all reasonable expenses of the Bank incurred in connection therewith.
Section 6. Miscellaneous.
6.01 No Waiver. No failure on the part of the Bank or any of its agents to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Bank or any of its agents of any
right, power or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies herein are
cumulative and are not exclusive of any remedies provided by law.
6.02 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York.
SECURITY AGREEMENT
<PAGE>
-13-
6.03 Notices. All notices, requests, consents and demands hereunder shall
be in writing and telexed, telecopied, telegraphed, cabled or delivered to the
intended recipient at its address or telex number specified pursuant to Section
10.02 of the Credit Agreement and shall be deemed to have been given at the
times specified in said Section 10.02.
6.04 Waivers, etc. The terms of this Agreement may be waived, altered or
amended only by an instrument in writing duly executed by the Company and the
Bank. Any such amendment or waiver shall be binding upon the Bank, each holder
of any Secured Obligation and the Company.
6.05 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the Company,
the Bank, and each holder of the Secured Obligations (provided, however, that
the Company shall not assign or transfer its rights hereunder without the prior
written consent of the Bank).
6.06 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one and the same instrument
and any of the parties hereto may execute this Agreement by signing any such
counterpart.
6.07 Banks. The Bank may employ agents and attorneys-in-fact in connection
herewith and shall not be responsible for the negligence or misconduct of any
such agents or attorneys-in-fact selected by it in good faith.
6.08 Severability. If any provision hereof is invalid and unenforceable in
any applicable jurisdiction, then, to the fullest extent permitted by law, (i)
the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Bank in order to
carry out the intentions of the parties hereto as nearly as may be possible and
(ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
SECURITY AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed as of the day and year first above written.
CYGNE DESIGNS, INC.
By /s/ ROY E. GREEN
-------------------------
Name: Roy E. Green
Title: Vice President--Finance
Address for Notices:
1372 Broadway - 2nd Floor
New York, NY 10018
Telecopy: (212) 245-7724
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, NEW YORK BRANCH
By /s/ IAN WRIGHT
-------------------------
Name: Ian Wright
Title: Vice President
Address for Notices:
140 Broadway
New York, NY 10005
Attention: NYK CBU TRS
Telecopy: (212) 658-2813
<PAGE>
ANNEX 1
LIST OF PLEDGED STOCK
Certificate Registered
Issuer Nos. Owner Number of Shares
------ ----------- ---------- ----------------
1. CAT US, Inc. #9 Cygne Designs, Inc. 6,000 shares of
common stock having
a par value of
$0.01 per share
(60% of outstanding
capital stock)
2. Cygne Group (F.E.) #7 Cygne Designs, Inc. 65 shares of 99
Limited (formerly shares of common
known as Cygne Design stock having a par
F.E. Limited) value of HK$1,000
per share (65% of
outstanding capital
stock)
3. M.T.G.I. Textile N/A Cygne Designs, Inc. 109,050 ordinary
Manufacturers shares having a
Group (Israel) Ltd. nominal value of
NIS 1.00 each (50%
of outstanding
capital stock)
4. T. Wear Company S.r.l. N/A Cygne Designs, Inc. Shares for lire
150,000,000 (50% of
share capital)
5. JMB International, S.A. #18-49 Cygne Designs, Inc. 32 shares of stock
having a par value
of Ql00.00 each
(64% of outstanding
capital stock)
<PAGE>
ANNEX 2
Cygne Designs, Inc. ACTIVE
9/27/95 INVENTORY LOCATIONS
DOMESTIC LOCATIONS
- ------------------
FACTORIES
---------
AC Services
4915 NW 159 Avenue
Miami, FL 33014
AMP/Andy & Cindy
257 W. 39th Street - 6th Floor
New York, NY 10018
Artland
25-33 Hall Street - 2nd Floor
Brooklyn, NY 11205
Bethel Industries
600 Palisades Avenue
Union City, NJ 07087
Dochine Inc.
25-33 Hall Street - 2nd Floor
Brooklyn, NY 11205
Double Luck Fashion
655 8th Avenue - 7th Floor
New York, NY 10018
Golden Craft
128 Mott Street
New York, NY 10013
Gregarious Fashions
46-48 Lispenard Street
New York, NY 10013
H. Production/HH
252 West 37th Street - 6th Floor
New York, NY 10018
JC Fashiona
54 Canal Street - 8th Floor
New York, NY 10002
<PAGE>
Cygne Designs, Inc. ACTIVE
9/27/95 INVENTORY LOCATIONS
JDS Cutting
147 West 35th Street - 5th Floor
New York, NY 10001
JDLS
34-01 38th Avenue
Long Island City, NY 11101
Karene Fashions/Sky Blue
41 Elizabeth Street - 4th Floor
New York, NY 10013
Key Trading
54 Canal Street - 9th Floor
New York, NY 10002
KTJ
442 Broadway - 3rd Floor
New York, NY 10013
L'assassino
226 West 37th Street
New York, NY 10018
Lilan Fashion
530A 63rd Street
Brooklyn, NY 11220
LTW
252 West 37th Street
New York, NY 10018
Luster Star
150 Lafayette Street - 12th Floor
New York, NY 10013
M. Mitchell
1607 Manhattan Avenue
Union City, NJ 07057
May Fashion
589 8th Avenue - 10th Floor
New York, NY 10018
Metro Fusing
315 West 36th Street
New York, NY 10018
<PAGE>
Cygne Designs, Inc. ACTIVE
9/27/95 INVENTORY LOCATIONS
Mikado Fashions Inc.
46-48 Lispenard Street - 5th Floor
New York, NY 10013
MRC
13 V2 Van Houten Street
Peterson, NJ 07605
New JKT
53 West 36th Street - 9th Floor
New York, NY 10018
One Notch-Up
240 West 35th Street - 11th Floor
New York, NY 10001
Our Fashion
589 8th Avenue - 4th Floor
New York, NY 10018
Refine Fashion
54 Canal Street - 6th Floor
New York, NY 10002
Reliable Cutting Inc.
509 West 34th Street - 4th Floor
New York, NY 10018
Sky Blue
129 Lafayette Street - 7th Floor
New York, NY 10013
SSCI
1072 West Side Avenue
Jersey City, NJ 07306
Sun East
147 West 35th Street - 15th Floor
New York, NY 10018
Triple 8
138 33rd Street
Brooklyn, NY 11232
<PAGE>
Cygne Designs, Inc. ACTIVE
9/27/95 INVENTORY LOCATIONS
WAREHOUSES
----------
Flag Trucking Service Co. Inc.
5 Dwight Place
Fairfield, NJ 07005
Freight-A-Rangers
3275 Alum Creek Drive
Columbus, OH
Pronto Cargo Brokers Inc.
7330 N.W. 66th Street
Miami, FL 33166
Summit
Building 40
Hackensack Avenue
Kearny, NJ
DOMINICAN REPUBLIC
------------------
Cibao Manufacturing Co.
Zona France Industrial
Aptdo. Postal 2A
La Vega, D.R.
Dominican Republic
Modas New York
Industrial Free Zone
Santiago
Dominican Republic
Young's NY S.A.
Zona France Industrial
Moca
Dominican Republic
GUATEMALA
---------
Dong Bang
KM 495 Carretaera Panamericana
El Tejer. Chimaltenango. Guatemala
Dong Kyoung, S.A.
KM 17.5 Carr
San Juan, Sacatepequez, Guatelama
<PAGE>
Cygne Designs, Inc. ACTIVE
9/27/95 INVENTORY LOCATIONS
JMB Mfg. S.A.
3a Calle 52-15
Zone 2. Mixco
Col. Molino De Las Flores
Guatemala City, Guatemala
Sam Lucas S.A.
KM 37.5 Lote II
Granjas Manzanales
Santiago, Sacatepequez, Guatemala
EL SALVADOR
-----------
Do-All Industries S.A. De C.V.
Zona Franca El Progreso
KM 11 1/2 Carretera Al Puerto De La Libertad
Nueva An Salvador
El Salvador
LIDO
Zona Franca El Progreso
KM 11 1/2 Carretera al Puerto De La Libertad
Nueva San Salvador
El Salvador
HONG KONG
---------
Cygne Far East Ltd.
Room 715-718
20 Salisbury Road, TST
New World Office Building, West Wing
Kowloon, Hong Kong
Romax Investment Ltd
Flat E & F, 2nd Floor
Wong King Industrial Building
2 Tai Yau Street
San Po Kong
Kowloon, Hong Kong
Future Fashion
7 Shing Yip Street
Kwun Tong
Hong Kong
<PAGE>
Cygne Designs, Inc. ACTIVE
9/27/95 INVENTORY LOCATIONS
Golden True International Ltd
8 Ng Fong Street
San Po Kong
Kowloon
Hong Kong
Merrison Garment Co.
Merrison Center
107-109 Wai Yip Street
Kwun Tong
Kowloon, Hong Kong
Pologain Garment Factory
Room 4-B, 8th Floor
Vanla Industrial Center
Tai Lin Pai Road
Kwai Chung, N.T.
Hong Kong
THAILAND
--------
Biotex
Address to follow
HUNGARY
-------
Lantos
3963 Karcsa
Tarcsics U-1
Hungary
Sal-Kon Clothing Factory
H-3100 Salgotarjan
Ruhagyari, U-32, PF: 29
Hungary
Soproni Ruhagyar
9400 Sopron
Rakozzi U-8
Hungary
ROMANIA
-------
Incom Vranco
51 Coda Voda Street
Foscani
Romania
<PAGE>
Cygne Designs, Inc. ACTIVE
9/27/95 INVENTORY LOCATIONS
ITALY
-----
T-Wear Co
Via San Paolo. 1
Case lo Autosole
Firenze Signa 50018
Scandicci
Firenze
Italy
ISRAEL
------
MTGI Ltd
New Industrial Zone
Hadera. 28103
Israel
OPTION AGREEMENT
OPTION AGREEMENT dated as of September 20, 1996 between CYGNE DESIGNS,
INC., a Delaware corporation having an office at 1372 Broadway, New York, NY
10018 ("CDI"), and CYGNE GROUP (F.E.) LIMITED, a Hong Kong corporation ("CGFE"
and, together with CDI, hereinafter referred to as the "Company"), and THE
HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, a foreign banking corporation
acting through its New York Branch (the "Bank").
W I T N E S S E T H:
WHEREAS, CDI and the Bank are parties to an Amended and Restated Credit
Agreement dated as of September 20, 1996 (as modified and supplemented and in
effect from time to time, the "Credit Agreement"), providing, subject to the
terms and conditions thereof, for extensions of credit (by issuing letters of
credit and making loans) to be made by the Bank to CDI in an aggregate face or
principal amount not exceeding $17,500,000;
WHEREAS, the Credit Agreement provides for CDI (i) to grant a first
priority perfected pledge and security interest under the Security Agreement (as
defined in the Credit Agreement) with respect to all of the validly issued,
fully paid and nonassessable shares of common stock of AnnTaylor Stores
Corporation ("ATSC"), par value $0.0068 per share (the "ATSC Shares"), received
by CDI in connection with the Stock and Asset Purchase Agreement (as defmed in
the Credit Agreement), and (ii) to assign to the Bank all rights relating to the
registration by ATSC of the ATSC Shares with the Securities and Exchange
Commission as provided in the Stockholders Agreement dated as of September 20,
1996 between ATSC, CDI and CGFE, as amended from time to time;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
Section 1. Definitions. Unless otherwise defined herein, terms defined in
the Credit Agreement are used herein as defined therein.
Section 2. Option. The Company does hereby grant to the Bank an option (the
"Option") to exercise all the Company's rights and interests under the
Stockholders Agreement, including with respect to the registration by ATSC of
the ATSC Shares with the Securities and Exchange Commission under the
Stockholders
<PAGE>
Agreement, including without limitation, the rights of the Company to cause ATSC
to file a registration statement under the Securities Act of 1933, as amended,
in accordance with the Stockholders Agreement (collectively, the "Registration
Rights"), which Option shall be exercisable in the event the Company fails to
take action to cause ATSC to comply with Article II of the Stockholders
Agreement.
Section 3. (a) Liabilities of the Company. It is expressly agreed that,
anything herein contained to the contrary notwithstanding:
(i) The Company shall at all times remain liable to ATSC under the
Stockholders Agreement to perform all duties and obligations of the Holder
(as defined in the Stockholders Agreement) thereunder to the same extent as
if this Option Agreement had not been executed, including, without
limitation, the Company's obligations with respect to compliance with
applicable Federal and state securities law and the indemnification
provisions set forth in Section 2.06(b) of the Stockholders Agreement,
arising out of or related to the sale of ATSC Shares by the Company (and
not by the Bank as a secured creditor) pursuant to the Registration
Statement or any other action by the Company under Article II of the
Stockholders Agreement.
(ii) The exercise by the Bank of any right assigned hereunder shall
not release the Company from any of its duties or obligations to ATSC under
the Stockholders Agreement.
(iii) From and after the date hereof, the Bank shall be subject to all
the terms and conditions of Articles I, III and IV of the Stockholders
Agreement.
(iv) Upon and after the exercise by the Bank of its rights under this
Option Agreement with respect to Article II of the Stockholders Agreement
(including exercising its rights pursuant to Section 6 hereof) to sell the
ATSC Shares pursuant to the Registration Statement, the Bank shall be
subject to all the terms and conditions of such Article II.
(v) The Bank shall have no liability under the Stockholders Agreement
arising out of or related to the sale of ATSC Shares by the Company (and
not by the Bank as a secured creditor) pursuant to the Registration
Statement or any other action by the Company under Article II of the
Stockholders Agreement.
2
<PAGE>
(b) Indemnification Limitation. It is expressly agreed that, anything
herein contained to the contrary notwithstanding, the Bank shall have no right
to indemnification from the Company in respect of the failure of the Bank to
meet its obligations under applicable Federal and state securities law.
Section 4. ATSC Consent. ATSC hereby consents to the terms of Section 3(a)
hereof and, to the extent that Section 3(a) remains in effect, to the granting
of the Option under Section 2. ATSC has not reviewed the Credit Agreement or any
other agreements between CDI and the Bank (other than this Agreement) and
nothing in Sections 1, 2 and 3(a) hereof shall be modified in any manner by the
terms or provisions of any such agreement.
Section 5. Further Assurances. The Company agrees that at any time and from
time to time upon the written request of the Bank, the Company will promptly and
duly execute and deliver such further documents and take such further actions as
the Bank may reasonably request in order to obtain the full benefits of this
Option Agreement and of the rights and powers granted herein.
Section 6. Events of Default. Effective from and after the time, if any,
that an Event of Default shall occur or be continuing, and until such time as
such Event of Default shall no longer be continuing, the Company does hereby
constitute the Bank, its successors and assigns, the Company's true and lawful
attorney-in-fact irrevocably, with full power (in the name of the Company or
otherwise), at the sole cost and expense of the Company, to assert and enforce
whatever claims and rights the Bank may have under or arising out of the
Stockholders Agreement with respect to the Registration Rights and, for such
period as the Bank may exercise rights with respect thereto under this Option
Agreement, to file any claims or take any actions or institute (or, if
previously commenced, assume control of) any proceedings and to obtain any
recovery in connection therewith which the Bank may deem to be necessary or
advisable with respect to such claims and rights.
Section 7. Representations and Warranties. The Company hereby represents
and warrants to the Bank that:
(a) The Stockholders Agreement is in full force and effect and is
enforceable in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws of general applicability affecting the enforcement of creditors'
rights and (ii) the application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3
<PAGE>
(b) The Company is not in default under the Stockholders Agreement.
(c) The Company has not assigned or pledged, and hereby covenants that, so
long as this Option Agreement shall remain in effect, it will not assign or
pledge the whole or any part of the rights assigned hereby to anyone other than
the Bank.
Section 8. Notices. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers or
consents under, this Option Agreement) shall be given or made in writing and
telecopied, telegraphed, cabled, mailed or delivered, addressed to the parties
at the addresses set forth herein or, as to either party, at such other address
as shall be designated by such party in a notice to the other party. Except as
otherwise provided in this Option Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopier, delivered to the
telegraph or cable office or personally delivered or, in the case of a mailed
notice, five (5) Business Days after the date deposited in the mails, postage
prepaid, in each case given or addressed as aforesaid.
Section 9. Successors; Permitted Assigns. This Option Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. The Bank may assign its rights hereunder to an
Affiliate of the Bank that is a member of the HSBC Group, provided such
Affiliate assumes the Bank's obligations hereunder. "Affiliate" has the meaning
ascribed to it under the United States Federal securities laws.
Section 10. Amendments, Etc. Any provision hereof may be amended or
modified only by an instrument in writing signed by each of the parties hereto.
Section 11. Governing Law, Submission to Jurisdiction. This Option
Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York applicable to contracts to be performed
entirely within the State of New York, without reference to or application of
rules or principles of conflicts of law. Each of the parties hereto hereby
submits to the nonexclusive jurisdiction of the United States District Court for
the Southern District of New York and of any New York State Court sitting in New
York City for the purposes of all legal proceedings arising out of or relating
to this Option Agreement or the transactions contemplated hereby. Each of the
parties hereto irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or
4
<PAGE>
hereafter have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum.
Section 12. Captions. The captions and section headings contained in this
Option Agreement are included solely for convenience or reference and shall not
affect the meaning or interpretation of any provision hereof.
Section 13. Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Option
Agreement.
Section 14. Counterparts. This Option Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Option Agreement
by signing any such counterpart.
Section 15. Severability. If any provision hereof is invalid and
unenforceable in any applicable jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in favor of the
Bank in order to carry out the intentions of the parties hereto as nearly as may
be possible and (ii) the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Option Agreement
to be duly executed as of the day and year first above written.
Address for Notices: CYGNE DESIGNS, INC.
1372 Broadway - 2nd Floor
New York, NY 10018 By /s/ PAUL BAIOCCHI
------------------------------
Paul Baiocchi
Vice President
CYGNE GROUP (F.E.) LIMITED
By Cygne Designs, Inc.
Director
Address for Notices: By /s/ PAUL BAIOCCHI
c/o Cygne Designs, Inc. ------------------------------
1372 Broadway - 2nd Floor Paul Baiocchi
New York, NY 10018 Vice President
Address for Notices: THE HONGKONG AND SHANGHAI BANKING
140 Broadway CORPORATION LIMITED, NEW YORK BRANCH
New York, NY 10005
Attention: NYK CBU TRS By /s/ IAN WRIGHT
------------------------------
Ian Wright
Vice President
Consented and agreed to as to Section 4 only:
By /s/ JOCELYN BARANDIARAN
- ----------------------------------------------
Name: Jocelyn Barandiaran
Title: Senior Vice President
6
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of September 20, 1996 (the "Agreement"),
among AnnTaylor Stores Corporation, a Delaware corporation (the "Company"),
Cygne Designs, Inc., a Delaware corporation ("Cygne"), and Cygne Group (F.E.)
Limited, a Hong Kong corporation and wholly owned subsidiary of Cygne ("CGFE"
and, together with Cygne, "Holder").
WHEREAS, pursuant to that certain Stock and Asset Purchase Agreement, dated
as of June 7, 1996 as amended by Amendment dated August 27, 1996 (the "Purchase
Agreement"), the Company has acquired (the "Acquisition") from Holder (i) all of
the shares of common stock, par value $.01 per share, of CAT US, Inc., a
Delaware corporation, and all of the HK $1 ordinary shares of C.A.T. (Far East)
Limited, a Hong Kong corporation, owned by Holder and (ii) certain of the assets
of Cygne's AnnTaylor Woven Division;
WHEREAS, in consideration for the Acquisition, the Company has, among other
things, issued to Holder 2,348,145 shares of common stock, par value $.0068 per
share (the "Common Stock"), of the Company (the shares of Common Stock issued to
Holder in consideration for the Acquisition are hereinafter referred to as the
"Acquisition Shares"); and
WHEREAS, the Company and Holder have determined that it is in their best
interests that certain aspects of their relationship be regulated according to
the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
The term "ACQUISITION" shall have the meaning ascribed to it in the
second paragraph of the preamble.
The term "ACQUISITION SHARES" shall have the meaning ascribed to it in
the third paragraph of the preamble.
The term "AFFILIATE" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.
The term "AGREEMENT" shall have the meaning ascribed to it in the
first paragraph of the preamble.
The term "COMMON STOCK" shall have the meaning ascribed to it in the
third paragraph of the preamble.
The term "COMPANY" shall have the meaning ascribed to it in the first
paragraph of the preamble.
The term "COMPANY OFFERING" shall mean the sale of equity securities
of the Company, or securities convertible into or exchangeable or
exercisable for equity securities of the Company, pursuant to a
registration statement filed by the Company under the Securities Act (other
than (i) a registration statement filed on Form S-4 or any successor form
or (ii) a registration statement filed on Form S-8 or any successor form)
respecting an underwritten offering, whether primary or secondary, that is
declared effective by the SEC.
The term "COMPANY SUBSIDIARY" shall mean any Person the majority of
the outstanding voting securities or interests of which are owned by the
Company, and shall include AnnTaylor Stores Corporation Finance Trust.
The term "EFFECTIVE DATE" shall have the meaning ascribed to it in
Section 2.02.
The term "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations of the SEC promulgated
thereunder.
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The term "HOLDER" shall have the meaning ascribed to it in the first
paragraph of the preamble.
The term "LOSSES" shall have the meaning ascribed to it in Section
2.06(a).
The term "PERSON" shall mean an individual, trustee, corporation,
partnership, business trust, limited liability company, limited liability
partnership, joint stock company, trust, unincorporated association, union,
business association, firm or other entity.
The term "PURCHASE AGREEMENT" shall have the meaning ascribed to it in
the second paragraph of the preamble.
The term "REGISTRATION EXPENSES" shall have the meaning ascribed to it
in Section 2.05.
The term "RULE 144" shall mean Rule 144 promulgated under the
Securities Act (or any successor rule).
The term "RULE 415 OFFERING" shall have the meaning ascribed to it in
Section 2.01(a).
The term "SEC" shall mean the Securities and Exchange Commission.
The term "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated thereunder.
The term "SHELF REGISTRATION STATEMENT" shall have the meaning
ascribed to it in Section 2.01(a).
The term "TRANSFER" shall mean any attempt to, directly or indirectly,
offer, sell, assign, transfer, grant a participation in, pledge or
otherwise dispose of any of the Acquisition Shares, or the consummation of
any such transactions, or the soliciting of any offers to purchase or
otherwise acquire, or take a pledge of any of the Acquisition Shares.
ARTICLE II
REQUIRED REGISTRATION
Section 2.01 Required Registration.
(a) Form S-3. As promptly as practicable, but in no event later than
fifteen (15) business days after the date on which the Acquisition closes, the
Company shall use reasonable best efforts to prepare and file with the SEC a
registration statement (the "Shelf Registration Statement") on Form S-3 or
another appropriate form permitting registration of the Acquisition Shares so as
to permit promptly the resale of the Acquisition Shares by Holder pursuant to an
offering on a delayed or continuous basis pursuant to Rule 415 (or any successor
rule) under the Securities Act (a "Rule 415 Offering") and shall use reasonable
best efforts to cause the Shelf Registration Statement to be declared effective
by the SEC as promptly as practicable.
(b) Effectiveness. The Company shall use reasonable best efforts to keep
the Shelf Registration Statement continuously effective under the Securities Act
until the date that is the earliest to occur of (i) the date that all
Acquisition Shares covered by the Shelf Registration Statement have been sold,
(ii) the third anniversary of the date hereof and (iii) when, in the written
opinion of counsel to the Company, all outstanding Acquisition Shares held by
persons which are not Affiliates of the Company may be resold without
registration under the Securities Act pursuant to Rule 144(k) under the Act or
any successor provision thereto.
(c) Amendments/Supplements. The Company shall amend and supplement the
Shelf Registration Statement and the prospectus contained therein if required by
the rules, regulations or instructions applicable to the registration form used
by the Company for such Shelf Registration Statement or if required by the
Securities Act; provided, however, that the Company may delay the filing of any
such amendment or supplement for up to 90 days if the Company in good faith has
a valid business reason for such delay.
(d) Offerings. At any time after the effective date of the Shelf
Registration Statement, Holder, subject to the restrictions and conditions
contained herein, and to compliance which all applicable state and federal
securities laws, shall have the right to dispose of all or any portion of the
Acquisition Shares from time to time in negotiated or market transactions (which
may include delivery to class action plaintiffs or a distribution to Holder's
stockholders).
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Section 2.02 Holdback Agreement.
From and after the first anniversary of the date on which the Shelf
Registration Statement is declared effective by the SEC (the "Effective Date"),
upon the request of the Company, Holder shall not effect any public sale or
distribution (including sales pursuant to Rule 144) of Acquisition Shares,
during the ten (10)-day period prior to the date on which the Company has
notified Holder that the Company intends to commence a Company Offering through
the filing of a registration statement with the Securities and Exchange
Commission, through the one hundred twenty (120)-day period immediately
following the closing date of such Company Offering; provided, however, that
Holder shall not be obligated to comply with this Section 2.02 on more than one
(1) occasion in any twelve (12)-month period.
Section 2.03 Blackout Provisions.
The Company shall be deemed not to have used its reasonable best efforts to
keep the Shelf Registration Statement effective during the requisite period if
the Company voluntarily takes any action that would result in Holder not being
able to offer and sell any Acquisition Shares during that period, unless (i)
such action is required by applicable law, (ii) upon the occurrence of any event
contemplated by Section 2.04(a)(8) below, such action is taken by the Company in
good faith and for valid business reasons or (iii) the continued effectiveness
of the Shelf Registration Statement would require the Company to disclose a
material financing, acquisition or other corporate development, and the proper
officers of the Company shall have determined in good faith that such disclosure
is not in the best interests of the Company and its stockholders, and, in the
case of clause (ii) above, the Company thereafter promptly comply with the
requirements of Section 2.04(a)(8) below; provided that the Company takes the
same action in respect of the Shelf Registration Statement filed pursuant to
that certain Registration Rights Agreement, dated as of April 25, 1996, between
the Company and the Initial Purchasers named therein.
Section 2.04 Registration Procedures.
(a) Procedures. In connection with the registration of the Acquisition
Shares pursuant to this Agreement, the Company shall use reasonable best efforts
to effect the registration and sale of the Acquisition Shares in accordance with
Holder's intended method of disposition thereof and, in connection therewith,
the Company shall as expeditiously as practicable:
(1) prepare and file with the SEC the Shelf Registration Statement and
use reasonable best efforts to cause the Shelf Registration Statement to
become and remain effective in accordance with Section 2.01(a) and (b)
above;
(2) prepare and file with the SEC amendments and supplements to the
Shelf Registration Statement and the prospectuses used in connection
therewith in accordance with Section 2.01(c) above;
(3) before filing with the SEC the Shelf Registration Statement or
prospectus or any amendments or supplements thereto, the Company shall
furnish to one counsel selected by Holder and one counsel for the
underwriter or sales or placement agent, if any, in connection therewith,
drafts of all such documents proposed to be filed and provide such counsel
with a reasonable opportunity for review thereof and comment thereon, such
review to be conducted and such comments to be delivered with reasonable
promptness;
(4) promptly (i) notify Holder of each of (x) the filing and
effectiveness of the Shelf Registration Statement and each prospectus and
any amendments or supplements thereto, (y) the receipt of any comments from
the SEC or any state securities law authorities or any other governmental
authorities with respect to any such Shelf Registration Statement or
prospectus or any amendments or supplements thereto, and (z) any oral or
written stop order with respect to such registration, any suspension of the
registration or qualification of the sale of the Acquisition Shares in any
jurisdiction or any initiation or threatening of any proceedings with
respect to any of the foregoing and (ii) use reasonable best efforts to
obtain the withdrawal of any order suspending the registration or
qualification (or the effectiveness thereof) or suspending or preventing
the use of any related prospectus in any jurisdiction with respect thereto;
(5) furnish to Holder, the underwriters or the sales or placement
agent, if any, and one counsel for each of the foregoing, a conformed copy
of the Shelf Registration Statement and each amendment and supplement
thereto (in each case, including all exhibits thereto) and such additional
number of copies of such Shelf
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<PAGE>
Registration Statement, each amendment and supplement thereto (in such
case, without such exhibits), the prospectus (including each preliminary
prospectus) included in such Shelf Registration Statement and prospectus
supplements and all exhibits thereto and such other documents as Holder,
underwriter, agent or such counsel may reasonably request in order to
facilitate the disposition of the Acquisition Shares by Holder;
(6) if requested by Holder or the managing underwriter or underwriters
of a Rule 415 Offering, subject to approval of counsel to the Company in
its reasonable judgment, promptly incorporate in a prospectus, supplement
or post-effective amendment to the Shelf Registration Statement such
information concerning underwriters and the plan of distribution of the
Acquisition Shares as such managing underwriter or underwriters or Holder
reasonably shall furnish to the Company in writing and request be included
therein, including, without limitation, information with respect to the
number of Acquisition Shares being sold by Holder to such underwriter or
underwriters, the purchase price being paid therefor by such underwriter or
underwriters and with respect to any other terms of the underwritten
offering of the Acquisition Shares to be sold in such offering; and make
all required filings of such prospectus, supplement or post-effective
amendment as soon as reasonably practicable after being notified of the
matters to be incorporated in such prospectus, supplement or post-effective
amendment;
(7) use reasonable best efforts to register or qualify the Acquisition
Shares under such securities or "blue sky" laws of such jurisdictions as
Holder reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable Holder to consummate the
disposition in such jurisdictions in which the Acquisition Shares are to be
sold and keep such registration or qualification in effect for so long as
the Shelf Registration Statement remains effective under the Securities Act
(provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required
to qualify but for this paragraph, (ii) subject itself to taxation in any
such jurisdiction where it would not otherwise be subject to taxation but
for this paragraph or (iii) consent to the general service of process in
any jurisdiction where it would not otherwise be subject to general service
of process but for this paragraph);
(8) notify Holder, at any time when a prospectus relating to the Shelf
Registration Statement is required to be delivered under the Securities
Act, upon the discovery that, or of the happening of any event as a result
of which, the Shelf Registration Statement, as then in effect, contains an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or any fact necessary to make the statements
therein not misleading, and, subject to Section 2.03 above, promptly
prepare and furnish to the Holder a supplement or amendment to the
prospectus contained in the Shelf Registration Statement so that the Shelf
Registration Statement shall not, and such prospectus as thereafter
delivered to the purchasers of such Acquisition Shares shall not, contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or any fact necessary to make the statements
therein not misleading;
(9) cause all of the Acquisition Shares to be listed on each national
securities exchange and included in each established over-the-counter
market on which or through which the Common Stock is then listed or traded;
(10) make available for inspection by Holder, any underwriter
participating in any disposition pursuant to the Shelf Registration
Statement, and any attorney, accountant or other agent retained by Holder
or underwriter, all reasonably requested financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors, employees, attorneys and independent
accountants to supply all information reasonably requested by Holder,
underwriters, attorneys, accountants or agents in connection with the Shelf
Registration Statement; information which the Company determines, in good
faith, to be confidential shall not be disclosed by such persons unless,
subject to Section 2.03 above, (i) the disclosure of such information is
required by applicable federal securities laws or is necessary to avoid or
correct a misstatement or omission in such Shelf Registration Statement or
(ii) the release of such information is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction; Holder agrees, on its
own behalf and on behalf of all of its underwriters, accountants, attorneys
and agents, that the information obtained by any of them as a result of
such inspections shall be deemed confidential unless and until such is made
generally available to the public; Holder further agrees, on its own behalf
and on behalf of all of its underwriters, accountants, attorneys and
agents, that it will, upon learning that disclosure of such information is
sought in a court of competent jurisdiction, give notice to the Company and
allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of the information deemed confidential; nothing
contained herein shall require the Company to waive any attorney-client
privilege or disclose attorney work product;
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(11) use reasonable best efforts to comply with all applicable laws
related to the Shelf Registration Statement and offering and sale of
securities and all applicable rules and regulations of governmental
authorities in connection therewith (including, without limitation, the
Securities Act and the Exchange Act, and the rules and regulations
promulgated by the Commission) and make generally available to its security
holders as soon as practicable (but in any event not later than fifteen
(15) months after the effectiveness of the Shelf Registration Statement) an
earnings statement of the Company and the Company Subsidiaries complying
with Section 11(a) of the Securities Act;
(12) use reasonable best efforts to furnish to Holder a signed
counterpart of (x) an opinion of counsel for the Company and (y) a
"comfort" letter signed by the independent public accountants who have
certified the Company's financial statements included or incorporated by
reference in such registration statement, covering such matters with
respect to such registration statement and, in the case of the accountants'
comfort letter, with respect to events subsequent to the date of such
financial statements as are customarily covered in opinions of issuer's
counsel and in accountants' comfort letters delivered to the underwriters
in underwritten public offerings of securities for the account of, or on
behalf of, a holder of common stock, such opinion and comfort letters to be
dated the date that such opinion and comfort letters are customarily dated
in such transactions; and
(13) take other actions as Holder or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of
the Acquisition Shares.
(b) Further Agreements. Without limiting any of the foregoing, in the event
that the sale of Acquisition Shares is to be made by or through an underwriter,
the Company shall enter into an underwriting agreement with a managing
underwriter or underwriters selected by Holder containing representations,
warranties, indemnities and agreements customarily included (but not
inconsistent with the agreements contained herein) by an issuer of common stock
in underwriting agreements with respect to offerings of common stock for the
account of, or on behalf of, holders of common stock; provided, however, that
the Holder shall not utilize the Shelf Registration Statement for more than one
underwritten offering during the term of this Agreement. In connection with the
sale of Acquisition Shares hereunder, Holder may, at its option, require that
any and all representations and warranties by, and the other agreements of, the
Company to or for the benefit of such underwriter or underwriters (or which
would be made to or for the benefit of such an underwriter or underwriter if
such sale of Acquisition Shares were pursuant to a customary underwritten
offering) be made to and for the benefit of Holder and that any or all of the
conditions precedent to the obligations of such underwriter or underwriters (or
which would be so for the benefit of such underwriter or underwriters under a
customary underwriting agreement) be conditions precedent to the obligations of
Holder in connection with the disposition of its securities pursuant to the
terms hereof. In connection with any offering of Acquisition Shares registered
pursuant to this Agreement, the Company shall, upon receipt of duly endorsed
certificates representing the Acquisition Shares, (x) furnish to the
underwriter, if any (or, if no underwriter, Holder), unlegended certificates
representing ownership of Acquisition Shares being sold, in such denominations
as requested, and (y) instruct any transfer agent and registrar of the
Acquisition Shares to release any stop transfer order with respect thereto.
Holder agrees that upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraph (8) of Section
2.04(a), Holder shall forthwith discontinue its disposition of Acquisition
Shares pursuant to the Shelf Registration Statement and prospectus relating
thereto until its receipt of the copies of the supplemented or amended
prospectus contemplated by paragraph (8) of Section 2.04(a) and, if so directed
by the Company, deliver to the Company all copies, other than permanent file
copies, then in Holder's possession of the prospectus current at the time of
receipt of such notice relating to the Acquisition Shares.
Section 2.05 Registration Expenses.
All expenses incidental to the Company's performance of, or compliance
with, its obligations under this Agreement including, without limitation, all
registration and filing fees, all fees and expenses of compliance with
securities and "blue sky" laws (including, without limitation, the fees and
expenses of counsel for underwriters or placement or sales agents in connection
with "blue sky" law compliance), all printing and copying expenses, all
messenger and delivery expenses, all reasonable out-of-pocket expenses of
underwriters and sales and placement agents in connection therewith (excluding
discounts and commissions and the fees and expenses of counsel therefor), all
fees and expenses of the Company's independent certified public accountants and
counsel (including, without limitation, with respect to "comfort" letters and
opinions) and other Persons retained by the Company in connection therewith
(collectively, the "Registration Expenses"), shall be borne by the Company. The
Company shall not be
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responsible for and shall not pay the fees and expenses of legal counsel,
accountants, agents or experts retained by Holder in connection with the sale of
the Acquisition Shares. The Company will pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties, the expense of any annual audit and the
expense of any liability insurance) and the expenses and fees for listing the
Acquisition Shares on the New York Stock Exchange.
Section 2.06 Indemnification.
(a) By the Company. The Company agrees to indemnify Holder, its officers,
directors, employees and agents and each Person who controls (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) Holder or
such other indemnified Person against all losses, claims, damages, liabilities
and expenses (collectively, the "Losses") caused by, resulting from or relating
to any untrue or alleged untrue statement of material fact contained in the
Shelf Registration Statement, any prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained
in, or alleged to be omitted from, any information furnished in writing to the
Company by Holder or its underwriter or other agent expressly for use therein or
by Holder's failure to deliver, or its underwriter's or other agent's failure to
deliver, a copy of the Shelf Registration Statement or prospectus or any
amendments or supplements thereto after the Company has furnished Holder with
the requested number of copies of the same. In connection with an underwritten
offering and without limiting any of the Company's other obligations under this
Agreement, the Company shall indemnify such underwriters, their officers,
directors, employees and agents and each Person who controls (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) such
underwriters or such other indemnified Person to the same extent as provided
above with respect to the indemnification of Holder.
(b) By Holder. In connection with the Shelf Registration Statement, Holder
shall furnish to the Company in writing information regarding Holder's ownership
of Acquisition Shares and its intended method of distribution thereof and shall
indemnify the Company, its directors, officers, employees and agents and each
Person who controls (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) the Company or such other indemnified Person
against all Losses caused by, resulting from or relating to any untrue or
alleged untrue statement of material fact contained in the Shelf Registration
Statement, any prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission or
alleged untrue statement or omission (i) is caused by, results from or relates
to, or is alleged to be omitted from, such information so furnished in writing
by Holder or (ii) arises out of or results from Holder's failure to deliver, or
its underwriter's or other agent's failure to deliver, a copy of the Shelf
Registration Statement or prospectus or any amendments or supplements thereto
after the Company has furnished Holder with the requested number of copies of
the same; provided, however, that Holder shall not be liable for any claims
hereunder in excess of the amount of net proceeds received by Holder from the
sale of Acquisition Shares pursuant to the Shelf Registration Statement. In
connection with an underwritten offering and without limiting any of Holder's
other obligations under this Agreement, (i) Holder shall indemnify such
underwriters, their officers, directors, employees and agents and each Person
who controls (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) such underwriters or such other indemnified Person to
the same extent as provided above with respect to the indemnification of the
Company and (ii) Holder shall cause each underwriter of an underwritten offering
to indemnify the Company, its directors, officers, employees and agents and each
Person who controls (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) the Company or such indemnified Person against
all Losses caused by, resulting from or relating to any untrue or alleged untrue
statement of material fact contained in the Shelf Registration Statement, any
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only to the extent that such untrue statement or omission or alleged untrue
statement or omission (x) is caused by, results from or relates to, or is
alleged to be omitted from, such information furnished in writing by such
underwriter or (y) arises out of or results from such underwriter's failure to
delivery a copy of the Shelf Registration Statement or prospectus or any
amendments or supplements thereto after the Company has furnished such
underwriter with the requested number of copies of the same.
(c) Notice. Any Person entitled to indemnification hereunder shall give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification; provided, however, the failure to give
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such notice shall not release the indemnifying party from its obligation,
except to the extent that the indemnifying party has been prejudiced by such
failure to provide such notice.
(d) Defense of Actions. In any case in which any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not (so long as it shall
continue to have the right to defend, contest, litigate and settle the matter in
question in accordance with this paragraph) be liable to such indemnified party
hereunder for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, supervision and monitoring (unless such indemnified
party reasonably objects to such assumption on the grounds that there may be
defenses available to it which are different from or in addition to the defenses
available to such indemnifying party, in which event the indemnified party shall
be reimbursed by the indemnifying party for the reasonable expenses incurred in
connection with retaining one separate legal counsel). An indemnifying party
shall not be liable for any settlement of an action or claim effected without
its consent. The indemnifying party shall lose its right to defend, contest,
litigate and settle a matter if it shall fail to diligently contest such matter
(except to the extent settled in accordance with the next following sentence).
No matter shall be settled by an indemnifying party without the consent of the
indemnified party unless such settlement contains a full and unconditional
release of the indemnified party.
(e) Survival. The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified Person and will survive the transfer of the
Registrable Securities.
(f) Contribution. If recovery is not available under the foregoing
indemnification provisions for any reason or reasons other than as specified
therein, any Person who otherwise would be entitled to indemnification by the
terms thereof shall nevertheless be entitled to contribution with respect to any
Losses with respect to which such Person would be entitled to such
indemnification but for such reason or reasons. In determining the amount of
contribution to which the respective Persons are entitled, there shall be
considered the Persons' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and other equitable
considerations appropriate under the circumstances. It is hereby agreed that it
would not necessarily be equitable if the amount of such contribution were
determined by pro rata or per capita allocation. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not found guilty of
such fraudulent misrepresentation.
Section 2.07 Transferability of Registration Rights.
The rights and obligations of Holder under this ARTICLE II may not be
transferred or assigned without the prior written consent of the Company;
provided, however, that such rights and obligations may be assigned by Holder in
connection with a pledge of the Acquisition Shares in a bona fide transaction to
secure indebtedness of Cygne for borrowed money to a lender that agrees in a
writing reasonably satisfactory to the Company to be subject to the terms of
this Agreement.
ARTICLE III
STANDSTILL PROVISIONS
Section 3.01 Certain Prohibited Actions.
During the term of this Agreement, without the prior written consent of the
Company, neither Cygne nor CGFE shall, and each shall cause each of its
Affiliates not to, singly or as part of a "group", directly or indirectly,
through one or more intermediaries or otherwise (i) make, or in any way
participate, directly or indirectly, in, any "solicitation" of "proxies" (as
such terms are defined or used in Regulation 14A under the Exchange Act) with
respect to the Common Stock or any securities of the Company Subsidiaries
(including by the execution of actions by written consent),
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become a "participant" in any "election contest" (as such terms are defined
or used in Rule 14a-11 under the Exchange Act) with respect to the Company or
seek to advise or influence any person or entity with respect to the voting of
any shares of Common Stock or any securities of the Company Subsidiaries; (ii)
initiate, propose, or participate in the solicitation of stockholders for the
approval of one or more stockholder proposals with respect to the Company, as
described in Rule 14a-8 under the Exchange Act, or induce or encourage any other
individual or entity to initiate any stockholder proposal relating to the
Company; (iii) form, join, influence or participate in a "group", or act in
concert with any other person or entity, for the purpose of acquiring, holding,
voting or disposing of any securities of the Company or the Company Subsidiaries
or taking any other actions prohibited under this Section 3.01; (iv) hold any
discussions with another Person regarding, make any proposal to or any public
announcement relating to a tender or exchange offer for any securities of the
Company or the Company Subsidiaries, or a merger, business combination, sale of
assets, liquidation, restructuring, recapitalization or other extraordinary
corporate transaction relating to the Company or any of the Company Subsidiaries
or its or their material assets or take any action which might require the
Company to make a public announcement regarding any of the foregoing; (v) cause
the merger of Cygne or CGFE with or into, the consolidation of the Cygne or CGFE
with, or the sale of the business or assets of Cygne or CGFE substantially as an
entirety to, any other Person unless (A) Cygne or CGFE, as the case may be, is
the surviving Person or the surviving Person agrees in writing to be bound by
this Agreement and (B) within 120 days after consummation of the transaction,
the surviving Person disposes of all shares of Common Stock owned by it (in
excess of those owned by Cygne or CGFE, as the case may be, prior to
consummation of the transaction); (vi) act, alone or in concert with others
(including by providing financing for another party), to seek or offer to
control the Company; (vii) deposit any Acquisition Shares in a voting trust or
subject any Acquisition Shares to any arrangement or agreement with respect to
the voting thereof (except pursuant to Section 3.03 below); (viii) execute any
written consents; (ix) enter into any discussions, negotiations, arrangements or
understandings with or provide any information to any third party with respect
to any of the foregoing; (x) disclose any intention, plan or arrangement
inconsistent with the foregoing prohibitions or advise or assist any other
Person in connection with any activity included in the foregoing prohibitions;
or (xi) seek, request, or propose any waiver, modification, amendment or
termination of any provision of this Section 3.01 (other than any request or
proposal made or solicited by the Company).
Section 3.02 Transferability of Acquisition Shares.
(a) Lock-up Period. Except pursuant to a pledge in a bona fide transaction
to secure indebtedness of Cygne for borrowed money to a lender that agrees in a
writing reasonably acceptable to the Company to be subject to the terms of this
Agreement, Holder may not Transfer any of the Acquisition Shares prior to the
Effective Date.
(b) Permitted Transfers. From and after the Effective Date, Holder may not
Transfer the Acquisition Shares except in the following circumstances:
(i) to the Company or with the Company's prior written consent;
(ii) pursuant to a pledge in a bona fide transaction to secure
indebtedness of Cygne for borrowed money to a lender that agrees in a
writing reasonably acceptable to the Company to be subject to the terms of
this Agreement;
(iii) to an Affiliate that agrees in a writing reasonably acceptable
to the Company to be bound by the terms of this Agreement;
(iv) pursuant to a tender offer made by a person with respect to which
the Company does not recommend rejection;
(v) pursuant to a settlement with the plaintiffs in the class action
VERONICA ZUCKER V. SASAKI, ET AL.;
(vi) pursuant to a pro rata dividend or other pro rata distribution to
all of Cygne's stockholders, upon liquidation of Cygne or otherwise; or
(vii) pursuant to Rule 144 or otherwise pursuant to the Shelf
Registration Statement;
provided, however, that, other than pursuant to clauses (iv)-(vi) above or
pursuant to an underwritten public offering, no Transfers of more than two
percent (2%) of the Company's then outstanding shares of Common Stock may be
made in any two (2)-week period; and provided, further, that any underwriter of
a public offering or any placement
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agent, broker or other agent shall be instructed that (x) no Transfers of
any Acquisition Shares may knowingly be made to any person who beneficially owns
in excess of five percent (5%) of the then outstanding shares of Common Stock,
and (y) no Transfer of more than two percent (2%) of the Company's then
outstanding Common Stock may knowingly be made to a single purchaser (or group
of related purchasers).
Section 3.03 Voting.
During the term of this Agreement, the Holder (i) shall be present in
person or represented by proxy at all stockholder meetings of the Company so
that all Acquisition Shares then beneficially owned by Holder shall be counted
for the purpose of determining the presence of a quorum at such meetings, and
(ii) shall vote, or act by consent with respect to, all Acquisition Shares then
beneficially owned by Holder pro rata in the same proportion as the votes cast
by all other stockholders of the Company.
ARTICLE IV
MISCELLANEOUS
Section 4.01 Effectiveness of Agreement.
The provisions of this Agreement shall be effective as of the date hereof.
Section 4.02 Restrictive Legends.
Holder hereby acknowledges and agrees that, during the term of this
Agreement, each of the certificates representing Acquisition Shares shall be
subject to stop transfer instructions and shall include the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED
WHETHER BY SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE, GIFT, BEQUEST,
APPOINTMENT OR OTHERWISE, AND ANNTAYLOR STORES CORPORATION (THE "COMPANY")
WILL NOT REGISTER THE TRANSFER OF SUCH SHARES, EXCEPT PURSUANT AND SUBJECT
TO THAT CERTAIN STOCKHOLDERS AGREEMENT DATED SEPTEMBER 20, 1996, AS MAY BE
AMENDED FROM TIME TO TIME, BETWEEN ATSC AND CYGNE DESIGNS, INC. A COPY OF
SUCH AGREEMENT IS ON FILE WITH THE SECRETARY OF THE COMPANY."
Section 4.03 Recapitalization.
In the event that any capital stock or other securities are issued as a
dividend or distribution on, in respect of, in exchange for, or in substitution
of, any Acquisition Shares, such securities shall be deemed to be Acquisition
Shares for all purposes under this Agreement.
Section 4.04 Notices.
All notices, requests, demands, waivers and other communications required
or permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered personally, by mail (certified or
registered mail, return receipt requested), by reputable overnight courier or by
facsimile transmission (receipt of which is confirmed):
(a) If to the Company, to:
AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention: General Counsel
Facsimile: (212) 541-3299
9
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with a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq,
Facsimile: (302) 651-3001
(b) If to Holder, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: General Counsel
Facsimile: (212) 536-4174
with a copy to:
Fulbright and Jaworski, L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Roy L. Goldman, Esq.
Facsimile: (212) 752-5958
or to such other person or address as any party shall specify by notice in
writing, given in accordance with this Section 4.04, to the other parties
hereto. All such notices, requests, demands, waivers and communications shall
be deemed to have been given on the date on which so hand-delivered, on the
third business day following the date on which so mailed, on the next business
day following the date on which delivered to such overnight courier and on the
date of such facsimile transmission and confirmation, except for a notice of
change of person or address, which shall be effective only upon receipt
thereof.
Section 4.05 Entire Agreement.
This Agreement contains the entire understanding of the parties hereto with
respect to the subject matter hereof. This Agreement supersedes all prior
agreements and understandings, oral and written, with respect to its subject
matter.
Section 4.06 Severability.
Should any provision of this Agreement, or any part thereof, for any reason
be declared invalid or unenforceable, such declaration shall not affect the
validity or enforceability of any other provision of this Agreement, or any
other part thereof, all of which other provisions, and parts, shall remain in
full force and effect, and the application of such invalid or unenforceable
provision, or such part thereof, to persons or circumstances other than those as
to which it is held invalid or unenforceable shall be valid and be enforced to
the fullest extent permitted by law.
Section 4.07 Binding Effect; Assignment.
This Agreement and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, successors and permitted assigns, but, except as expressly
contemplated herein, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned, directly or indirectly, by the Company
or Holder without the prior written consent of the other. Upon any such
assignment, this Agreement shall be amended to substitute the assignee as a
party hereto in a writing reasonably acceptable to the other party.
Section 4.08 Amendment, Modification and Waiver.
This Agreement may be amended, modified or supplemented at any time by
written agreement of the parties hereto. Any failure by Holder, on the one hand,
or the Company, on the other hand, to comply with any term or provision of this
Agreement may be waived by the Company or Holder, respectively, at any time by
an instrument in
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writing signed by or on behalf of the Company and Holder, but such waiver
or failure to insist upon strict compliance with such term or provision shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure to comply.
Section 4.09 Third-Party Beneficiaries.
This Agreement is not intended, and shall not be deemed, to confer upon or
give any person except the parties hereto and their respective successors and
permitted assigns, any remedy, claim, liability, reimbursement, cause of action
or other right under or by reason of this Agreement.
Section 4.10 Counterparts.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Section 4.11 Interpretation.
The article and section headings contained in this Agreement are solely for
the purpose of reference, are not part of the agreement of the parties and shall
not in any way affect the meaning or interpretation of this Agreement.
Section 4.12 Governing Law.
This Agreement shall be governed by the laws of the State of New York,
without regard to the principles of conflicts of law thereof.
Section 4.13 Termination; Restrictive Legend.
This Agreement shall terminate on the third anniversary of the date hereof;
provided, however, that the provisions of Section 2.06 hereof shall survive
termination of this Agreement. It is understood and agreed that any restrictive
legends set forth on any Acquisition Shares shall be removed by delivery of
substitute certificates without such legends and such Acquisition Shares shall
no longer be subject to the terms of this Agreement, upon the resale of such
Acquisition Shares in accordance with the terms of this Agreement (other than
pursuant to Section 3.02(b) (i), (ii) or (iii)) or, if not theretofore removed,
on the third anniversary of the date hereof.
IN WITNESS WHEREOF, the undersigned hereby agree to be bound by the terms
and provisions of this Stockholders Agreement as of the date first above
written.
ANNTAYLOR STORES CORPORATION
By: /s/ WALTER J. PARKS
----------------------------------
Name: Walter J. Parks
Title: Senior Vice President-Finance
CYGNE DESIGNS, INC.
By: /s/ BERNARD M. MANUEL
----------------------------------
Name: Bernard M. Manuel
Title: Chairman and Chief Executive Officer
CYGNE GROUP (F.E.) LIMITED
By: /s/ BERNARD M. MANUEL
---------------------------------
Name: Bernard M. Manuel
Title: Chairman and Chief Executive Officer
11
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is made and entered into as of the 20th day of
September, 1996, by and between AnnTaylor Stores Corporation, a Delaware
corporation ("ATSC"), AnnTaylor, Inc., a Delaware corporation and wholly owned
subsidiary of ATSC ("ATI" and, together with ATSC, "Ann Taylor"), Cygne Designs,
Inc., a Delaware corporation ("Cygne"), and Mr. Bernard M. Manuel
("Consultant").
W I T N E S S E T H :
WHEREAS, pursuant to that certain Stock and Asset Purchase Agreement, dated
as of June 7, 1996, as amended as of August 27, 1996, among ATSC, ATSI, Cygne
and Cygne Group (F.E.) Limited, a Hong Kong corporation and wholly owned
subsidiary of Cygne ("CGFE"), ATI acquired from Cygne (i) all of the shares of
common stock, par value $.01 per share, of CAT US, Inc., a Delaware corporation
("CAT-US"), owned by Cygne; and (ii) certain of the assets of Cygne's AnnTaylor
Woven Division (the "Division");
WHEREAS, pursuant to the Purchase Agreement, ATI acquired from CGFE all of
the shares of common stock, par value $1 HK per share, of C.A.T. (Far East)
Limited, a Hong Kong corporation ("CAT-Far East" and, together with CAT-US,
"CAT"), owned by CGFE;
WHEREAS, CAT serves as a fully dedicated sourcing capability for ATI;
WHEREAS, prior to the date hereof, Cygne, through the Division, served as a
private label designer, merchandiser and manufacturer of women's apparel for
ATI;
WHEREAS, Consultant is the Chairman and Chief Executive Officer of Cygne
with particular expertise regarding sourcing of fabric and materials,
particularly with respect to suppliers and factories in Hong Kong and Asia; and
WHEREAS, Ann Taylor, as partial consideration for the transactions
contemplated by the Purchase Agreement, desires to obtain, and Cygne and
Consultant desire that Consultant provide, information, consultation, advice and
other services in aid of Ann Taylor's business, all subject to the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants, agreements and conditions contained
herein, Ann Taylor, Cygne and Consultant, intending to be legally bound, agree
as follows:
1. Engagement of Consultant.
(a) Cygne hereby covenants and agrees to make make Consultant available to
provide services to Ann Taylor upon the terms and conditions set forth herein.
Consultant hereby agrees to act as a consultant to and on behalf of Ann Taylor
in accordance with the terms and conditions set forth herein. Cygne, Consultant
and Ann Taylor agree that Consultant will provide services to Ann Taylor not in
excess of thirty percent (30%) of his business time and that Consultant will
continue his duties as Chairman and Chief Executive Officer of Cygne. Cygne
agrees to allow Consultant reasonable time to perform his duties as a consultant
to Ann Taylor on a timely basis, provided, however, that the performance of such
duties shall be at mutually agreeable times that do not unreasonably interfere
with Consultant's continuing obligations to Cygne.
(b) Cygne shall cause Consultant to, at the request of the President of Ann
Taylor, provide Ann Taylor information, consultation and advice on fabric and
material sourcing, particularly with respect to suppliers and factories in Hong
Kong and Asia.
(c) Cygne shall cause Consultant, and Consultant hereby agrees, to
diligently and faithfully serve Ann Taylor and to devote his reasonable best
efforts, his highest talents and skills, and all necessary time and attention in
providing the information, consultation and advice requested pursuant to
paragraph (b) of this Section 1; provided that Consultant shall not, without the
consent of Cygne and Consultant, be required to travel outside HongKong. Cygne
hereby consents to the allocation of up to thirty percent (30%) of Consultant's
business time to perform services under this Agreement.
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2. Term of Agreement. Unless terminated at an earlier date in accordance
with Section 4 of this Agreement, the term of this Agreement shall commence on
the date of this Agreement and shall end on the third anniversary thereof (the
"Expiration Date").
3. Payment for Services.
(a) Consultant's Fee. In consideration of Cygne causing Consultant to
perform the services provided for in this Agreement, Ann Taylor shall pay to
Cygne, at such time and in the manner as set forth in Section 3(b) hereof, a fee
of $225,000 per year (the "Consultant's Fee"). Ann Taylor shall not provide
Consultant with any compensation or benefits, including, but not limited to,
medical or pension benefits, bonuses or vacation, holiday or sick pay.
(b) Time Of Payment. The Consultant's Fee shall be due and payable to Cygne
by Ann Taylor in quarterly installments commencing on the date hereof; provided,
however, that the first installment shall be prorated to reflect the remaining
days of the current fiscal quarter.
(c) Reimbursement Of Expenses. Ann Taylor shall reimburse Cygne or
Consultant, as the case may be, for all reasonable out-of-pocket expenses
incurred by Cygne or Consultant in connection with the performance of
Consultant's services hereunder in accordance with AnnTaylor's travel policies.
4. Termination.
(a) Death. This Agreement shall terminate upon the Consultant's death.
(b) Termination by Default. Each of the following shall constitute, without
limitation or restriction, an event of default under this Agreement, in which
case, the non-defaulting party may give the other notice that this Agreement
shall terminate on the date selected by the non-defaulting party and set forth
in such notice (the "Termination Date"), unless cured as specified below:
(i) If either Ann Taylor or Cygne shall, whether by action or
inaction, breach in any material respect any obligation under this
Agreement, including a material failure by Consultant to perform his duties
and responsibilities hereunder, and such breach is not remedied within
thirty (30) days after written notice thereof from the non-defaulting
party;
(ii) If, for any reason, Consultant shall be convicted of a felony; or
if Consultant shall be convicted of any other crime as a result of which
his ability to perform the services described in Section 1 hereof is
materially impaired;
(iii) If there has been fraud, bad faith or willful misconduct on the
part of Cygne or Consultant in connection with the performance of
Consultant's duties and responsibilities hereunder;
(iv) If Ann Taylor institutes proceedings relief under the United
States Bankruptcy Code or any similar law, or consents to entry of an order
for relief against it in any bankruptcy or insolvency proceeding or similar
proceeding, or files a petition or answer or consent for reorganization or
other relief under any bankruptcy act or similar law, or consents to the
filing against it, of any petition for the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
it, or of any substantial part of its property, or makes an assignment for
the benefit of creditors, or admits in writing its inability to pay its
debts as they become due, or fails to pay its debts as they become due or
takes any action in furtherance of the foregoing; or
(v) If Cygne or Consultant breaches in any manner Section 5 hereof.
(c) Effect of Termination. Upon termination of this Agreement, Cygne's
obligation to cause Consultant to provide services to Ann Taylor hereunder, and
Ann Taylor's obligation to make payment to Cygne under Section 3 hereof, shall
terminate, except that AnnTaylor shall be obligated to reimburse all expenses
incurred through the termination date in accordance with Section 3(b) hereof.
5. Confidentiality.
(a) Proprietary Information. Each of Cygne and Consultant acknowledges and
agrees that during the course of the provision of Consultant's services to Ann
Taylor, Consultant may be exposed to sensitive data and information concerning
the business and affairs of Ann Taylor, including, without limitation, fabric,
product and merchandise designs, and that all of such data and information,
financial plans, financial results, quantity or assortment of merchandise orders
or plans and inventory levels (collectively, the "Proprietary Information") are
vital, sensitive, confidential and proprietary to Ann Taylor.
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(b) Consultant's Agreement. In consideration of the Purchase Price (as
defined in the Purchase Agreement) to be paid by Ann Taylor to Cygne in
connection with the transactions contemplated by the Purchase Agreement,
Consultant agrees to the covenants and restrictions set forth in this Section 5.
(c) Cygne's Agreement. In consideration of the Purchase Price to be paid by
Ann Taylor to Cygne in connection with the transactions contemplated by the
Purchase Agreement, Cygne agrees to the covenants and restrictions set forth in
this Section 5.
(d) Trade Secret Status. Each of Cygne and Consultant expressly
acknowledges the trade secret status of the Proprietary Information and
acknowledges that the Proprietary Information constitutes a protectable business
interest of Ann Taylor, and covenants and agrees that during the term of the
engagement hereunder and at all times after the expiration or termination of
such engagement, neither Cygne nor Consultant shall, directly or indirectly,
whether, in the case of Consultant, individually, as a director, stockholder,
owner, partner, employee, principal or agent of or consultant to any business,
or in any other capacity, make known, disclose, furnish, make available or
utilize any of the Proprietary Information, other than in the proper performance
of the duties contemplated herein during the term of the engagement hereunder.
Cygne's and Consultant's obligations under this Section 5(d) with respect to
particular Proprietary Information shall terminate only at such time (if any) as
the Proprietary Information in question becomes generally known to the public
other than through a breach of either Cygne's or Consultant's obligations
hereunder.
(e) Return of Proprietary Information. Each of Cygne and Consultant
acknowledges and agrees that all records or documents containing Proprietary
Information prepared by Consultant or coming into his possession by virtue of
the engagement are and shall remain the property of Ann Taylor and that, upon
termination or expiration of this engagement, Consultant shall return
immediately to Ann Taylor all such items in his possession, together with all
copies and extracts, and will destroy all summaries thereof and any such
information stored electronically on tapes, computer disks or in any other
manner.
(f) Consultant Non-solicitation. Consultant agrees that during the term of
this Agreement and for a period of one (1) year thereafter he shall not,
directly or indirectly, induce or solicit (or authorize or assist in the taking
of any such actions by any third party) any employee or consultant of Ann Taylor
to leave his or her business association with Ann Taylor.
(g) Cygne Non-Solicitation. Cygne agrees that during the term of this
Agreement and for a period of one (1) year thereafter it shall not, directly or
indirectly, induce or solicit (or authorize or assist in the taking of any such
actions by any third party) any employee or consultant of Ann Taylor to leave
his or her business association with Ann Taylor.
(h) Ann Taylor Non-Solicitation. Ann Taylor agrees that during the term of
this Agreement and for a period of one (1) year thereafter it shall not,
directly or indirectly, induce or solicit (or authorize or assist in the taking
of any such actions by any third party) any employee or consultant of Cygne to
leave his or her business association with Cygne.
(i) Acknowledgment. Consultant and Cygne acknowledge and agree that the
covenants set forth in this Section 5 and each subsection hereof are reasonable
and necessary for the protection of Ann Taylor's business interests, that
irreparable injury will result to Ann Taylor if Consultant or Cygne breaches any
of the terms of said covenants, and that in the event of Consultant's or Cygne's
actual or threatened breach of any such covenants, Ann Taylor will have no
adequate remedy at law. Cygne and Consultant accordingly agree that in the event
of any actual or threatened breach by Consultant of any of said covenants, Ann
Taylor shall be entitled to immediate injunctive and other equitable relief
without bond and without the necessity of showing actual monetary damages. Cygne
accordingly agrees that in the event of any actual or threatened breach by Cygne
of any of said covenants, Ann Taylor shall be entitled to immediate injunctive
and other equitable relief without bond and without the necessity of showing
actual monetary damages. Notwithstanding the provisions of Section 9 hereof,
such equitable relief may be sought in any court of competent jurisdiction.
Nothing contained herein shall be construed as prohibiting Ann Taylor from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of any damages which it is able to prove.
(j) The provisions of this Section 5 shall survive the expiration or
termination of this Agreement, and any of the arrangements contained herein, and
shall be binding upon Consultant's, Cygne's and Ann Taylor's corporate or
personal successors and assigns.
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6. Representations and Warranties of Consultant. Consultant represents and
warrants to Cygne and Ann Taylor that he has full legal power and authority to
enter into this Agreement, perform all of his obligations hereunder and to
consummate the transactions contemplated hereby.
7. Consultant's Independence and Discretion.
(a) Nothing herein contained shall be construed to constitute the parties
hereto as partners or as joint venturers, or as agent of the others, or, as
between Ann Taylor and Consultant, as employer and employee. By virtue of the
relationship described herein, Consultant's relationship to Ann Taylor during
the term of this Agreement shall only be that of an independent contractor and
the Consultant shall perform all services pursuant to this Agreement as an
independent contractor. The Consultant shall not provide any services under Ann
Taylor's business name and shall not present himself as an agent or employee of
Ann Taylor and shall have no authority to enter into any binding obligation on
behalf of Ann Taylor.
(b) Subject to the terms of this Agreement, the manner, means, details or
methods by which the Consultant performs his obligations under this Agreement
shall be determined by Cygne, subject to the reasonable satisfaction of Ann
Taylor.
(c) Each of Cygne and Consultant acknowledges and agrees that Ann Taylor
shall not provide to Consultant any unemployment, disability, workers'
compensation or medical insurance or any other employee benefits. Payments to
Cygne under Section 3 hereof shall not be subject to withholding taxes or other
employment taxes.
8. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration before three
(3) arbitrators selected in accordance with the Commercial Arbitration Rules of
the American Arbitration Association in the City of New York. Arbitration as
provided herein shall be the exclusive means for determination of all matters as
above provided, and any decision and award of the arbitrators shall be final,
binding and conclusive upon the parties and such decision and award may be
entered as a final judgment in any court of competent jurisdiction. Except as
provided in Section 5(j) hereof, none of the parties shall institute any action
or proceeding in any court of law or equity, state or federal, other than as may
be necessary for purposes of enforcement of the arbitrators' decision and award
hereunder.
9. Consultant's Employment. Cygne and Consultant hereby acknowledge that
Consultant's execution of this Agreement is a condition to Consultant's
continued employment with Cygne.
10. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally,
by mail (certified or registered mail, return receipt requested), by reputable
overnight courier or by facsimile transmission (receipt of which is confirmed):
(a) If to ATSC or ATI, to:
AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention: General Counsel
Facsimile: (212) 541-3299
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq.
Facsimile: (302) 651-3001
(b) If to Cygne, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: General Counsel
Facsimile: (212) 536-4174
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with a copy to:
Fulbright and Jaworski, L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Roy L. Goldman, Esq.
Facsimile: (212) 752-5958
(c) If to Consultant, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: Bernard M. Manuel
Facsimile: (212) 536-4174
or to such other person or address as any party shall specify by notice in
writing, given in accordance with this Section 10 to the other parties hereto.
All such notices, requests, demands, waivers and communications shall be deemed
to have been given on the date on which so hand-delivered, on the third business
day following the date on which so mailed, on the next business day following
the date on which delivered to such overnight courier and on the date of such
facsimile transmission and confirmation, except for a notice of change of person
or address, which shall be effective only upon receipt thereof.
11. Entire Agreement. This Agreement contains the entire understanding of
the parties hereto with respect to the subject matter hereof. This Agreement
supersedes all prior agreements and understandings, oral and written, with
respect to its subject matter.
12. Severability. Should any provision of this Agreement, or any part
thereof, for any reason be declared invalid or unenforceable, such declaration
shall not affect the validity or enforceability of any other provision of this
Agreement, or any other part thereof, all of which other provisions, and parts,
shall remain in full force and effect, and the application of such invalid or
unenforceable provision, or such part thereof, to persons or circumstances other
than those as to which it is held invalid or unenforceable shall be valid and be
enforced to the fullest extent permitted by law.
13. Binding Effect; Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, executors, successors and permitted assigns, but, except
as contemplated herein, neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned, directly or indirectly, by ATSC,
ATI, Cygne or Consultant without the prior written consent of the other parties
hereto; provided, however, that ATSC or ATI may assign any or all of its rights,
interests or obligations hereunder to any one or more, direct or indirect,
wholly owned subsidiaries of ATSC or ATI, provided, however, that no such
assignment by ATSC or ATI shall limit or affect ATSC's or ATI's obligations
hereunder; provided, further, however, that this Agreement shall automatically
be assigned to and assumed by Consultant in the event that (i) Consultant's
employment with Cygne is terminated; or (ii) Cygne is liquidated or dissolved,
whether through Chapter 7 of the U.S. Bankruptcy Laws or otherwise; provided,
however, that Consultant hereby agrees, in the event of any such assignment by
Cygne and assumption by Consultant, to assume and perform all of Cygne's
obligations hereunder, to the extent applicable.
14. Amendment, Modification And Waiver. This Agreement may be amended,
modified or supplemented at any time by written agreement of the parties hereto.
Any failure by Cygne or Consultant, on the one hand, or ATSC or ATI, on the
other hand, to comply with any term or provision of this Agreement may be waived
by ATSC, ATI, Cygne or Consultant, respectively, at any time by an instrument in
writing signed by or on behalf of ATSC, ATI, Cygne or Consultant, but such
waiver or failure to insist upon strict compliance with such term or provision
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure to comply.
15. Third-Party Beneficiaries. Except as otherwise expressly provided
herein, this Agreement is not intended, and shall not be deemed, to confer upon
or give any person except the parties hereto and their respective successors and
permitted assigns, any remedy, claim, liability, reimbursement, cause of action
or other right under or by reason of this Agreement.
16. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5
<PAGE>
17. Interpretation. The section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement. As used in this Agreement, the term "person" shall mean and include
an individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
18. Governing Law. This Agreement shall be governed by the laws of the
State of New York, without regard to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
ANNTAYLOR STORES CORPORATION
By /s/ WALTER J. PARKS
------------------------------------
Name: Walter J. Parks
Title: Senior Vice President-Finance
ANNTAYLOR, INC.
By /s/ WALTER J. PARKS
------------------------------------
Name: Walter J. Parks
Title: Senior Vice President-Finance
CYGNE DESIGNS, INC.
By /s/ BERNARD M. MANUEL
------------------------------------
Name: Bernard M. Manuel
Title:
CONSULTANT
By /s/ BERNARD M. MANUEL
------------------------------------
Bernard M. Manuel
Consultant
6
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is made and entered into as of the 20th day of
September, 1996, by and between AnnTaylor Stores Corporation, a Delaware
corporation ("ATSC"), AnnTaylor, Inc., a Delaware corporation and wholly owned
subsidiary of ATSC ("ATI" and, together with ATSC, "Ann Taylor"), Cygne Designs,
Inc., a Delaware corporation ("Cygne"), and Mr. Irving Benson ("Consultant").
W I T N E S S E T H :
WHEREAS, pursuant to that certain Stock and Asset Purchase Agreement, dated
as of June 7, 1996, as amended as of August 27, 1996, among ATSC, ATSI, Cygne
and Cygne Group (F.E.) Limited, a Hong Kong corporation and wholly owned
subsidiary of Cygne ("CGFE"), ATI acquired from Cygne (i) all of the shares of
common stock, par value $.01 per share, of CAT US, Inc., a Delaware corporation
("CAT-US"), owned by Cygne; and (ii) certain of the assets of Cygne's AnnTaylor
Woven Division (the "Division");
WHEREAS, pursuant to the Purchase Agreement, ATI acquired from CGFE all of
the shares of common stock, par value $1 HK per share, of C.A.T. (Far East)
Limited, a Hong Kong corporation ("CAT-Far East" and, together with CAT-US,
"CAT"), owned by CGFE;
WHEREAS, CAT serves as a fully dedicated sourcing capability for ATI;
WHEREAS, prior to the date hereof, Cygne, through the Division, served as a
private label designer, merchandiser and manufacturer of women's apparel for
ATI;
WHEREAS, Consultant is the President and Vice Chairman of Cygne with
particular expertise regarding design, merchandising and product development;
and
WHEREAS, Ann Taylor, as partial consideration for the transactions
contemplated by the Purchase Agreement, desires to obtain, and Cygne and
Consultant desire that Consultant provide, information, consultation, advice and
other services in aid of Ann Taylor's business, all subject to the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants, agreements and conditions contained
herein, Ann Taylor, Cygne and Consultant, intending to be legally bound, agree
as follows:
1. Engagement of Consultant.
(a) Cygne hereby covenants and agrees to make Consultant available to
provide services to Ann Taylor upon the terms and conditions set forth
herein. Consultant hereby agrees to act as a consultant to and on behalf of
Ann Taylor in accordance with the terms and conditions set forth herein.
Cygne, Consultant and Ann Taylor agree that Consultant will provide
services to Ann Taylor not in excess of thirty percent (30%) of his
business time and that Consultant will continue his duties as President and
Vice Chairman of Cygne. Cygne agrees to allow Consultant reasonable time to
perform his duties as a consultant to Ann Taylor on a timely basis,
PROVIDED, HOWEVER, that the performance of such duties shall be at mutually
agreeable times that do not unreasonably interfere with Consultant's
continuing obligations to Cygne.
(b) Cygne shall cause Consultant to, at the request of the President
of Ann Taylor, provide Ann Taylor information, consultation and advice on
design, merchandising and product development.
(c) Cygne shall cause Consultant, and Consultant hereby agrees, to
diligently and faithfully serve Ann Taylor and to devote his reasonable
best efforts, his highest talents and skills, and all necessary time and
attention in providing the information, consultation and advice requested
pursuant to paragraph (b) of this Section 1; provided that Consultant shall
not, without the consent of Cygne and Consultant, be required to travel
outside New York. Cygne hereby consents to the allocation of up to thirty
percent (30%) of Consultant's business time to perform services under this
Agreement.
2. Term of Agreement. Unless terminated at an earlier date in accordance
with Section 4 of this Agreement, the term of this Agreement shall commence on
the date of this Agreement and shall end on the third anniversary thereof (the
"Expiration Date").
1
<PAGE>
3. Payment for Services.
(a) Consultant's Fee. In consideration of Cygne causing Consultant to
perform the services provided for in this Agreement, Ann Taylor shall pay
to Cygne, at such time and in the manner as set forth in Section 3(b)
hereof, a fee of $225,000 per year (the "Consultant's Fee"). Ann Taylor
shall not provide Consultant with any compensation or benefits, including,
but not limited to, medical or pension benefits, bonuses or vacation,
holiday or sick pay.
(b) Time of Payment. The Consultant's Fee shall be due and payable to
Cygne by Ann Taylor in quarterly installments commencing on the date
hereof; provided, however, that the first installment shall be prorated to
reflect the remaining days of the current fiscal quarter.
(c) Reimbursement of Expenses. Ann Taylor shall reimburse Cygne or
Consultant, as the case may be, for all reasonable out-of-pocket expenses
incurred by Cygne or Consultant in connection with the performance of
Consultant's services hereunder in accordance with AnnTaylor's travel
policies.
4. Termination.
(a) Death. This Agreement shall terminate upon the Consultant's death.
(b) Termination by Default. Each of the following shall constitute,
without limitation or restriction, an event of default under this
Agreement, in which case, the non-defaulting party may give the other
notice that this Agreement shall terminate on the date selected by the
non-defaulting party and set forth in such notice (the "Termination Date"),
unless cured as specified below:
(i) If either Ann Taylor or Cygne shall, whether by action or
inaction, breach in any material respect any obligation under this
Agreement, including a material failure by Consultant to perform his
duties and responsibilities hereunder, and such breach is not remedied
within thirty (30) days after written notice thereof from the
non-defaulting party;
(ii) If, for any reason, Consultant shall be convicted of a
felony; or if Consultant shall be convicted of any other crime as a
result of which his ability to perform the services described in
Section 1 hereof is materially impaired;
(iii) If there has been fraud, bad faith or willful misconduct on
the part of Cygne or Consultant in connection with the performance of
Consultant's duties and responsibilities hereunder;
(iv) If Ann Taylor institutes proceedings relief under the United
States Bankruptcy Code or any similar law, or consents to entry of an
order for relief against it in any bankruptcy or insolvency proceeding
or similar proceeding, or files a petition or answer or consent for
reorganization or other relief under any bankruptcy act or similar
law, or consents to the filing against it, of any petition for the
appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of it, or of any substantial part of its
property, or makes an assignment for the benefit of creditors, or
admits in writing its inability to pay its debts as they become due,
or fails to pay its debts as they become due or takes any action in
furtherance of the foregoing; or
(v) If Cygne or Consultant breaches in any manner Section 5
hereof.
(c) Effect of Termination. Upon termination of this Agreement, Cygne's
obligation to cause Consultant to provide services to Ann Taylor hereunder,
and Ann Taylor's obligation to make payment to Cygne under Section 3
hereof, shall terminate, except that AnnTaylor shall be obligated to
reimburse all expenses incurred through the termination date in accordance
with Section 3(b) hereof.
5. Confidentiality.
(a) Proprietary Information. Each of Cygne and Consultant acknowledges
and agrees that during the course of the provision of Consultant's services
to Ann Taylor, Consultant may be exposed to sensitive data and information
concerning the business and affairs of Ann Taylor, including, without
limitation, fabric, product and merchandise designs, and that all of such
data and information, financial plans, financial results, quantity or
assortment of merchandise orders or plans and inventory levels
(collectively, the "Proprietary Information") are vital, sensitive,
confidential and proprietary to Ann Taylor.
(b) Consultant's Agreement. In consideration of the Purchase Price (as
defined in the Purchase Agreement) to be paid by Ann Taylor to Cygne in
connection with the transactions contemplated by the Purchase Agreement,
Consultant agrees to the covenants and restrictions set forth in this
Section 5.
2
<PAGE>
(c) Cygne's Agreement. In consideration of the Purchase Price to be
paid by Ann Taylor to Cygne in connection with the transactions
contemplated by the Purchase Agreement, Cygne agrees to the covenants and
restrictions set forth in this Section 5.
(d) Trade Secret Status. Each of Cygne and Consultant expressly
acknowledges the trade secret status of the Proprietary Information and
acknowledges that the Proprietary Information constitutes a protectable
business interest of Ann Taylor, and covenants and agrees that during the
term of the engagement hereunder and at all times after the expiration or
termination of such engagement, neither Cygne nor Consultant shall,
directly or indirectly, whether, in the case of Consultant, individually,
as a director, stockholder, owner, partner, employee, principal or agent of
or consultant to any business, or in any other capacity, make known,
disclose, furnish, make available or utilize any of the Proprietary
Information, other than in the proper performance of the duties
contemplated herein during the term of the engagement hereunder. Cygne's
and Consultant's obligations under this Section 5(d) with respect to
particular Proprietary Information shall terminate only at such time (if
any) as the Proprietary Information in question becomes generally known to
the public other than through a breach of either Cygne's or Consultant's
obligations hereunder.
(e) Return of Proprietary Information. Each of Cygne and Consultant
acknowledges and agrees that all records or documents containing
Proprietary Information prepared by Consultant or coming into his
possession by virtue of the engagement are and shall remain the property of
Ann Taylor and that, upon termination or expiration of this engagement,
Consultant shall return immediately to Ann Taylor all such items in his
possession, together with all copies and extracts, and will destroy all
summaries thereof and any such information stored electronically on tapes,
computer disks or in any other manner.
(f) Consultant Non-Solicitation. Consultant agrees that during the
term of this Agreement and for a period of one (1) year thereafter he shall
not, directly or indirectly, induce or solicit (or authorize or assist in
the taking of any such actions by any third party) any employee or
consultant of Ann Taylor to leave his or her business association with Ann
Taylor.
(g) Cygne Non-Solicitation. Cygne agrees that during the term of this
Agreement and for a period of one (1) year thereafter it shall not,
directly or indirectly, induce or solicit (or authorize or assist in the
taking of any such actions by any third party) any employee or consultant
of Ann Taylor to leave his or her business association with Ann Taylor.
(h) Ann Taylor Non-Solicitation. Ann Taylor agrees that during the
term of this Agreement and for a period of one (1) year thereafter it shall
not, directly or indirectly, induce or solicit (or authorize or assist in
the taking of any such actions by any third party) any employee or
consultant of Cygne to leave his or her business association with Cygne.
(i) Acknowledgment. Consultant and Cygne acknowledge and agree that
the covenants set forth in this Section 5 and each subsection hereof are
reasonable and necessary for the protection of Ann Taylor's business
interests, that irreparable injury will result to Ann Taylor if Consultant
or Cygne breaches any of the terms of said covenants, and that in the event
of Consultant's or Cygne's actual or threatened breach of any such
covenants, Ann Taylor will have no adequate remedy at law. Cygne and
Consultant accordingly agree that in the event of any actual or threatened
breach by Consultant of any of said covenants, Ann Taylor shall be entitled
to immediate injunctive and other equitable relief without bond and without
the necessity of showing actual monetary damages. Cygne accordingly agrees
that in the event of any actual or threatened breach by Cygne of any of
said covenants, Ann Taylor shall be entitled to immediate injunctive and
other equitable relief without bond and without the necessity of showing
actual monetary damages. Notwithstanding the provisions of Section 9
hereof, such equitable relief may be sought in any court of competent
jurisdiction. Nothing contained herein shall be construed as prohibiting
Ann Taylor from pursuing any other remedies available to it for such breach
or threatened breach, including the recovery of any damages which it is
able to prove.
(j) The provisions of this Section 5 shall survive the expiration or
termination of this Agreement, and any of the arrangements contained
herein, and shall be binding upon Consultant's, Cygne's and Ann Taylor's
corporate or personal successors and assigns.
6. Representations and Warranties of Consultant. Consultant represents and
warrants to Cygne and Ann Taylor that he has full legal power and authority to
enter into this Agreement, perform all of his obligations hereunder and to
consummate the transactions contemplated hereby.
3
<PAGE>
7. Consultant's Independence and Discretion.
(a) Nothing herein contained shall be construed to constitute the
parties hereto as partners or as joint venturers, or as agent of the
others, or, as between Ann Taylor and Consultant, as employer and employee.
By virtue of the relationship described herein, Consultant's relationship
to Ann Taylor during the term of this Agreement shall only be that of an
independent contractor and the Consultant shall perform all services
pursuant to this Agreement as an independent contractor. The Consultant
shall not provide any services under Ann Taylor's business name and shall
not present himself as an agent or employee of Ann Taylor and shall have no
authority to enter into any binding obligation on behalf of Ann Taylor.
(b) Subject to the terms of this Agreement, the manner, means, details
or methods by which the Consultant performs his obligations under this
Agreement shall be determined by Cygne, subject to the reasonable
satisfaction of Ann Taylor.
(c) Each of Cygne and Consultant acknowledges and agrees that Ann
Taylor shall not provide to Consultant any unemployment, disability,
workers' compensation or medical insurance or any other employee benefits.
Payments to Cygne under Section 3 hereof shall not be subject to
withholding taxes or other employment taxes.
8. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration before three
(3) arbitrators selected in accordance with the Commercial Arbitration Rules of
the American Arbitration Association in the City of New York. Arbitration as
provided herein shall be the exclusive means for determination of all matters as
above provided, and any decision and award of the arbitrators shall be final,
binding and conclusive upon the parties and such decision and award may be
entered as a final judgment in any court of competent jurisdiction. Except as
provided in Section 5(j) hereof, none of the parties shall institute any action
or proceeding in any court of law or equity, state or federal, other than as may
be necessary for purposes of enforcement of the arbitrators' decision and award
hereunder.
9. Consultant's Employment. Cygne and Consultant hereby acknowledge that
Consultant's execution of this Agreement is a condition to Consultant's
continued employment with Cygne.
10. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally,
by mail (certified or registered mail, return receipt requested), by reputable
overnight courier or by facsimile transmission (receipt of which is confirmed):
(a) If to ATSC or ATI, to:
AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention: General Counsel
Facsimile: (212) 541-3299
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq.
Facsimile: (302) 651-3001
(b) If to Cygne, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: General Counsel
Facsimile: (212) 536-4174
4
<PAGE>
with a copy to:
Fulbright and Jaworski, L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Roy L. Goldman, Esq.
Facsimile: (212) 752-5958
(c) If to Consultant, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: Irving Benson
Facsimile: (212) 536-4174
or to such other person or address as any party shall specify by notice in
writing, given in accordance with this Section 10 to the other parties hereto.
All such notices, requests, demands, waivers and communications shall be
deemed to have been given on the date on which so hand-delivered, on the third
business day following the date on which so mailed, on the next business day
following the date on which delivered to such overnight courier and on the
date of such facsimile transmission and confirmation, except for a notice of
change of person or address, which shall be effective only upon receipt
thereof.
11. Entire Agreement. This Agreement contains the entire understanding of
the parties hereto with respect to the subject matter hereof. This Agreement
supersedes all prior agreements and understandings, oral and written, with
respect to its subject matter.
12. Severability. Should any provision of this Agreement, or any part
thereof, for any reason be declared invalid or unenforceable, such declaration
shall not affect the validity or enforceability of any other provision of this
Agreement, or any other part thereof, all of which other provisions, and parts,
shall remain in full force and effect, and the application of such invalid or
unenforceable provision, or such part thereof, to persons or circumstances other
than those as to which it is held invalid or unenforceable shall be valid and be
enforced to the fullest extent permittedby law.
13. Binding Effect; Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, executors, successors and permitted assigns, but, except
as contemplated herein, neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned, directly or indirectly, by ATSC,
ATI, Cygne or Consultant without the prior written consent of the other parties
hereto; provided, however, that ATSC or ATI may assign any or all of its rights,
interests or obligations hereunder to any one or more, direct or indirect,
wholly owned subsidiaries of ATSC or ATI, provided, however, that no such
assignment by ATSC or ATI shall limit or affect ATSC's or ATI's obligations
hereunder; provided, further, however, that this Agreement shall automatically
be assigned to and assumed by Consultant in the event that (i) Consultant's
employment with Cygne is terminated; or (ii) Cygne is liquidated or dissolved,
whether through Chapter 7 of the U.S. Bankruptcy Laws or otherwise; provided,
however, that Consultant hereby agrees, in the event of any such assignment by
Cygne and assumption by Consultant, to assume and perform all of Cygne's
obligations hereunder, to the extent applicable.
14. Amendment, Modification and Waiver. This Agreement may be amended,
modified or supplemented at any time by written agreement of the parties hereto.
Any failure by Cygne or Consultant, on the one hand, or ATSC or ATI, on the
other hand, to comply with any term or provision of this Agreement may be waived
by ATSC, ATI, Cygne or Consultant, respectively, at any time by an instrument in
writing signed by or on behalf of ATSC, ATI, Cygne or Consultant, but such
waiver or failure to insist upon strict compliance with such term or provision
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure to comply.
15. Third-Party Beneficiaries. Except as otherwise expressly provided
herein, this Agreement is not intended, and shall not be deemed, to confer upon
or give any person except the parties hereto and their respective successors and
permitted assigns, any remedy, claim, liability, reimbursement, cause of action
or other right under or by reason of this Agreement.
16. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5
<PAGE>
17. Interpretation. The section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement. As used in this Agreement, the term "person" shall mean and include
an individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
18. Governing Law. This Agreement shall be governed by the laws of the
State of New York, without regard to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
ANNTAYLOR STORES CORPORATION
By /s/ WALTER J. PARKS
------------------------------------
Name: Walter J. Parks
Title: Senior Vice President-Finance
ANNTAYLOR, INC.
By /s/ WALTER J. PARKS
------------------------------------
Name: Walter J. Parks
Title: Senior Vice President-Finance
CYGNE DESIGNS, INC.
By /s/ BERNARD M. MANUEL
------------------------------------
Name: Bernard M. Manuel
Title:
CONSULTANT
/s/ IRVING BENSON
------------------------------------
Irving Benson
Consultant
6
CONSULTING AND SEVERANCE AGREEMENT
AGREEMENT dated as of November 27, 1996 between CYGNE DESIGNS, INC., a
Delaware corporation, having an office at 1372 Broadway, New York, New York
10018 ("Cygne") and IRVING BENSON, having an address at 6 Baiting Hollow Road,
East Hampton, New York 11937 ("Benson").
WHEREAS, Cygne and Benson are parties to an Employment Agreement dated as
of May 1, 1993 (the "Employment Agreement"); and
WHEREAS, Cygne and Benson have agreed to terminate their employment
relationship and Cygne has agreed to make severance payments to Benson, as
provided below; and
WHEREAS, in view of Benson's abilities and knowledge of and experience with
Cygne and its business, Cygne wishes to engage Benson to perform certain
consulting services on a part-time basis as an independent contractor, as
described below; and
WHEREAS, Benson desires to accept such engagement upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
1. Termination of Employment.
The parties agree that the employment of Benson by Cygne, and any of its
subsidiaries, affiliates, joint ventures and any other businesses, of whatever
description, which are owned or controlled, in whole or in part, directly or
indirectly, by Cygne, pursuant to the Employment Agreement or pursuant to any
other agreement or understanding, oral or in writing, prior to this Consulting
and Severance Agreement, is hereby duly terminated effective November 29, 1996.
Cygne and all of its direct or indirect subsidiaries, affiliates and joint
ventures are referred to collectively hereinafter as the "Company".
2. Resignations.
Benson hereby resigns, effective November 29, 1996, each and every office,
officership and directorship he holds with each entity included in the Company,
except his position as a director of Cygne, and Benson agrees, upon Cygne's
reasonable request, to execute such further documentation and to take such
further actions reasonably satisfactory to Cygne and Benson as may be necessary
or appropriate to
<PAGE>
confirm or effectuate such resignations. In addition to, and without limiting
the generality of the foregoing, Benson hereby resigns as nominee holder of any
stock of any direct or indirect subsidiary of Cygne and Benson agrees, upon
Cygne's reasonable request, to execute such further documentation and to take
such further actions reasonably satisfactory to Cygne and Benson as may be
necessary or appropriate to transfer any shares of stock held by him as nominee
holder (or any similar capacity) of any direct or indirect subsidiary of Cygne
in accordance with Cygne's instructions.
3. Severance Payments; Continued Benefits.
Cygne shall pay or provide to Benson, in full satisfaction of all claims or
rights to compensation or other benefits in connection with his employment by
the Company, including without limitation, unpaid salary, unpaid bonus and
severance or termination pay under the Employment Agreement or otherwise, the
following:
(i) an aggregate amount equal to $200,000, payable quarterly in
advance of the quarter, beginning on December 1, 1996, in eight (8) equal
installments of $25,000.00 each (less applicable withholding taxes and
payroll deductions); and
(ii) Benson shall be entitled to participate, at Cygne's expense to
the extent paid by Cygne for its senior management personnel generally and
as permitted by such programs, in Cygne's health insurance and disability
insurance programs as in effect from time to time until November 30, 1998
or, if this Agreement is renewed, during any Extended Term (it being
understood that after such date Benson may become eligible for COBRA
coverage in accordance with applicable law). Cygne shall also reimburse
Benson in accordance with past practice for all business expenses he
incurred before November 30, 1996.
4. Stock Options.
Cygne shall use its reasonable best efforts to have Cygne's Stock Option
and Compensation Committee, at its next meeting and as soon as practicable,
amend Benson's stock option agreement pertaining to the grant to him on April
15, 1993 of options to acquire 55,000 shares of Cygne common stock at a price of
$4.00 per share so that the expiration date of such options heretofore granted
to Benson under Cygne's 1993 Stock Option Plan shall be 10 years from the grant
date for such options; provided, however, that Benson hereby agrees that the
options granted to Benson on May 31, 1994 to acquire 55,000 shares of Cygne
common stock at a price of $18.50 per share are hereby terminated and of no
further force and effect. It is understood that in view of the foregoing and
this Agreement, Benson shall not be a participant in Cygne's Stock Option Plan
for Non-Employee Directors. During the period Benson is performing Services
hereunder, he shall be eligible to participate in Cygne's 1993 Stock Option
Plan.
-2-
<PAGE>
5. Consulting Engagement and Duties.
(a) Cygne hereby engages Benson to provide certain consulting services to
the Company, as reasonably requested by Cygne from time to time, as hereinafter
provided (the "Services").
(b) The Services shall consist of advising and consulting with the Company,
in keeping with Benson's past practices, with respect to (i) the design,
development and merchandising of apparel products, (ii) various public relations
matters and (iii) special projects such as the identification and analysis of
licensing and joint venture arrangements. Benson shall generally be available to
perform the Services on regular business days, provided that Benson shall not be
required to perform the Services in excess of 120 days per year during the Term.
In the event Cygne requests and Benson performs Services in any year in excess
of 120 days, then Cygne shall pay to Benson an additional prorated amount for
the excess days in the amount of $1,750 per day. Benson agrees that, prior to
his performance of any requested services which would result in a payment in
accordance with the preceding sentence, he shall have given written notice
thereof to Cygne. Cygne and Benson shall as promptly as practicable after the
end of each quarter during the Term confirm in writing the number of days of
Services performed by Benson during such quarter.
(c) Benson shall have no authority to bind Cygne without the express prior
written authorization of Cygne.
(d) Benson agrees that he will perform the Services in a reasonably
diligent and appropriate manner and will abide by and carry out Cygne's
reasonable policies and instructions. Except as otherwise expressly provided in
Section 9 of this Agreement, Benson shall be permitted to engage in any and all
other business activities during the Term.
(e) Cygne and Benson shall cooperate to work out and confirm in writing in
advance on a monthly basis a mutually beneficial schedule for the performance of
the Services and Cygne shall provide to Benson reasonable advance notice of any
requests for travel. Days spent traveling outside of the United States in
connection with the Services shall be deemed work days for purposes of this
Agreement.
(f) The principal location at which Benson shall perform his duties
hereunder shall be at the Company's offices in New York, New York or at such
other location as may be designated from time to time by the Board of Directors
of the Company; provided that if the principal location of Benson's duties is
transferred from New York, New York, the new principal location of Benson's
duties shall not be transferred beyond a 25-mile radius of New York, New York
without Benson's consent. Notwithstanding the foregoing, Benson shall perform
such services at such other locations as may be required for the proper
performance of his duties hereunder, and Benson recognizes that such duties may
involve significant travel. Cygne shall provide
-3-
<PAGE>
reasonable office space and support for Benson as reasonably necessary for the
performance of the Services on those days that Benson is performing Services at
Cygne's offices in New York City.
6. Payment for Services; Expense Reimbursement.
(a) In consideration for Benson's performance of the Services, Cygne agrees
to pay to Benson a consulting fee at a rate of $110,000 per year during the
Term, payable in equal monthly installments of $9,166.66 on the first business
day of each month, commencing December 2, 1996 except that a pro rata amount
shall be paid with respect to any period thereafter during the Term that does
not constitute a full month.
(b) Cygne shall reimburse Benson for all expenses authorized in writing in
advance by Cygne's Chairman and incurred by Benson in connection with the
performance of Services under this Agreement. Such reimbursement shall be made
promptly after Benson's submission of appropriate vouchers and receipts
therefor. It is understood that from time to time Benson may be requested in
writing by Cygne to travel in connection with the performance of the Services
and, in the case of such requested travel, Benson shall be permitted to use
first class airservice and shall receive a per diem allowance of $600 per day in
respect of all other expenses incurred by Benson in connection with such travel.
7. Term.
Subject to earlier termination as provided in Section 8 below, the term of
Benson's engagement to perform Services under this Agreement (the "Term") shall
commence November 30, 1996 and shall terminate on November 30, 1998. However,
this Agreement shall automatically be renewed and extended for successive one
year periods (the "Extended Term") and all of its provisions shall remain the
same (except for Benson's consulting fee) unless either party provides the other
with written notice of non-renewal (a "Non-renewal Notice") no later than six
months prior to the then existing termination date. During any Extended Term,
Benson's consulting fee shall be increased to $225,000 per year.
8. Termination.
(a) Benson's engagement to perform the Services and Cygne's obligation to
pay any otherwise subsequently due consulting fee under Section 6 hereof shall
terminate upon Benson's death or disability (as defined in Section 7(c) of the
Employment Agreement).
-4-
<PAGE>
(b) Each of the following shall constitute an event of default under this
Agreement, in which case, the non-defaulting party may give the other notice
that this Agreement shall terminate on the date selected by the non-defaulting
party and set forth in such notice, unless cured as specified below:
(i) If either Benson or Cygne shall, whether by action or inaction,
breach in any material respect any obligation under this Agreement,
including a material failure by Benson to perform his duties and
responsibilities hereunder or a failure by Cygne to pay amounts when due
hereunder or to provide the insurance required hereunder, and such breach
is not remedied within thirty (30) days after written notice thereof from
the non-defaulting party;
(ii) If, for any reason, Benson shall be convicted of a felony or any
other crime as a result of which his ability to perform the services
described in Section 5 hereof is materially impaired; or
(iii) If there has been fraud, bad faith or willful misconduct on the
part of Cygne or Benson in connection with the performance of Benson's
duties and responsibilities hereunder.
Upon termination of this Agreement pursuant to this Section 8(b), Benson's
obligation to provide Services to Cygne hereunder, and Cygne's obligation to
make payments to Benson under Section 6 hereof, shall terminate, except that
Cygne shall be obligated to reimburse all expenses incurred through the
termination date in accordance with Section 6(b) hereof. In addition, upon
termination of this Agreement pursuant to this Section 8(b) as a result of a
material breach by Benson of Section 9 hereof, Cygne's obligations to make
payments to Benson and provide benefits to Benson under Section 3 hereof shall
terminate.
(c) Anything in this Agreement to the contrary notwithstanding, Benson
shall have the right at any time after May 31, 1997 to terminate this Agreement,
upon 30 days prior written notice to Cygne. Upon termination of this Agreement
pursuant to this Section 8(c), Benson's obligation to provide Services to Cygne
hereunder, and Cygne's obligations to make payments to Benson under Section 3
and Section 6 hereof, and to provide benefits to Benson under Section 3 hereof,
shall terminate, except that Cygne shall be obligated to reimburse all expenses
incurred through the termination date in accordance with Section 6(b) hereof.
(d) Anything in this Agreement to the contrary notwithstanding, Cygne shall
have the right to terminate this Agreement at any time after May 31, 1997, upon
30 days prior written notice to Benson (a "Cygne Termination Notice"). Upon
-5-
<PAGE>
termination of this Agreement pursuant to this Section 8(d), Benson's obligation
to provide Services to Cygne hereunder, and Cygne's obligation to make payments
to Benson under Section 3 and Section 6 hereof, and to provide benefits to
Benson under Section 3 hereof, shall terminate; provided, however, that (i)
Cygne shall be obligated to reimburse all expenses incurred through the
termination date in accordance with Section 6(b) hereof and (ii) Cygne shall pay
Benson a severance in an aggregate amount equal to $210,000, payable in twelve
(12) equal installments of $17,500 each (less applicable withholding taxes and
payroll deductions) on the first day of each month following the effectiveness
of such termination.
(e) If this Agreement is not renewed after November 30, 1998 as a result of
a Non-renewal Notice delivered by Cygne to Benson, then Benson shall be entitled
to a severance in an aggregate amount of $210,000, payable quarterly in advance
of the quarter, beginning on December 1, 1998, in four equal installments of
$52,500 (less applicable withholding taxes and payroll deductions). It is
understood that under no circumstances shall Cygne be obligated to make payments
pursuant to both Section 8(d) (which is triggered only by a Cygne Termination
Notice) and this Section 8(e) (which is triggered only by a Non-renewal Notice
delivered by Cygne to Benson).
9. Employment Agreement.
Benson and Cygne hereby agree that the Employment Agreement (other than
Sections 9(a), (b), (c) and (d), 10, 11 and 12 thereof) is hereby terminated and
that, notwithstanding termination of such Employment Agreement, Sections 9(a),
(b), (c) and (d), 10, 11 and 12 thereof shall remain in full force and effect;
provided, however, that Cygne shall not be required to make any payments to
Benson pursuant to the Employment Agreement; and provided further that the
parties expressly acknowledge and agree that, anything in this Agreement or the
Employment Agreement to the contrary notwithstanding, Benson may engage in any
business or consulting activities so long as (i) they would not be directly
competitive with or materially adverse to the Company's business and (ii) they
do not involve the disclosure of confidential information under Section 11 of
the Employment Agreement. Notwithstanding the termination of this Agreement
pursuant to Section 8, the provisions of this Section 9 shall remain effective
during any period in which Cygne is making payments to Benson in accordance with
Section 8(d) or Section 8(e).
10. Assignment of Ann Taylor Consulting Agreement.
Cygne and Benson agree that, in accordance with the provisions of Section
13 of the Consulting Agreement dated as of September 20, 1996 by and between
AnnTaylor Stores Corporation, AnnTaylor, Inc., Cygne and Benson (the "Ann Taylor
Consulting Agreement"), the Ann Taylor Consulting Agreement is, effective
November 30, 1996, assigned by Cygne to Benson and Benson agrees to assume and
perform all of Cygne's obligations thereunder, to the extent applicable and
Cygne shall
-6-
<PAGE>
advise AnnTaylor Stores Corporation and AnnTaylor, Inc. in writing, with a copy
to Benson, to make all payments thereunder directly to Benson; provided,
however, that the quarterly fee payment to be paid by Ann Taylor with respect to
the current quarter under the Ann Taylor Consulting Agreement shall be allocated
between Cygne and Benson, respectively, on a prorated basis reflecting the
number of days in such quarterly period through the close of business on
November 29, 1996 and after such date, and provided, further, that if any
portion of the amount of any such allocated fee payment due to Cygne in
accordance with the foregoing proviso is paid by Ann Taylor to Benson and not
promptly thereafter paid by Benson to Cygne, then Cygne shall be entitled to
offset such amount against any amounts otherwise due to Benson under Section 6
hereof.
11. Third-Party Beneficiaries.
Except as otherwise expressly provided herein, this Agreement is not
intended, and shall not be deemed, to confer upon or give any person except the
parties hereto and their respective successors, heirs and/or permitted assigns,
any remedy, claim, liability, reimbursement, cause of action or other right
under or by reason of this Agreement.
12. Releases.
(a) Except as set forth in the proviso to this Section 12(a), in
consideration of the transactions contemplated hereby and the release being
given by Benson in Section 12(b) hereof, Cygne for itself and for its successors
and assigns, and for its affiliates, officers, directors and employees
(collectively, the "Cygne Releasor"), hereby releases and forever discharges
Benson, the executors and administrators of his estate, his heirs, successors
and assigns (collectively the "Benson Releasee"), from any and all claims,
actions, causes of action, suits, sums of money, debts, covenants, contracts,
controversies, agreements, promises, demands or damages of any nature whatsoever
or by reason of any matter, cause or thing regardless of whether known or
unknown at present, whether at common law, by statute or otherwise, which
against the Benson Releasee the Cygne Releasor ever had, now has or hereafter
can, shall or may have for, upon, or by reason of, any matter, cause or thing
whatsoever from the beginning of the world to the date hereof, including without
limitation any matter, cause or thing relating to or arising out of the
employment of Benson in any capacity by Cygne or any of its affiliates or any
actions taken or omitted to be taken by Benson while employed by Cygne or any of
its affiliates; provided, however, that nothing contained in this Section 12(a)
is intended to preclude Cygne from bringing any action to enforce its rights
under this Agreement. Cygne agrees that the Cygne Releasor will never institute
a claim of any kind against the Benson Releasee, including without limitation
any claim relating to his employment with Cygne, except to enforce its rights
under this Agreement and those provisions of Benson's Employment Agreement which
continue pursuant to Section 9 hereof. Cygne agrees that if the Cygne Releasor
violates this release by instituting suit against the Benson Releasee, it will
pay all costs and
-7-
<PAGE>
expenses of defending against the suit incurred by the Benson Releasee,
including reasonable attorneys' fees.
(b) Except as set forth in the proviso to this Section 12(b), Benson, in
consideration of the payments being made to him hereunder and the release being
given by Cygne in Section 12(a) hereof, for himself and for the executors and
administrators of his estate, his heirs, successors and assigns (collectively,
the "Benson Releasor"), hereby releases and forever discharges the Company
(including without limitation Cygne), its affiliates, and its and their
officers, directors, employees and stockholders and the respective executors,
administration heirs, successors and assigns of the foregoing (collectively, the
"Cygne Releasee"), from any and all claims (including without limitation any
claims arising under the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, or any similar federal or state laws, rules or regulations
dealing with discrimination in employment on the basis of sex, race, national
origin, religion, disability or age), actions, causes of action, suits, sums of
money, debts, covenants, contracts, controversies, agreements, promises, demands
or damages of any nature whatsoever or by reason of any matter, cause or thing
regardless of whether known or unknown at present, whether at common law, by
statute or otherwise, which against the Cygne Releasee the Benson Releasor ever
had, now has or hereafter can, shall or may have for, upon, or by reason of, any
matter, cause or thing whatsoever from the beginning of the world to the date
hereof, including without limitation any matter, cause or thing relating to or
arising out of the employment of Benson by Cygne or any of its affiliates;
provided, however, that nothing contained in this Section 12(b) is intended to
preclude Benson from bringing any action to enforce his rights under this
Agreement. Benson agrees that the Benson Releasor will never institute a claim
of any kind against the Cygne Releasee relating to his employment with Cygne or
any of its affiliates, except to enforce its rights under this Agreement. Benson
agrees that if the Benson Releasor violates this release by instituting suit
against the Cygne Releasee, he will pay all costs and expenses of defending
against the suit incurred by the Cygne Releasee, including reasonable attorneys'
fees. Nothing in the foregoing, however, is intended to or shall affect or alter
the continued rights of Benson, pursuant to law, the Certificate of
Incorporation or By-Laws of Cygne or any of its affiliates or any contract or
policy of insurance relating to indemnification in respect of matters arising
during his employment with Cygne, or any of its affiliates or his service as a
director, officer or employee of any of the foregoing.
(c) Each of the parties hereto acknowledges that he or it may have
sustained damages, expenses or losses which are presently unknown or not
suspected and that such damages, expenses or losses, if any, may give rise to
additional damages, expenses or losses in the future which are not now
anticipated. Each of the parties hereto hereby expressly waives any and all
rights that he or it may have had under any statute or common law principle
which would limit the effect of the foregoing release to those claims actually
known or suspected to exist at the time of execution of this Agreement.
-8-
<PAGE>
(d) Each of Cygne and Benson acknowledges that, in connection with the
execution of this Agreement, it or he has had the opportunity to consult with
independent legal counsel of its or his own choosing, and that it or he
understands that by execution hereof it or he, except as otherwise expressly
provided herein, waives and releases any and all rights or claims it or he may
have against the other party hereto and their respective affiliates, officers,
directors, employees or stockholders, arising under Benson's employment
relationship with Cygne, and whether known or unknown to such party at present.
Each party further acknowledges that the terms hereof are fully satisfactory to
it or him, that there exists between the parties no further additional
agreements or understandings, either oral or in writing, not set forth herein,
and that this Agreement constitutes the entire agreement among the parties with
respect to the subject matter hereof and may not be modified except by a writing
signed by both parties hereto.
13. Arbitration.
Any controversy or claim arising out of or relating to this Agreement, or
the breach thereof, shall be settled by arbitration before one (1) arbitrator
selected in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in the City of New York. Arbitration as provided herein
shall be the exclusive means for determination of all matters as above provided,
and any decision and award of the arbitrators shall be final, binding and
conclusive upon the parties and such decision and award may be entered as a
final judgment in any court of competent jurisdiction. None of the parties shall
institute any action or proceeding in any court of law or equity, state or
federal, other than as may be necessary for purposes of enforcement of the
arbitrators' decision and award hereunder.
14. Indemnity.
(a) Cygne shall indemnify, defend, reimburse, and hold Benson harmless from
and against any and all costs, liabilities, claims, losses, and suits arising
from or relating to the performance by Benson of the Services; provided that the
foregoing shall not apply to any costs, liabilities, claims, losses and suits
arising from or relating to the gross negligence or wilful misconduct of Benson.
(b) Benson shall indemnify, defend, reimburse, and hold Cygne harmless from
and against any and all costs, liabilities, claims, losses, and suits arising
from or relating to the gross negligence or wilful misconduct of Benson in the
performance of the Services.
15. Miscellaneous.
(a) Changes in or additions to this Agreement may be made, and compliance
with any provision herein set forth may be omitted or waived, only with the
consent thereto in writing of the party for whose benefit such provision was
intended.
-9-
<PAGE>
(b) All notices, requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally, by mail
(certified or registered mail, return receipt requested), by reputable overnight
courier or by facsimile transmission (receipt of which is confirmed);
(i) If to Cygne to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: General Counsel
Facsimile: (212) 921-8318
(ii) If to Benson to:
6 Baiting Hollow Road
East Hampton, New York 11937
Facsimile: (516) 324-5837
or to such other person or address as any party shall specify by notice in
writing, given in accordance with this Section, to the other party hereto.
(c) This Agreement shall be binding upon each of the parties hereto and
their respective successors and assigns and shall inure to the benefit of each
of the parties hereto and their respective heirs, executors, successors and
permitted assigns, but, except as contemplated herein, neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned,
directly or indirectly, by Cygne or Benson without the prior written consent of
the other party hereto; provided, however, that Cygne may assign any or all of
its rights, interests or obligations hereunder to any one or more, direct or
indirect, wholly owned subsidiaries of Cygne, provided, however, that no such
assignment by Cygne hereunder shall limit or affect Cygne's obligations
hereunder; provided, further, however, that Benson may assign any or all of his
rights, interests or obligations hereunder to any domestic corporation of which
he is the sole record and beneficial stockholder, provided, however, that no
such assignment by Benson shall limit or affect Benson's obligations hereunder.
(d) This Agreement constitutes the entire agreement among the parties and
supersedes any prior understandings or agreements concerning the subject matter
hereof.
(e) If any term or provision of this Agreement is determined or
held to be unenforceable, the balance of this Agreement, and the application of
such term or provision in another jurisdiction or under different circumstances
shall nevertheless be unaffected by such holding or determination. In addition,
in any such event, the parties agree that it is their intention and agreement
that any term or
-10-
<PAGE>
provision which is held or determined to be unenforceable, as written, shall
nonetheless be in force and binding to the fullest extent permitted by law or
applicable rule or regulation as though such term or provision had been written
in such a manner and to such an extent as to be enforceable under the
circumstances.
(f) Each party agrees to execute all such documents and to take such
further actions as may be reasonably requested by the other party to further
effectuate the terms of this Agreement. The parties shall cooperate and act in
good faith with respect to any and all matters relating to this Agreement.
(g) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York. Subject to Section 13 above, any legal action
or proceedings against any party with respect to this Agreement shall be brought
in the courts of the State of New York, United States of America, or the U.S.
Federal Courts in such state, and each party hereto irrevocably submits to the
jurisdiction of such courts for the purpose of any action or proceedings arising
hereunder.
(h) This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CYGNE DESIGNS, INC.
By: /s/ BERNARD M. MANUEL
--------------------------------
Name: Bernard M. Manuel
Title:
/s/ IRVING BENSON
-------------------------------------
Irving Benson
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRELY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-04-1996
<PERIOD-END> NOV-03-1996
<CASH> 3,434
<SECURITIES> 34,254
<RECEIVABLES> 14,535
<ALLOWANCES> 0
<INVENTORY> 7,298
<CURRENT-ASSETS> 67,571
<PP&E> 8,149
<DEPRECIATION> 0
<TOTAL-ASSETS> 78,716
<CURRENT-LIABILITIES> 43,792
<BONDS> 0
0
0
<COMMON> 124
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 78,716
<SALES> 240,351
<TOTAL-REVENUES> 240,351
<CGS> 211,269
<TOTAL-COSTS> 211,269
<OTHER-EXPENSES> 23,903
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,975
<INCOME-PRETAX> 27,999
<INCOME-TAX> 7,124
<INCOME-CONTINUING> 20,875
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,914
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 1.60
</TABLE>
