UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 May 4, 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
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(Address of principal executive offices) (Zip Code)
(212) 354-6474
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(Registrant's telephone number, including area code)
Not applicable
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(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 June 7, 1996
<PAGE>
Cygne Designs, Inc. and Subsidiaries
Index to Form 10-Q
<TABLE>
<CAPTION>
PAGE NO.
--------
PART I FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at May 4, 1996 (unaudited)
and February 3, 1996 3
Condensed Consolidated Statements of Operations for the
three months ended May 4, 1996 and April 29, 1995 (unaudited) 4
Condensed Consolidated Statement of Stockholders' Equity
for the three months ended May 4, 1996 (unaudited) 5
Condensed Consolidated Statements of Cash Flows for the
three months ended May 4, 1996 and April 29, 1995 (unaudited) 6
Notes to Condensed Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
PART II OTHER INFORMATION
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 26
</TABLE>
2
<PAGE>
Cygne Designs, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
MAY FEBRUARY
4, 1996 3, 1996
--------------------------
(Unaudited) (Note 1)
(In thousands)
ASSETS
Current assets:
Cash $ 8,473 $ 5,487
Trade accounts receivable 40,511 35,117
Inventory 13,441 29,999
Other receivables and prepaid expenses 9,372 8,150
Assets held for sale - 15,200
Deferred income taxes 4,066 4,066
-------------------------
Total current assets 75,863 98,019
Fixed assets, net 13,211 13,533
Other assets 761 803
Deferred income taxes 2,000 2,000
Goodwill, net 2,699 2,790
-------------------------
Total assets $ 94,534 $ 117,145
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 29,178 $ 37,453
Accounts payable 18,846 32,928
Trade credit facilities outstanding 9,110 8,945
Accrued expenses 13,136 14,083
Income taxes payable 5,878 5,677
Current portion of long-term debt 2,003 2,047
-------------------------
Total current liabilities 78,151 101,133
Long-term debt 1,409 1,562
Deferred rent credits 1,463 1,386
-------------------------
Total liabilities 81,023 104,081
Minority interests in subsidiaries 4,466 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 (May 4, 1996) and
(February 3, 1996) shares
issued and outstanding 124 124
Paid-in capital 120,918 120,918
Accumulated deficit (111,968) (111,999)
Foreign currency translation adjustment (29) 3
-------------------------
Total stockholders' equity 9,045 9,046
-------------------------
Total liabilities and stockholders' equity $ 94,534 $ 117,145
=========================
See accompanying notes.
3
<PAGE>
Cygne Designs, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
THREE MONTHS ENDED
MAY APRIL
4, 1996 29, 1995
-------------------------
(In thousands, except per
share amounts)
Net sales $ 83,756 $ 128,367
Cost of goods sold 73,044 117,239
------------------------
Gross profit 10,712 11,128
Selling, general and administrative expenses 9,159 18,178
Gain from sale of subsidiary, net - (4,742)
Bad debt expense - 1,030
Amortization of intangibles 91 956
------------------------
Income (loss) from operations 1,462 (4,294)
Other income 388 -
Interest expense 935 2,111
------------------------
Income (loss) before provision for income taxes
and minority interests 915 (6,405)
Provision (benefit) for income taxes 436 (2,122)
------------------------
Income (loss) before minority interests 479 (4,283)
Income attributable to minority interests 448 397
------------------------
Net income (loss) $ 31 $ (4,680)
========================
Net income (loss) per share $ 0.00 $ 0.36
========================
Weighted average number of common and common
equivalent shares outstanding 12,438 12,886
========================
See accompanying notes.
4
<PAGE>
Cygne Designs, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders' Equity (Unaudited)
<TABLE>
<CAPTION>
Common Stock Foreign
--------------------------- Currency
Number Paid-in Translation Accumulated
of Shares Amount Capital Adjustment Deficit Total
------------- ------------- -------------- ------------- -------------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at February 3, 1996 12,438 $124 $ 120,918 $ 3 $ (111,999) $ 9,046
Foreign currency translation adjustment -- -- -- (32) -- (32)
Net income for the three months ended
May 4, 1996 -- -- -- -- 31 31
------------- ------------- -------------- ------------- -------------- -------------
Balance at May 4, 1996 12,438 $124 $ 120,918 $ (29) $ (111,968) $ 9,045
============= ============= ============== ============= ============== =============
</TABLE>
See accompanying notes.
5
<PAGE>
<TABLE>
Cygne Designs, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
THREE MONTHS ENDED
MAY APRIL
4, 1996 29, 1995
--------------------------
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ 31 $(4,680)
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 489 1,017
Gain from sale of subsidiary, net - (4,742)
Bad debt expense - 1,030
Rent expense not currently payable 77 270
Amortization of intangibles 91 893
Deferred income taxes 3 35
Income attributable to minority interests 448 397
Changes in operating assets and liabilities:
Trade accounts receivable (5,392) 11,352
Inventory 16,559 12,253
Other receivables and prepaid expenses 1,457 2,697
Accounts payable (14,038) (4,221)
Accrued expenses (967) (5,161)
Income taxes payable 201 (2,126)
-------------------------
Net cash (used in) provided by operating activities (1,041) 9,014
-------------------------
INVESTING ACTIVITIES
Purchase of fixed assets (161) (3,081)
Other assets 36 201
Sale of business 12,500 -
Sale of subsidiary - (464)
Purchase of businesses - (3,107)
-------------------------
Net cash provided by (used in) investing activities 12,375 (6,451)
-------------------------
FINANCING ACTIVITIES
Short-term borrowings, net (8,275) (3,935)
Credit facility outstanding, net 165 2,429
Repayments of long-term debt, net (206) (58)
Net proceeds from issuance of common stock - 20
-------------------------
Net cash provided by (used in) financing activities (8,316) (1,544)
Effect of exchange rate changes on cash (32) (69)
-------------------------
Net increase in cash 2,986 950
Cash at beginning of period 5,487 14,202
-------------------------
Cash at end of period $ 8,473 $15,152
=========================
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 232 $ 517
Interest paid 672 2,055
Exchange of Company common stock for acquisitions - 675
Retirement of Company common stock from sale of subsidiary - 7,500
</TABLE>
See accompanying notes.
6
<PAGE>
June 15, 19961:39 AM
Cygne Designs, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
May 4, 1996
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 months ended May 4, 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. For the three months ended May 4, 1996 and April 29, 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, was 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.
7
<PAGE>
Cygne Designs, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited) (continued)
2. PURCHASES AND SALES OF COMPANIES (CONTINUED)
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. for future contingent payments based on
future earnings of this subsidiary. 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 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 primarily serving prominent specialty retail store
chains and department stores in the U.S. and the United Kingdom (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 connection with this transaction, Mr. Fenn resigned his positions as
Director and Vice Chairman of the Company, and as President of FWM. 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.
8
<PAGE>
Cygne Designs, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited) (continued)
2. PURCHASES AND SALES OF COMPANIES (CONTINUED)
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 of period. Therefore, the FWM goodwill
was written off.
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, from G.J.M. International Limited, a company
wholly-owned by Mr. W. Glynn Manson (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 owned by GJM International to The Limited, Inc.
Additional costs related to this acquisition approximated $1,700,000. 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 connection with the GJM Acquisition the Company also paid $3,200,000 to two
key executives of GJM for non-compete agreements of fifteen years and four
years, respectively, and issued options vesting over four years to certain key
personnel of GJM to purchase an aggregate of 165,000 shares of the Company's
common stock at a purchase price of $20.50 per share, which option purchase
price as to 125,000 of such shares was subsequently reduced to $2.00 per share
along with the reduction of the option purchase price for other employees.
In February 1996, the Company sold substantially all of the assets of its GJM
intimate apparel and sleepwear business to Warnaco Inc. In the transaction,
Warnaco paid Cygne $12,500,000 in cash and assumed certain liabilities of the
GJM business. Warnaco is also holding an additional $1,500,000 in a treasury
security to secure its obligations to make post-closing payments based upon a
formula that provides, to the extent that net assets (as defined in the purchase
agreement) acquired by Warnaco exceed $8,100,000, Warnaco will pay Cygne the
$1,500,000 held in a treasury security and the amount by which the net assets
exceeds $8,100,000. To the extent such net assets are less than $8,100,000,
Cygne will pay Warnaco the difference first by applying up to $1,500,000
9
<PAGE>
Cygne Designs, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited) (continued)
2. PURCHASES AND SALES OF COMPANIES (CONTINUED)
being held in a treasury security by Warnaco against the amount the net assets
fall below $8,100,000 and thereafter will pay Warnaco any further difference
below $6,600,000 in net assets. Warnaco has informed the Company that it
believes the net assets acquired aggregated only $1,589,000 and that the Company
owes Warnaco $6,511,000, of which $1,500,000 would be satisfied through the
treasury security. The Company disagrees with Warnaco's calculations and is in
the process of reviewing them with Warnaco. The Company cannot predict the
outcome of this dispute. At the time the dispute is resolved, and depending on
the determination of the value of net assets acquired by Warnaco, the Company
may recognize an increase or a decrease in the loss of approximately $31,200,000
on the sale. The Company used all the proceeds from the sale to repay
outstanding senior bank indebtedness. GJM accounted for approximately 12.0% of
the Company's net sales of $128,367,000 for the quarter ended April 29, 1995.
In February 1995, Cygne acquired Tralee S.A. ("TSA"), a Uruguayan corporation
that sources 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 decided to cease operations of TSA by the
end of the second quarter of 1996 and wrote-off the remaining goodwill.
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 have been included in the consolidated operating results since their
respective dates of acquisition.
On June 7, 1996 Cygne signed a definitive agreement with AnnTaylor Stores
Corporation regarding the previously announced sale to AnnTaylor of Cygne's 60%
interest in CAT, Cygne's sourcing joint venture arrangement with AnnTaylor, and
the assets of Cygne's AnnTaylor Woven Division that are used in sourcing
merchandise for AnnTaylor (the "AnnTaylor Disposition").
10
<PAGE>
Cygne Designs, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited) (continued)
2. PURCHASES AND SALES OF COMPANIES (CONTINUED)
The aggregate consideration to be paid to Cygne in the transaction consists of
unregistered shares of AnnTaylor common stock having a market value of $36
million (based upon the market price of the common stock for the ten trading
days prior to closing, but in no event greater than 2.5 million shares), and a
cash payment in an amount equal to the tangible net book value of the fixed
assets of Cygne's AnnTaylor Woven Division (but not to exceed $2,646,000) plus
the tangible net book value of the inventory of Cygne's AnnTaylor Woven
Division, less the amount of certain liabilities of the Division to be assumed
by AnnTaylor.
The closing of the transaction is subject to various conditions, including
approval by the Company's stockholders, the consent and release of liens by
certain of the Company lenders, and the continuation of CAT's $40 million credit
facility. It is currently anticipated that the transaction will close in August
1996, following approval by Cygne's stockholders. There can be no assurance,
however, that the conditions to the closing will be satisfied, that the
transaction will be consummated or, if consummated, that it will be consummated
within the currently anticipated time frame. In order to facilitate the
integration of CAT and Cygne's AnnTaylor Woven Division into AnnTaylor's
operations, Cygne has agreed to make available for a three year period the
services of Mr. Bernard Manuel, the Company's Chief Executive Officer, and Mr.
Irving Benson, the Company's President. Cygne will make available up to 30% of
Messrs. Benson's and Manuel's time and will receive an aggregate fee of $450,000
per year. AnnTaylor has agreed to register the shares issued to Cygne for
resale, although Cygne will be subject to certain restrictions on the timing of
sales and the amount of shares which can be sold at any one time.
CAT and the AnnTaylor Woven Division accounted for approximately 72% of the
Company's net sales of $83,756,000 for the quarter ended May 4, 1996.
11
<PAGE>
Cygne Designs, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited) (continued)
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:
MAY FEBRUARY
4, 1996 3, 1996
---------------------------
(In thousands)
Raw materials $ 9,451 $ 21,748
Finished goods 1,228 2,972
Finished goods-in-transit 2,762 5,279
---------------------------
$ 13,441 $ 29,999
===========================
4. CREDIT FACILITIES
During the quarter ended October 28, 1995, Cygne and CAT each entered into a
Credit Agreement with the HS Bank which modified the previous credit arrangement
with the HS Bank. The modifications included (i) the consolidation of the Cygne,
FWM and GJM facilities, previously aggregating up to $76,400,000, into one
facility of up to $70,000,000, (ii) an increase in the CAT facility from up to
$28,000,000 to up to $40,000,000, (iii) a requirement under each agreement to
comply with certain financial covenants as well as various other restrictions,
and (iv) an increase in the Cygne facility interest rate. Borrowings under these
facilities, which may be terminated by the HS Bank or the Company at any time as
to future borrowings upon proper notice, are subject to certain borrowing base
limitations and the HS Bank's agreement as to amount, purpose, interest rate,
maturity and collateral. Borrowings under these facilities are due on the
earlier of demand or the maturity date specified by the HS Bank for each
borrowing. Amounts outstanding under the Cygne agreement bear interest at 1.25%
above the prime rate through January 31, 1996 and between 1% and 1.75% above the
prime rate thereafter depending upon the working capital, as defined, of the
Company, exclusive of CAT. Amounts outstanding under the CAT agreement bear
interest at 0.5% above the prime rate. Each agreement provides for additional
interest at 2% per annum on amounts not paid when due. The HS Bank facilities
are cross guaranteed by Cygne and certain of its subsidiaries and are secured by
a first lien on substantially all the assets of the Company including a pledge
of 65% of the capital stock of certain of Cygne's foreign subsidiaries, except
for C.A.T. (Far East) Limited as to which 60% of the capital stock is pledged.
12
<PAGE>
Cygne Designs, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited) (continued)
4. CREDIT FACILITIES (CONTINUED)
The following table sets forth information with respect to the HS Bank
facilities:
MAY 4, 1996
-------------------------------
DIRECT OPEN DIRECT
TOTAL BORROWING LETTERS BORROWINGS
FACILITY (1) LIMIT (2) OF CREDIT OUTSTANDING
----------------------------------------------------------------
(In thousands)
Cygne (3) $ 70,000 $ 50,000 $ 8,501 $ 21,149
CAT (4) 40,000 8,000 22,193 5,600
--------------------------------------------------------------
Total $ 110,000 $ 58,000 $ 30,694 $ 26,749
==============================================================
(1) The total facility, less any direct borrowings outstanding is available
for letters of credit.
(2) Consists principally of revolving loans and borrowings against
import/exports.
(3) The Limited, Inc. had guaranteed $10,000,000 of HS Bank facilities
through May 31, 1996.
(4) Cygne has guaranteed 60% of the indebtedness outstanding under this
facility and AnnTaylor, Inc., which owns 40% of CAT, has provided the HS
Bank with a $4,000,000 standby letter of credit.
On May 15, 1996, the Company received a commitment letter from HS Bank to
provide the Company with a new credit facility to replace the existing facility.
The commitment letter provides a committed facility of up to $30 million until
the earlier of August 31, 1996 or the closing of the AnnTaylor Disposition;
thereafter the facility reduces to $22.5 million and further reduces to $15
million at October 31, 1996; $10 million at November 30, 1996; $5 million at
December 31, 1996; and matures on January 31, 1997. Borrowings under this
facility are subject to borrowing base limitations. The Company is obligated to
pledge substantially all of its assets, including the AnnTaylor stock to be
received at the closing of the AnnTaylor Disposition. The credit facility is
subject to the completion of definitive documentation.
13
<PAGE>
Cygne Designs, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited) (continued)
4. CREDIT FACILITIES (CONTINUED)
Certain foreign subsidiaries have credit facilities aggregating $2,429,000 at
May 4, 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 May 4,
1996, $9,110,000 of this facility was outstanding. The Company has reached an
agreement in principle to restructure the amounts outstanding under this trade
credit facility.
5. DEBT
The Company has existing mortgages, of $999,000 at May 4, 1996 relating to a
foreign office and manufacturing facility with bears interest at LIBOR plus 2%
and is payable quarterly in equal payments of $52,600.
At May 4, 1996, the Company also has a $1,258,000 unsecured note payable to The
Limited, Inc., a major customer of the Company. The principal amount
outstanding, which is currently payable, bears interest at prime plus 2% and was
originally due on December 31, 1995.
At May 4, 1996, the balance outstanding on other debt was $1,155,000 of which
$616,000 is long-term.
6. 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
14
<PAGE>
Cygne Designs, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited) (continued)
6. LITIGATION (CONTINUED)
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. Defendants are
scheduled to file their reply memoranda on June 18, 1996. The Company believes
that all of the allegations contained in the complaint are without merit and
intends to continue to defend the action vigorously. An adverse decision in this
action could have a material adverse effect on the Company's financial condition
or results of operations.
Richard Kramer, a former employee of the Company, brought an action against the
Company, Bernard Manuel and Irving Benson alleging three causes of action: (1)
fraudulent inducement of Kramer to accept employment as a Group Vice President;
(2) breach of contract by refusing to pay Kramer approximately $168,500 upon his
termination, under a provision which states that if he were terminated without
cause he would receive consideration equal to that sum; and (3) breach of
contract for failure to deliver certain stock options to Kramer. In October
1995, the defendants moved to dismiss the action on the grounds that the
complaint failed to state a cause of action, that Kramer refused to give the
Company a release in return for payment of the $168,500, and that Kramer, who
had been employed for only two months at the time of his termination, was not
entitled to stock options under the employment letter between the parties. The
motion was denied to the extent that it sought dismissal of the fraudulent
inducement claim and the claim for $168,500, but granted insofar as to the claim
for stock options. An agreement in principle was reached with respect to this
matter for an amount that the Company does not deem material during mandatory
nonbinding mediation but a definitive settlement agreement has not yet been
entered into.
The Company is involved in various other legal proceedings that are incidental
to the conduct of its business, non of which the Company believes could
reasonable be expected to have a material adverse effect on the Company's
financial condition or results of operations.
15
<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. In June 1996, the Company entered into a definitive agreement to sell
its 60% interest in its joint venture arrangement with AnnTaylor and the assets
of Cygne's AnnTaylor Woven Division.
Upon consummation of the above dispositions, the Company will continue in three
principal segments of the women's apparel market: career sportswear, casual
sportswear and dresses. In addition, upon the consummation of the AnnTaylor
Disposition, the Company anticipates that it will no longer have sales to
AnnTaylor. The Company has been dependent on its key customers (The Limited,
Inc. and AnnTaylor) and, with the loss of AnnTaylor 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.
16
<PAGE>
General
In June 1992, the Company and certain of its stockholders formed CAT, a joint
venture arrangement with AnnTaylor to source products exclusively for AnnTaylor.
During 1992 and the first quarter of 1993, AnnTaylor owned a 20% interest in
CAT. Effective May 1, 1993, AnnTaylor's interest in CAT increased to 40%. As a
result of such change in ownership, AnnTaylor has 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 Company wrote-off the remaining $44,530,000 of goodwill
in fiscal 1995.
17
<PAGE>
On October 7, 1994, Cgyne 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. See Note 2 of Notes to Consolidated Financial
Statements of the Company.
In February 1996, the Company sold the GJM Business to Warnaco Inc. In the
transaction, Warnaco paid Cygne $12.5 million in cash and assumed certain
liabilities of the GJM Business. Warnaco is also holding an additional $1.5
million in a treasury security to secure its obligations to make post-closing
payments based upon a formula that provides, to the extent that net assets ( as
defined in the purchase agreement) acquired by Warnaco exceed $8.1 million,
Warnaco will pay Cygne the $1.5 million held in a treasury security and the
amount by which the net assets exceed $8.1 million. To the extent such net
assets are less than $8.1 million, Cygne will pay Warnaco the difference first
by applying up to $1.5 million being held in a treasury security by Warnaco
against the amount the net assets fall below $8.1 million and thereafter will
pay Warnaco any further difference below $6.6 million in net assets. Warnaco has
informed the Company that it believes the net assets acquired aggregated only
$1.6 million, and that the Company owes Warnaco $6.5 million, of which $1.5
million would be satisfied through the treasury security. The Company disagrees
with Warnaco's calculations and is in the process of reviewing them with
Warnaco. The Company cannot predict the outcome of this dispute. As a result of
the sale, the Company incurred a loss of approximately $31.2 million. This
amount may be increased or decreased depending on the final value of the net
assets acquired by Warnaco. The Company used all the proceeds of the sale to
repay outstanding senior bank indebtedness. See "--Liquidity and Capital
Resources."
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. Cygne also issued options to purchase an aggregate of 55,000 shares of
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 and the Company anticipates that operations will
terminate by the end of the second quarter of 1996.
On June 7, 1996, Cygne entered into a definitive agreement with AnnTaylor Stores
Corporation regarding the previously announced sale to AnnTaylor of Cygne's 60%
interest in CAT, Cygne's sourcing joint venture with AnnTaylor, and the assets
of Cygne's AnnTaylor Woven
18
<PAGE>
Division that are used in sourcing merchandise for AnnTaylor (the "AnnTaylor
Disposition").
The aggregate consideration to be paid to Cygne in the transaction consists of
unregistered shares of AnnTaylor common stock having a market value of $36
million (based upon the market price of the common stock for the ten trading
days prior to closing, but in no event greater than 2.5 million shares), and a
cash payment in an amount equal to the tangible net book value of the fixed
assets of Cygne's AnnTaylor Woven Division (but not to exceed $2,646,000) plus
the tangible net book value of the inventory of Cygne's AnnTaylor Woven
Division, less the amount of certain liabilities of the Division to be assumed
by AnnTaylor.
The closing of the transaction is subject to various conditions, including
approval by the Company's stockholders, the consent and release of liens by
certain of the Company's lenders, and the continuation of CAT's $40 million
credit facility. It is currently anticipated that the transaction will close in
August 1996, following approval by Cygne's stockholders. There can be no
assurance, however, that the conditions to closing will be satisfied, that the
transaction will be consummated or, if consummated, that it will be consummated
within the currently anticipated time frame. In order to facilitate the
integration of CAT and Cygne's AnnTaylor Woven Division into AnnTaylor's
operations, Cygne has agreed to make available for a three year period the
services of Mr. Bernard Manuel, the Company's Chief Executive Officer, and Mr.
Irving Benson, the Company's President. Cygne will make available up to 30% of
Messrs. Benson's and Manuel's time and will receive an aggregate fee of $450,000
per year. AnnTaylor has agreed to register the shares issued to Cygne for
resale, although Cygne will subject to certain restrictions on the timing of
sales and the amount of shares which can be sold at any one time.
CAT and the AnnTaylor Woven Division accounted for approximately 72% of the
Company's net sales of $83.8 million for the quarter ended May 4, 1996. CAT and
the AnnTaylor Woven Division had combined net sales of $60.5 million and
combined net income of $2.2 million for the quarter ended May 4, 1996.
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. Upon the consummation of the AnnTaylor Disposition, the Company
anticipates that it will no longer have sales to AnnTaylor. The Company has been
dependent on its key customers and, with the loss of AnnTaylor as a customer,
its future success is 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 AnnTaylor 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, the
19
<PAGE>
Limited Stores, which is the Company's largest customer among the divisions of
The Limited, Inc., has formed an internal design and product development group
as well as added a direct souring department.
The apparel industry historically has been subject to substantial cyclical
variation, with purchases of apparel and related goods tending to decline during
necessary periods when disposable income is low. This could have a material
adverse effect on the Company's business. The Company believes that the weakness
of retail sales of women's apparel adversely affected its operating results, and
believes that its operating results will continue to be adversely affected as
long as this weakness continues. 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.
RESULTS OF OPERATIONS
Financial Summary
Certain captions of the Condensed Consolidated Statements of Operations for the
three months ended May 4, 1996 and April 29, 1995 expressed as a percentage of
net sales are as follows:
THREE MONTHS ENDED
MAY APRIL
4, 1996 29, 1995
--------------------------
% OF NET % OF NET
SALES SALES
--------------------------
Net sales 100.0% 100.0%
Gross profit 12.8 8.7
Selling, general and administrative expenses 10.9 14.2
Amortization of intangibles 0.1 0.7
Net gain from sale of subsidiary - (3.7)
Bad debt expense - 0.8
Income (loss) from operations 1.8 (3.3)
Interest expense 1.1 1.6
Net income (loss) 0.0 (3.6)
20
<PAGE>
Net Sales
Net sales for the first quarter of 1996 decreased 34.8% to $83.8 million from
$128.4 million for the comparable period in 1995. The $44.6 million decrease in
net sales for the first quarter of 1996 was primarily attributable to the sale
of the GJM business on February 9, 1996 ($15.4 million) and to discontinued
customers and product lines ($38.0 million), partially offset by an increase in
sales to AnnTaylor.
Net sales to AnnTaylor for the quarter ended May 4, 1996 amounted to $60.5
million, or 72% of the Company's net sales. Upon consummation of the AnnTaylor
Disposition, the Company anticipates that it will no longer have sales to
AnnTaylor.
Gross Profit
Gross profit for the first quarter of 1996 was $10.7 million, a decrease of
$400,000 or 3.7% from the comparable period in 1995. However, gross margin
(gross profit as a percentage of net sales) increased to 12.8% in the first
quarter of 1996 from 8.7% in the first quarter of 1995. Gross margin in the
first quarter of 1995 was adversely affected by low margins on sales to
discontinued customers. 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 first quarter of 1996 were
$9.2 million, representing a decrease of $9.0 million or 49.6% over the first
quarter of 1995. As a percentage of net sales, selling general and
administrative expenses were 10.9% in the first quarter of 1996, compared to
14.2% in the comparable prior year period. The decrease in these expenses and as
a percentage of net sales were primarily attributable to reductions in the
Company's overhead as well as the disposition of the GJM business.
Bad Debt Expenses
Bad debt expense of $1.1 million in the first quarter of 1995 resulted from the
bankruptcy filing of a customer.
Amortization of Intangibles
The amortization of intangibles for the first quarter of 1996 was $91,000, a
decrease of $856,000 over the first quarter 1995. The decrease was primarily
attributable to the write offs subsequent to the first quarter of 1995 of
intangibles recorded in connection with the FWM Acquisition and the sale of the
GJM business.
21
<PAGE>
Interest Expense
Interest expense for the first quarter of 1996 was $935,000, a decrease of $1.2
million or 55.7% over the comparable prior year period. The decrease in the
interest expense is primarily attributable to the reduction in anticipation
taken by customers and the sale of the GJM business.
Provision for Income Taxes
The provision for income taxes in the first quarter of 1996 primarily represents
tax on CAT's income. At February 3, 1996, the Company had net operating loss
carryforwards of approximately $84 million, which can be used to offset future
taxable income.
LIQUIDITY AND CAPITAL RESOURCES
Credit Facilities
During the quarter ended October 28, 1995, Cygne and CAT each entered into a
Credit Agreement with the HS Bank, which modified and, in the case of Cygne, FWM
and GJM, consolidated the previous credit arrangement with the HS Bank. The
modifications included (i) the consolidation of the Cygne, FWM and GJM
facilities, previously aggregating up to $76,400,000, into one facility of up to
$70,000,000, (ii) an increase in the CAT facility from up to $28,000,000 to up
to $40,000,000, (iii) a requirement under each agreement to comply with certain
financial covenants as well as various other restrictions, (iv) an increase in
the Cygne facility interest rate, and (v) the elimination of the requirement to
maintain a certain certificate of deposit as additional security for the prior
separate GJM credit facility. Borrowings under these facilities, which may be
terminated by the HS Bank or the Company at any time as to future borrowings
upon proper notice, are subject to certain borrowing base limitations and the HS
Bank's agreement as to amount, purpose, interest rate, maturity and collateral.
Borrowings under these facilities are due on the earlier of demand or the
maturity date specified by the HS Bank for each borrowing. Amounts outstanding
under the Cygne agreement bear interest at 1.25% above the prime rate through
January 31, 1996 and between 1% and 1.75% above the prime rate thereafter
depending upon the working capital, as defined, of the Company, exclusive of
CAT. Amounts outstanding under the CAT agreement bear interest at 0.5% above the
prime rate. Each agreement provides for additional interest at 2% per annum on
amounts not paid when due. The HS Bank facilities are cross guaranteed by Cygne
and certain of its subsidiaries and are secured by a first lien on substantially
all the assets of the Company including a pledge of 65% of the capital stock of
certain of Cygne's foreign subsidiaries, except for C.A.T. (Far East) Limited as
to which 60% of the capital stock is pledged.
22
<PAGE>
The following table sets forth information with respect to the HS Bank
facilities:
MAY 4, 1996
-------------------------------
DIRECT OPEN DIRECT
TOTAL BORROWING LETTERS BORROWINGS
FACILITY (1) LIMIT (2) OF CREDIT OUTSTANDING
----------------------------------------------------------------
(In thousands)
Cygne (3) $ 70,000 $ 50,000 $ 8,501 $ 21,149
CAT (4) 40,000 8,000 22,193 5,600
--------------------------------------------------------------
Total $ 110,000 $ 58,000 $ 30,694 $ 26,749
==============================================================
(1) The total facility, less any direct borrowings outstanding is available
for letters of credit.
(2) Consists principally of revolving loans and borrowings against
import/exports.
(3) The Limited, Inc. had guaranteed $10,000,000 of HS Bank facilities
through May 31, 1996.
(4) Cygne has guaranteed 60% of the indebtedness outstanding under this
facility and AnnTaylor, Inc., which owns 40% of CAT, has provided the HS
Bank with a $4,000,000 standby letter of credit.
On May 15, 1996, the Company received a commitment letter from HS Bank to
provide the Company with a new credit facility to replace the existing facility.
The commitment letter provides a committed facility of up to $30 million until
the earlier of August 31, 1996 or the closing of the AnnTaylor Disposition;
thereafter the facility reduces to $22.5 million and further reduces to $15
million at October 31, 1996; $10 million at November 30, 1996; $5 million at
December 31, 1996; and matures on January 31, 1997. Borrowings under this
facility are subject to borrowing base limitations. The Company is obligated to
pledge substantially all of its assets, including the AnnTaylor stock to be
received at the closing of the AnnTaylor Disposition. The credit facility is
subject to the completion of definitive documentation.
Certain foreign subsidiaries have credit facilities aggregating $2.4 million at
May 4, 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 May 4,
1996, $9.1 million of this facility was outstanding. The Company has reached an
agreement in principle to restructure the amounts outstanding under this trade
credit facility.
23
<PAGE>
In addition, from time to time customers finance the purchase of raw materials
on behalf of the Company, and the Company anticipates that they will continue to
do so, although there can be no assurance of this.
Net cash used by operating activities for the first quarter of 1996 was $1
million. The cash used resulted primarily from decreases in accounts payable and
an increase in accounts receivable substantially offset by decreases in
inventory. Net additions to fixed assets aggregated approximately $161,000 for
the first quarter of 1996.
As discussed above, the financing of the Company's operations currently depends
primarily upon financing provided by the HS Bank, the Company's customers and to
a lesser extent, third party vendors. As a result of the Company not being in
compliance with financial covenants in its HS Bank credit facility and the
liquidity pressure faced by the Company, third party vendors have been less
willing to extend credit to the Company than in prior years. Although the HS
Bank has waived the default, there can be no assurance that such third party
vendors will continue to extend credit to the Company.
During 1995 and the first quarter of 1996, 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 new credit facility
with the HS Bank and the proceeds from the AnnTaylor Disposition will alleviate
the liquidity pressures faced by the Company during 1995 and the first quarter
of 1996. However, there can be no assurance that the AnnTaylor Disposition will
occur or that the new credit facility will be implemented. If the AnnTaylor
Disposition does not occur or the new credit facility is not implemented the
Company will face the liquidity pressures previously experienced which would
adversely affect the Company's financial condition and results of operations.
TAXES
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.
24
<PAGE>
PART II OTHER INFORMATION
Item 5. Other Information
On June 7, 1996, the Company entered into a definitive agreement with Ann Taylor
Stores Corporation regarding the previously announced sale to Ann Taylor of
Cygne's 60% interest in CAT, Cygne's sourcing joint venture arrangement with Ann
Taylor, and the assets of Cygne's Ann Taylor Woven Division that are used in
sourcing merchandise for Ann Taylor. The aggregate consideration to be paid to
Cygne in the transaction consists of unregistered shares of Ann Taylor common
stock having a market value of $36 million (based upon the market price of the
common stock for the ten trading days prior to closing, but in no event greater
than 2.5 million shares), and a cash payment in an amount equal to the tangible
net book value of the fixed assets of Cygne AnnTaylor Woven Division (but not to
exceed $2,646,000) plus the tangible net book value of the inventory of Cygne's
Ann Taylor Woven Division, less the amount of certain liabilities of the
Division to be assumed by Ann Taylor.
The closing of the transaction is subject to various conditions, including
approval by the Company's stockholders, the consent and release of liens by
certain of the Company's lenders, and the continuation of CAT's $40 million
credit facility. It is currently anticipated that the transaction will close in
August 1996, following approval by Cygne's stockholders. There can be no
assurance, however, that the conditions to the closing will be satisfied, that
the transaction will be consummated or, if consummated, that it will be
consummated within the currently anticipated time frame. In order to facilitate
the integration of CAT and Cygne's Ann Taylor Woven Division into Ann Taylor's
operations, Cygne has agreed to make available for a three year period the
services of Mr. Bernard Manuel, the Company's Chief Executive Officer, and Mr.
Irving Benson, the Company's President. Cygne will make available up to 30% of
Messrs. Benson's and Manuel's time and will receive an aggregate fee of $450,000
per year. Ann Taylor has agreed to register the shares issued to Cygne for
resale, although Cygne will be subject to certain restrictions on the timing of
sales and the amount of shares which can be sold at any one time.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Stock and Asset Purchase Agreement by and between
Cygne Designs, Inc., Cygne Group (F.E.) Limited,
AnnTaylor Stores Corporation and Ann Taylor, Inc.
27 Financial Data Schedule (for SEC use only)
b. Reports on Form 8-K
Current report on Form 8-K dated February 9, 1996
relating to the consummation of the disposition of the
Company's GJM Business.
Current report on Form 8-K dated April 8, 1996
relating to the agreement in principal with AnnTaylor
relating to the AnnTaylor Disposition.
25
<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)
June 18, 1996 By /s/BERNARD M. MANUEL
-------------------------------
Bernard M. Manuel, Chairman of the Board
and Chief Executive Officer
June 18, 1996 By /s/ROY E. GREEN
------------------------------
Roy E. Green, Senior Vice President,
Chief Financial Officer and Treasurer
- --------------------------------------------------------------------------------
STOCK AND ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CYGNE DESIGNS, INC.,
CYGNE GROUP (F.E.) LIMITED,
ANNTAYLOR STORES CORPORATION
AND
ANNTAYLOR, INC.
DATED AS OF June 7, 1996
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
STOCK AND ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CYGNE DESIGNS, INC.,
CYGNE GROUP (F.E.) LIMITED,
ANNTAYLOR STORES CORPORATION
AND
ANNTAYLOR, INC.
- --------------------------------------------------------------------------------
-----------------------------
DATED AS OF JUNE 7, 1996
-----------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
I. TRANSFER OF ASSETS AND LIABILITIES.................................. 2
1.1 Assets to be Sold........................................... 2
1.2 Consideration............................................... 8
1.3 Closing..................................................... 10
1.4 Deliveries by Seller........................................ 10
1.5 Deliveries by Buyer......................................... 12
1.6 Post-Closing Adjustments.................................... 14
1.7 Allocation of Purchase Price................................ 19
1.8 Assumed Liabilities......................................... 20
II. RELATED MATTERS.................................................... 20
2.1 Ancillary Agreements........................................ 20
2.2 Receivables Settlement...................................... 22
2.3 Finished Goods.............................................. 22
2.4 Joint Venture Agreement..................................... 23
2.5 Leases...................................................... 23
2.6 Meyer Employment Agreement.................................. 23
2.7 Mail Received After Closing................................. 24
2.8 Employees, Benefit Plans.................................... 24
III. REPRESENTATIONS AND WARRANTIES OF SELLER.......................... 30
3.1 Organization of Seller and CAT;
Authority................................................... 30
3.2 No Violation; Consents and Approvals........................ 32
3.3 Seller Financial Statements................................. 36
3.4 CAT Financial Statements.................................... 37
3.5 Combined Entity Financial Statements........................ 39
3.6 Absence of Seller Undisclosed
Liabilities................................................. 42
3.7 Absence of CAT Undisclosed Liabilities...................... 42
3.8 Absence of Division Undisclosed
Liabilities................................................. 42
3.9 Absence of Certain Changes or Events........................ 43
3.10 Title to CAT Shares........................................ 43
3.11 Title to Assets; Leased Property........................... 45
3.12 Litigation/Claims.......................................... 50
3.13 Employee Benefit Plans..................................... 51
3.14 Certain Contracts and Arrangements......................... 52
3.15 Compliance with Laws; Licenses............................. 55
3.16 Insurance.................................................. 56
3.17 Labor Matters.............................................. 57
3.18 Assets of the Division Business............................ 59
3.19 Disclosure................................................. 59
i
<PAGE>
3.20 Environmental Matters...................................... 60
3.21 Opinion of Financial Advisor............................... 62
3.22 Brokers.................................................... 62
3.23 Intellectual Property...................................... 63
3.24 Absence of Violations of Quotas and
Visas...................................................... 63
3.25 No Tariffs or Duties....................................... 63
3.26 Compliance with U.S. Customs and
Trade Laws................................................. 64
3.27 SEC Documents.............................................. 64
3.28 Compliance with Laws by CAT; Licenses...................... 65
3.29 CAT Taxes.................................................. 66
3.30 Acquisition of the ATSC Common
Stock for Investment; Securities Act....................... 68
3.31 Suppliers.................................................. 69
3.32 Disclaimer of Other Representations
and Warranties............................................. 69
IV. REPRESENTATIONS AND WARRANTIES OF ATSC AND BUYER................... 70
4.1 Organization of ATSC and Buyer;
Authority................................................... 70
4.2 No Violation; Consents and Approvals........................ 72
4.3 Litigation/Claims........................................... 75
4.4 SEC Documents and Other Reports............................. 76
4.5 Capital Stock............................................... 77
4.6 Absence of Certain Changes or Events........................ 78
4.7 Information Supplied........................................ 78
4.8 Brokers..................................................... 78
4.9 Disclaimer of Other Representations
and Warranties.............................................. 79
V. COVENANTS OF THE PARTIES............................................ 79
5.1 Conduct of the Division Business............................ 79
5.2 Access to Information; Confidentiality...................... 83
5.3 Financial Statements........................................ 84
5.4 Reasonable Best Efforts..................................... 87
5.5 Consents.................................................... 87
5.6 Antitrust Notification...................................... 88
5.7 Public Announcements........................................ 88
5.8 Access to Books and Records Following
the Closing................................................. 89
5.9 Other Transactions.......................................... 89
5.10 Discharge of Liens......................................... 90
5.11 Resignations............................................... 90
5.12 Insurance.................................................. 90
5.13 Supplementary Disclosure................................... 91
5.14 Brazil Sourcing............................................ 91
ii
<PAGE>
5.15 Letters of Credit.......................................... 92
5.16 Amendment.................................................. 92
5.17 Proxy Statement; Stockholder Approval...................... 93
5.18 Occupancy.................................................. 95
5.19 Transfer Taxes............................................. 96
5.20 Conduct of ATSC Business................................... 96
VI. CONDITIONS TO OBLIGATIONS OF BOTH PARTIES.......................... 97
6.1 Conditions.................................................. 97
VII. CONDITIONS TO OBLIGATIONS OF SELLER............................... 98
7.1 Conditions.................................................. 98
VIII. CONDITIONS TO OBLIGATIONS OF BUYER...............................100
8.1 Conditions..................................................100
IX. TERMINATION, AMENDMENT AND WAIVER..................................102
9.1 Termination.................................................102
9.2 Procedure and Effect of Termination.........................103
9.3 Other Remedies..............................................104
X. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION........................104
10.1 Survival of Representations................................104
10.2 Seller's Agreement to Indemnify............................104
10.3 Seller's Limitation of Liability...........................106
10.4 Buyer's Agreement to Indemnify.............................108
10.5 Buyer's Limitation of Liability............................109
10.6 Conditions of Indemnification..............................110
10.7 Exclusive Remedies.........................................112
10.8 Transfer Pricing...........................................113
10.9 Claims Against CAT Directors and
Officers...................................................113
XI. MISCELLANEOUS......................................................113
11.1 Fees and Expenses..........................................113
11.2 Further Assurances.........................................114
11.3 Notices....................................................114
11.4 Entire Agreement...........................................116
11.5 Severability...............................................116
11.6 Binding Effect; Assignment.................................116
11.7 Amendment, Modification and Waiver.........................117
11.8 Third-Party Beneficiaries..................................117
11.9 Counterparts...............................................118
11.10 Bulk Sales................................................118
11.11 Interpretation............................................118
11.12 Governing Law.............................................119
iii
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ANNEXES AND EXHIBITS
ANNEX I................................................Division Fabric and Trim
ANNEX II......................................................Assumed Contracts
ANNEX III......................................................Net Fixed Assets
ANNEX IV.........................................................Lease Deposits
EXHIBIT A..........................................................Bill of Sale
EXHIBIT B...................................Assignment and Assumption Agreement
EXHIBIT C...........................................................Undertaking
EXHIBIT D....................................................Advance Instrument
EXHIBIT E......................................................Pledge Agreement
EXHIBIT F......................................NY Transition Services Agreement
EXHIBIT G...................................Miami Transition Services Agreement
EXHIBIT H...........................................Manuel Consulting Agreement
EXHIBIT I...........................................Benson Consulting Agreement
EXHIBIT J................................................Stockholders Agreement
EXHIBIT K........................................................Florence Lease
EXHIBIT L......................................Legal Opinion of Buyer's Counsel
EXHIBIT M.....................................Legal Opinion of Seller's Counsel
iv
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GLOSSARY
PAGE
----
Agreement.................................................................... 1
Seller....................................................................... 1
CGFE......................................................................... 1
ATSC......................................................................... 1
Buyer........................................................................ 1
Joint Venture Agreement...................................................... 1
CAT-US....................................................................... 1
CAT-Far East................................................................. 1
CAT.......................................................................... 1
Division..................................................................... 1
Division Business............................................................ 1
CAT US Shares................................................................ 2
CAT Far East Shares.......................................................... 2
CAT Shares................................................................... 2
Closing ..................................................................... 2
Liens ..................................................................... 3
Inventory.................................................................... 3
Division Fabric and Trim..................................................... 3
Capital Leases............................................................... 3
Contracts.................................................................... 3
NY Facility.................................................................. 4
NY Lease..................................................................... 4
FWM Lease.................................................................... 4
CAT Sublease................................................................. 4
Net Fixed Assets............................................................. 4
Intellectual Property........................................................ 6
Books and Records............................................................ 6
Assets ..................................................................... 6
Bill of Sale................................................................. 7
Subleases.................................................................... 7
Assignment and Assumption Agreements......................................... 7
Other Instruments............................................................ 7
ATSC Common Stock............................................................ 8
Stock Consideration.......................................................... 9
Average Trading Price........................................................ 9
Inventory Consideration...................................................... 9
Fixed Asset Consideration.................................................... 9
Purchase Price............................................................... 9
Undertaking.................................................................. 9
Accounts Payable............................................................. 10
Advance Instrument........................................................... 10
Advances..................................................................... 10
Liabilities.................................................................. 10
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Closing Date................................................................. 10
Bank Account................................................................. 13
GAAP......................................................................... 14
Estimated Amount............................................................. 14
Net Fixed Asset Value........................................................ 14
Initial Payment Amount....................................................... 14
Pledged Amount............................................................... 15
Seller Statement............................................................. 15
Statement of Objection....................................................... 15
Closing Date Statement....................................................... 15
Reviewing Accountants........................................................ 16
Accountant Statement......................................................... 16
Adjusted Net Book Value...................................................... 17
Pledge Agreement............................................................. 18
Code......................................................................... 19
IRS.......................................................................... 20
Stockholders Agreement....................................................... 21
Florence Facility............................................................ 21
Florence Lease............................................................... 21
Ancillary Agreements......................................................... 21
Accounts Receivable Estimate................................................. 22
Receivables Payment Amount................................................... 22
Employment Agreements........................................................ 24
Affected Employees........................................................... 24
CAT Employees................................................................ 24
Hired Employees.............................................................. 25
Continued Employees.......................................................... 25
Prior Welfare Plans.......................................................... 26
Replacement Welfare Plans.................................................... 26
COBRA........................................................................ 26
Material Adverse Effect...................................................... 31
Seller Disclosure Schedule................................................... 31
Seller Related Instruments................................................... 31
Governmental Entities........................................................ 34
HSR Act ..................................................................... 34
Exchange Act................................................................. 34
1996 Balance Sheet........................................................... 36
Audited Financial Statements................................................. 36
Financial Statements......................................................... 36
CAT 1996 Balance Sheet....................................................... 37
CAT Audited Financial Statements............................................. 38
CAT Financial Statements..................................................... 38
Combined Entity.............................................................. 39
Combined Entity 1996 Balance Sheet........................................... 39
Combined Entity Audited Financial Statements................................. 39
Combined Entity Unaudited Financial Statements............................... 40
Combined Entity Financial Statements......................................... 40
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Permitted Liens............................................................. 46
Miami Lease................................................................. 47
Leases...................................................................... 47
Miami Facility.............................................................. 47
Leased Properties........................................................... 47
Plans....................................................................... 51
ERISA Affiliate............................................................. 51
ERISA....................................................................... 51
Division Contracts.......................................................... 53
Permits .................................................................... 56
Environmental Laws.......................................................... 60
Environmental Claim......................................................... 60
Hazardous Materials......................................................... 61
PCBs........................................................................ 62
SEC......................................................................... 64
Seller SEC Documents........................................................ 64
Securities Act.............................................................. 64
Tax......................................................................... 67
Taxes....................................................................... 67
Tax Return.................................................................. 68
Buyer Related Instruments................................................... 71
Buyer Disclosure Schedule................................................... 75
ATSC SEC Documents.......................................................... 76
Confidentiality Agreements.................................................. 84
Combined Entity 1994 Audited Financial Statements........................... 85
Subsequent Monthly Financial Statements..................................... 85
CAT Subsequent Monthly Financial Statements................................. 85
Combined Entity Subsequent Monthly Financial
Statements............................................................. 85
Subsequent Quarterly Financial Statements................................... 85
CAT Subsequent Quarterly Financial Statements............................... 85
Combined Entity Subsequent Quarterly Financial
Statements............................................................. 85
Subsequent Financial Statements............................................. 85
CAT Subsequent Financial Statements......................................... 86
Combined Entity Subsequent Financial Statements............................. 86
Exclusivity Period.......................................................... 89
Existing Gordon Agreement................................................... 92
Commission.................................................................. 93
Preliminary Proxy Materials................................................. 93
Annual Meeting.............................................................. 93
Proposal.................................................................... 93
Proxy Statement............................................................. 94
Transfer Taxes.............................................................. 96
Buyer Group.................................................................104
Damages ....................................................................105
Seller Claims...............................................................106
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Buyer's Deductible..........................................................107
Seller Group................................................................108
Buyer Claims................................................................109
Claims ....................................................................109
Seller's Deductible.........................................................110
Failure of Condition........................................................112
Waiving Party...............................................................112
person ....................................................................118
affiliate...................................................................119
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STOCK AND ASSET PURCHASE AGREEMENT
STOCK AND ASSET PURCHASE AGREEMENT, dated as of June 7, 1996 (the
"Agreement"), by and between CYGNE DESIGNS, INC., a Delaware corporation
("Seller"), CYGNE GROUP (F.E.) LIMITED, a Hong Kong corporation and a wholly
owned subsidiary of Seller ("CGFE"), ANNTAYLOR STORES CORPORATION, a Delaware
corporation ("ATSC"), and ANNTAYLOR, INC., a Delaware corporation and a wholly
owned subsidiary of ATSC ("Buyer").
W I T N E S S E T H
WHEREAS, pursuant to that certain Agreement, dated July 13, 1993 (the
"Joint Venture Agreement"), by and among Seller, CGFE, CAT-US, Inc., a Delaware
corporation ("CAT-US"), C.A.T. (Far East) Limited, a Hong Kong corporation
("CAT-Far East" and, together with CAT-US, "CAT"), and Buyer, Seller and Buyer
own 60% and 40%, respectively, of the outstanding capital stock of CAT, which
serves as a fully dedicated direct sourcing capability for Buyer;
WHEREAS, Seller, through its AnnTaylor Woven Division (the "Division"),
serves as a private label designer, merchandiser and manufacturer of women's
apparel for AnnTaylor (the "Division Business");
WHEREAS, Seller desires to sell to Buyer and Buyer desires to acquire from
Seller (i) all of the shares of
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common stock, par value $.01 per share, of CAT-US owned by Seller (the "CAT-US
Shares"); and (ii) certain of the assets of the Division as more fully described
herein; and
WHEREAS, CGFE desires to sell to Buyer and Buyer desires to acquire from
CGFE all the shares of common stock, par value $1 HK per share, of CAT-Far East
owned by CGFE (the "CAT-Far East Shares" and, together with the CAT-US Shares,
the "CAT Shares").
NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants, agreements and conditions contained
herein, and intending to be legally bound hereby, the parties agree as follows:
I. TRANSFER OF ASSETS AND LIABILITIES.
1.1 ASSETS TO BE SOLD.
(a) Upon the terms and subject to the conditions of this Agreement, at the
closing provided for in Section 1.3 hereof (the "Closing"), Seller shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer shall purchase, acquire
and accept from Seller, the following:
(i) all right, title and interest in and to the CAT-US Shares, free
and clear of all liens, encumbrances, security interests, mortgages, pledges,
claims, options or restrictions of any kind, other than
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restrictions on transfer imposed under federal and state securities laws
(collectively, "Liens");
(ii) the following items of inventory (the "Inventory"): (x) fabric
and trim owned by Seller for use by the Division in the production of
merchandise for Buyer ("Division Fabric and Trim") as of February 3, 1996 and
identified on ANNEX I hereto to the extent not used as of the Closing Date in
the production of merchandise for Buyer; (y) Division Fabric and Trim purchased
since February 3, 1996 pursuant to written commitments or purchase orders issued
by Buyer to the extent not used as of the Closing Date in the production of
merchandise for Buyer and (z) work-in-progress owned by Seller for use by the
Division in the production of merchandise for Buyer pursuant to purchase orders
issued by Buyer;
(iii) the capital leases and other agreements relating to equipment
located on the fifth, sixth and nineteenth floors of Seller's facility located
at 1372 Broadway, New York City, New York (the "NY Facility") and at the
Florence Facility (as hereinafter defined), to the extent they relate to the
Division Business and are listed on and marked with an asterisk on Annex II
hereto (collectively, the "Capital Leases") and other contracts, personal
property leases and other commitments to which Seller is a party to the extent
they relate to the Division Business and
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are listed on ANNEX II hereto (collectively with the Capital Leases, the
"Contracts");
(iv) Seller's or its affiliate's rights as tenant in accordance with
Section 1.1(b) hereof (A) with respect to the sixth floor of the NY Facility
under the Agreement of Lease, dated August 7, 1991, between Seller, as tenant,
and Nineteen New York Properties Limited Partnership, as landlord, as amended
(as it relates to the sixth floor only, the "NY Lease"), and (B) with respect to
the fifth and nineteenth floors of the NY Facility under the Agreement of Lease,
dated June 24, 1994, between Fenn, Wright and Manson, Incorporated, as tenant,
and Nineteen New York Properties Limited Partnership, as landlord (as it relates
to the fifth and nineteenth floors only, the "FWM Lease"), as amended by that
certain sublease, dated February 28, 1995, between Fenn, Wright and Manson
Incorporated, as sublessor, and CAT-US, Inc., as sublessee (the "CAT Sublease");
(v) all leasehold improvements, furniture, fixtures and equipment that
meet all of the following conditions: (x) are owned by Seller or subject to a
Capital Lease, (y) relate to and are used exclusively or primarily in the
Division Business and (z) are located on the fifth, sixth or nineteenth floor of
the NY Facility or at the
4
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Florence Facility on the Closing Date (the "Net Fixed Assets"), including those
listed on ANNEX III hereto;
(vi) all licenses, permits, registrations, renewals thereof and
applications therefor, variances, exemptions, orders, approvals and
authorizations issued by any governmental, regulatory or administrative agency
or authority (domestic or foreign), held by Seller or any affiliate of Seller of
or relating to the Division Business, including all quota allocations for the
export of goods to the United States and elsewhere, necessary or desirable for
the lawful conduct of the Division Business, to the extent transferable under
applicable law;
(vii) all purchase orders, bills of lading, trust receipts, warehouse
receipts and other documents of title of whatever kind and description relating
to the Inventory;
(viii) all rights under insurance policies covering Inventory in
transit and all rights and claims under insurance policies for damage to any
Assets to the extent not repaired or replaced prior to the Closing;
(ix) all goodwill, intellectual property rights, patents, trademarks,
service marks, copyrights (including all copyrights in computer software and
databases), licenses and applications therefor (if any), know-how, processes,
methods, techniques, formulae, designs, drawings,
5
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patterns, trade secrets, proprietary information, sketches, technical
information, computer software, databases and other proprietary or confidential
information of or relating to the Division Business and all rights in any
licenses to or from any third party of or for the foregoing (collectively, the
"Intellectual Property"), it being understood, however, that the rights to the
Intellectual Property shall be non-exclusive unless such Intellectual Property
relates solely to the Division Business and Seller's rights therein are
exclusive;
(x) all intangible assets of or relating to the Division Business,
including claims against third parties; and
(xi) all books and records (including all computerized records and
storage media and associated software) of CAT, and those relating solely to the
Division Business and, to the extent practicable, those portions of Seller's
other books and records that relate to the Division Business (collectively,
"Books and Records"), including, without limitation, (a) all Books and Records
relating to the employees of, and the purchase of materials, supplies and
services for, the Division Business or CAT, but not including the tax returns,
general ledger or corporate minute books and capital stock books of Seller, and
(b) the tax returns, general ledger and corporate minute books and
6
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capital stock books of CAT-US and CAT-Far East (together with the items listed
in clauses (ii)-(x) above, the "Assets").
(b) Such sale, conveyance, assignment, transfer and delivery shall be
effected by delivery by Seller to Buyer or its designees of (i) stock
certificates representing the CAT-US Shares, duly endorsed or accompanied by
stock powers duly executed in blank with appropriate transfer stamps, if any,
affixed, and any other documents that are necessary to transfer title to the
CAT-US Shares to Buyer, (ii) a duly executed bill of sale in substantially the
form of EXHIBIT A hereto (the "Bill of Sale"), (iii) a mutually satisfactory
sublease agreement with respect to each of the NY Lease and the FWM Lease (the
"Subleases") or, alternatively, newly negotiated leases between Buyer and the
landlord of the NY Facility relating to the premises subject to the NY Lease and
the FWM Lease, respectively, (iv) duly executed assignment and assumption
agreements in substantially the form of EXHIBIT B hereto (the "Assignment and
Assumption Agreements") with respect to each of the Contracts, and (v) such
other good and sufficient instruments of conveyance and transfer (collectively,
the "Other Instruments") as shall be reasonably necessary to vest in Buyer good
and valid title to the CAT-US Shares and the Assets, free and clear of all
Liens, other than the Permitted Liens (as hereinafter defined).
7
<PAGE>
(c) Upon the terms and subject to the conditions of this Agreement, at the
Closing, CGFE shall sell, convey, assign, transfer and deliver to Buyer, and
Buyer shall purchase, acquire and accept from CGFE, all right, title and
interest in and to the CAT Far East Shares, free and clear of all Liens. Such
sale, conveyance, assignment, transfer and delivery shall be effected by
delivery by CGFE to Buyer or its designees of stock certificates representing
the CAT Far East Shares, duly endorsed or accompanied by stock powers duly
executed in blank with appropriate transfer stamps, if any, affixed, and any
other documents that are necessary to transfer title to the CAT Far East Shares
to Buyer.
1.2 CONSIDERATION.
(a) Upon the terms and subject to the conditions of this Agreement, in
consideration of the aforesaid sale, conveyance, assignment, transfer and
delivery of the CAT Shares and the Assets, Buyer shall, in accordance with the
terms of this Agreement, deliver or cause to be delivered to Seller, on its own
behalf and on behalf of CGFE, as their respective interests may appear, in full
payment for the aforesaid sale, conveyance, assignment, transfer and delivery of
the CAT Shares and the Assets:
(i) the number of validly issued, fully paid and nonassessable
shares of common stock, par value
8
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$.0068 per share, of ATSC ("ATSC Common Stock"), rounded to the nearest whole
share, equal to the quotient obtained by dividing (a) $36.0 million by (b) the
Average Trading Price of the ATSC Common Stock (the "Stock Consideration");
PROVIDED, HOWEVER, that the number of shares of ATSC Common Stock to be issued
shall in no event exceed 2.5 million shares. As used in this Agreement, the
"Average Trading Price" shall mean the average of the high and low sale prices
of the ATSC Common Stock on the New York Stock Exchange Composite Tape (or as
reported on any other exchange on which the ATSC Common Stock is then listed) on
each of the 10 consecutive trading days ending on the trading day immediately
prior to the Closing Date;
(ii) a dollar amount in cash equal to the Adjusted Net Book Value
(as hereinafter defined) of the Inventory determined in accordance with Section
1.6 hereof (the "Inventory Consideration");
(iii) a dollar amount in cash equal to the lesser of (x) the Net
Fixed Asset Value (as hereinafter defined) and (y) $2,646,000 (the "Fixed Asset
Consideration" and, together with the Inventory Consideration and the Stock
Consideration, the "Purchase Price");
(iv) the Subleases, if applicable;
9
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(v) the Assignment and Assumption Agreements;
(vi) an undertaking substantially in the form of EXHIBIT C hereto
(the "Undertaking") evidencing the assumption by Buyer of accounts payable
associated with the Inventory (the "Accounts Payable"); and
(vii) an instrument, substantially in the form of EXHIBIT D
hereto (the "Advance Instrument"), evidencing the forgiveness by Buyer of
$7,985,000 of outstanding advances (the "Advances" and, collectively with the
Capital Leases and the Accounts Payable, the "Liabilities") made to Seller by
Buyer.
1.3 CLOSING. The Closing of the transactions contemplated by this Agreement
shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom, 919
Third Avenue, New York, New York, at 10:00 a.m., Eastern time, on the first
business day following the Annual Meeting (as hereinafter defined) or, if the
conditions to Closing set forth in Articles VI, VII and VIII hereof shall not
have been satisfied or waived by such date, as soon as practicable after such
conditions shall have been satisfied or waived, or such other place, date and
time as shall be agreed upon in writing by the parties hereto. The date on which
the Closing actually occurs is referred to herein as the "Closing Date".
10
<PAGE>
1.4 DELIVERIES BY SELLER. At the Closing, Seller and CGFE, as applicable,
shall deliver or cause to be delivered to Buyer (unless delivered previously)
the following:
(a) the stock certificates representing the CAT Shares, duly
endorsed or accompanied by stock powers duly executed in blank with appropriate
transfer stamps, if any, affixed, and any other documents that are reasonably
necessary to transfer title to the CAT Shares to Buyer;
(b) the Bill of Sale;
(c) the Subleases, if applicable;
(d) the Assignment and Assumption Agreements;
(e) the Pledge Agreement (as hereinafter defined);
(f) the resignations of certain officers and directors of CAT
referred to in Section 5.11 hereof;
(g) the compliance certificate referred to in Subsection 8.1(c)
hereof;
(h) the opinion of counsel to Seller referred to in Subsection
8.1(d) hereof;
(i) duly executed counterparts of any consent or approval
referred to in Subsection 8.1(g) hereof;
(j) the Ancillary Agreements (as hereinafter defined); and
11
<PAGE>
(k) all other documents, certificates, instruments or writings
required to be delivered by Seller at or prior to the Closing pursuant to this
Agreement or otherwise reasonably required in connection herewith.
1.5 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver or cause to be
delivered to Seller (unless delivered previously) the following:
(a) a stock certificate or stock certificates representing the
shares of ATSC Common Stock to be delivered to Seller in payment of the Stock
Consideration, free and clear of all Liens other than as set forth in, and
bearing the legend set forth in, the Stockholder's Agreement (as hereinafter
defined);
(b) a wire transfer of Federal or other immediately available
funds in an amount equal to the Initial Payment Amount (as hereinafter defined);
(c) a wire transfer of Federal or other immediately available
funds in amount equal to the Fixed Asset Consideration;
(d) a wire transfer of Federal or other immediately available
funds in an amount equal to the Receivables Payment Amount (as hereinafter
defined);
(e) a wire transfer of Federal or other immediately available
funds in an amount equal to the deposits
12
<PAGE>
under the Leases (as hereinafter defined) listed on ANNEX IV hereto;
(f) a wire transfer of Federal or other immediately available
funds in an amount equal to the Pledged Amount (as hereinafter defined) to a
bank account in the name of Buyer (the "Bank Account");
(g) the Pledge Agreement;
(h) the Subleases, if applicable;
(i) the Assignment and Assumption Agreements;
(j) the Undertaking;
(k) the Advance Instrument;
(l) the officer's certificate referred to in Subsection 7.1(c)
hereof;
(m) the opinion of counsel to Buyer referred to in Subsection
7.1(d) hereof;
(n) the Ancillary Agreements;
(o) evidence that Buyer has substituted letters of credit or
provided an alternative form of financial support for the letters of credit
listed on the schedule delivered pursuant to Section 5.15 hereof; and
(p) all other documents, certificates, instruments or writings
reasonably required to be delivered by Buyer at or prior to the Closing pursuant
to this Agreement or otherwise required in connection herewith.
13
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The wire transfers pursuant to subparagraphs (b) (c) (d) and (e) above
shall be made by a single wire transfer to an account designated in writing at
least two (2) business days prior to the Closing Date by Seller.
1.6 POST-CLOSING ADJUSTMENTS.
(a) At least five (5) business days prior to the Closing Date,
Seller shall prepare and deliver to Buyer (i) a good faith estimate, prepared in
accordance with United States generally accepted accounting principles ("GAAP"),
applied in a manner consistent with the preparation of the financial statements
referred to in Section 3.5 hereof, except as otherwise expressly provided below,
and accompanied by a certificate of the chief financial officer of Seller to
that effect, of the aggregate amount of the Adjusted Net Book Value of the
Inventory determined in accordance with clause (f) below (the "Estimated
Amount") as of the Closing Date, (ii) a statement, prepared in good faith in a
manner consistent with the preparation of the Company's books and records during
the periods reflected in the financial statements referred to in Section 3.5
hereof and accompanied by a certificate of the chief financial officer of Seller
to that effect, of the aggregate amount of the net book value of the Net Fixed
Assets as of the Closing Date (the "Net Fixed Asset Value"), and (iii) a
schedule of all open purchase orders of Seller relating to the Division.
14
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(b) At Closing, Buyer shall (i) deliver to Seller an amount equal
to 80% of the Estimated Amount (the "Initial Payment Amount") and (ii) cause the
Bank Account to be credited with an amount equal to 20% of the Estimated Amount
(the "Pledged Amount").
(c) Beginning two (2) days prior to the Closing Date, Seller and
Buyer shall jointly conduct, or shall cause to be jointly conducted by their
respective independent public accountants, a physical count of all Inventory as
of the Closing Date. The physical count of the Inventory shall be conducted in
accordance with procedures to be mutually agreed upon by the parties' respective
independent public accountants. As promptly as practicable thereafter, but in no
event more than thirty (30) days following the Closing Date, Seller shall
prepare or cause to be prepared and shall deliver to Buyer a reasonably detailed
statement setting forth the Adjusted Net Book Value of the Inventory, determined
in accordance with clause (f) below (the "Seller Statement"). Unless within
thirty (30) days after its receipt of the Seller Statement Buyer shall deliver
to Seller a reasonably detailed statement describing its objections to the
Seller Statement (a "Statement of Objection"), the amount of the Adjusted Net
Book Value of the Inventory determined in accordance with this clause (c) shall
be final and binding on the parties hereto and the
15
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Seller Statement shall be the final statement hereunder (the "Closing Date
Statement"). Buyer may include in its Statement of Objection one or more
objections to items included by Seller in the Inventory that, in Buyer's good
faith determination, were not properly included as Inventory pursuant to Section
1.1(a)(ii) hereof;
(d) If Buyer shall deliver to Seller a timely Statement of
Objection, Buyer and Seller and their respective independent accountants shall
negotiate in good faith and use reasonable best efforts to resolve any disputes.
If a resolution is reached, such resolution shall be final and binding on the
parties and Buyer and Seller shall set forth the Adjusted Net Book Value of the
Inventory on a mutually acceptable statement and such statement shall be the
Closing Date Statement. If a final resolution is not reached within fifteen (15)
days after Buyer has submitted its Statement of Objection, any remaining
disputes shall be resolved by a third firm of independent accountants (the
"Reviewing Accountants") selected jointly by the parties' independent accounting
firms. The Reviewing Accountants shall be instructed to resolve any matters in
dispute as promptly as practicable, but in no event more than thirty (30) days,
and set forth their resolution in a statement setting forth the Net Book Value
of the Inventory (the "Accountant Statement"). In such event, the determination
16
<PAGE>
of the Reviewing Accountants shall be final and binding on the parties hereto
and the Accountant Statement shall be the Closing Date Statement.
(e) Seller and Buyer each shall pay one-half of the fees and
expenses of the Reviewing Accountants. Seller and the Buyer shall cooperate with
each other and the Reviewing Accountants in connection with the matters
contemplated by this Section 1.6, including Seller's preparation of and Buyer's
review of the Closing Date Statement, including by furnishing such information
and access to books, records (including accountants' work papers), personnel and
properties as may be reasonably requested.
(f) The "Adjusted Net Book Value" shall be equal to the tangible
net book value of the Inventory, less the amount of the Liabilities, as set
forth on the Closing Date Statement. The Closing Date Statement shall be
prepared in accordance with GAAP applied in a manner consistent with the
financial statements referred to in Section 3.5 hereof, except as otherwise
expressly set forth in this Section 1.6, and except that Inventory shall be
valued at cost, not the lower of cost or market. For purposes of this Section
1.6, the Inventory, regardless of condition, shall be valued as follows: (i) raw
materials shall be valued at cost, including, without limitation, to the extent
actually incurred: FOB or CF purchase price, as the case may be;
17
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inspection costs; re-dyeing and/or refinishing charges; duty; freight and
brokerage charges; fabric commission; insurance; and storage charges; PROVIDED,
HOWEVER, that such valuation applies only to raw materials available to Buyer
(I.E., excludes shrinkage); and (ii) work-in-progress shall include (A) raw
material costs as determined above; and (B) making charges to the extent such
charges have been paid by Seller. Notwithstanding the foregoing, finished goods
rejected or canceled by Buyer prior to the Closing Date shall not be included in
the Assets and such finished goods shall remain in Seller's possession.
(g) At the Closing, Buyer shall pledge the Bank Account to Seller
as security for its interest under this Section 1.6 pursuant to a Pledge
Agreement in substantially the form of EXHIBIT E hereto (the "Pledge
Agreement"). Upon delivery of the Closing Date Statement, Seller hereby releases
its right and security interest in the Bank Account (but not in the proceeds
thereof, to the extent such proceeds are due to Seller pursuant to this Section
1.6) automatically and without any further action required on the part of
Seller.
(h) If the Adjusted Net Book Value set forth in the Closing Date
Statement exceeds the Initial Payment Amount, Buyer shall distribute to Seller
in cash out of the Pledged Amount the amount of such excess. Buyer shall
18
<PAGE>
retain the remainder, if any, of the Pledged Amount. Buyer shall distribute
interest earned on the Pledged Amount in the Bank Account to Seller, or shall
retain such interest, in proportion to the amount of the Pledged Amount
distributed or retained, as the case may be, by each.
(i) If the Adjusted Net Book Value set forth in the Closing Date
Statement is less than the Initial Payment Amount, Seller shall pay the
difference to Buyer in immediately available funds, plus interest on such amount
from the Closing Date to the date of payment at the rate of 8% per annum. In
such event, Buyer shall retain the Pledged Amount and all interest earned
thereon.
(j) If the Adjusted Net Book Value set forth in the Closing Date
Statement exceeds the Estimated Amount, then, in addition to distribution of the
Pledged Amount pursuant to clause (h) above, Buyer shall pay the difference to
Seller in immediately available funds, plus interest on such amount from the
Closing Date to the date of payment at the rate of 8% per annum.
1.7 ALLOCATION OF PURCHASE PRICE. Prior to the Closing, the parties shall
agree to the appropriate allocation of the Purchase Price and the Liabilities
among the CAT Shares and Assets, which allocation shall comply with Section 1060
of the Internal Revenue Code of 1986, as amended (the "Code"). The parties
hereby agree that such allocation
19
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shall be conclusive and binding on each of them for purposes of federal and,
where applicable, state and local tax returns and that they will not voluntarily
take any position inconsistent therewith. The parties hereby agree to prepare
and timely file all applicable Internal Revenue Service ("IRS") and other
governmental authority forms, to cooperate with each other in the preparation of
such forms, and to furnish each other with a copy of such forms prepared in
draft, within a reasonable period prior to the filing due date thereof.
1.8 ASSUMED LIABILITIES. Except for liabilities and obligations expressly
assumed in this Agreement, Buyer has not agreed to pay, shall not be required to
assume and shall have no liability or obligation with respect to, and Seller
shall indemnify and hold Buyer harmless from and against, any liability or
obligation, direct or indirect, absolute or contingent, of Seller, the Division
or any of their affiliates.
II. RELATED MATTERS.
2.1 ANCILLARY AGREEMENTS.
(a) At the Closing, Seller and Buyer shall enter into (i) a
mutually satisfactory transition services agreement relating to the CAD-CAM work
stations located at the NY Facility with substantially the terms set forth on
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EXHIBIT F hereto and (ii) a mutually acceptable transition services agreement
relating to the Miami Facility (as hereinafter defined) with substantially the
terms set forth on EXHIBIT G hereto.
(b) At the Closing, Seller and Buyer shall enter into a
consulting agreement in substantially the form of EXHIBIT H hereto, relating to
the services of Mr. Bernard M. Manuel.
(c) At the Closing, Seller and Buyer shall enter into a
consulting agreement in substantially the form of EXHIBIT I hereto, relating to
the services of Mr. Irving Benson.
(d) At the Closing, Seller and Buyer shall enter into a
stockholders agreement (the "Stockholders Agreement") relating to the shares of
ATSC Common Stock issued to Seller pursuant to Subsection 1.2(a)(i) hereof in
substantially the form of EXHIBIT J hereto.
(e) At the Closing, Seller or an affiliate of Seller and Buyer
shall enter into a mutually satisfactory lease whereby Buyer shall lease certain
real property in Florence, Italy (the "Florence Facility") from Seller or such
affiliate with substantially the terms set forth on EXHIBIT K hereto (the
"Florence Lease" and, collectively with the agreements listed in paragraphs
(a)-(d) above, the "Ancillary Agreements").
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2.2 RECEIVABLES SETTLEMENT. At least five (5) business days prior to the
Closing Date, Seller shall deliver to Buyer a detailed schedule setting forth
Seller's good faith estimate (the "Accounts Receivable Estimate"), accompanied
by a certificate of the chief financial officer of Seller to that effect, of the
dollar amount of the accounts receivable of Seller from Buyer and CAT for
finished goods that have been received, quality checked and accepted. At the
Closing, Buyer shall deliver to Seller (a) a detailed statement describing its
disputes, if any, to the Accounts Receivable Estimate, and (b) a wire transfer
of immediately available funds in an amount equal to the Accounts Receivable
Estimate not so disputed (the "Receivables Payment Amount"). Buyer and Seller
agree to negotiate in good faith to resolve any dispute of the Accounts
Receivable Estimate. If any such dispute is not resolved by the parties and
their respective independent accountants within ten (10) business days after the
Closing, such dispute shall be resolved by the Reviewing Accountants as promptly
as practicable, and such resolution shall be final and binding on the parties.
The expenses of the Reviewing Accountants shall be paid one half by each of
Seller and Buyer.
2.3 FINISHED GOODS. All finished goods other than those referred to in
Section 2.2 hereof shall be shipped and paid for in the ordinary course of
business in
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accordance with the relevant purchase orders; PROVIDED, HOWEVER,
that Seller shall pay all costs incurred or to be incurred in delivering
finished goods to Buyer.
2.4 JOINT VENTURE AGREEMENT. The execution and delivery of this
Agreement by each of Seller, CGFE, ATSC and Buyer shall not be construed to
defeat, impair or limit in any way the rights, obligations, claims or remedies
of Seller, CGFE or Buyer under the Joint Venture Agreement, including, without
limitation, under Section 5 thereof. Upon consummation of the Closing, the Joint
Venture Agreement shall terminate automatically and be of no further force or
effect.
2.5 LEASES. In the event Buyer enters into the Subleases at the
time of Closing, (i) at Seller's election at any time within two (2) years after
the Closing Date, Buyer shall assume those obligations of Seller under the NY
Lease or the FWM Lease, as the case may be, that relate to the subleased
premises, and (ii) the Subleases shall contain the consents of the respective
landlords to the assignment described in clause (i) above.
2.6 MEYER EMPLOYMENT AGREEMENT. Buyer shall (i) pay to Mr. Dwight
Meyer any amount payable to him as a result of the consummation of transactions
contemplated by this Agreement under his existing employment agreement with
CAT-US and (ii) use reasonable best efforts to cause Mr.
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Meyer to execute and deliver a full release of all of Seller's, Buyer's and
CAT's obligations to Mr. Meyer in respect of his employment by CAT prior to the
Closing Date.
2.7 MAIL RECEIVED AFTER CLOSING. On and after the Closing, Buyer
may receive and open all mail addressed to former employees of Seller who are
Continuing Employees and deal with the contents thereof in its discretion to the
extent that such mail and the contents thereof relate to the Division, the
Division Business, CAT, the Assets or any of the Liabilities. Buyer agrees to
deliver, or to cause to be delivered, promptly to Seller all other mail
received.
2.8 EMPLOYEES, BENEFIT PLANS.
(a) HIRING OF EMPLOYEES. Buyer shall not have any
obligation to assume or honor any employment agreement ("Employment Agreements")
between Seller and any current or former employee of Seller. As of the Closing
Date, Seller shall terminate the employment of, and Buyer shall offer employment
to, employees of Seller or its affiliates who are actively employed immediately
prior to the Closing Date, whose primary employment is with the Division and who
have been identified to Seller in writing by Buyer as employees to whom Buyer
shall offer employment ("Affected Employees"). CAT employees who are employed by
CAT immediately prior to the Closing Date shall remain employees of CAT
following the Closing Date ("CAT Employees"). All Affected
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Employees who accept employment with Buyer ("Hired Employees") and CAT Employees
who continue employment by CAT immediately following the Closing Date, shall be
referred to, collectively, as "Continued Employees".
(b) WAGES. Buyer shall pay or cause to be paid when due to
the Hired Employees the amount of all wages, salary, bonuses, commissions,
incentive payments and other compensation (including, without limitation, any
vacation and sick pay) or any other benefit, perquisite, cost, expense,
liability or obligation attributable to services provided on and after the
Closing Date. Seller shall pay or cause to be paid all amounts due to employees
of Seller engaged in the Division Business, including Hired Employees, for
wages, salary, bonuses, commissions, incentive payments and other compensation
(including, without limitation, any vacation and sick pay) or any other benefit,
perquisite, cost, expense, liability or obligation attributable to services
provided prior to the Closing Date. Prior to the Closing Date, Seller shall
allow (and Seller represents and warrants to Buyer that it has allowed) the
Hired Employees the opportunity to use all accrued or earned vacation; provided,
however, that if any vacation time remains owed to the Hired Employees as of the
Closing Date, Seller shall pay any and all such amounts to the Hired Employees.
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(c) WELFARE PLANS. As of the Closing Date, Continued
Employees shall cease to participate in the employee welfare benefit plans (as
such term is defined in ERISA) maintained or sponsored by Seller or its
affiliates (the "Prior Welfare Plans") and shall commence to participate in
welfare benefit plans of Buyer or its affiliates (the "Replacement Welfare
Plans"), in accordance with the terms of such plans. Seller shall be responsible
for any claims by Continued Employees for benefits relating to claims incurred
prior to the Closing Date (regardless of when reported) and Buyer or CAT shall
be responsible for any claims incurred by Continued Employees on or after the
Closing Date.
(d) WORKMEN'S COMPENSATION LIABILITY. Any payments to be
made on or after the Closing Date relating to workmen's compensation claims of
Continued Employees pending at the time of Closing or arising from services
provided prior to Closing shall be made by Seller or its insurance carrier.
(e) COBRA COVERAGE. To the extent required by law, Seller
shall give the Affected Employees and their spouses notice of their rights to
continuation coverage under Section 4980B of the Code ("COBRA") in accordance
with applicable law. Seller shall continue to be responsible at all times after
the Closing Date for continuation coverage
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under COBRA with respect to all Affected Employees, former CAT Employees and
their present or former dependents. Seller hereby agrees to indemnify and hold
harmless Buyer against any and all losses which the Buyer may incur in respect
of any of the foregoing.
(f) EMPLOYMENT LAW LIABILITIES.
(i) Seller hereby agrees to indemnify Buyer and its
affiliates against, and agrees to hold them harmless from, any and all claims,
losses, damages and expenses (including, without limitation, reasonable
attorneys' fees) and other liabilities and obligations incurred or suffered as a
result of any claim by any employee of Seller, including any Hired Employee,
that arises under federal, state or local statute (including, without
limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of
1991, the Age Discrimination in Employment Act of 1990, the Equal Pay Act, the
Americans with Disabilities Act of 1990, the Employee Retirement Income Security
Act of 1974 and all other statutes regulating the terms and conditions of
employment), regulation or ordinance, under the common law or in equity
(including any claims for wrongful discharge or otherwise), or under any policy,
agreement, understanding or promise, written or oral, formal or informal,
between Seller and the employee, arising out of actions, events or omissions
that occurred (or, in the case of
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omissions, failed to occur) on or prior to the Closing Date; and
(ii) Buyer hereby agrees to indemnify Seller and its
affiliates against, and agrees to hold them harmless from, any and all claims,
losses, damages and expenses (including, without limitation, reasonable
attorneys' fees) and other liabilities and obligations incurred or suffered as a
result of any claim by any Hired Employee that arises under federal, state or
local statute (including, without limitation, Title VII of the Civil Rights Act
of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act
of 1990, the Equal Pay Act, the Americans with Disabilities Act of 1990, the
Employee Retirement Income Security Act of 1974 and all other statutes
regulating the terms and conditions of employment), regulation or ordinance,
under the common law or in equity (including any claims for wrongful discharge
or otherwise), or under any policy, agreement, understanding or promise, written
or oral, formal or informal, between Buyer and such Hired Employee, arising out
of actions, events or omissions that occurred (or, in the case of
omissions, failed to occur) subsequent to the Closing Date.
(g) WARN ACT LIABILITIES. Seller shall bear, and
indemnifies and holds harmless Buyer and its affiliates from and against, all
direct and indirect costs,
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claims, losses, damages, expenses and other liabilities and obligations arising
from or relating to claims made by or on behalf of the Affected Employees
relating to the termination of any such person's employment by Seller or its
affiliates prior to or on the Closing Date, including, but not limited to,
claims in respect of the Worker Adjustment and Retraining Notification Act of
1988, severance pay, salary continuation and similar obligations. Buyer agrees
to bear, and indemnify and hold harmless Seller from and against, all direct and
indirect costs, claims, losses, damages, expenses and other liabilities and
obligations arising from or relating to claims made by or on behalf of the
Continued Employees relating to the termination of any such person's employment
by Buyer or CAT after the Closing Date, except for claims in respect of the
Worker Adjustment and Retraining Notification Act of 1988 which would not have
arisen but for aggregation with terminations by Seller prior to the Closing
Date.
(h) NO THIRD-PARTY BENEFICIARIES. Nothing in this Section
2.8 is intended, or shall be construed, to confer upon any person, other than
the parties hereto and their successors and permitted assigns, any rights or
remedies by reason of this Section 2.8.
III. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer as follows:
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3.1 ORGANIZATION OF SELLER AND CAT; AUTHORITY.
(a) Each of Seller, CAT-US and CAT-Far East is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization and has all requisite corporate power and
authority to own, lease and operate its properties and assets and to conduct its
business as it is now being conducted, including, without limitation, in the
case of Seller, the Division. Each of Seller, CAT-US and CAT-Far East is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the property or assets owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except in those jurisdictions where the failure to have
such power and authority or to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on the business, properties, assets, results of
operations or financial condition (a "Material Adverse Effect") of the Division,
CAT-US or CAT-Far East. Except as set forth in Section 3.1 of the Disclosure
Schedule being delivered by Seller to Buyer concurrently herewith (the "SELLER
DISCLOSURE SCHEDULE"), Seller does not have any subsidiaries or equity interests
in any business entity engaged in the Division Business.
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(b) Each of Seller and CGFE has all requisite corporate
power and authority to enter into this Agreement and any instruments and
agreements contemplated herein required to be executed and delivered by it
pursuant to this Agreement (including, without limitation, as applicable, the
Ancillary Agreements, the Bill of Sale, the Assignment and Assumption
Agreements, and any Other Instruments, which are referred to collectively herein
as the "Seller Related Instruments") and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Seller Related Instruments and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of each of Seller and CGFE, other than
approval of Seller's stockholders. This Agreement has been, and each of the
Seller Related Instruments when executed and delivered will be, duly executed
and delivered by Seller and CGFE, as applicable, and this Agreement constitutes,
and each of the Seller Related Instruments to which it is a party will, when
executed and delivered, constitute a valid and binding obligation of Seller or
CGFE, as applicable, enforceable against Seller or CGFE, as applicable, in
accordance with its terms, except that (i) such enforcement may be subject to
any bankruptcy, insolvency, reorganization, moratorium, or other laws, now
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or hereafter in effect, relating to or limiting creditors' rights generally and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. Each of Seller
and CGFE shall deliver to Buyer true, correct and complete copies of resolutions
duly and validly adopted by its board of directors, evidencing the authorization
of the execution and delivery of this Agreement and the Seller Related
Instruments, as applicable, and the consummation of the transactions
contemplated hereby and thereby.
3.2 NO VIOLATION; CONSENTS AND APPROVALS.
(a) Except as set forth in Section 3.2(a) of the SELLER
DISCLOSURE SCHEDULE, the execution and delivery of this Agreement and the Seller
Related Instruments do not, and the consummation of the transactions
contemplated hereby or thereby and compliance with the terms hereof or thereof
will not, (i) conflict with, or result in any violation of or default under, (A)
any provision of the charter or by-laws of Seller or CGFE, or (B) any judgment,
order or decree, or statute, law, ordinance, rule or regulation of any
Governmental Entity (as hereinafter defined) applicable to Seller, CGFE, CAT,
the Division or the Assets; or (ii) conflict with, or result in any breach or
violation of or constitute a default (or an event or condition which, with
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notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or cause the
acceleration of any maturity of any liability or obligation pursuant to, or
result in the creation or imposition of any Lien under, any note, bond,
mortgage, indenture, license, contract, agreement, lease or other instrument or
obligation to which Seller, CGFE or CAT is a party or by which Seller, CGFE or
CAT may be bound or affected or to which any of the Assets may be subject,
except where the conflict, violation, default, breach, termination,
acceleration, creation or imposition would not reasonably be expected to have a
Material Adverse Effect on the Division or CAT, would not prevent or delay
Seller's ability, or, to the best knowledge of Seller, Buyer's ability, to
consummate the transactions contemplated hereby, would not impair in any
material respect Buyer's ability to operate CAT or the Division Business as
currently operated or would not result in any liability, cost or expense of
Seller (other than the Liabilities or other liabilities and obligations not in
excess of $50,000 in the aggregate) being incurred by Buyer.
(b) Except as set forth in Section 3.2(b) of the SELLER
DISCLOSURE SCHEDULE, no consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or
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other governmental entity, authority or instrumentality, domestic or foreign
(collectively, "Governmental Entities"), is required to be obtained or made by
or with respect to Seller, CGFE or CAT in connection with the execution and
delivery by Seller or CGFE of this Agreement or any Seller Related Instrument or
the consummation by Seller or CGFE of the transactions contemplated hereby or
thereby, or compliance by Seller or CGFE with the terms hereof or thereof, other
than (i) compliance with and filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) compliance with and
filings under Sections 13(a) and (d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and (iii) those the failure of which to obtain
would not reasonably be expected to have a Material Adverse Effect on the
Division or CAT, would not prevent or delay Seller's ability, or, to the best
knowledge of Seller, Buyer's ability, to consummate the transactions
contemplated hereby, would not impair in any material respect Buyer's ability to
operate CAT or the Division Business as currently operated or would not result
in any liability, cost or expense of Seller (other than the Liabilities or other
liabilities and obligations not in excess of $50,000 in the aggregate) being
incurred by Buyer.
(c) Except for the approval of Seller's stockholders, and
as set forth in Section 3.2(c) of the
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SELLER DISCLOSURE SCHEDULE, no consent, approval, order or authorization of,
notice to, or registration, declaration or filing with, any third party is
required to be obtained or made by Seller, CGFE or CAT in connection with the
execution and delivery by Seller or CGFE of this Agreement or any Seller Related
Instrument, or the consummation by Seller or CGFE of the transactions
contemplated hereby or thereby or compliance by Seller or CGFE with the terms
hereof or thereof, except where the failure to obtain any consent, approval,
order or authorization, or to give notice, or to make any registration,
declaration or filing would not reasonably be expected to have a Material
Adverse Effect on the Division or CAT, would not prevent or delay Seller's
ability, or, to the best knowledge of Seller, Buyer's ability, to consummate the
transactions contemplated hereby, would not impair in any material respect
Buyer's ability to operate CAT or the Division Business as currently operated or
would not result in any liability, cost or expense of Seller (other than the
Liabilities or other liabilities and obligations not in excess of $50,000 in the
aggregate) being incurred by Buyer.
3.3 SELLER FINANCIAL STATEMENTS.
(a) Seller has delivered to Buyer true, correct and
complete copies of the audited, consolidated balance sheets of Seller as of
January 29, 1994, January 28,
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1995, and February 3, 1996 (the "1996 Balance Sheet") and the audited,
consolidated income statements and statements of cash flows of Seller for the
fiscal years ended January 29, 1994, January 28, 1995 and February 3, 1996,
accompanied, in each case, by an unqualified report of Seller's independent
public accountants, Ernst & Young, LLP (collectively, the "Audited Financial
Statements").
(b) As used in this Agreement, the term "Financial
Statements" means, collectively, the Audited Financial Statements and the
Subsequent Financial Statements (as hereinafter defined).
(c) The balance sheets included in the Audited Financial
Statements present, and the balance sheets included in the Subsequent Financial
Statements will present, fairly the financial position of Seller as of the
respective dates thereof; PROVIDED, HOWEVER, that the Subsequent Financial
Statements will be subject to normal year-end adjustments and will lack
footnotes. The statements of income and statements of cash flows included in the
Audited Financial Statements present, and the statements of income and
statements of cash flows included in the Subsequent Financial Statements will
present, fairly the results of operations and cash flows of Seller for the
respective periods indicated; PROVIDED, HOWEVER, that the Subsequent Financial
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Statements will be subject to normal year-end adjustments and will lack
footnotes.
(d) The Audited Financial Statements were and the
Subsequent Financial Statements will have been, based on the accounting books
and records of Seller and have been prepared or will be prepared in accordance
with GAAP applied on a consistent basis throughout the periods presented in the
Financial Statements; PROVIDED, HOWEVER, that the Subsequent Financial
Statements will be subject to normal year-end adjustments and will lack
footnotes.
3.4 CAT FINANCIAL STATEMENTS.
(a) Seller has delivered to Buyer true, correct and
complete copies of the audited, combined balance sheets of CAT as of January 29,
1994, January 28, 1995 and February 3, 1996 (the "CAT 1996 Balance Sheet") and
the audited, combined income statements and statements of cash flows of CAT for
the fiscal years ended January 29, 1994, January 28, 1995 and February 3, 1996,
accompanied, in each case, by an unqualified report of CAT's independent public
accountants, Ernst & Young, LLP (collectively, the "CAT Audited Financial
Statements").
(b) As used in this Agreement, the term "CAT Financial
Statements" means, collectively, the CAT Audited Financial Statements and the
CAT Subsequent Financial Statements (as hereinafter defined).
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(c) The balance sheets included in the CAT Audited Financial
Statements present, and the balance sheets included in the CAT Subsequent
Financial Statements will present, fairly the financial position of CAT as of
the respective dates thereof; PROVIDED, HOWEVER, that the CAT Subsequent
Financial Statements will be subject to normal year-end adjustments and will
lack footnotes. The statements of income and statements of cash flows included
in the CAT Audited Financial Statements present, and the statements of income
and statements of cash flows included in the CAT Subsequent Financial Statements
will present, fairly the results of operations and cash flows of CAT for the
respective periods indicated; PROVIDED, HOWEVER, that the CAT Subsequent
Financial Statements will be subject to normal year-end adjustments and will
lack footnotes.
(d) The CAT Audited Financial Statements were, and the CAT
Subsequent Financial Statements will have been, based on the accounting books
and records of CAT and have been prepared or will have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
presented in the CAT Financial Statements; PROVIDED, HOWEVER, that the CAT
Subsequent Financial Statements will be subject to normal year-end adjustments
and will lack footnotes.
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3.5 COMBINED ENTITY FINANCIAL STATEMENTS.
(a) Seller has delivered to Buyer true, correct and complete copies of the
following:
(i) the audited combined balance sheets of CAT and the Division
(the "Combined Entity") as of February 3, 1996 (the "Combined Entity 1996
Balance Sheet") and the audited combined income statements and statements of
cash flows of the Combined Entity for the fiscal year ended February 3, 1996,
accompanied, in each case, by an unqualified report of Seller's independent
public accountants, Ernst & Young, LLP (collectively, the "Combined Entity
Audited Financial Statements"); and
(ii) the unaudited combined balance sheets of the Combined Entity
as of January 28, 1995 and the unaudited combined income statements and
statements of cash flows of the Combined Entity for the fiscal year ended
January 28, 1995 (collectively, the "Combined Entity Unaudited Financial
Statements").
(b) As used in this Agreement, the term "Combined Entity Financial
Statements" means, collectively, the Combined Entity Audited Financial
Statements, the
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Combined Entity Unaudited Financial Statements and the Combined Entity
Subsequent Financial Statements (as hereinafter defined).
(c) The balance sheets included in the Combined Entity Audited Financial
Statements and the Combined Entity Unaudited Financial Statements present, and
the balance sheets included in the Combined Entity Subsequent Financial
Statements will present, fairly the pro forma financial position of the Combined
Entity as of the respective dates thereof, based upon the assumption set forth
therein and the notes thereto; PROVIDED, HOWEVER, that the Combined Entity
Unaudited Financial Statements are, and the Combined Entity Subsequent Financial
Statements (other than the Combined Entity 1994 Audited Financial Statements)
will be, subject to normal year-end adjustments and will lack footnotes. The
statements of income and statements of cash flows included in the Combined
Entity Audited Financial Statements and the Combined Entity Unaudited Financial
Statements present, and the statements of income and statements of cash flows
included in the Combined Entity Subsequent Financial Statements will present,
fairly the pro forma results of operations and cash flows of the Combined Entity
for the respective periods indicated, based on the assumptions set forth therein
and the notes thereto; PROVIDED, HOWEVER, that the Combined Entity Unaudited
Financial
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Statements are, and the Combined Entity Subsequent Financial Statements (other
than the Combined Entity 1994 Audited Financial Statements) will be, subject to
normal year-end adjustments and will lack footnotes.
(d) The Combined Entity Audited Financial Statements and the Combined
Entity Unaudited Financial Statements were, and the Combined Entity Subsequent
Financial Statements will have been, based on the accounting books and records
of the Combined Entity, subject to the assumptions set forth in such financial
statements and the notes thereto, and have been prepared or will be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
presented in the Combined Entity Financial Statements, subject to the
assumptions set forth in such financial statements and the notes thereto;
PROVIDED, HOWEVER, that the Combined Entity Unaudited Financial Statements are,
and the Combined Entity Subsequent Financial Statements (other than the Combined
Entity 1994 Audited Financial Statements) will be, subject to normal year-end
adjustments and will lack footnotes.
3.6 ABSENCE OF SELLER UNDISCLOSED LIABILITIES. Except for (a) liabilities
and obligations set forth in Section 3.6 of the SELLER DISCLOSURE SCHEDULE or
reflected on the 1996 Balance Sheet or (b) liabilities and obligations incurred
in the ordinary course of business consistent with
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past practice since the date of the 1996 Balance Sheet, Seller has incurred
no liabilities or obligations relating to the Division in excess of $50,000 in
the aggregate (whether absolute, accrued, contingent or otherwise, and whether
due or to become due).
3.7 ABSENCE OF CAT UNDISCLOSED LIABILITIES. To the best knowledge of
Seller, except for (a) liabilities and obligations set forth in Section 3.7 of
the SELLER DISCLOSURE SCHEDULE or reflected on the CAT 1996 Balance Sheet or (b)
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of the CAT 1996 Balance Sheet, CAT
has incurred no liabilities or obligations in excess of $50,000 in the aggregate
(whether absolute, accrued, contingent or otherwise, and whether due or to
become due).
3.8 ABSENCE OF DIVISION UNDISCLOSED LIABILITIES. Except for (a) liabilities
and obligations set forth in Section 3.8 of the SELLER DISCLOSURE SCHEDULE or
reflected on the Division 1996 Balance Sheet or (b) liabilities and obligations
incurred in the ordinary course of business consistent with past practice since
the date of the Division 1996 Balance Sheet, the Division has incurred no
liabilities or obligations in excess of $50,000 in the aggregate (whether
absolute, accrued, contingent or otherwise, and whether due or to become due).
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3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in Section
3.9 of the SELLER DISCLOSURE SCHEDULE, since February 3, 1996, (a) there has not
been any Material Adverse Effect on the Division Business; and (b) neither
Seller nor CAT has taken any action, no event has occurred and no condition
exists that is identified in Section 5.1 hereof.
3.10 TITLE TO CAT SHARES.
(a) Seller has good and valid title to the CAT US Shares, free
and clear of all Liens, other than (i) Liens arising under the Joint Venture
Agreement and (ii) Liens in favor of The HongKong and Shanghai Banking
Corporation. Upon delivery to Buyer at the Closing of certificates representing
the CAT US Shares, duly endorsed by Seller for transfer to Buyer or accompanied
by stock powers duly executed in blank, and upon delivery by Buyer in accordance
with the terms hereof of the consideration provided for in Section 1.2 hereof,
assuming Buyer has purchased the CAT US Shares in good faith without notice of
an adverse claim (as such term is defined in Section 8-302 of the Uniform
Commercial Code as currently in effect in the State of New York) and has not
been a party to any fraud or illegality affecting such shares, good and valid
title to the CAT US Shares will pass to Buyer, free and clear of any Liens.
Other than under this Agreement, the Joint Venture Agreement and
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Seller's agreements with The HongKong and Shanghai Banking Corporation, the CAT
US Shares are not subject to any voting trust agreement or other contract,
agreement, arrangement, commitment or understanding, including any such
agreement, arrangement, commitment or understanding restricting or otherwise
relating to the voting, dividend rights or disposition of the CAT US Shares.
(b) CGFE has good and valid title to the CAT Far East Shares,
free and clear of all Liens, other than (i) Liens arising under the Joint
Venture Agreement and (ii) Liens in favor of The HongKong and Shanghai Banking
Corporation. Upon delivery to Buyer at the Closing of certificates representing
the CAT Far East Shares, duly endorsed by CGFE for transfer to Buyer or
accompanied by stock powers duly executed in blank, and upon delivery by
Buyer in accordance with the terms hereof of the consideration provided for in
Section 1.2 hereof, assuming Buyer has purchased the CAT Far East Shares in good
faith without notice of an adverse claim (as such term is defined in Section
8-302 of the Uniform Commercial Code as currently in effect in the state of New
York) and has not been a party to any fraud or illegality affecting such shares,
good and valid title to the CAT Far East Shares will pass to Buyer, free and
clear of any Liens. Other than under this Agreement, the Joint Venture Agreement
and Seller's agreements with The HongKong and Shanghai
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Banking Corporation, the CAT Far East Shares are not subject to any voting trust
agreement or other contract, agreement, arrangement, commitment or
understanding, including any such agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, dividend rights
or disposition of the CAT Far East Shares.
3.11 TITLE TO ASSETS; LEASED PROPERTY.
(a) Except as set forth in Section 3.11(a) of the SELLER
DISCLOSURE SCHEDULE, Seller has (i) good and valid title to all of the Assets
which are owned by Seller as of the date hereof and valid leasehold interests
in, or other rights to use, all of the Assets which are not owned by Seller,
free and clear of all Liens other than Permitted Liens and (ii) Seller will have
good and valid title to all of the Assets which will be owned by Seller as of
the Closing Date and will have valid leasehold interests in, or other rights to
use, all of the Assets which will not be owned by Seller as of the Closing Date,
excluding Assets sold or otherwise disposed of in the ordinary course of
business and including Assets purchased, leased or licensed, as the case may be,
between the date hereof and the Closing Date. As used in this Agreement, the
term "Permitted Liens" means (i) mechanics', carriers', workmen's, repairmen's
or other like liens arising or incurred in the ordinary course of business, (ii)
liens for taxes, assessments and other
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governmental charges which are not due and payable or which may hereafter be
paid without penalty or which are being contested in good faith by appropriate
proceedings (for which adequate reserves have been made in the Combined Entity
Financial Statements in accordance with GAAP) and (iii) other imperfections of
title or encumbrances, if any, which imperfections of title or other
encumbrances, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on the Division Business, would not prevent or
delay Seller's ability, or, to the best knowledge of Seller, Buyer's ability, to
consummate the transactions contemplated hereby, would not impair in any
material respect Buyer's ability to operate the Division Business as currently
operated or would not result in any liability, cost or expense (other than
liabilities and obligations not in excess of $50,000 in the aggregate) to Buyer
or any of its affiliates, CAT or the Division.
(b) Set forth on ANNEX IV hereto is a true and correct
listing of the portions of the deposits under the NY Lease and the FWM Lease
relating to premises to be occupied by Buyer after the Closing Date. Seller has
delivered to Buyer true, correct and complete copies of the NY Lease and all
amendments thereto, the FWM Lease and all amendments thereto, including the CAT
Sublease, and the Business Lease, dated January 21, 1992, among Seller, as
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tenant, and David Schaecter and Marvis Schaecter, as landlord (the "Miami Lease"
and, collectively with the NY Lease and the FWM Lease, the "Leases"), relating
to Seller's facility located at 4915 NW 159th Street, Miami Lakes, Florida (the
"Miami Facility") and all amendments thereto. For purposes of this Section 3.11,
the term Seller shall include Seller's wholly owned subsidiary Fenn, Wright and
Manson, Incorporated, as applicable. Seller or CAT, as the case may be, has a
valid and subsisting leasehold estate with respect to each of the properties
subject to a Lease (the "Leased Properties"). Except as set forth in Section
3.11(b) of the SELLER DISCLOSURE SCHEDULE, to the best knowledge of Seller, (i)
each of the Leases is in full force and effect and (ii) none of the Leases has
been modified or amended. Neither Seller nor CAT, as the case may be, has given
or received a written notice of default under any of the Leases which remains
uncured, and, to the best knowledge of Seller, there exists no event of default,
event, occurrence or act which, with the giving of notice, the lapse of time, or
both, or the happening of a further event or condition, would result in a
default under any of the Leases by Seller or CAT, as the case may be, or, to the
best knowledge of Seller, the applicable landlord under any such Leases. There
are no pending unresolved material disputes with any landlord under any of the
Leases. All security deposits
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required under the Leases have been paid to the applicable landlord under the
Leases in compliance with the applicable Lease. Except as set forth in Section
3.11(b) of the SELLER DISCLOSURE SCHEDULE, there are no subtenants occupying any
portion of the Leased Properties other than CAT and, except for Seller, to the
best knowledge of Seller, no other person or entity has any right to occupy or
possess any portion of the Leased Properties other than affiliates of Seller
claiming by, through or under Seller who shall (except for CAT) vacate their
respective premises on or prior to the Closing Date. Except as set forth in
Section 3.11(b) of the SELLER DISCLOSURE SCHEDULE, as to the Leases, (i) none of
Seller's or CAT's interests in any of the Leases has been assigned, pledged,
hypothecated or otherwise encumbered in any manner; (ii) no written waiver,
indulgence or postponement of the applicable landlord's obligations under any of
the Leases has been granted by Seller or CAT; (iii) neither Seller nor CAT has
any right or option to purchase or otherwise acquire any of the Leased
Properties or any portion thereof; and (iv) neither Seller nor CAT has given any
notices to any landlord indicating that Seller or CAT either will or will not
(A) be exercising any extension or renewal options, or any right or option to
purchase any of the Leased Properties or any portion thereof, (B) abandon any of
the Leased
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Properties or any portion thereof, or (C) terminate any of the Leases.
(c) Except as set forth in Section 3.11(c) of the SELLER
DISCLOSURE SCHEDULE, (i) to the best knowledge of Seller, the building and
structure at the Florence Facility are structurally sound and are free from
defects (ordinary wear and tear excepted) and are adequate for the uses to which
they are being put, and (ii) all machinery and equipment owned, leased or used
by Seller in the conduct of the Division Business are free from defects
(ordinary wear and tear excepted) and are in good and normal operating condition
and repair (ordinary wear and tear excepted), and are adequate for the uses to
which they are being put, in each case, except for defects which, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on the Division Business, would not impair in any material respect
Buyer's ability to operate the Division Business as currently operated or would
not result in any liability, cost or expense to Buyer or any of its affiliates
(other than the Liabilities or other liabilities and obligations not in excess
of $50,000 in the aggregate).
(d) Except as set forth in Section 3.11(d) of the SELLER
DISCLOSURE SCHEDULE, upon Closing in accordance with the terms of this
Agreement, Buyer shall receive
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from Seller good and valid title to all of the Assets, free and clear of all
Liens, other than Permitted Liens.
3.12 LITIGATION/CLAIMS.
(a) Section 3.12(a) of the SELLER DISCLOSURE SCHEDULE sets
forth a true, complete and correct list of any and all claims, actions, suits
and proceedings pending or, to the best knowledge of Seller, threatened, and, to
the best knowledge of Seller, any investigations or inquiries pending or
threatened, against Seller which relate to the Division or CAT.
(b) Except as set forth in Section 3.12(b) of the SELLER
DISCLOSURE SCHEDULE, there is (i) no claim, action, suit or proceeding pending
or, to the best knowledge of Seller, threatened, and (ii) to the best knowledge
of Seller, no investigation or inquiry pending or threatened, by or before any
Governmental Entity, or by or on behalf of any third party, which challenges the
validity of this Agreement or any Seller Related Instrument or which, if
adversely determined, would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Division Business, prevent or
delay Seller's ability, or, to the best knowledge of Seller, Buyer's ability, to
consummate the transactions contemplated hereby, impair in any material respect
Buyer's ability to operate the Division Business as currently operated, or
result in any liability,
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cost or expense to Buyer or any of its affiliates (other than the Liabilities or
other liabilities and obligations not in excess of $50,000 in the aggregate).
3.13 EMPLOYEE BENEFIT PLANS. (a) With respect to each employee
benefit plan, arrangement or agreement that is maintained, or was maintained at
any time during the five (5) calendar years preceding the date of this Agreement
(the "Plans"), by either Seller or CAT or by any trade or business, whether or
not incorporated (an "ERISA Affiliate"), which together with either Seller or
CAT would be deemed a "single employer" within the meaning of Section 4001 of
the Employment Retirement Income Security Act of 1974, as amended ("ERISA"):
(i) each of the Plans that is subject to ERISA has been
maintained and administered in all material respects in compliance with ERISA
and each of the Plans intended to be "qualified" within the meaning of Section
401(a) of the Code is so qualified;
(ii) no Plan has an accumulated or waived funding
deficiency within the meaning of Section 412 of the Code;
(iii) no Plan is a multiemployer plan (within the meaning
of Section 4001(a)(3) of ERISA) and no Plan is a multiple employer plan as
defined in Section 413 of the Code; and
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(iv) no Plan that is or was maintained by CAT is subject
to Article IV of ERISA.
(b) Neither Seller nor CAT has any obligations with
respect to medical benefits for retired employees of the Division or CAT.
(c) Neither Seller nor CAT has any obligations to the
Affected Employees with respect to any 401(k) plan or pension plan.
3.14 CERTAIN CONTRACTS AND ARRANGEMENTS.
(a) Except as set forth in Section 3.14(a) of the SELLER
DISCLOSURE SCHEDULE, there are no binding oral agreements to which Seller is a
party relating to the Division or the Assets or to which the Division or any of
the Assets is subject. Section 3.14(b) of the SELLER DISCLOSURE SCHEDULE sets
forth a true, correct and complete list of all written agreements, contracts and
commitments to which Seller is a party and to which the Division or any of the
Assets is subject (the "Division Contracts"), including, without limitation:
(i) employment agreements or severance agreements;
(ii) covenants not to compete;
(iii) agreements or contracts with any affiliate of
Seller;
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(iv) agreements or contracts under which Seller has borrowed
or loaned money, or any note, bond, indenture or other evidence of indebtedness
or any guarantee of indebtedness, agreements with factors or trade credit
agreements;
(v) "open purchase orders", "take-or-pay" agreements or any
other agreements with suppliers, but excluding purchase orders which relate to
specific goods made for Buyer in the ordinary course of business;
(vi) agreements or contracts with any cutting room operator;
(vii) agreements or contracts with contract manufacturers or
factory operators;
(viii) all real property leases to which Seller is a party
and which relate to the Division Business; or
(ix) other agreements, contracts, leases, licenses,
commitments or instruments to which the Seller is a party, which relate,
directly or indirectly, to the Division or any Asset; PROVIDED, HOWEVER, that
(x) purchase orders and written fabric commitments accepted from Buyer and the
fabric commitments related to the fabric listed on ANNEX I hereto and (y) such
agreements, contracts or commitments as may be terminated by Buyer at any time
after the Closing without liability, penalty or premium upon notice of
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three months or less or which will not result in future annual expenditures or
receipts by the Division at any time of $50,000 or more need not be and are not
listed in Section 3.14 of the SELLER DISCLOSURE SCHEDULE. Seller and, to the
best knowledge of Seller, no other party to any Division Contract is in breach
thereof or in default thereunder, which breach or default would, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Division Business, prevent or delay Seller's ability, or, to the best
knowledge of Seller, Buyer's ability, to consummate the transactions
contemplated hereby, impair in any material respect Buyer's ability to operate
the Division Business as currently operated or result in any liability, cost or
expense to Buyer or any of its affiliates (other than the Liabilities or other
liabilities and obligations not in excess of $50,000 in the aggregate). Subject
to obtaining any requisite consents of third parties, the enforceability of the
Division Contracts will not be affected in any material respect by the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby. To the best knowledge of Seller, there have been no
threatened cancellations of, or any dispute under, any Division Contract.
(b) All amounts due and payable by Seller or an affiliate of
Seller under the Contracts as of the date
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hereof have been paid in full by Seller or such affiliate, and all amounts due
and payable by Seller or an affiliate of Seller under the Contracts as of the
Closing Date shall have been paid in full by Seller or such affiliate.
3.15 COMPLIANCE WITH LAWS; LICENSES. Except as set forth in
Section 3.15(a) of the SELLER DISCLOSURE SCHEDULE, the Division has been, and is
being, operated in compliance with all applicable laws, statutes, ordinances,
rules, regulations and orders of all Governmental Entities, except for laws the
violation of which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Division Business, would not
prevent or delay Seller's ability, or, to the best knowledge of Seller, Buyer's
ability, to consummate the transactions contemplated hereby, would not impair in
any material respect Buyer's ability to operate the Division Business as
currently operated or would not result in any liability, cost or expense to
Buyer or any of its affiliates (other than the Liabilities or other liabilities
and obligations not in excess of $50,000 in the aggregate). Section 3.15(b) of
the SELLER DISCLOSURE SCHEDULE sets forth a true, correct and complete list of
all permits, certificates, licenses, approvals and other authorizations of
Governmental Entities ("Permits") possessed by Seller or any affiliate of Seller
in connection with the operation of the Division as currently
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operated and ownership of the Assets, which are all the Permits required in
connection with the operation of the Division as currently operated and
ownership of the Assets under applicable laws, statutes, ordinances, rules,
regulations and orders, except where the failure to possess such Permits,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on the Division Business, would not prevent or delay
Seller's ability, or, to the best knowledge of Seller, Buyer's ability, to
consummate the transactions contemplated hereby, would not impair in any
material respect Buyer's ability to operate the Division Business as currently
operated or would not result in any liability, cost or expense to Buyer or any
of its affiliates (other than the Liabilities or other liabilities and
obligations not in excess of $50,000 in the aggregate).
3.16 INSURANCE. Section 3.16 of the SELLER DISCLOSURE SCHEDULE
sets forth a true, correct and complete list of all policies of fire, medical,
life, liability, product liability, workmen's compensation, libel, health and
other forms of insurance presently in effect with respect to the Division or
CAT. All such policies are in full force and effect, all premiums due and
payable with respect thereto have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. All
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such policies are sufficient for compliance in all material respects with all
requirements of law and the terms of the Leases and are valid, outstanding and
enforceable and will remain in full force and effect through the Closing Date.
Except as set forth in Section 3.16 of the SELLER DISCLOSURE SCHEDULE, no risks
with respect to the Division or CAT have been designated by Seller as being
self-insured. Except as set forth in Section 3.16 of the SELLER DISCLOSURE
SCHEDULE, Seller has not been refused any insurance in connection with the
Division or CAT, nor has any coverage been limited by any insurance carrier to
which Seller has applied for such insurance or with which Seller has carried
such insurance in the last three years.
3.17 LABOR MATTERS. Except as set forth in Section 3.17 of the
SELLER DISCLOSURE SCHEDULE, with respect to the Division, (a) Seller is in
compliance in all material respects with all applicable laws regarding
employment and employment practices, terms and conditions of employment, wages,
hours of work and occupational safety and health, (b) Seller is not a party to
or bound by any collective bargaining agreement or similar agreement with any
labor organization, and, to the best knowledge of Seller, no union claims to
represent Division employees, (c) there is no unfair labor practice charge or
complaint against Seller pending or, to the best knowledge of Seller, threatened
before the
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National Labor Relations Board or any similar state or foreign agency, nor is
there any grievance or any arbitration proceeding arising out of or under any
collective bargaining agreement pending or, to the best knowledge of Seller,
threatened against Seller, (d) there is no labor strike, slowdown, work stoppage
or lockout pending or, to the best knowledge of Seller, threatened against
Seller and (e) there is no charge or complaint pending or, to the best knowledge
of Seller, threatened against Seller before the Equal Employment Opportunity
Commission or any state, local or foreign agency responsible for the prevention
of unlawful employment practices. Except as set forth in Section 3.17 of the
SELLER DISCLOSURE SCHEDULE, Seller has not received written notice of the intent
of any federal, state, local or foreign agency responsible for the enforcement
of labor or employment laws to conduct an investigation of or relating to Seller
with respect to the Division, and, to the best knowledge of Seller, no such
investigation is in progress or threatened.
3.18 ASSETS OF THE DIVISION BUSINESS. All of the Assets are used
exclusively or primarily in the conduct of the Division Business other than the
CAT Shares and certain Intellectual Property.
3.19 DISCLOSURE. No representation or warranty by Seller
contained in this Agreement, and no statement contained
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in any document (including, without limitation, the Seller Related Instruments,
the Financial Statements, the CAT Financial Statements, the Division Financial
Statements and the SELLER DISCLOSURE SCHEDULE), list, certificate or other
writing furnished or to be furnished by or on behalf of Seller to Buyer or any
of its representatives pursuant to this Agreement, contains or will contain any
untrue statement of a material fact, or omits or will omit to state any material
fact necessary, in the light of the circumstances under which it was or will be
made, in order to make the statements herein or therein not misleading, or
necessary in order to fully and fairly provide the information required to be
provided in any such document, list, certificate or other writing.
3.20 ENVIRONMENTAL MATTERS.
(a) Except as set forth in Section 3.20(a) of the SELLER
DISCLOSURE SCHEDULE, Seller is in compliance in all material respects with all
applicable federal, state, local and foreign laws and regulations relating to
pollution or protection of human health or the environment ("Environmental
Laws") with respect to the Division (which compliance includes, but is not
limited to, the possession by Seller of all permits and other governmental
authorizations required under applicable Environmental Laws with respect to the
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Division, and compliance with the terms and conditions thereof).
(b) Except as set forth in Section 3.20(b) of the SELLER
DISCLOSURE SCHEDULE, there is no Environmental Claim pending or, to the best
knowledge of Seller, threatened against Seller relating to the Division or, to
the best knowledge of Seller, against any person or entity whose liability for
any Environmental Claim the Division has or may have retained or assumed either
contractually or by operation of law which would reasonably be expected to
result in a Material Adverse Effect on the Division Business or would result in
any liability, cost or expense to Buyer or any of its affiliates (other than the
Liabilities or other liabilities and obligations not in excess of $50,000 in the
aggregate). As used herein, "Environmental Claim" means any claim, action, cause
of action, investigation or notice (written or oral) by any person or entity
alleging potential liability arising out of, based on or resulting from (i) the
presence, or release, spill, discharge, emission, leaching or migration into the
indoor or outdoor environment, of any Hazardous Materials at any location,
whether or not owned or operated by Seller, or (ii) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.
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(c) Except as set forth in Section 3.20(c) of the SELLER
DISCLOSURE SCHEDULE, the Seller has not and, to the best knowledge of Seller, no
other person has placed, stored, deposited, discharged, buried, dumped or
disposed of substances defined as Hazardous Substances, Oils, Pollutants or
Contaminants in the National Oil and Hazardous Substances Pollution Contingency
Plan, 40 C.F.R. ss. 300.5, or defined as such by, or regulated as such under,
any Environmental Law ("Hazardous Materials") or any other wastes produced by,
or resulting from, any business, commercial or industrial activities, operations
or processes, on, beneath or adjacent to any property currently or formerly
owned, operated or leased by the Seller for use in the Division, except for
inventories of such substances to be used, and wastes generated therefrom, in
the ordinary course of business of Seller (which inventories and wastes, if any,
were and are stored or disposed of in accordance in all material respects with
applicable Environmental Laws and in a manner such that there has been no
Release of any such substances into the indoor or outdoor environment in
violation of Environmental Laws).
(d) Without limiting the generality of the foregoing, except
as set forth in Section 3.20(d) of the SELLER DISCLOSURE SCHEDULE, to the best
knowledge of Seller, none of the properties owned, operated or leased by Seller
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and used by the Division contain any: underground storage tanks; asbestos;
polychlorinated biphenyls ("PCBs"); or septic tanks or waste disposal pits in
which process wastewater or any Hazardous Materials have been discharged or
disposed.
3.21 OPINION OF FINANCIAL ADVISOR. Seller has received an opinion
from Ladenburg, Thalmann & Co., Inc. to the effect that the consideration to be
received by Seller represents reasonable equivalent value and fair consideration
for the CAT Shares and the Assets and a copy of such opinion has been provided
to ATSC.
3.22 BROKERS. No broker, finder or financial advisor or other
person is entitled to any brokerage fees, commissions, finders' fees or
financial advisory fees in connection with the transactions contemplated hereby
by reason of any action taken by Seller or any of its affiliates, employees,
representatives or agents.
3.23 INTELLECTUAL PROPERTY. Seller has no registered patents,
trademarks, copyrights, service marks, or applications therefor relating to the
Division Business. Except as set forth in Section 3.23 of the SELLER DISCLOSURE
SCHEDULE, Seller (a) owns or licenses the Intellectual Property related to or
used in the conduct of the Division Business free and clear of all Liens, (b)
Seller has the right to transfer its interest in the Intellectual Property to
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Buyer, (c) no claims have been asserted or, to the best knowledge of Seller,
threatened against Seller with respect to the ownership, use or transfer by
Seller of the Intellectual Property, and (d) to the best knowledge of Seller, no
third party is in violation of any of Seller's rights in the Intellectual
Property.
3.24 ABSENCE OF VIOLATIONS OF QUOTAS AND VISAS. Except as set
forth in Section 3.24 of the SELLER DISCLOSURE SCHEDULE, Seller, with respect to
the Division Business, is not in violation in any material respect of any visa
or quota restrictions under any trade agreements, including, without limitation,
the Multifiber Arrangement or other arrangements under the General Agreement on
Tariffs and Trade.
3.25 NO TARIFFS OR DUTIES. With respect to the Division Business,
Seller's payment of all tariffs and duties are current in all jurisdictions, and
Seller does not owe any tariffs or duties other than those incurred in the
ordinary course of business (a) under any trade agreements, including, without
limitation, The North American Free Trade Agreement, Caribbean Basin Economic
Recovery or the JacksonVanik Amendment to the Trade Act of 1974; and (b) to the
U.S. Customs Service.
3.26 COMPLIANCE WITH U.S. CUSTOMS AND TRADE LAWS. Seller, with
respect to the Division Business, is not in violation in any material respect of
any U.S. Customs or
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trade laws, including, without limitation, laws pertaining to country-of-origin,
marking or labeling.
3.27 SEC DOCUMENTS. Seller has filed all documents required to be
filed by it with the Securities and Exchange Commission (the "SEC") since
January 1995 (the "Seller SEC Documents"). As of their respective dates, the
Seller SEC Documents complied in all material respects with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange
Act, as the case may be, and none of Seller's SEC Documents contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of Seller included in the Seller SEC Documents complied as
to form in all material respects with the applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto. Since
January 28, 1995, Seller has not made any change in the accounting practices or
policies applied in the preparation of its financial statements.
3.28 COMPLIANCE WITH LAWS BY CAT; LICENSES. Except as set forth
in Section 3.28(a) of the SELLER DISCLOSURE SCHEDULE, CAT has been, and is
being, operated in compliance with all applicable laws, statutes, ordinances,
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rules, regulations and orders of all Governmental Entities, except for laws the
violation of which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on CAT, would not prevent or delay
Seller's ability, or, to the best knowledge of Seller, Buyer's ability, to
consummate the transactions contemplated hereby, would not impair in any
material respect Buyer's ability to operate CAT as currently operated, or would
not result in any liability, cost or expense of CAT being incurred by Buyer or
any of its affiliates, or the Division. Section 3.28(b) of the SELLER DISCLOSURE
SCHEDULE sets forth a true, correct and complete list of all Permits possessed
by Seller or CAT in connection with the operation of CAT as currently operated,
which are all the Permits required in connection with the operation of CAT as
currently operated under applicable laws, statutes, ordinances, rules,
regulations and orders, except where the failure to possess such Permits,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on CAT, would not prevent or delay Seller's ability, or,
to the best knowledge of Seller, Buyer's ability, to consummate the transactions
contemplated hereby, would not impair in any material respect Buyer's ability to
operate CAT as currently operated or would not result in any liability, cost or
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expense (other than liabilities and obligations not in excess of $50,000 in the
aggregate) of CAT being incurred by Buyer.
3.29 CAT TAXES.
(a) CAT and any affiliated group, within the meaning of
Section 1504 of the Code (or similar provision of state law), of which CAT is or
has been a member, have, except as set forth in Section 3.29 of the SELLER
DISCLOSURE SCHEDULE, (i) duly filed with the appropriate federal, state, local
and foreign taxing authorities all Tax Returns (as hereinafter defined) required
to be filed by or with respect to CAT and such Tax Returns are true, correct and
complete in all material respects; (ii) paid in full or have made adequate
provision on their balance sheets (in accordance with GAAP) for all Taxes (as
hereinafter defined) shown to be due on such tax returns; and (iii) satisfied in
full all withholding tax requirements. There are no Liens for Taxes upon the
assets of CAT except for statutory liens for current taxes not yet due and
payable or which may hereafter be paid without penalty or which are being
contested in good faith by appropriate proceedings. Except as set forth in
Section 3.29 of the SELLER DISCLOSURE SCHEDULE, there is not in force any
extension of time with respect to the due date for the filing of any Tax Return
of, or with respect to, CAT or any waiver or agreement for any extension of time
for the assessment or payment of any Tax of, or with
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respect to, CAT, and CAT has not received any notice of deficiency or assessment
from any federal, state, local or foreign taxing authority with respect to
liabilities for Taxes of CAT which has not been fully paid or finally settled.
(b) For purposes of this Agreement, "Tax" or "Taxes" shall
mean (i) any tax of any kind, including, without limitation, all income,
property, sales, use, occupation, franchise, excise, value added, employees'
income withholding and social security taxes, and related to such taxes,
charges, fees, levies, penalties or other assessments, imposed by the United
States or by any foreign country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country, or by any other
taxing authority and (ii) any interest thereon.
(c) For purposes of this Agreement, "Tax Return" shall
mean any return, report, information return or other document (including any
related or supporting information) with respect to Taxes.
3.30 ACQUISITION OF THE ATSC COMMON STOCK FOR INVESTMENT;
SECURITIES ACT. Seller is acquiring the shares of ATSC Common Stock to be issued
pursuant to Section 1.2(a) hereof for investment purposes only and not with a
view toward, or for sale in connection with, any distribution thereof, nor with
any present intention of distributing or
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selling such shares in violation of federal, state or other securities laws.
Seller agrees that it will not sell, transfer, offer for sale, pledge,
hypothecate or otherwise dispose of such shares of ATSC Common Stock in
violation of any federal, state or other securities laws. Seller acknowledges
that the ATSC Common Stock is subject to market and other conditions beyond the
control of ATSC and agrees that neither ATSC nor any of its agents,
representatives, employees or affiliates has or shall have any liability or
responsibility whatsoever to Seller on any basis (including, without limitation,
in contract or tort, under federal or state securities laws, or otherwise),
except as and to the extent expressly set forth herein and subject to the
limitations and restrictions contained herein. The foregoing shall not be deemed
a waiver of or a limitation on Seller's rights as a stockholder of ATSC with
regard to circumstances or events occurring after the Closing Date and bearing
no relation to the acquisition by Seller of shares of ATSC Common Stock pursuant
to this Agreement.
3.31 SUPPLIERS. Section 3.31 of the SELLER DISCLOSURE SCHEDULE
sets forth (i) a list of all suppliers of each of CAT and the Division to whom
CAT or Seller made payments in excess of $250,000 during the fiscal year ended
February 3, 1996 and (ii) the dollar amount of payments made to each such
supplier in such fiscal year. No supplier
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required to be listed in Section 3.31 of the SELLER DISCLOSURE SCHEDULE has (i)
given notice to either CAT or Seller that it intends to terminate its
relationship with CAT or Seller, as the case may be, or (ii) threatened in
writing to terminate its relationship with CAT or Seller, as the case may be. To
the best knowledge of Seller, no supplier required to be listed in Section 3.31
of the SELLER DISCLOSURE SCHEDULE is likely to pursue a course of action having
either the purpose or effect of terminating its relationship with either CAT or
the Division if the transactions contemplated by this Agreement are consummated.
3.32 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Except
as expressly set forth in this Article III, Seller makes no representation or
warranty, express or implied, at law or in equity, in respect of CAT, the
Assets, the Division or the Division Business, including, without limitation,
with respect to merchantability or fitness for any particular purpose or the
future performance of CAT or the Division Business, and any such other
representations or warranties are hereby expressly disclaimed.
IV. REPRESENTATIONS AND WARRANTIES OF ATSC AND BUYER.
ATSC and Buyer hereby represent and warrant to Seller as follows:
4.1 ORGANIZATION OF ATSC AND BUYER; AUTHORITY.
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(a) Each of ATSC and Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of ATSC and Buyer has all requisite corporate power and authority
to own, lease and operate its properties and assets and to conduct its business
as it is now being conducted. Each of ATSC and Buyer is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each
jurisdiction in which the property or assets owned, leased or operated by it or
the nature of the business conducted by it makes such qualifications necessary,
except in those jurisdictions where the failure to have such power and authority
or to be so duly qualified or licensed and in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on ATSC or Buyer, respectively.
(b) Each of ATSC and Buyer has all requisite corporate
power and authority to enter into this Agreement and any instruments and
agreements contemplated herein required to be executed and delivered by it
pursuant to this Agreement (including, without limitation, as applicable, the
Ancillary Agreements, the Assignment and Assumption Agreements, the Undertaking
and the Advance Instrument) (collectively, the "Buyer Related Instruments") and
to consummate the transactions contemplated hereby and thereby. The
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execution, delivery and performance of this Agreement and the Buyer Related
Instruments to which it is a party and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action on the part of each of ATSC and Buyer. This Agreement has been,
and each of the Buyer Related Instruments to which it is a party, when executed
and delivered will be, duly executed and delivered by each of ATSC and Buyer and
this Agreement constitutes, and each of the Buyer Related Instruments to which
it is a party will, when executed and delivered, constitute, a valid and binding
obligation of each of ATSC and Buyer, enforceable against each of ATSC and Buyer
in accordance with its terms, except that (a) such enforcement may be subject to
any bankruptcy, insolvency, reorganization, moratorium, or other laws, now or
hereafter in effect, relating to or limiting creditors' rights generally and (b)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. Each of ATSC and Buyer
shall deliver to Seller true, correct and complete copies of resolutions duly
and validly adopted by their respective board of directors, evidencing the
authorization of the execution and delivery of this Agreement and the Buyer
Related Instruments, as applicable, to
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which it is a party and the consummation of the transactions contemplated hereby
and thereby.
4.2 NO VIOLATION; CONSENTS AND APPROVALS.
(a) Subject to the consents, approvals or filings referred
to in Section 4.2(b) and Section 4.2(c) hereof, the execution and delivery of
this Agreement by each of ATSC and Buyer and the Buyer Related Instruments to
which it is a party do not, and the consummation of the transactions
contemplated hereby or thereby and compliance with the terms hereof or thereof
will not, (i) conflict with, or result in any violation of or default under, (A)
any provision of the charter or by-laws of either ATSC or Buyer or (B) any
judgment, order or decree, or statute, law, ordinance, rule or regulation of any
Governmental Entity applicable to either ATSC or Buyer, or the assets of either
ATSC or Buyer; or (ii) conflict with, or result in any breach or violation of or
constitute a default (or an event or condition which, with notice or lapse of
time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or cause the acceleration of any
maturity of any liability or obligation pursuant to, or result in the creation
or imposition of any Lien under, any note, bond, mortgage, indenture, license,
contract, agreement, lease or other instrument or obligation to which either
ATSC or Buyer is a party or by which either
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may be bound or affected, except where the conflict, violation, default, breach,
termination, acceleration, creation or imposition would not reasonably be
expected to have a Material Adverse Effect on ATSC or Buyer, would not prevent
or delay ATSC's or Buyer's ability, or, to the best knowledge of ATSC and Buyer,
Seller's ability, to consummate the transactions contemplated hereby or would
not result in any liability, cost or expense to Seller or any of its affiliates
(other than liabilities and obligations not in excess of $50,000 in the
aggregate).
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required to
be obtained or made in connection with the execution and delivery by ATSC or
Buyer of this Agreement or the Buyer Related Instruments to which each is a
party, or the consummation by ATSC or Buyer of the transactions contemplated
hereby or thereby or compliance by ATSC and Buyer with the terms hereof or
thereof, other than (i) compliance with and filings under the HSR Act, (ii)
compliance with and filings under Section 13(a) of the Exchange Act and (iii)
those the failure of which to obtain would not reasonably be expected to have a
Material Adverse Effect on ATSC or Buyer, would not prevent or delay ATSC's or
Buyer's ability, or, to the best knowledge of ATSC and Buyer, Seller's ability,
to consummate the transactions
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contemplated hereby or would not result in any liability, cost or expense to
Seller or any of its affiliates (other than liabilities and obligations not in
excess of $50,000 in the aggregate).
(c) Except for the consent of the lenders under Buyer's
existing credit facility, no consent, approval, order or authorization of,
notice to or registration, declaration or filing with, any third party is
required to be obtained or made by or with respect to Buyer or ATSC in
connection with the execution and delivery by either ATSC or Buyer of this
Agreement or any Buyer Related Instrument, or the consummation of the
transactions contemplated hereby or thereby or compliance by ATSC or Buyer of
the terms hereof or thereof, except where the failure to obtain any consent,
approval, order or authorization, or to give notice, or to make any
registration, declaration or filing would not reasonably be expected to have a
Material Adverse Effect on ATSC or Buyer, would not prevent or delay ATSC's or
Buyer's ability, or, to the best knowledge of ATSC and Buyer, Seller's ability,
to consummate the transactions contemplated hereby or would not result in any
liability, cost or expense to Seller (other than liabilities and obligations not
in excess of $50,000 in the aggregate).
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4.3 LITIGATION/CLAIMS. Except as set forth in Section 4.3 of the
Disclosure Schedule being delivered by Buyer to Seller concurrently herewith
(the "BUYER DISCLOSURE SCHEDULE"), there is (i) no claim, action, suit or
proceeding pending or, to the best knowledge of ATSC or Buyer, threatened and
(ii) to the best knowledge of ATSC and Buyer, no investigations or inquiries
pending or threatened by or before any Governmental Entity, or by or on behalf
of any third party, in either case, which challenges the validity of this
Agreement or any Buyer Related Instrument or which, if adversely determined,
would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on ATSC or Buyer, or would adversely affect the ability
of ATSC or Buyer to consummate the transactions contemplated by this Agreement
and the Buyer Related Instruments or comply with the terms hereof or thereof.
4.4 SEC DOCUMENTS AND OTHER REPORTS. ATSC has filed all documents
required to be filed by it with the SEC since January 1995 (the "ATSC SEC
Documents"). As of their respective dates, the ATSC SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and none of the ATSC SEC Documents contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
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therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of ATSC included in the ATSC
SEC Documents complied as to form in all material respects with the applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except, in the case
of the unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto) and fairly present the consolidated financial position
of ATSC and its consolidated subsidiaries as at the respective dates thereof and
the consolidated results of their operations and their consolidated cash flows
for the respective periods then ended (subject, in the case of the unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein and the absence of footnotes). Since January 28, 1995, ATSC
has not made any change in the accounting practices or policies applied in the
preparation of its financial statements.
4.5 CAPITAL STOCK.
(a) ATSC's authorized capitalization is as set forth in the
ATSC SEC Documents. All of ATSC's issued and outstanding capital stock has been
duly authorized, validly issued and is fully paid and nonassessable.
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(b) The ATSC Common Stock to be issued to Seller has been
duly and validly authorized for issuance by ATSC and ATSC has the corporate
power and authority to issue, sell and deliver the ATSC Common Stock to be sold
by it hereunder; and, when the ATSC Common Stock is issued and delivered to
Seller against payment therefor as provided by this Agreement, the shares of
ATSC Common Stock issued to Seller hereunder will have been validly issued,
fully paid and nonassessable, and the issuance of such shares will not be
subject to any preemptive or similar rights.
(c) The shares of ATSC Common Stock to be issued to Seller
at the Closing will be duly approved for listing on the New York Stock Exchange
or such other securities exchange on which the ATSC Common Stock is then listed,
subject to official notice of issuance.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since February 3, 1996,
(a) there has not been any Material Adverse Effect on ATSC or Buyer and (b)
neither ATSC nor Buyer has taken any action, no event has occurred and no
condition exists that would violate Section 5.20 hereof.
4.7 INFORMATION SUPPLIED. None of the information supplied or to
be supplied by ATSC or Buyer in writing for inclusion in the Proxy Statement (as
hereinafter defined) relating to the Annual Meeting will, at the time of mailing
of the Proxy Statement to stockholders of Seller and
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at the time of the Annual Meeting to be held in accordance with Section 5.17,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
4.8 BROKERS. No broker, finder or financial advisor or other
person is entitled to any brokerage fees, commissions, finders' fees or
financial advisory fees in connection with the transactions contemplated hereby
by reason of any action taken by Buyer or any of its directors, officers,
employees, representatives or agents.
4.9 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Except as
expressly set forth in this Article IV, neither ATSC nor Buyer makes any
representation or warranty, express or implied, at law or in equity, in respect
of ATSC or Buyer, including, without limitation, with respect to the future
market value of the ATSC Common Stock issued to Seller pursuant to Section
1.2(a)(i) hereof.
V. COVENANTS OF THE PARTIES
5.1 CONDUCT OF THE DIVISION BUSINESS. Except as expressly
permitted by this Agreement, during the period from the date of this Agreement
to the Closing Date, Seller shall conduct the Division Business, and shall cause
CAT to
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conduct the business of CAT, in the ordinary course consistent with past
practice and use its reasonable best efforts to preserve their respective
current relationships with suppliers, contract manufacturers, factors and others
having business dealings with them. Without limiting the generality of the
foregoing, except as set forth in Section 5.1 of the SELLER DISCLOSURE SCHEDULE,
during the period from the date of this Agreement to the Closing Date, without
the prior written consent of Buyer, Seller, with respect to the Division, shall
not, and shall cause CAT not to:
(a) cause CAT or the Division, as the case may be, to incur
any liabilities, obligations or indebtedness of any nature (whether absolute,
accrued, contingent or otherwise and whether due or to become due), except items
incurred in the ordinary course of business and consistent with past practice,
none of which shall exceed, except in connection with the manufacture of women's
apparel for Buyer pursuant to purchase orders and/or written fabric commitments
provided by Buyer (as to which there shall not be any such dollar limitation),
$50,000 (counting liabilities or obligations arising from one transaction or a
series of related transactions, and all periodic installments or payments under
any lease or other agreement providing for periodic installments or payments, as
a single obligation or liability);
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(b) permit, allow or suffer any of the Assets or any assets
of CAT, as the case may be, to be subjected to any Lien, restriction or charge
of any kind, other than Permitted Liens and Liens in favor of The HongKong and
Shanghai Banking Corporation, Mitsubishi Corporation and Mitsubishi
International Corporation existing on the date hereof;
(c) fail to maintain the properties, machinery and equipment
of CAT or the Division, as the case may be, in good operating condition and
repair (ordinary wear and tear excepted);
(d) fail to maintain all policies of insurance listed in
Section 3.16 of the SELLER DISCLOSURE SCHEDULE and all policies of insurance
relating to CAT, as the case may be, in full force and effect, at least at such
levels as are in effect on the date hereof, through and including the Closing
Date; or take, or fail to take, any action that would enable the insurers under
such policies to avoid liability for claims arising out of occurrences prior to
the Closing;
(e) revise, amend or enter into any employment agreement or
arrangement or pay any bonus or increase the rate of compensation of, or pay or
agree to pay any benefit to, including, without limitation, severance benefits,
any CAT Employee or any Affected Employee, as the case
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may be, except as may be required by any Plan or by applicable law; PROVIDED,
HOWEVER, that Seller may implement planned annual increases in the rates of
compensation in the ordinary course of business consistent with past practice,
provided that such increases are disclosed to Buyer prior to becoming effective;
(f) enter into, adopt or amend any Plan, except as may be
required by applicable law;
(g) sell any inventory other than to Buyer in the ordinary
course of business or inventory rejected by Buyer in the ordinary course of
business, or sell, lease, transfer or otherwise dispose of any other Asset or
any asset of CAT, as the case may be, other than in the ordinary course of
business;
(h) acquire or agree to acquire on behalf of CAT or the
Division, as the case may be, any assets which are material, individually or in
the aggregate, to CAT or the Division, as the case may be, other than fabric and
other apparel components necessary to manufacture women's apparel pursuant to
purchase orders issued by Buyer;
(i) modify, amend or terminate any Lease or any Contract
required to be listed in Section 3.14 of the SELLER DISCLOSURE SCHEDULE or to
which CAT is a party, as the case may be, or enter into any other contract,
agreement or commitment by which CAT or the Division, as the case may
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be, or any Asset or any asset of CAT, as the case may be, may be bound, and, in
the case of the Division, which would have been required to be listed in Section
3.14 of the SELLER DISCLOSURE SCHEDULE had such agreement been entered into
prior to the date of this Agreement, other than purchase and sale orders entered
into in connection with the manufacture of women's apparel for Buyer pursuant to
purchase orders issued by Buyer;
(j) fail to maintain (i) the accounts and Books and Records
of the Division and (ii) the accounts and books and records of CAT, as the case
may be, in the usual, regular and ordinary manner on a basis consistently
applied;
(k) terminate, discontinue, close or dispose of any facility
or business operation of CAT or the Division, as the case may be;
(l) make any capital expenditure or any commitment for
capital expenditures with respect to CAT or the Division, as the case may be,
for additions to property, plant, equipment or intangible capital assets, which
individually exceeds $50,000 or, in the aggregate, exceeds $250,000;
(m) cancel any debt or waive any claim or right of
substantial value with respect to CAT or the Division, as the case may be;
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(n) pay, loan or advance any amount to, or sell, transfer or
lease any property or asset (real, personal or mixed, tangible or intangible)
to, any affiliate of Seller; or enter into any contract, agreement or commitment
with any affiliate of Seller; or
(o) agree, whether in writing or otherwise, to do any of the
foregoing.
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) During the period from the date of this Agreement
through the Closing Date, the parties hereto shall afford each other and their
respective authorized representatives such access during regular business hours
to all plants, offices, warehouses, facilities and books and records as each
party and their respective representatives may reasonably request; PROVIDED,
HOWEVER, each party shall schedule their access and visits through a designated
representative of the other party and in such a way as to avoid disrupting the
normal business of the other party.
(b) Each of ATSC, Buyer, Seller and CGFE shall hold, and
shall cause its controlled affiliates, consultants and advisors to hold, any
information which it receives in connection with the transactions contemplated
by this Agreement in confidence in accordance with and subject to the terms of
(i) the letter of confidentiality between Seller and ATSC, dated March 15, 1996,
and (ii) the letter
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of confidentiality between Seller and ATSC, dated April 18, 1996 (collectively,
the "Confidentiality Agreements").
5.3 FINANCIAL STATEMENTS.
(a) On or before June 10, 1996, Seller shall deliver to
Buyer, the audited combined balance sheets of the Combined Entity as of January
28, 1995 and the audited combined income statements and statements of cash flows
of the Combined Entity for the fiscal year ended January 28, 1995 accompanied,
in each case, by an unqualified report of Seller's independent public
accountants, Ernst & Young, LLP (collectively, the "Combined Entity 1994 Audited
Financial Statements"); and
(b) Until the Closing, on or before the 30th day of each
month beginning with the month following the execution of this Agreement, Seller
shall deliver to Buyer unaudited balance sheets and income statements of Seller
(the "Subsequent Monthly Financial Statements"), CAT (the "CAT Subsequent
Monthly Financial Statements") and the Combined Entity (the "Combined Entity
Subsequent Monthly Financial Statements"), as at and for the monthly period
ending the last day of the preceding month, and as soon as available, but not
later than 45 days after the end of each fiscal quarter, Seller shall deliver to
Buyer unaudited balance sheets as of the end of such fiscal quarter and
unaudited income statements and statements of cash flows for
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the three-month and year-to-date periods then ended, of Seller (the "Subsequent
Quarterly Financial Statements"), CAT (the "CAT Subsequent Quarterly Financial
Statements") and the Combined Entity (the "Combined Entity Subsequent Quarterly
Financial Statements"). The Subsequent Monthly Financial Statements and the
Subsequent Quarterly Financial Statements are referred to, collectively herein,
as the "Subsequent Financial Statements". The CAT Subsequent Monthly Financial
Statements and the CAT Subsequent Quarterly Financial Statements are referred
to, collectively, herein as the "CAT Subsequent Financial Statements". The
Combined Entity 1995 Audited Financial Statements, Combined Entity Subsequent
Monthly Financial Statements and the Combined Entity Subsequent Quarterly
Financial Statements are referred to, collectively, herein as the "Combined
Entity Subsequent Financial Statements". The Subsequent Financial Statements,
the CAT Subsequent Financial Statements and the Combined Entity Subsequent
Financial Statements shall be prepared in a format consistent with the Audited
Financial Statements, the CAT Financial Statements and the Combined Entity
Financial Statements, respectively.
(c) Until the Closing, on or before the 30th day of each
month beginning with the month following the execution of this Agreement, ATSC
shall deliver to Seller unaudited consolidated balance sheets and income
statements
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of ATSC, as at and for the monthly period ending the last day of the
preceding month, and as soon as available, but not later than 45 days after the
end of each fiscal quarter, ATSC shall deliver to Seller unaudited consolidated
balance sheets as of the end of such fiscal quarter and unaudited income
statements and statements of cash flows for the three-month and year-to-date
periods then ended of ATSC. Such financial statements shall be prepared in a
manner consistent with ATSC's financial statements included in the ATSC SEC
Documents.
5.4 REASONABLE BEST EFFORTS. Subject to the terms and conditions
of this Agreement, each of the parties hereto shall use its reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement no
later than August 15, 1996. Each of the parties will use its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the Closing conditions set
forth in Articles VI, VII and VIII hereof).
5.5 CONSENTS. Without limiting the generality of Section 5.4
hereof, each of the parties hereto shall use its
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reasonable best efforts to obtain all licenses, permits, authorizations,
consents and approvals of all third parties and Governmental Entities necessary
in connection with the consummation of the transactions contemplated by this
Agreement prior to the Closing, and shall use reasonable best efforts to obtain
estoppel certificates from the landlords under the NY Lease and the FWM Lease.
Notwithstanding the foregoing, neither Buyer nor Seller shall have any
obligation to pay any fee to any third party for the purpose of obtaining any
consent or approval or any costs and expenses of any third party resulting from
the process of obtaining such consent or approval. Each of the parties hereto
shall make or cause to be made all filings and submissions under laws and
regulations applicable to it as may be required for the consummation of the
transactions contemplated by this Agreement. Buyer and Seller shall coordinate
and cooperate with each other in exchanging such information and assistance as
any of the parties hereto may reasonably request in connection with the
foregoing.
5.6 ANTITRUST NOTIFICATION. Buyer and Seller shall use their
respective reasonable best efforts to obtain all authorizations or waivers
required under the HSR Act to consummate the transactions contemplated hereby,
including, without limitation, making all filings required in connection
therewith.
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5.7 PUBLIC ANNOUNCEMENTS. Neither Seller nor Buyer shall issue
any report, statement or press release, or otherwise make any public statement,
with respect to this Agreement or the Ancillary Agreements and the transactions
contemplated hereby or thereby, without prior consultation with and approval of
the other parties, except as may be required by federal, state, local or foreign
securities laws or stock exchange rules, or as may be necessary in order to
discharge its reporting or disclosure obligations under such laws or rules;
PROVIDED, HOWEVER, that Buyer may communicate with the Employees regarding its
offer of employment pursuant to Section 2.8 hereof.
5.8 ACCESS TO BOOKS AND RECORDS FOLLOWING THE CLOSING. Following
the Closing, Buyer shall permit Seller and its authorized representatives,
during normal business hours and upon reasonable notice, to have reasonable
access to, and examine and make copies of, all books and records which relate to
transactions or events occurring prior to the Closing or transactions or events
occurring subsequent to the Closing which are related to or arise out of
transactions or events occurring prior to the Closing. Buyer shall retain all
books and records for a period of three years following the Closing.
5.9 OTHER TRANSACTIONS. Neither Seller nor any of its affiliates,
whether acting directly or through any
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authorized agent, attorney or representative, shall, from the date hereof
through the Closing Date (the "Exclusivity Period"), solicit, encourage or
entertain any offers from any party other than Buyer, nor shall they, during the
Exclusivity Period, initiate or enter into any form of preliminary discussion,
negotiation for a purchase (or other acquisition), merger, share exchange or
other consolidation, sale of stock or other equity securities or any other form
or manner of transaction, howsoever described or denominated, involving any
material interest in CAT or the Division or any option or other contractual
right with respect to any of the foregoing. In the event Seller or any of its
affiliates receives any offer or proposal to enter into any such negotiations or
other communication with a party other than Buyer during the Exclusivity Period,
Seller will provide prompt notice of the same to Buyer.
5.10 DISCHARGE OF LIENS. Seller shall cause all Liens (other than
Permitted Liens) on any real or personal property owned or leased by Seller
which is included in the Assets to be terminated or otherwise discharged at or
prior to the Closing.
5.11 RESIGNATIONS. At or prior to the Closing Date, each officer
and director of CAT designated by Seller shall execute and deliver to Buyer a
letter of resignation,
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effective at the Closing Date, as an officer or director of CAT.
5.12 INSURANCE. From the date hereof through and including the
Closing Date, Seller shall, at its sole expense, maintain in full force and
effect the insurance policies listed in Section 3.16 of the SELLER DISCLOSURE
SCHEDULE and such additional insurance policies as may be necessary to comply in
all material respects with all requirements of law and the Leases. As of the
Closing, Seller hereby assigns to Buyer any and all assignable rights which
Seller may have under such insurance policies covering claims related to the
Assets or the Assumed Liabilities for the period on or prior to the Closing
Date.
5.13 SUPPLEMENTARY DISCLOSURE. Seller shall promptly supplement
or amend the SELLER DISCLOSURE SCHEDULE and Buyer shall promptly supplement or
amend the BUYER DISCLOSURE SCHEDULE with respect to any matter hereafter arising
or discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or listed in the SELLER DISCLOSURE SCHEDULE
or BUYER DISCLOSURE SCHEDULE, respectively; PROVIDED, HOWEVER, that for the
purpose of the rights and obligations of the parties hereunder, any such
supplemental or amended disclosure shall not affect the other party's ability to
rely on the condition set forth in Section 7.1(a) or 8.1(a), as the case may
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be, unless so agreed to in writing by Buyer, as to the SELLER DISCLOSURE
SCHEDULE, or Seller, as to the BUYER DISCLOSURE SCHEDULE.
5.14 BRAZIL SOURCING. Buyer shall use (i) reasonable best efforts
to enter into a new consulting agreement with John Peter M. Gordon, the head of
Seller's Brazilian sourcing operations, pursuant to which Buyer shall compensate
Mr. Gordon in the amount of $240,000 per year through July 31, 1998, and (ii)
reasonable best efforts to cause Seller and its affiliates to be released from
their obligations under the Consulting Agreement, dated February 1, 1995,
between Tralee, S.A., an affiliate of Seller, and Mr. Gordon (the "Existing
Gordon Agreement"). Buyer shall not assume the Existing Gordon Agreement or any
of Seller or its affiliate's obligations thereunder.
5.15 LETTERS OF CREDIT.
(a) At least ten (10) business days prior to Closing, Seller
shall provide a schedule of all letters of credit as of the Closing Date (i) for
raw materials and making charges relating to fabric and work-in-progress
included in the Assets and (ii) securing Seller's or its affiliate's obligations
under the NY Lease. At the Closing, Buyer shall substitute letters of credit or
provide an alternative form of financial support; PROVIDED, that Buyer shall
replace only that portion of the letters of credit for
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the NY Lease that relate to the sixth floor of the leased premises.
(b) Seller shall reimburse Buyer for all finance charges
incurred by CAT as the result of the opening of letters of credit by CAT for the
benefit of Seller in connection with piece goods purchases, FOB garment
purchases and CMT purchases relating to certain products of the Division
pursuant to Buyer purchase orders.
5.16 AMENDMENT. At the election of Buyer, this Agreement shall be
amended in a manner reasonably acceptable to Seller to provide for (i) the
transfer and sale of the Assets to CAT and assumption of the Liabilities by CAT
prior to Closing, and (ii) the subsequent purchase of the CAT Shares by Buyer
for the Purchase Price, provided that Seller determines in good faith that such
amendment will not have a material adverse tax or other material economic
consequences to it.
5.17 PROXY STATEMENT; STOCKHOLDER APPROVAL.
(a) Seller, acting through its Board of Directors, shall,
subject to and in accordance with applicable law and its Certificate of
Incorporation, as amended, and its By-Laws, (i) file with the Securities and
Exchange Commission (the "Commission") its preliminary proxy materials (the
"Preliminary Proxy Materials") relating to the Annual Meeting as soon as
possible; (ii) promptly and duly
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call, give notice of, convene and hold an annual meeting of stockholders of
Seller ("Annual Meeting") and shall hold such meeting not later than
twenty-three (23) days subsequent to the date on which the Proxy Statement (as
hereinafter defined) is cleared with the Commission (provided that, if such day
is not a business day, then the Annual Meeting shall be held on the next
business day); (iii) at such Annual Meeting, introduce a proposal (the
"Proposal") to approve and adopt this Agreement and the transactions
contemplated hereby, and recommend approval and adoption of this Agreement and
the transactions contemplated hereby by the stockholders of Seller and include
in the definitive proxy statement relating to the Annual Meeting (the "Proxy
Statement") such recommendation; and (iv) take all reasonable action to solicit
and obtain such approval.
(b) Seller, as promptly as practicable, shall cause the
Proxy Statement to be mailed to its stockholders. Seller shall not take any
action that would require the Proxy Statement to be delayed or recirculated
under circumstances which would, in the reasonable judgment of Buyer, delay the
occurrence of the Closing beyond August 15, 1996.
(c) Seller shall supply ATSC with copies of (i) the
Preliminary Proxy Materials at least ten (10) business days in advance of filing
with the Commission, (ii)
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copies of all correspondence with the Commission relating to the Preliminary
Proxy Materials promptly upon receipt or delivery, as the case may be, by
Seller, and (iii) copies of the Proxy Statement at least one (1) business day in
advance of mailing to Seller's stockholders; PROVIDED, that in the cases of each
clause (i)-(iii) above, Seller shall provide ATSC and its counsel with a
reasonable opportunity for review thereof and comment thereon, such review to be
conducted and such comments to be delivered with reasonable promptness.
(d) On the date hereof, Mr. Bernard M. Manuel, Mrs. Isabelle
Manuel, Mr. Irving Benson, Mrs. Dianne Benson and Mr. Roy E. Green, as trustee
of the Bernard Manuel 1992 Irrevocable Trust for Children, are each executing
and delivering to Buyer a Proxy entitling Paul E. Francis, Walter J. Parks and
Jocelyn F.L. Barandiaran, each an officer of ATSC and Buyer to vote all shares
of capital stock of Seller over which such person or entity has voting authority
(i) for the approval and adoption of this Agreement and the transactions
contemplated hereby and any and all related agreements and (ii) against any
other transaction or proposal that could (x) prevent or delay the consummation
of the transactions contemplated by this Agreement or (y) frustrate the purposes
of this Agreement (each, a "Proxy"). On or before June 30, 1996, Seller shall
deliver
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to Buyer executed Proxies from each of GJM International Limited, Fenn, Wright
and Manson (Antilles) N.V., and Cleveland Investment Limited, with respect to
the shares of capital stock of Seller owned by such entities. Seller shall use
its reasonable best efforts to obtain a Proxy from Limited Direct Associates
L.P. with respect to the shares of capital stock of Seller owned by it.
5.18 OCCUPANCY. Certain employees of Buyer and CAT are occupying
the fifth and sixth floors of Seller's leased facility in New York City, New
York. Commencing the earlier of April 15, 1996 or the date on which such
employees began to occupy such floors, Seller shall charge Buyer and CAT,
determined based upon head-count, a pro rata portion of the cash rental, rental
tax and cleaning service costs.
5.19 TRANSFER TAXES. Buyer shall be responsible for the timely
payment of all transfer taxes and stamp duty taxes attributable to the
transactions effected pursuant to this Agreement which are not measured by gain
or income realized by Seller ("Transfer Taxes"). Upon Buyer's request on or
after the Closing Date, Seller shall pay to Buyer an amount equal to 50% of all
Transfer Taxes paid or to be paid by Buyer. Buyer shall prepare or cause to be
prepared and timely file or cause to be timely filed all tax returns
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required to be filed in respect of Transfer Taxes (other than any notices
required to be given under any applicable bulk sales laws) and, to the extent
that Buyer so requests, Seller shall sign such tax returns and notices and fully
cooperate with Buyer in connection with such filings.
5.20 CONDUCT OF ATSC BUSINESS. Except as expressly permitted by
this Agreement, during the period from the date of this Agreement to the Closing
Date, ATSC (a) shall conduct its business in the ordinary course consistent with
past practice and use its reasonable best efforts to preserve its current
relationships with suppliers, contract manufacturers, factors and others having
business dealings with it, (b) shall not effect a stock split or combination
with respect to, declare a stock dividend on or engage in a recapitalization of,
the ATSC Common Stock or (c) shall not, and shall not permit any of its
affiliates to, take any action which would reasonably be expected to have a
Material Adverse Effect on CAT or the Division Business.
VI. CONDITIONS TO OBLIGATIONS OF BOTH PARTIES.
6.1 CONDITIONS. The respective obligations of each party to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction or waiver of the following conditions:
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(a) the stockholders of Seller shall have approved the
transactions contemplated by this Agreement.
(b) No statute, rule, regulation, order, decree or
injunction shall have been enacted, entered, promulgated or enforced by a
Governmental Entity which prohibits the consummation of the transactions
contemplated by this Agreement and shall be in effect; PROVIDED, that the
parties shall use their reasonable best efforts to have any such injunction
lifted.
(c) The waiting period under the HSR Act with respect to the
transactions contemplated by this Agreement shall have expired or been
terminated.
(d) Each of Mitsubishi International Corporation, Mitsubishi
Corporation and HongKong and Shanghai Banking Corporation shall have consented
to the transactions contemplated by this Agreement and released any Liens held
by them on the Assets and the CAT Shares not later than June 30, 1996. Seller
and Buyer shall use reasonable best efforts to cause the consents required by
this Subsection 6.1(d) to include an acknowledgment of fair value, a waiver of
any fraudulent transfer claims and a waiver of any right to participate in any
recovery of fraudulent transfer claims brought by the debtor in possession or
trustee.
(e) LANDLORDS' CONSENTS. In the event Buyer enters into the
Subleases at the time of Closing, then
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Seller shall have obtained from the landlords under the NY Lease and the FWM
Lease its consent to such Subleases.
VII. CONDITIONS TO OBLIGATIONS OF SELLER.
7.1 CONDITIONS. The obligations of Seller to consummate the
transactions contemplated by this Agreement are subject to the fulfillment at or
prior to the Closing of each of the following conditions (any or all of which,
to the extent permitted by law, may be waived in whole or in part by Seller):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer in this Agreement qualified as to materiality shall be true,
complete and correct in all respects, and those not so qualified shall be true,
complete and correct in all material respects, as of the date when made and at
and as of the Closing Date, as though such representations and warranties were
made at and as of the Closing Date.
(b) PERFORMANCE. Buyer shall have performed and complied
with, in all material respects, all agreements, obligations, covenants and
conditions required by this Agreement to be so performed or complied with by
Buyer at or prior to the Closing.
(c) OFFICER'S CERTIFICATE. Buyer shall have delivered to
Seller a duly executed certificate, dated as of
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the Closing Date, certifying the fulfillment of the conditions specified in
Subsections 7.1(a) and 7.1(b) hereof.
(d) OPINION OF COUNSEL. Buyer shall have delivered to Seller
an opinion of legal counsel of Buyer, dated the Closing Date, in substantially
the form of EXHIBIT L hereto.
(e) DOCUMENTS. Seller shall have received the Instruments of
Assignment, the Pledge Agreement, the Undertaking and the Ancillary Agreements,
in each case, duly executed by each party thereto (other than Seller).
(f) RELEASE. Seller shall have been released from its
obligations in respect of CAT's credit facility with HongKong and Shanghai
Banking Corporation.
(g) MATERIAL CHANGE. No event, occurrence, fact, condition,
change or development shall have occurred or come to exist which, individually
or in the aggregate, has had or resulted in, or would reasonably be expected to
have or result in, a Material Adverse Effect on ATSC.
VIII. CONDITIONS TO OBLIGATIONS OF BUYER.
8.1 CONDITIONS. The obligations of Buyer to consummate the
transactions contemplated by this Agreement are subject to the fulfillment at or
prior to the Closing of each of the following conditions (any or all of which,
to
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the extent permitted by law, may be waived in whole or in part by Buyer):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller in this Agreement qualified as to materiality shall be
true, complete and correct in all respects, and those not so qualified shall be
true, complete and correct in all material respects, as of the date when made
and at and as of the Closing Date, as though such representations and warranties
were made at and as of the Closing Date.
(b) PERFORMANCE. Seller shall have performed and complied
with, in all material respects, all agreements, obligations, covenants and
conditions required by this Agreement to be so performed or complied with by
Seller at or prior to the Closing.
(c) OFFICER'S CERTIFICATE. Seller shall have delivered to
Buyer a duly executed certificate, dated as of the Closing Date, certifying the
fulfillment of the conditions specified in Subsections 8.1(a) and 8.1(b) hereof.
(d) OPINION OF COUNSEL. Seller shall have delivered to Buyer
an opinion of legal counsel to Seller, dated as of the Closing Date, in
substantially the form of EXHIBIT M hereto.
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(e) DOCUMENTS. Buyer shall have received the Instruments of
Assignment, the Pledge Agreement and the Ancillary Agreements, in each case,
duly executed by each party thereto (other than Buyer);
(f) CAT CREDIT AGREEMENT. HongKong and Shanghai Banking
Corporation shall have entered into an amended and restated credit agreement
with CAT on substantially the terms set forth in (or terms no less favorable to
CAT than those set forth in) the Commitment Letter, dated April 22, 1996, the
terms of which are satisfactory to ATSC and Buyer.
(g) LENDERS' CONSENT. Buyer shall have obtained the consent
of the lenders under Buyer's Second Amended and Restated Credit Agreement, dated
as of September 29, 1996, among Buyer and the Lenders named therein to the
transactions contemplated by this Agreement.
(h) MATERIAL CHANGE. No event, occurrence, fact, condition,
change or development shall have occurred or come to exist which, individually
or in the aggregate, has had or resulted in, or would reasonably be expected to
have or result in, a Material Adverse Effect on the Division Business or on CAT.
(i) EMPLOYMENT AGREEMENTS. CAT shall have entered into a new
employment agreement reasonably satisfactory to Buyer with Mr. Dwight Meyer.
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IX. TERMINATION, AMENDMENT AND WAIVER.
9.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by mutual written agreement of Buyer and Seller;
(b) at any time after August 30, 1996 by either Buyer or
Seller, if the Closing shall not have occurred, unless the Closing has not
occurred due to the failure of such party to perform or comply with any of the
agreements or covenants hereof to be performed or complied with by such party
prior to the Closing; or
(c) by either Buyer or Seller, if (i) the stockholders of
Seller fail to approve the transactions contemplated by this Agreement at the
Annual Meeting, or (ii) any event, fact or condition shall occur or exist that
makes it impossible to satisfy a condition to such party's obligations to
consummate the transactions contemplated by this Agreement, unless the
occurrence or existence of such event, fact or condition shall be due to the
failure of such party to perform or comply with any of the agreements or
covenants hereof to be performed or complied with by such party prior to the
Closing.
9.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of the
termination of this Agreement and the
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abandonment of the transactions contemplated hereby pursuant to Section 9.1(b)
or (c) hereof, written notice thereof shall forthwith be given by the party so
terminating to the other party, and this Agreement shall terminate, and the
transactions contemplated hereby shall be abandoned, without further action by
Seller or Buyer. If this Agreement is terminated pursuant to Section 9.1 hereof:
(a) All confidential information received by the parties
shall be treated in accordance with Section 5.2 hereof and the Confidentiality
Agreements referred to in such Section;
(b) all filings, applications and other submissions made
pursuant to Sections 5.4, 5.5 and 5.6 hereof shall, to the extent practicable,
be withdrawn from the agency or other person to which made; and
(c) the obligations provided for in this Section 9.2,
Article X, Sections 11.1 and 11.12 hereof, the confidentiality provision
contained in Section 5.2 hereof and the Confidentiality Agreements referred to
in such Section shall survive any termination of this Agreement.
9.3 OTHER REMEDIES. In no event shall termination of this
Agreement limit or restrict the rights and remedies of any party hereto against
any other party which has willfully breached the terms of this Agreement prior
to termination hereof.
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X. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.
10.1 SURVIVAL OF REPRESENTATIONS. The representations and
warranties in this Agreement and in any other document delivered in connection
herewith shall survive the Closing hereunder regardless of any investigation
made by or on behalf of any party hereto; PROVIDED, HOWEVER, that all
representations and warranties in this Agreement and in any other document
delivered herewith relating to CAT (other than Section 3.10 relating to title to
the CAT Shares) shall not survive the Closing.
10.2 SELLER'S AGREEMENT TO INDEMNIFY. Upon the terms and subject
to the conditions of this Article X, Seller shall indemnify, defend and hold
harmless Buyer and its affiliates, and its and their directors, officers,
employees and agents (collectively, the "Buyer Group"), at any time after the
Closing, from and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses, including,
without limitation, interest, penalties and reasonable fees and expenses of
attorneys and other professionals (collectively, "Damages"), asserted against,
resulting to, imposed upon or incurred by the Buyer Group or any member thereof,
directly or indirectly, by reason of or resulting from: (a) liabilities,
obligations or claims of or against Seller or any affiliate of Seller other than
CAT (whether absolute,
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accrued, contingent or otherwise) existing as of the Closing Date or arising out
of facts, conditions or circumstances occurring at or prior thereto (excluding
the Liabilities), whether or not such liabilities, obligations or claims were
known at the time of Closing; (b) a breach of any representation, warranty,
covenant or agreement of Seller contained in or made pursuant to this Agreement
or any Seller Related Instrument or any facts or circumstances constituting such
a breach; (c) each item listed in Section 3.20 of the SELLER DISCLOSURE
SCHEDULE; (d) the violation of any Environmental Law prior to the Closing Date
(or allegation of same), by Seller or the Division, or any other Damages arising
under Environmental Laws; (e) any tax or related claim asserted against the
Buyer Group or any member thereof relating to the operations or properties of
the Division with respect to any period ending on or prior to or including the
Closing Date; (f) any failure to comply with any "bulk sales" laws applicable to
the transactions contemplated hereby; and (g) all Damages arising out of or
relating to any Plans or CAT Plans, including, without limitation, all benefits
accrued by any employees under the Plans and CAT Plans and any liability arising
under Section 4980B of the Code (collectively, "Seller Claims").
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10.3 SELLER'S LIMITATION OF LIABILITY.
(a) Anything in this Agreement to the contrary
notwithstanding, the liability of Seller to indemnify the Buyer Group pursuant
to Section 10.2(b) hereof against any Damages sustained by reason of any Seller
Claim thereunder for a breach of any representation and warranty of Seller shall
be limited to Seller Claims as to which any member of the Buyer Group has given
Seller written notice on or prior to April 30, 1997, whether or not any Damages
have then actually been sustained; PROVIDED, HOWEVER, that, notwithstanding the
foregoing, the liability of Seller to indemnify the Buyer Group against any
Damages sustained by reason of any Seller Claim for a breach of any of the
representations and warranties set forth in Section 3.10 and the first sentence
of Section 3.11 hereof shall not be so limited.
(b) Other than with respect to the representations and
warranties set forth in Section 3.10 and the first sentence of Section 3.11
hereof, the provisions in Section 10.2(b) hereof for indemnity by Seller of the
Buyer Group against Damages sustained by reason of any Seller Claim thereunder
for a breach of any representation or warranty of Seller shall be effective only
after the aggregate amount of all such Seller Claims for which Seller is liable
exceeds $500,000, and then only to the extent of such
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excess (the "Buyer's Deductible"). With respect to any breach by Seller of
the representation and warranty set forth in the first sentence of Section 3.11
hereof, if such breach relates to Seller's title to any of the Inventory or the
Net Fixed Assets, Seller's indemnity obligations hereunder shall be limited to
the amount of the Inventory Consideration or the Fixed Asset Consideration,
respectively. Notwithstanding the foregoing, in no event shall Seller's
indemnity obligations under this Agreement exceed $3.6 million.
(c) The liability of Seller to indemnify the Buyer Group
against any Damages sustained by reason of any Seller Claim for a breach of any
covenant or agreement shall not be limited in any manner and shall not be
subject to the Buyer's Deductible, PROVIDED, HOWEVER, that Seller shall not be
liable for breach of any covenant or agreement contained in Section 5.1 hereof
if the transactions contemplated hereby are consummated unless such breach also
constitutes a breach of a representation or warranty for which Buyer would
otherwise be entitled to indemnification hereunder.
(d) Seller may satisfy its indemnification obligations
hereunder either by the payment of cash or by delivering shares of ATSC Common
Stock having a fair market value equal to the amount of the claim. For purposes
of this Section 10.3(d), fair market value shall mean the
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average high and low sale price of the ATSC Common Stock on the New York Stock
Exchange Composite Tape (or as reported on any other exchange on which the ATSC
Common Stock is then listed) on each of the ten (10) consecutive trading days
ending on the trading day immediately preceding the payment date.
10.4 BUYER'S AGREEMENT TO INDEMNIFY. Upon the terms and subject
to the conditions of this Article X, Buyer shall indemnify, defend and hold
harmless the Seller and its affiliates, and its and their directors, officers,
employees and agents (collectively, the "Seller Group"), at any time after the
Closing, from and against all Damages asserted against, resulting to, imposed
upon or incurred by the Seller Group or any member thereof, directly or
indirectly, by reason of or resulting from: (a) a breach of any representation,
warranty, covenant or agreement of Buyer contained in or made pursuant to this
Agreement or any Buyer Related Instrument or any facts or circumstances
constituting such a breach; or (b) the Liabilities ("Buyer Claims" and,
collectively with Seller Claims, "Claims").
10.5 BUYER'S LIMITATION OF LIABILITY.
(a) Anything in this Agreement to the contrary
notwithstanding, the liability of Buyer to indemnify the Seller Group pursuant
to Section 10.4(a) hereof against any Damages sustained by reason of any Buyer
Claim
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thereunder for a breach of any representation and warranty of Buyer shall be
limited to Buyer Claims as to which any member of the Seller Group has given
Buyer written notice on or prior to April 30, 1997, whether or not any Damages
have then actually been sustained; PROVIDED, HOWEVER, that notwithstanding the
foregoing, the liability of Buyer to indemnify the Seller Group against any
Damages sustained by reason of any Buyer Claim for a breach of any of the
representations and warranties set forth in Section 4.5(b) hereof shall not be
so limited.
(b) Other than with respect to the representations and
warranties set forth in Section 4.5(b), the provisions in Section 10.4(a) for
indemnity by Buyer of the Seller Group against Damages sustained by reason of
any Buyer Claim thereunder for a breach of any representation and warranty of
Buyer shall be effective only after the aggregate amount of all such Buyer
Claims for which Seller is liable exceeds $500,000, and then only to the extent
of such excess (the "Seller's Deductible"). Notwithstanding the foregoing, in no
event shall Buyer's indemnity obligations under this Agreement exceed $3.6
million.
(c) The liability of Buyer to indemnify the Seller Group
against any Damages sustained by reason of any Buyer Claim for a breach of any
covenant or agreement shall not be limited in any manner and shall not be
subject to
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Seller's Deductible, PROVIDED, HOWEVER, that Buyer shall not be liable for
breach of any covenant or agreement contained in Section 5.20 hereof if the
transactions contemplated hereby are consummated unless such breach also
constitutes a breach of a representation or warranty for which Seller would
otherwise be entitled to indemnification hereunder.
10.6 CONDITIONS OF INDEMNIFICATION. The obligations and
liabilities of the Seller Group and Buyer Group with respect to Claims made by
third parties shall be subject to the following terms and conditions:
(a) The indemnified party will give the indemnifying party
prompt notice of any such Claim, and the indemnifying party shall have the right
to undertake the defense thereof by representatives chosen by it;
(b) If the indemnifying party undertakes the defense of any
such Claim, the indemnified party shall, to the best of its ability, assist the
indemnifying party, at the expense of the indemnifying party, in the defense of
such Claim, and shall promptly send to the indemnifying party, at the expense of
the indemnifying party, copies of any documents received by the indemnified
party which relate to such Claim; PROVIDED, HOWEVER, that the indemnified party
shall have no such obligation if and to the extent that such third-party Claim
arises out of or relates to facts, events or circumstances which may also give
rise to a separate
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Claim by the indemnified party against the indemnifying party;
(c) If the indemnifying party, within a reasonable time
after notice of any such Claim, fails to defend the indemnified party against
which such Claim has been asserted, the indemnified party shall (upon further
notice to the indemnifying party) have the right to undertake the defense,
compromise or settlement of such Claim on behalf of and for the account and risk
of the indemnifying party, subject to the right of the indemnifying party to
assume the defense of such Claim at any time prior to settlement, compromise or
final determination thereof; and
(d) Anything in this Article X to the contrary
notwithstanding, (i) if there is a reasonable probability that a Claim may
materially and adversely affect the indemnified party other than as a result of
money damages or other money payments, the indemnified party shall have the
right, at its own cost and expense, to defend, compromise or settle such Claim;
and (ii) the indemnifying party shall not, without the written consent of the
indemnified party, settle or compromise any Claim or consent to the entry of any
judgment which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the indemnified party a release from all
liability with respect to such Claim.
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(e) Notwithstanding anything to the contrary contained
herein, if the conditions of Subsection 7.1(a) or (b) or Subsection 8.1(a) or
(b) are not satisfied as of the Closing Date (a "Failure of Condition"), and the
party for whose benefit such condition exists (the "Waiving Party") elects to
proceed with the Closing notwithstanding such Failure of Condition, then such
condition shall be deemed to be satisfied and the Waiving Party shall not bring
any Claim for indemnity hereunder or any other Claim arising out of the facts or
circumstances causing such Failure of Condition.
10.7 EXCLUSIVE REMEDIES. The remedies provided herein shall be
the exclusive remedies of each of the parties hereto with respect to any Claims
or Damages arising out of the transactions contemplated by this Agreement,
including, without limitation, any Claim in tort or under any federal or state
securities laws; PROVIDED, HOWEVER, that the parties hereto shall be entitled to
an injunction or other equitable relief to prevent breaches of this Agreement,
to enforce specifically the terms and provisions of this Agreement or seek any
other remedy to which they are entitled in equity in any court of the United
States located in the State of New York or in New York State court.
10.8 TRANSFER PRICING. Seller and Buyer acknowledge and agree
that the buying agent fees and other pricing
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arrangements between CAT-US and CAT-Far East were established in good faith and
in accordance with industry standards.
10.9 CLAIMS AGAINST CAT DIRECTORS AND OFFICERS. Buyer hereby
agrees that it will not, and will not permit any of its affiliates, including
CAT, to, bring any claim against any of Messrs. Bernard Manuel, Irving Benson or
Roy Green for any action taken or failed to be taken by such person in his
capacity as an officer or director of CAT, other than any such claim for fraud
or intentional misconduct.
XI. MISCELLANEOUS.
11.1 FEES AND EXPENSES. Whether or not the transactions
contemplated hereby or by the Ancillary Agreements are consummated pursuant
hereto or thereto, each of Seller and Buyer shall pay all fees and expenses
incurred by it or on its behalf in connection with or in anticipation of this
Agreement and such related instruments and the consummation of the transactions
contemplated hereby and thereby.
11.2 FURTHER ASSURANCES. From time to time after the Closing
Date, at the request of any party hereto and at the expense of the party so
requesting, Buyer and Seller shall execute and deliver to such requesting party
such documents and take such other action as such requesting
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party may reasonably request in order to consummate more effectively the
transactions contemplated hereby, including, without limitation, such documents
or actions as Buyer may require for the purpose of enabling the recordation of
any Instrument of Assignment.
11.3 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered by hand, by
mail (certified or registered mail, return receipt requested), by reputable
overnight courier or by facsimile transmission (receipt of which is confirmed):
(a) If to Buyer or ATSC, to:
AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention: General Counsel
Facsimile: (212) 541-3299
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq.
Facsimile: (302) 651-3001
(b) If to Seller, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: General Counsel
Facsimile: (212) 536-4174
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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
or to such other person or address as any party shall specify by notice in
writing, given in accordance with this Section 11.3, to the other parties
hereto. All such notices, requests, demands, waivers and communications shall be
deemed to have been given on the date on which so hand-delivered, on the third
business day following the date on which so mailed, on the next business day
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.
11.4 ENTIRE AGREEMENT. This Agreement, the SELLER DISCLOSURE
SCHEDULE, the BUYER DISCLOSURE SCHEDULE, and the ANNEXES, EXHIBITS and other
documents referred to herein which form a part hereof (including, without
limitation, the Confidentiality Agreements referred to in Section 5.2 hereof)
contain the entire understanding of the parties hereto with respect to the
subject matter hereof. This Agreement supersedes all prior agreements
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and understandings, oral and written, with respect to its subject matter.
11.5 SEVERABILITY. Should any provision of this Agreement, or any
part thereof, for any reason be declared invalid or unenforceable, such
declaration shall not affect the validity or enforceability of any other
provision of this Agreement, or any other part thereof, all of which other
provisions, and parts, shall remain in full force and effect, and the
application of such invalid or unenforceable provision, or such part thereof, to
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.
11.6 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
Buyer or Seller without the prior written consent of the other parties hereto;
PROVIDED, HOWEVER, that ATSC or Buyer may assign any or all of its rights,
interests or obligations hereunder to any one or more direct or indirect wholly
owned subsidiaries of ATSC or Buyer, PROVIDED,
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HOWEVER, that no such assignment by ATSC or Buyer shall limit or affect ATSC or
Buyer's obligations hereunder.
11.7 AMENDMENT, MODIFICATION AND WAIVER. This Agreement may be
amended, modified or supplemented at any time by written agreement of the
parties hereto. Any failure by Seller, on the one hand, or ATSC or Buyer, on the
other hand, to comply with any term or provision of this Agreement may be waived
by ATSC or Buyer or Seller, respectively, at any time by an instrument in
writing signed by or on behalf of ATSC, Buyer or Seller, but such waiver or
failure to insist upon strict compliance with such term or provision shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure to comply.
11.8 THIRD-PARTY BENEFICIARIES. Except as otherwise expressly
provided herein, this Agreement is not intended, and shall not be deemed, to
confer upon or give any person except the parties hereto and their respective
successors and permitted assigns, any remedy, claim, liability, reimbursement,
cause of action or other right under or by reason of this Agreement.
11.9 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.
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11.10 BULK SALES. Without limiting Seller's obligations under
Section 10.2(f) hereof, each of Buyer and Seller hereby waive compliance by the
other with the "bulk sales" provisions of Article 6 of the Uniform Commercial
Code as may be in effect in the jurisdictions where the Assets are located and
any other similar provision of applicable law as may be in effect in any such
jurisdiction.
11.11 INTERPRETATION. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this 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. As used in this Agreement, the term "affiliate"
shall have the meaning set forth in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
11.12 GOVERNING LAW. This Agreement shall be governed by the laws
of the State of New York, without regard to the principles of conflicts of law
thereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Stock
and Asset Purchase Agreement as of the day and year first above written.
CYGNE DESIGNS, INC.
/s/ BERNARD M. MANUEL
By: -------------------------------
Name: Bernard M. Manuel
Title: Chairman
CYGNE GROUP (F.E.) LIMITED
/s/ BERNARD M. MANUEL
By: -------------------------------
Name: Bernard M. Manuel
Title: Director
ANNTAYLOR STORES CORPORATION
/s/ J. PATRICK SPAINHOUR
By: -------------------------------
Name: J. Patrick Spainhour
Title: President
ANNTAYLOR, INC.
/s/ J. PATRICK SPAINHOUR
By: -------------------------------
Name: J. Patrick Spainhour
Title: President
119
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EXHIBIT A
BILL OF SALE
THIS BILL OF SALE (the "Bill of Sale") is executed as of
__________, 1996 by CYGNE DESIGNS, INC., a Delaware corporation ("Seller"), in
favor of ANNTAYLOR, INC., a Delaware corporation ("Buyer"), in connection with
the transactions contemplated by the Stock and Asset Purchase Agreement dated as
of __________, 1996 (the "Purchase Agreement") by and between Seller, Buyer,
ANNTAYLOR STORES CORPORATION, a Delaware corporation and holder of all of the
outstanding capital stock of Buyer ("ATSC"), and CYGNE GROUP (F.E.) LIMITED, a
Hong Kong corporation and a wholly owned subsidiary of Seller. Capitalized terms
used and not otherwise defined herein shall have the respective meanings
ascribed to them in the Purchase Agreement.
INTENDING TO BE LEGALLY BOUND, and for good and valuable
consideration, sufficiency and receipt of which are hereby acknowledged, Seller
hereby sells, transfers, conveys, assigns and delivers unto Buyer, its
successors and assigns, forever, all of Seller's right, title and interest in
and to the assets of the Division listed and described on ANNEX I hereto
(collectively, the "Assets").
Notwithstanding the foregoing, nothing herein
<PAGE>
is intended to, nor shall this Bill of Sale, constitute or evidence the sale,
transfer, conveyance, assignment or delivery to Buyer of any assets not listed
or described on ANNEX I hereto.
Seller hereby authorizes Buyer to take any appropriate action to
protect the right, title and interest in the Assets hereby sold, conveyed,
assigned, transferred and delivered to Buyer, in the name of Seller or Buyer or
any other name (for the benefit of Buyer and its successors and assigns) against
each and every person or persons whomsoever claiming or asserting any claim
against any or all of the same.
Seller hereby covenants and agrees, pursuant to Section 1.1(b) of
the Purchase Agreement, to execute and deliver all such Other Instruments and
all such other notices, releases, acquittances, consents and powers of attorney
as may be necessary more fully to sell, transfer, convey and assign to Buyer, or
its successors or permitted assigns, all of Seller's right, title and interest
in and to the Assets therein and hereby sold, transferred, conveyed and assigned
to Buyer; and in case of conflict, such specific instrument shall control with
respect to the Assets sold, transferred, conveyed or assigned thereby.
2
<PAGE>
Seller hereby further covenants and agrees that in the event
Buyer shall acquire title to any of the Assets subject to any Lien, other than
those expressly permitted by the Purchase Agreement, Seller shall promptly cause
such Lien to be terminated, released or otherwise discharged.
3
<PAGE>
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be
executed as of the date first above written.
CYGNE DESIGNS, INC.
By: _______________________________
Name:
Title:
4
<PAGE>
ANNEX I TO
BILL OF SALE
THE ASSETS
The following property and assets of Seller comprise the Assets
to be purchased by Buyer:
(a) the following items of inventory (the "Inventory"): (x)
fabric and trim owned by Seller for use by the Division in the production of
merchandise for Buyer (the "Division Fabric and Trim") as of February 3, 1996
and identified on Attachment A hereto to the extent not used as of the Closing
Date in the production of merchandise for Buyer; (y) Division Fabric and Trim
purchased since February 3, 1996 pursuant to written commitments or purchase
orders issued by Buyer to the extent not used as of the Closing Date in the
production of merchandise for Buyer and (z) work-in-progress owned by Seller for
use by the Division in the production of merchandise for Buyer pursuant to
purchase orders issued by Buyer;
(b) all leasehold improvements, furniture, fixtures and equipment
that (x) are owned by Seller or subject to a Capital Lease (y) relate to and are
used exclusively or primarily in the Division Business and (z) are located on
the fifth, sixth or nineteenth floor of the NY Facility or
<PAGE>
at the Florence Facility on the Closing Date, including
those listed on ATTACHMENT B to this ANNEX I;
(c) all licenses, permits, registrations, renewals thereof and
applications therefor, variances, exemptions, orders, approvals and
authorizations issued by any governmental, regulatory or administrative agency
or authority (domestic or foreign), held by Seller or any affiliate of Seller of
or relating to the Division Business, including all quota allocations for the
export of goods to the United States and elsewhere, necessary or desirable for
the lawful conduct of the Division Business to the extent transferrable under
applicable law;
(d) all purchase orders, bills of lading, trust receipts,
warehouse receipts and other documents of title of whatever kind and description
relating to the Inventory;
(e) all rights under insurance policies covering Inventory in
transit and all rights and claims under insurance policies for damage to any
Assets to the extent not repaired or replaced prior to the Closing;
(f) all goodwill, intellectual property rights, patents,
trademarks, service marks, copyrights (including all copyrights in computer
software and databases), licenses and applications therefor (if any), know-how,
processes, methods, techniques, formulae, designs, drawings, patterns,
2
<PAGE>
trade secrets, proprietary information, sketches, technical information,
computer software, databases and other proprietary or confidential information
of or relating to the Division Business and all rights in any licenses to or
from any third party of or for the foregoing, it being understood, however, that
the rights to the Intellectual Property shall be non-exclusive unless such
Intellectual Property relates solely to the Division Business and Seller's
rights therein are exclusive;
(g) all intangible assets of or relating to the Division
Business, including claims against third parties; and
(h) all books and records (including all computerized records and
storage media and associated software) of CAT, and those relating solely to the
Division Business and, to the extent practicable, those portions of Seller's
other books and records that relate to the Division Business, including, without
limitation, (a) all Books and Records relating to the employees of and the
purchase of materials, supplies and services for the Division Business or CAT,
but not including the tax returns, general ledger or corporate minute books and
capital stock books of Seller, and (b) the tax returns, general ledger and
corporate minute books and capital stock books of CAT-US and CAT-Far East.
3
<PAGE>
EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
(Contracts)
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Assignment Agreement"),
dated as of __________, 1996, is made by and between Cygne Designs, Inc., a
Delaware corporation ("Assignor"), and AnnTaylor, Inc., a Delaware corporation
("Assignee").
W I T N E S S E T H
WHEREAS, Assignor is a party to certain contracts and obligations and all
amendments and supplements thereto identified on SCHEDULE I attached hereto and
incorporated by reference herein (the "Contracts").
WHEREAS, Assignor and Assignee are parties to the Stock and Asset Purchase
Agreement, dated as of June 7, 1996 (the "Purchase Agreement") by and between
Assignor, Assignee, AnnTaylor Stores Corporation, a Delaware corporation and
holder of all of the outstanding capital stock of Assignee, and Cygne Group
(F.E.) Limited, a Hong Kong Corporation and a wholly owned subsidiary of
Assignor, pursuant to which Assignor agreed to sell and Assignee agreed to
purchase, among other things, certain assets of Assignor, all in accordance with
the terms and conditions set forth in the Purchase Agreement. Capitalized terms
used and not otherwise defined herein shall have the respective meanings
ascribed to such terms in the Purchase Agreement.
WHEREAS, in connection with the transactions contemplated by the Purchase
Agreement, and pursuant thereto, among other things, Assignor has agreed to
enter into this Assignment Agreement to assign all of Assignor's right, title,
interest, duties and obligations in and to the Contracts to Assignee and, in
partial consideration therefor, among other things, Assignee has agreed to
accept such assignment of the Contracts and assume the duties and obligations of
Assignor under the Contracts arising from and after the date hereof. Seller
shall be responsible for and retains all liabilities for duties and obligations
incurred under the Contracts prior to the date hereof.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Purchase Agreement, the
parties hereto agree as follows:
1. ASSIGNMENT. Assignor does hereby sell, transfer, convey, assign and
deliver to Assignee all of Assignor's right, title, interest, duties and
obligation in and to the Contracts.
2. ACCEPTANCE AND ASSUMPTION. (a) Assignee does hereby irrevocably accept
such sale, transfer, conveyance, assignment and delivery of all of Assignor's
right, title, interest, duties and obligations in and to the Contracts, and does
hereby assume all duties and obligations of Assignor under the Contracts arising
from and after the date hereof. Seller shall be responsible for and retains all
liabilities for all duties and obligations incurred prior to the date hereof.
(b) Assignee covenants and agrees to pay, perform, discharge and
satisfy when due all of Assignor's covenants, agreements and obligations under
the Contracts arising from and after the date hereof pursuant to, and in
accordance with, the terms and conditions of the respective Contracts.
3. EFFECTIVE TIME. The assignment of the Contracts by Assignor, and the
acceptance of such assignment and the assumption of the duties and obligations
of Assignor under the Contracts by Assignee, all pursuant to this Assignment
Agreement, shall be effective as of the date hereof.
4. AMENDMENT, MODIFICATION AND WAIVER. This Assignment Agreement may be
amended, modified or supplemented at any time by written agreement of the
parties hereto. Any failure by Assignor, on the one hand, or Assignee, on the
other hand, to comply with any term or provision of this Assignment Agreement
may be waived by Assignee or Assignor, respectively, at any time by an
instrument in writing signed by or on behalf of Assignee or Assignor, but such
waiver or failure to insist upon strict compliance with such term or provision
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure to comply.
2
<PAGE>
5. NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Assignment Agreement
shall be in writing and shall be deemed to have been duly given if delivered
personally, by mail (certified or registered mail, return receipt requested), by
reputable overnight courier or by facsimile transmission (receipt of which is
confirmed):
(a) If to Assignee, to:
AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention: General Counsel
Facsimile: (212) 541-3299
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq.
Facsimile: (302) 651-3001
(b) If to Assignor, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: General Counsel
Facsimile: (212) 536-4174
with a copy to:
Fulbright and Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Roy L. Goldman, Esq.
Facsimile: (212) 752-5958
or to such other person or address as any party shall specify by notice in
writing, given in accordance with this Section 5, to the other parties hereto.
All such notices, requests, demands, waivers and communications shall be deemed
to have been given on the date on which so
3
<PAGE>
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.
6. THIRD-PARTY BENEFICIARIES. Except as otherwise expressly provided
herein, this Assignment 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 Assignment Agreement.
7. GOVERNING LAW. This Assignment Agreement shall be governed by the laws
of the State of New York, without regard to the principles of conflicts of law
thereof.
8. COUNTERPARTS. This Assignment Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall con-
stitute one and the same instrument.
9. INTERPRETATION. The section headings contained in this Assignment
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Assignment Agreement. As used in this Assignment Agreement, the term
"person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
10. BINDING EFFECT; ASSIGNMENT. This Assignment 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 Assignment Agreement nor any of
the rights, interests or obligations hereunder shall be assigned, directly or
indirectly, by Assignee or Assignor without the prior written consent of the
other party hereto; PROVIDED, HOWEVER, that Assignee may assign any or all of
its rights, interests or obligations hereunder to any one or
4
<PAGE>
more wholly owned subsidiary of AnnTaylor Stores Corporation, PROVIDED, HOWEVER,
that no such assignment by Assignee shall limit or affect Assignee's obligations
hereunder.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment Agreement to be duly executed as of the day and year first set forth
above.
ASSIGNOR:
CYGNE DESIGNS, INC.
By:_____________________________
Name:
Title:
ASSIGNEE:
ANNTAYLOR, INC.
By:_____________________________
Name:
Title:
6
<PAGE>
EXHIBIT C
UNDERTAKING
THIS UNDERTAKING ("Undertaking"), is executed and delivered on
this_____ day of______ , 1996, by AnnTaylor, Inc., a Delaware corporation
("Buyer"), in favor of Cygne Designs, Inc., a Delaware corporation
("Seller").
W I T N E S S E T H:
WHEREAS, pursuant to the Stock and Asset Purchase Agreement
dated as of June 7, 1996 (the "Purchase Agreement") by and between Buyer,
Seller, AnnTaylor Stores Corporation, a Delaware corporation and holder of all
of the outstanding capital stock of Buyer, and Cygne Group (F.E.) Limited, a
Hong Kong corporation and wholly owned subsidiary of Seller, Seller has, among
other things, concurrently herewith sold, conveyed, assigned, transferred and
delivered to Buyer all of Seller's rights, title and interest in and to certain
of the assets of Seller.
WHEREAS, in partial consideration therefor, the Purchase
Agreement requires that Buyer undertake to assume and to agree to perform, pay
or discharge or cause
<PAGE>
to be performed, paid or discharged certain liabilities
and obligations of Seller.
NOW, THEREFORE, in consideration of these premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Buyer agrees as follows (capitalized terms used but not
otherwise defined herein having the respective meanings ascribed to them in the
Purchase Agreement):
1. Buyer hereby undertakes, assumes and agrees to pay or
discharge in accordance with their terms, to the extent not heretofore paid or
discharged and subject to the limitations contained in this Undertaking and to
the terms of the Purchase Agreement, the Accounts Payable of Seller which are
listed or described in ANNEX I hereto.
2. The assumption by Buyer of the liabilities and obligations
set forth in this Undertaking shall not be construed to defeat, impair or limit
in any way the rights, claims or remedies of Buyer under the Purchase Agreement.
3. Other than as expressly set forth in this
Undertaking, the Purchase Agreement or any Instruments of
Assignment, Buyer assumes no liability or obligation of
2
<PAGE>
any kind, character or description of Seller or any other
person.
4. This Undertaking shall be enforceable
against the successors and assigns of Buyer and shall
inure to the benefit of the successors and assigns of
Seller.
IN WITNESS WHEREOF, this Undertaking has been duly executed
and delivered by the duly authorized officers of AnnTaylor, Inc. on the date
first above written.
ANNTAYLOR, INC.
By:____________________________
Name:
Title:
3
<PAGE>
ANNEX I TO
UNDERTAKING
ASSUMED LIABILITIES
4
<PAGE>
EXHIBIT D
ADVANCE INSTRUMENT
THIS ADVANCE INSTRUMENT (the "Advance Instrument"), dated as of
__________, 1996, is executed and delivered by AnnTaylor, Inc. ("Ann Taylor") in
favor of Cygne Designs, Inc., a Delaware corporation ("Cygne").
W I T N E S S E T H
WHEREAS, Ann Taylor and Cygne are parties to a
Letter Agreement, dated as of February 10, 1995, pursuant to which Ann Taylor
made cash advances to Cygne in the amount of $5,000,000 (the "Advance").
WHEREAS, Ann Taylor made certain additional cash advances to
Cygne in the amount of $2,985,000 (the "Additional Advances").
WHEREAS, Cygne is party to a Stock and Asset Purchase Agreement,
dated as of June 7, 1996 (the "Purchase Agreement") by and among Cygne, Cygne
Group (F.E.) Limited, a Hong Kong corporation and wholly owned subsidiary of
Cygne, AnnTaylor Stores Corporation, a Delaware corporation and holder of all of
the outstanding capital stock of Ann Taylor ("ATSC"), and Ann Taylor, pursuant
to
<PAGE>
which Buyer is purchasing from Seller and Seller is selling to Buyer certain
assets of Seller.
WHEREAS, in connection with the transactions contemplated by the
Purchase Agreement, and pursuant thereto, among other things, ATSC has agreed to
cause Ann Taylor to enter into this Advance Instrument to forgive, release and
discharge the Advance and the Additional Advances.
NOW, THEREFORE, in consideration of the premises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. RELEASE AND DISCHARGE. Ann Taylor, for itself and its
successors and assigns, does hereby forgive, release and discharge Cygne from
any and all of Cygne's obligations for the repayment of the Advance and the
Additional Advances and from any and all manner of actions and causes of action,
claims and demands, suits, damages, costs, legal fees, expenses, debts, dues,
accounts, bonds, covenants, contracts, agreements and compensation whatsoever,
in law or in equity, whether the same are known or unknown, accrued or
unaccrued, fixed or contingent ("Claims") which Ann Taylor now has or may
hereafter have against Cygne in as much as such Claims
2
<PAGE>
relate to repayment of the Advance or the Additional Advances.
2. AMENDMENT, MODIFICATION AND WAIVER. This Advance Instrument
may be amended, modified or supplemented at any time by written agreement of the
parties hereto. Any failure by Cygne, on the one hand, or AnnTaylor, on the
other hand, to comply with any term or provision of this Advance Instrument may
be waived by AnnTaylor or Cygne, respectively, at any time by an instrument in
writing signed by or on behalf of AnnTaylor or Cygne, but such waiver or
failure to insist upon strict compliance with such term or provision shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure to comply.
3. NOTICES. All notices, requests, demands, waivers and other
communications given under this Advance Instrument shall be in writing and shall
be deemed to have been duly given if delivered personally, by mail (certified or
registered mail, return receipt requested), by reputable overnight courier or by
facsimile transmission (receipt of which is confirmed):
3
<PAGE>
(a) If to Ann Taylor, to
AnnTaylor, Inc.
142 West 57th Street
New York, New York 10019
Attention: General Counsel
Facsimile: (212) 541-3299
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq.
Facsimile: (302) 651-3001
(b) If to Cygne, to:
Cygne Designs, Inc.
1372 Broadway
New York, New York 10018
Attention: General Counsel
Facsimile: (212) 536-4174
with a copy to:
Fulbright and Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Roy L. Goldman, Esq.
Facsimile: (212) 752-5958
or to such other person or address as any party shall specify by notice in
writing, given in accordance with this Section 3, to the other parties hereto.
All such notices, requests, demands, waivers and communications shall be deemed
to have been given on the date on which so hand-delivered, on the third business
day following the date on which so mailed, on the next business day following
4
<PAGE>
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.
4. THIRD-PARTY BENEFICIARIES. Except as otherwise expressly
provided herein, this Advance Instrument is not intended, and shall not be
deemed, to confer upon or give any person except the parties hereto and their
respective successors and permitted assigns, any remedy, claim, liability,
reimbursement, cause of action or other right under or by reason of this Advance
Instrument.
5. GOVERNING LAW. This Advance Instrument shall be governed by
the laws of the State of New York, without regard to the principles of conflicts
of law thereof.
6. COUNTERPARTS. This Advance Instrument may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7. INTERPRETATION. The section headings contained in this
Advance Instrument 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 Advance Instrument. As used in
5
<PAGE>
this Advance Instrument, the term "person" shall mean and include an individual,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
8. BINDING EFFECT; ASSIGNMENT. This Advance Instrument and all of
the provisions hereof shall be 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 Advance Instrument nor
any of the rights, interests or obligations hereunder shall be assigned,
directly or indirectly, by Ann Taylor or Cygne without the prior written consent
of the other party hereto; PROVIDED, HOWEVER, that Ann Taylor may assign any or
all of its rights, interests or obligations hereunder to any one or more wholly
owned subsidiary of ATSC, PROVIDED, HOWEVER, that no such assignment by
Ann Taylor shall limit or affect Ann Taylor's obligations hereunder.
6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Advance
Instrument to be duly executed as of the day and year first above written.
ANNTAYLOR, INC.
By:_____________________________
Name:
Title:
CYGNE DESIGNS, INC.
By:_____________________________
Name:
Title:
7
<PAGE>
EXHIBIT E
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (the "Pledge Agreement"), dated_______ ,
1996, is made by and between Cygne Designs, Inc. ("Seller") and AnnTaylor, Inc.,
a Delaware corporation ("Buyer") (the "Pledge Agreement"). Capitalized terms
used and not otherwise defined herein shall have the respective meanings set
forth in the Stock and Asset Purchase Agreement, dated_______ , 1996, by and
among the parties hereto and AnnTaylor Stores Corporation, a Delaware
corporation and holder of all of the outstanding capital stock of Buyer, and
Cygne Group (F.E.) Limited ("CGFE"), a Hong Kong corporation and a wholly owned
subsidiary of Seller (the "Purchase Agreement").
W I T N E S S E T H
WHEREAS, the parties hereto have entered into the Purchase
Agreement providing for, among other things, the sale by Seller to Buyer of the
Assets and the sale by Seller and CGFE to Buyer of the CAT Shares owned by it,
for the Purchase Price specified in the Purchase Agreement;
WHEREAS, under the terms of the Purchase Agreement, a portion
of the estimated Cash Consideration is to be deposited by Buyer in an account in
the name of Buyer, subject to the security interest of Seller, at [Bank] pending
final resolution of the amount of the Cash Consideration, which account and
security shall be pledged upon consummation of the Closing by Buyer to Seller,
pursuant to this Pledge Agreement;
WHEREAS, Buyer has caused to be opened Account No. _________
(the "Bank Account") with [Bank] at its office at [Address], in the name of
Buyer, as pledgor, subject to the security interest of Seller, as pledgee, and
has caused such account to be credited with ___________ [$ amount equal to 20%
of the Estimated Amount] in immediately available funds (the "Pledged Amount");
and
WHEREAS, Buyer wishes to pledge and to grant a security
interest in the Bank Account and the Pledged Amount to Seller as herein
provided;
NOW, THEREFORE, in consideration of the premises
contained herein and for other good and valuable consideration,
<PAGE>
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
SECTION 1. PLEDGE. Buyer hereby pledges and grants
to Seller a security interest in the following collateral (the
"Collateral"):
(a) the Bank Account and all certificates and in-
struments, if any, from time to time representing or
evidencing the Bank Account;
(b) the Pledged Amount and all certificates and in-
struments, if any, from time to time representing or
evidencing the Pledged Amount;
(c) all interest, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of the then existing Collateral or
otherwise credited to the Bank Account; and
(d) all proceeds of any and all of the foregoing
Collateral.
SECTION 2. SECURITY FOR OBLIGATIONS. This Pledge Agreement and
the security interest in and pledge of the Collateral hereunder secures the
payment to Seller of all obligations of Buyer owed to Seller now or hereafter
existing under the Purchase Agreement and any fees and expenses (including
attorney's fees) incurred in connection with the successful exercise by the
secured party of any of its remedies hereunder (all such obligations of Buyer
being referred to hereinafter as the "Obligations").
SECTION 3. MAINTAINING THE ACCOUNT. Title to the Bank Account
and the Pledged Amount shall remain and reside in Buyer but subject to the
rights of Seller hereunder, until the proceeds of the Pledged Amount are
distributed to the parties, as their interests may appear, pursuant to the terms
of the Purchase Agreement. So long as any Obligations of Buyer are outstanding,
it shall be a term and condition of the Bank Account, except as otherwise
provided by the provisions of Section 8 of this Pledge Agreement, that no amount
(including interest on the Bank Account) shall be paid or released to or for the
account of or withdrawn by or for the account of Buyer or any other person or
entity from the Bank Account.
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SECTION 4. INVESTING OF AMOUNTS IN THE ACCOUNT. Buyer may from
time to time (i) invest amounts on deposit in the Bank Account in such notes,
certificates of deposit and other debt instruments as Buyer may select and
Seller may approve ("Permitted Investments") and (ii) invest interest paid on
the Permitted Investments referred to in clause (i) above, and reinvest other
proceeds of any such Permitted Investments which may mature or be sold, in each
case in such Permitted Investments as Buyer may select and Seller may approve.
Seller hereby approves any U.S. Treasury security having a remaining maturity of
30 days or less. Interest and proceeds that are not invested or reinvested in
Permitted Investments as provided above shall be deposited and held in the Bank
Account.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
(a) Buyer represents that it is the legal and beneficial owner
of the Collateral free and clear of any lien, security interest, option or other
charge or encumbrance except for the security interest created by this Pledge
Agreement.
(b) Buyer represents that the pledge of the Collateral
pursuant to this Pledge Agreement creates a valid and perfected first priority
security interest in the Collateral, securing the payment of the Obligations.
(c) Buyer represents that no consent of any other person or
entity and no authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required (i) for
the pledge by Buyer of the Collateral pursuant to this Pledge Agreement or for
the execution, delivery or performance of this Pledge Agreement by Buyer, (ii)
for the perfection or maintenance of the security interest created hereby
(including the first priority nature of such security interest) or (iii) for the
exercise by Seller of its rights and remedies hereunder.
(d) Buyer and Seller represent that there are no
conditions precedent to the effectiveness of this Pledge
Agreement that have not been satisfied or waived.
SECTION 6. FURTHER ASSURANCES. Seller and Buyer agree that at
any time and from time to time, at the expense of Seller and Buyer, Seller and
Buyer will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or
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that Seller may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Seller to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
SECTION 7. TRANSFERS AND OTHER LIENS. Buyer agrees that it
will not (i) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Collateral or (ii)
create or permit to exist any lien, security interest option or other charge or
encumbrance upon or with respect to any of the Collateral except for the
security interest under this Pledge Agreement.
SECTION 8. WITHDRAWALS UPON FINAL DETERMINATION OF THE
PURCHASE PRICE ADJUSTMENT. Upon the final determination of the Purchase Price
pursuant to Section 1.6 of the Purchase Agreement, (i) Seller hereby releases
its right and security interest in the Pledged Amount (but not in the proceeds
thereof, to the extent such proceeds are due to Seller pursuant to said Section
1.6) without any further action required on the part of Seller, (ii) Buyer shall
retain any amounts to which it is entitled under Section 1.6 of the Purchase
Agreement and (iii) Buyer shall deliver to Seller the remaining amount in the
Pledged Amount, if any.
SECTION 9. REMEDIES. Seller shall have all rights
and remedies available to a secured creditor under the New
York Uniform Commercial Code (the "Code").
SECTION 10. EXPENSES. Notwithstanding anything in this Pledge
Agreement to the contrary, whether or not the transactions contemplated by this
Pledge Agreement shall be consummated, each party hereto shall pay its own
expenses incident to preparing for, entering into and carrying out this Pledge
Agreement, except to the extent provided in Section 2 hereof.
SECTION 11. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Pledge Agreement, and no consent to any departure by Buyer
herefrom shall in any event be effective unless the same shall be in writing and
signed by Seller, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 12. ADDRESSES FOR NOTICES. All notices and
other communications provided for hereunder shall be in writ-
ing and shall be deemed given upon receipt by the parties at
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the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Buyer, to:
AnnTaylor, Inc.
142 West 57th Street
New York, New York 10016
Attention: Paul E. Francis
Telecopy: (212) 541-3299
with a copy to:
AnnTaylor, Inc.
142 West 57th Street
New York, New York 10016
Attention: Jocelyn F.L. Barandiaran
Telecopy: (212) 541-3299
and a further copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
7th Floor
Wilmington, DE 19801
Attention: Patricia Moran Chuff
Telecopy: 302-651-3001
and
(b) if to Seller, to
Cygne Designs, Inc.
1372 Broadway
New York, New York
Attention: Bernard M. Manuel
Telecopy: (212) 921-8318
with a copy to:
Cygne Designs, Inc.
1372 Broadway
New York, New York
Attention: Paul D. Baiocchi
Telecopy: (212) 921-8318
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and a further copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Roy L. Goldman
Telecopy: (212) 752-5958
SECTION 13. CONTINUAL SECURITY INTEREST; TERMINATION. This
Pledge Agreement shall create a continuing security interest in the Collateral
and shall (i) remain in full force and effect until the payment in full of the
Obligations and all other amounts payable under this Pledge Agreement, (ii) be
binding upon Buyer, its successors and assigns, and (iii) inure to the benefit
of, and be enforceable by, Seller and its respective successors, transferees and
assigns.
SECTION 14. GOVERNING LAW; TERMS. This Pledge Agreement shall
be governed by and construed in accordance with the laws of the State of New
York without regard to any applicable principles of conflicts of law. Unless
otherwise defined herein or in the Purchase Agreement, terms defined in Article
9 of the Code are used herein as therein defined.
IN WITNESS WHEREOF, Buyer and Seller have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ANNTAYLOR, INC.
By:_____________________________
Name:
Title:
CYGNE DESIGNS, INC.
By:_____________________________
Name:
Title:
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EXHIBIT F
TERM SHEET
NY Transition Services Agreement
ACCESS TO CAM-CAD EQUIPMENT Buyer shall allow up to two (2) of Seller's
employees access to the CAM-CAD marking and
grading work stations free of charge from the date
of the Closing through the end of fiscal 1996.
OPTION TO PURCHASE Seller shall have the option to purchase the
CAM-CAD equipment at the end of fiscal 1996 at its
net book value.
ACCESS TO SAMPLE ROOM AND Buyer shall allow up to three (3) patternmakers
EQUIPMENT and up to six (6) sewers to use the sample room
and related equipment free of charge from the date
of the Closing through the sixty (60)-day period
following the date of the Closing.
<PAGE>
EXHIBIT G
TERM SHEET
Miami Transition Services Agreement
WAREHOUSE RENTAL PAYMENT Buyer shall pay to Seller $40,000
per year (representing 50% of the
amount of the rent paid by Seller
under the Miami Lease applicable
to the portion of the Miami
Facility relating to the trim and
consolidation warehouse) for a
period of two (2) years from the
Closing Date.
WAREHOUSE LABOR PAYMENTS Seller shall provide to Buyer
trim and consolidation services of
five (5) employees of Seller at
the Miami Facility and Buyer shall
pay to Seller an amount equal to
50% of the labor costs associated
with such employees for a period
of two (2) years from the Closing
Date, subject to earlier
termination by Buyer upon ninety
(90) days' notice to Seller.
<PAGE>
EXPIRATION OF MIAMI LEASE Upon expiration of the current
rent term of the Miami Lease on
January 20, 1997: (i) in the event
that Seller does not renew the
Miami Lease and ceases its Miami
trim and consolidation operations,
then the Miami Transition
Services Agreement shall
terminate; and (ii) in the event
that Seller does not renew the
Miami Lease but relocates and
continues the Miami trim and
consolidation operations in
another facility, then the Miami
Transition Services Agreement
shall apply to the new facility.
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EXHIBIT H
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is made and entered into as of the ___
day of August, 1996, by and between AnnTaylor Stores Corporation, a Delaware
corporation ("ATSC"), AnnTaylor, Inc., a Delaware corporation and wholly owned
subsidiary of ATSC ("ATI" and, together with ATSC, "Ann Taylor"), Cygne Designs,
Inc., a Delaware corporation ("Cygne"), and Mr. Bernard M. Manuel
("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, 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
<PAGE>
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:
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(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
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<PAGE>
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.
(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
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<PAGE>
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.
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(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.
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<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
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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
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
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(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,
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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.
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
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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.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date and year first above written.
ANNTAYLOR STORES CORPORATION
By:__________________________
Name:
Title:
ANNTAYLOR, INC.
By:__________________________
Name:
Title:
CYGNE DESIGNS, INC.
By:__________________________
Name:
Title:
CONSULTANT
_____________________________
Bernard M. Manuel
Consultant
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EXHIBIT I
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is made and entered into as of the
___ day of August, 1996, by and between AnnTaylor Stores Corporation, a Delaware
corporation ("ATSC"), AnnTaylor, Inc., a Delaware corporation and wholly owned
subsidiary of ATSC ("ATI" and, together with ATSC, "Ann Taylor"), Cygne Designs,
Inc., a Delaware corporation ("Cygne"), and Mr. Irving Benson ("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, 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,
<PAGE>
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.
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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:
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(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
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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.
(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
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<PAGE>
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.
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<PAGE>
(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.
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<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
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<PAGE>
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
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
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<PAGE>
(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 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,
10
<PAGE>
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.
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
11
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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.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date and year first above written.
ANNTAYLOR STORES CORPORATION
By:__________________________
Name:
Title:
ANNTAYLOR, INC.
By:__________________________
Name:
Title:
CYGNE DESIGNS, INC.
By:__________________________
Name:
Title:
CONSULTANT
_____________________________
Irving Benson
Consultant
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EXHIBIT J
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of August __, 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 ___, 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 ______ 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:
<PAGE>
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.
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The term "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations of the SEC promulgated
thereunder.
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
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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
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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).
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.
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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
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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 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
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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,
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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;
(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
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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)
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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 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
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(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
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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 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
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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.
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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), 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
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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
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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 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.
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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 AUGUST __, 1996, AS MAY BE AMENDED FROM TIME TO
TIME, BETWEEN ATSC AND CYGNE DESIGNS, INC. A COPY OF SUCH AGREEMENT IS ON FILE
WITH THE SECRETARY OF THE COMPANY."
Section 4.03 Recapitalization.
In the event that any capital stock or other securities are
issued as a dividend or distribution on, in respect of, in exchange for, or in
substitution of, any Acquisition Shares, such securities shall be deemed to be
Acquisition Shares for all purposes under this Agreement.
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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
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
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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.
20
<PAGE>
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 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
21
<PAGE>
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:_________________________
Name:
Title:
CYGNE DESIGNS, INC.
By:_________________________
Name:
Title:
CYGNE GROUP (F.E.) LIMITED
By:_________________________
Name:
Title:
22
<PAGE>
EXHIBIT K
TERM SHEET
Florence Lease
LEASE Seller shall lease to Buyer the second floor of the Florence
Facility.
TERM Five (5) years, subject to cancellation at any time by either
party upon six (6) months' notice of termination. In the event of
termination by Seller, Seller shall purchase the leasehold
improvements from Buyer at their then net book value.
RENT $6,666.67 per month (which Seller represents is equivalent to the
current intercompany charge for rent of the Florence Facility from
an affiliate of Seller).
<PAGE>
EXHIBIT L
Skadden, Arps, Slate, Meagher & Flom, special counsel to Buyer and
ATSC, shall render its opinion to the following effect in a form reasonably
acceptable to Buyer (capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Stock and Asset Purchase Agreement):
1. Each of Buyer and ATSC are corporations validly existing and in
good standing under the laws of the State of Delaware. Each of Buyer and ATSC is
qualified to do business and is in good standing as a foreign corporation under
the laws of the State of New York.
2. Buyer has all requisite corporate power and authority to execute,
deliver and perform all of its obligations under (i) the Agreement, (ii) the
Assignment and Assumption Agreement, (iii) the Undertaking, (iv) the Manuel
Consulting Agreement, (v) the Benson Consulting Agreement, (vi) [the Subleases],
(vii) the Pledge Agreement and (viii) the Florence Lease. (The agreements listed
in clauses (ii)-(viii) are hereinafter collectively referred to as the "Buyer
Transaction Documents.") The execution and delivery of each of the Agreement and
the Buyer Transaction Documents, and the consummation by Buyer of the
transactions contemplated thereby, have been duly authorized by all requisite
corporate action on the part of Buyer.
3. ATSC has all requisite corporate power and authority to execute,
deliver and perform all of its obligations under (i) the Agreement and (ii) the
Stockholders Agreement. The execution and delivery of the Agreement and the
Stockholders Agreement, and the consummation of the transactions contemplated
thereby, have been duly authorized by all requisite corporate action on the part
of ATSC.
4. Each of the Agreement and the Buyer Transaction Documents have been
duly and validly executed and delivered by Buyer and (assuming each of the
Agreement and the Buyer Transaction Documents is a valid and binding obligation
of each of the other parties thereto) each constitutes the valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms,
except that the enforceability thereof may be limited by (i) bankruptcy,
insolvency, reorganization, fraudulent transfer, equity of redemption,
moratorium or other
<PAGE>
similar laws now or hereafter in effect relating to creditors' rights
generally, and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
5. Each of the Agreement and the Stockholders Agreement has been duly
and validly executed and delivered by ATSC and (assuming each of the Agreement
and the Stockholders Agreement is a valid and binding obligation of each of the
other parties thereto) each constitutes the valid and binding obligation of ATSC
enforceable against ATSC in accordance with its terms, except that the
enforceability thereof may be limited by (i) bankruptcy, insolvency,
reorganization, fraudulent transfer, equity of redemption, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally,
and (ii) general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
6. The execution and delivery by Buyer of each of the Agreement and
the Buyer Transaction Documents and the performance of its obligations under
each of the Agreement and the Buyer Transaction Documents, each in accordance
with its terms, do not (i) conflict with the Certificate of Incorporation or
By-laws of Buyer, (ii) constitute a violation of, or a default under, any
Applicable Contract (as hereinafter defined) or (iii) cause the creation of any
security interest or lien upon any property of Buyer pursuant to any Applicable
Contract. As used in such counsel's opinion, "Applicable Contracts" shall mean
those agreements or instruments set forth on a Schedule to such opinion and
which have been identified to such counsel as all the agreements and instruments
which are material to the business or financial condition of ATSC and its
subsidiaries, taken as a whole.
7. The execution and delivery by ATSC of each of the Agreement and the
Stockholders Agreement and the performance of its obligations under each of the
Agreement and the Stockholders Agreement, each in accordance with its terms, do
not (i) conflict with the Certificate of Incorporation or By-laws of ATSC, (ii)
constitute a violation of, or a default under, any Applicable Contract or (iii)
cause the creation of any security interest or lien upon any property of ATSC
pursuant to any Applicable Contract.
2
<PAGE>
8. The shares of ATSC Common Stock to be delivered to Seller in
payment of the Stock Consideration have been duly authorized and, upon issuance
of certificates therefor conforming to the specimen examined by such counsel,
against delivery of the CAT shares and the Assets for such ATSC Common Stock in
accordance with the terms of the Agreement, will be validly issued, fully paid
and non-assessable shares of common stock of ATSC.
9. No Governmental Approval (as hereinafter defined), which has not
been obtained or taken and is not in full force and effect, is required to
authorize or is required in connection with the execution, delivery or
performance of the Agreement or the Buyer Transaction Documents by Buyer.
10. No Governmental Approval, which has not been obtained or taken and
is not in full force and affect, is required to authorize or is required in
connection with the execution, delivery or performance of the Agreement or the
Stockholders Agreement by ATSC.
11. Neither the execution, delivery or performance by Buyer of the
Agreement and the Buyer Transaction Documents nor the compliance by Buyer with
the terms and provisions thereof will contravene any provision of any Applicable
Law.
12. Neither the execution, delivery or performance by ATSC of the
Agreement and the Stockholders Agreement nor the compliance by ATSC with the
terms and provisions thereof will contravene any provision of any Applicable
Law.
As used in such counsel's opinion, (i) "Governmental Approval" shall
mean any consent, approval, license, authorization or validation of, or filing,
recording or registration with, any Governmental Authority pursuant to any
Applicable Law, (ii) "Governmental Authority" shall mean any Delaware, New York
or federal executive, legislative, judicial, administrative or regulatory body
under any Applicable Law, and (iii) "Applicable Law" shall mean any law of the
State of New York, the General Corporation Law of the State of Delaware or any
law of the United States, which, in such counsel's experience, are normally
applicable to transactions of the type contemplated by the Agreement, the Buyer
Transaction Documents and the Stockholders Agreement.
3
<PAGE>
EXHIBIT M
Fulbright & Jaworski, special counsel to Seller and CGFE, shall render
its opinion to the following effect in a form reasonably acceptable to Buyer
(capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Stock and Asset Purchase Agreement):
1. Each of Seller, CGFE, CAT-US and CAT-Far East is a corporation
validly existing and in good standing under the laws of its jurisdiction of
organization. Each of Seller and CAT-US is qualified to do business and is in
good standing as a foreign corporation under the laws of the State of New York,
and, in the case of Seller, the laws of the State of Florida.
2. Seller has all requisite corporate power and authority to execute,
deliver and perform all of its obligations under (i) the Agreement, (ii) the
Assignment and Assumption Agreement, (iii) the Bill of Sale, (iv) the Manuel
Consulting Agreement, (v) the Benson Consulting Agreement, (vi) the [Subleases],
(vii) the Pledge Agreement, (viii) the Florence Lease and (ix) the Stockholders
Agreement. (The agreements listed in clauses (ii)-(ix) are hereinafter
collectively referred to as the "Seller Transaction Documents".) The execution
and delivery of each of the Agreement and the Seller Transaction Documents, and
the consummation by Seller of the transactions contemplated thereby, have been
duly authorized by all requisite corporate action on the part of Seller.
3. CGFE has all requisite corporate power and authority to execute,
deliver and consummate the transactions contemplated by the Agreement and the
Stockholders Agreement. The execution and delivery of the Agreement and the
Stockholders Agreement, and the consummation of the transactions contemplated
thereby, have been duly authorized by all requisite corporate action on the part
of CGFE.
4. Each of the Agreement and the Seller Transaction Documents has been
duly and validly executed and delivered by Seller, and (assuming each of the
Agreement and the Seller Transaction Documents is a valid and binding obligation
of each of the other parties thereto) each constitutes the valid and binding
obligation of Seller enforceable against Seller in accordance with its
<PAGE>
terms, except that the enforceability thereof may be limited by (i) bankruptcy,
insolvency, reorganization, fraudulent transfer, equity of redemption,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at law).
5. Each of the Agreement and the Stockholders Agreement has been duly
and validly executed and delivered by CGFE and (assuming each of the Agreement
and the Stockholders Agreement is a valid and binding obligation of each of the
other parties thereto) each constitutes the valid and binding obligation of CGFE
enforceable against CGFE in accordance with its terms, except that the
enforceability thereof may be limited by (i) bankruptcy, insolvency,
reorganization, fraudulent transfer, equity of redemption, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally,
and (ii) general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
6. The certificates representing the CAT US Shares are listed on
Schedule I hereto. Assuming that Buyer acquired its interest in the CAT US
Shares in good faith and without notice of any adverse claims (within the
meaning of Section 8-302 of the New York Uniform Commercial Code) and has not
been a party to any fraud or illegality affecting such shares, upon delivery to
Buyer at the Closing in the State of New York of the CAT US Shares, duly
endorsed to Buyer or accompanied by stock powers duly executed in blank, Buyer
will acquire all of Seller's rights in the CAT US Shares free of any adverse
claims (within the meaning of Section 8-302 of the New York Uniform Commercial
Code).
7. The certificates representing the CAT-Far East Shares are listed on
Schedule II hereto. Assuming that Buyer acquired its interest in the CAT-Far
East Shares in good faith and without notice of any adverse claims (within the
meaning of Section 8-302 of the New York Uniform Commercial Code) and has not
been a party to any fraud or illegality affecting such shares, upon delivery to
Buyer at the Closing in the State of New York of the CAT-Far East Shares, duly
endorsed to Buyer or accompanied by stock powers duly executed in blank, Buyer
will acquire all of CGFE's rights in the CAT-Far East
2
<PAGE>
Shares free of any adverse claims (within the meaning of Section 8-302 of the
New York Uniform Commercial Code).
8. No Governmental Approval (as hereinafter defined), which has not
been obtained or taken and is not in full force and effect, is required to
authorize or is required in connection with the execution, delivery or
performance of the Agreement or the Seller Transaction Documents by Seller.
9. No Foreign Governmental Approval (as hereinafter defined), which
has not been obtained or taken and is not in full force and effect, is required
to authorize or is required in connection with the execution, delivery or
performance of the Agreement or the Stockholders Agreement by CGFE. As used in
such counsel's opinion, "Foreign Governmental Approval" shall mean any consent,
approval, license, authorization or validation of, or filing, recording or
registration with, any governmental authority pursuant to the laws of Hong Kong
to the extent specifically referred to herein.
10. The execution and delivery by Seller of each of the Agreement and
the Seller Transaction Documents and the performance by Seller of its
obligations under each of the Agreement and the Seller Transaction Documents,
each in accordance with its terms, do not (i) violate the Certificate of
Incorporation or By-laws of Seller, (ii) constitute a violation of or a default
under any Applicable Contract or (iii) cause the creation of any security
interest or lien upon any of the property of Seller pursuant to any Applicable
Contract. As used in such counsel's opinion, "Applicable Contracts" shall mean
those agreements or instruments set forth on a Schedule to such opinion and
which have been identified to such counsel as all the agreements and instruments
which are material to the business or financial condition of Seller and its
subsidiaries taken as a whole.
11. The execution and delivery by CGFE of each of the Agreement and
the Stockholders Agreement and the performance by CGFE of its obligations under
each of the Agreement and the Stockholders Agreement, each in accordance with
its terms, do not (i) violate the organizational documents of CGFE, (ii)
constitute a violation of or a default under any Applicable Contract or (iii)
cause the creation of any security interest or lien upon any of the property of
CGFE pursuant to any Applicable Contract.
3
<PAGE>
12. Neither the execution, delivery or performance by Seller of the
Agreement and the Seller Transaction Documents nor the compliance by Seller with
the terms and provisions thereof will contravene any Applicable Law.
13. Neither the execution, delivery or performance by CGFE of the
Agreement and the Stockholders Agreement nor the compliance by CGFE with the
terms and provisions thereof will contravene any provision of any Applicable
Law.
As used in such counsel's opinion, (i) "Governmental Approval" shall
mean any consent, approval, license, authorization or validation of, or filing,
recording or registration with, any Governmental Authority pursuant to any
Applicable Law, (ii) "Governmental Authority" shall mean any Delaware, New York
or federal executive, legislative, judicial, administrative or regulatory body
under any Applicable Law, and (iii) "Applicable Law" shall mean any law of the
State of New York, the General Corporation Law of the State of Delaware or any
law of the United States, which, in such counsel's experience, are normally
applicable to transactions of the type contemplated by the Agreement and the
Seller Transaction Documents.
Grunfeld, Desiderio, Lebowitz & Silverman LLP, customs counsel to
Seller and CGFE, shall render its opinion to the following effect in a form
reasonably acceptable to Buyer (capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Stock and Asset Purchase
Agreement):
1. Seller has all licenses, permits, consents, orders, approvals and
other authorizations necessary under the customs and trade laws of the United
States of America, including, without limitation, bilateral trade agreements
(collectively, "Customs Laws"), to carry on the Division Business as currently
being conducted, except where the failure to have such licenses, permits,
consents, orders, approvals or other authorizations would not have a Material
Adverse Effect on Seller, CAT or the Division.
2. The execution and delivery by Seller of the Agreement and the
Seller Transaction Documents do not, and the consummation by Seller of the
transactions contemplated thereby will not, (a) result in any violation of or
default under, or to our knowledge the creation of any Lien, charge or
encumbrance upon any of the Assets of Seller related to the Division Business
under,
4
<PAGE>
any law or any rule or regulation known to us, or any judgment, decree or order
of any Governmental Authority known to us, in each case under the Customs Laws,
to which Seller is a party or to which any property or asset related to the
Division Business is subject; or (b) result in any suspension, revocation,
impairment, forfeiture or nonrenewal of any license under the Customs Laws.
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Company's Condensed Consolidated Balance Sheets and Condensed Consolidated
Statements of Operations and is qualified in its entirety by reference to such
financial statements
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> MAY-04-1996
<CASH> 8,473
<SECURITIES> 0
<RECEIVABLES> 40,511
<ALLOWANCES> 0
<INVENTORY> 13,441
<CURRENT-ASSETS> 75,863
<PP&E> 13,211
<DEPRECIATION> 0
<TOTAL-ASSETS> 94,534
<CURRENT-LIABILITIES> 78,151
<BONDS> 0
0
0
<COMMON> 124
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 94,534
<SALES> 83,756
<TOTAL-REVENUES> 83,756
<CGS> 73,044
<TOTAL-COSTS> 73,044
<OTHER-EXPENSES> 8,862
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 935
<INCOME-PRETAX> 915
<INCOME-TAX> 436
<INCOME-CONTINUING> 479
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
