Initial Public Offering (IPO): Pre-Effective Amendment to Registration Statement (General Form) — Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1/A Amendment No. 2 to Form S-1 124 804K
2: EX-1.1 Underwriting Agreement 54 165K
3: EX-2.1 Agreement and Plan of Contribution 54 159K
4: EX-3.2 Amended and Restated Cert. of Incorporation 19 66K
5: EX-3.3 Bylaws of Donna Karan International Inc. 20 42K
6: EX-5.1 Opinion of Proskauer Rose Goetz & Mendelsohn LLP 2 10K
15: EX-10.10 Stockholders Agreement 9 29K
16: EX-10.11 Donna Karen Incentive Compensation Plan 8 33K
7: EX-10.2 1996 Stock Incentive Plan 20 96K
8: EX-10.3 1996 Non-Employee Director Stock Option Plan 17 76K
9: EX-10.4 Registration Rights Agreement 33 106K
10: EX-10.5 Form License Agree. Bet Gab Studio & Donna Karan 55 109K
Co.
11: EX-10.6 Guaranty of Donna Karan International Inc. 3 11K
12: EX-10.7 Form of License Agree Bet Donna Karan & Stephen W 12 35K
13: EX-10.8 Employment Agreement/Donna Karan 20 51K
14: EX-10.9 Employment Agreement/Stephan Weiss 18 46K
17: EX-23.1 Consent of Ernst & Young LLP 1 8K
18: EX-24 Power of Attorney 1 10K
EX-2.1 — Agreement and Plan of Contribution
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EXHIBIT 2.1
AGREEMENT AND PLAN OF CONTRIBUTION
THIS AGREEMENT AND PLAN OF CONTRIBUTION is made and entered into as of
the _______ day of ______, 1996, by and among DONNA KARAN INTERNATIONAL INC., a
Delaware corporation (the "Corporation"), GABRIELLE STUDIO, INC., a New York
corporation ("Gabrielle"), TAKIHYO INC., a Delaware corporation ("Takihyo"),
DONNA KARAN ("Karan"), STEPHAN WEISS ("Weiss"), TRUST UNDER TRUST AGREEMENT FOR
THE BENEFIT OF LISA WEISS KEYES, COREY WEISS AND GABRIELLE KARAN (the
"Karan/Weiss Trust"), TRUST UNDER TRUST AGREEMENT FOR THE BENEFIT OF DONNA KARAN
(the "Karan Trust," and together with the Karan/Weiss Trust, the "KW Trusts"),
TOMIO TAKI ("Taki"), FRANK R. MORI ("Mori"), CHRISTOPHER MORI ("CM") and HEATHER
MORI ("HM"). Mori, CM and HM are sometimes referred to hereinafter as the "Mori
Family." Karan, Weiss, the KW Trusts, Taki, Mori, CM and HM are sometimes
referred to hereinafter as the "Stockholders."
W I T N E S E T H:
- - - - - - - - -
WHEREAS, the Corporation, Gabrielle, Takihyo and the Stockholders have
entered into this Agreement to accomplish a restructuring (the "Restructuring")
of the businesses conducted by The Donna Karan Company ("Company"), The Donna
Karan Company Store, G.P. ("Store"), DK Footwear Partners ("Shoe"), Donna Karan
Studio ("Studio") and DSTF Japan Company ("Japan"), all general partnerships,
and Donna Karan (H.K.) Limited, a Hong Kong corporation ("HK", and together
with Company, Store, Shoe, Studio and Japan, collectively referred to as the
"Donna Karan Companies"), in conjunction with an initial public offering (the
"Offering") of the Corporation's common stock as an integrated plan pursuant to
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code"); and
(a) Takihyo Fashion Company, L.P. ("TFC"), a limited partnership that owns a 50%
interest in Company and holds a 50% interest in HK (as Company's nominee) will
execute and deliver an instrument of transfer and execute such other documents
and take such other action as should be necessary to assign or transfer
ownership of such interest in HK to the Company under applicable law and (b)
Takihyo, Mori and Taki will cause to be liquidated (the "TM Liquidations"): (i)
TFC, (ii) Takihyo Design Company, L.P. ("TDC"), a limited partnership that owns
a 50% interest in Studio, (iii) TFT Store Company, L.P. ("TFT Store"), a limited
partnership that owns a 50% interest in Store, (iv) TFT Shoe Company, L.P. ("TFT
Shoe"), a limited partnership that owns a 50% interest in Shoe, and (v) TFT
Japan Company, L.P. ("TFT Japan"), a limited partnership that owns a 50%
interest in Japan; and
WHEREAS, pursuant to the TM Liquidations, (i) Takihyo will receive a
30% interest in each of Company, Studio,
Store, Shoe and Japan, (ii) Tolara Tetragon Inc. ("Tolara") and Full
Requirements Merchandising, Inc. ("Full"), each a New York corporation, will
each receive a 10% interest in each of Company and Studio, (iii) Tomio Tangents,
Inc. ("Tomio") and Formal Reserve Management, Inc. ("Formal"), each a New York
corporation, will each receive a 10% interest in Store, (iv) Tangents Two, Inc.
("Tangents") and First Run Management, Inc. ("First"), each a New York
corporation, will each receive a 10% interest in Shoe, and (v) TT DK Japan, Inc.
("TT Japan") and FM DK Japan, Inc. ("FM Japan"), each a New York corporation,
will each receive a 10% interest in Japan; and
WHEREAS, a Registration Statement on Form S-1 (the "Registration
Statement") with respect to the registration of shares of common stock, $.01 par
value per share, of the Corporation (the "Common Stock") was filed with the
Securities and Exchange Commission on April 17, 1996, in connection with the
proposed Offering pursuant to a proposed underwriting agreement with various
underwriters (the "Underwriters"), for which certain of the Underwriters will be
acting as representatives (the "Representatives"); and
WHEREAS, pursuant to the Restructuring and as part of an integrated
plan under Section 351 of the Code, on the Closing Date (as hereinafter
defined): (i) Karan, Weiss and the KW Trusts will each contribute all their
shares in each of Gabby Apparel, Inc. ("Gabby"), The Donna Karan Store
Corporation ("DK Store"), DK Shoe Corp. ("DK Shoe") and Gabrielle Japan, Inc.
("GJI"), each a New York corporation (collectively, the "DK Corporations"), to
the Corporation solely in exchange for certain shares of Common Stock, (ii)
Gabrielle will contribute its 50% interest in Studio to the Corporation solely
in exchange for certain shares of Common Stock, (iii) Takihyo will contribute
its 30% interest in each of the Donna Karan Companies (other than HK) to the
Corporation solely in exchange for certain shares of Common Stock, (iv) Taki
will contribute all the issued and outstanding shares in each of Tolara, Tomio,
Tangents and TT Japan (collectively, the "TT Corporations") to the Corporation
solely in exchange for certain shares of Common Stock, (v) Mori will contribute
all the issued and outstanding shares in each of Formal, First and FM Japan and
all his shares in Full to the Corporation solely in exchange for certain shares
of Common Stock, (vi) CM will contribute all his shares in Full to the
Corporation solely in exchange for certain shares of Common Stock, and (vii) HM
will contribute all her shares in Full to the Corporation solely in exchange for
certain shares of Common Stock (collectively, Full, Formal, First
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and FM Japan are referred to herein as the "FM Corporations");
WHEREAS, this Agreement and certain other documents (such documents
other than this Agreement being collectively referred to as the "Major
Documents") will be placed in escrow pursuant to an escrow agreement, dated as
of June 10, 1996, among the parties hereto and the Escrow Agent (as defined
therein);
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
EXCHANGE OF PROPERTY; PAYMENTS AND ADJUSTMENTS
SECTION 1.1. Exchange of Property.
--------------------
On the Closing Date (as defined herein) and upon the terms and subject
to the conditions set forth in this Agreement:
(a) Karan, Weiss, the Karan/Weiss Trust and the Karan Trust shall each
contribute all their shares in each of the DK Corporations to the Corporation in
exchange for an aggregate of 3,605,744, 961,532, 48,077, and 192,306 shares of
Common Stock, respectively.
(b) Gabrielle shall contribute its 50% equity interest in Studio to
the Corporation in exchange for an aggregate of 498,808 shares of Common Stock.
(c) Takihyo shall contribute its 30% equity interest in each of the
Donna Karan Companies (other than HK) to the Corporation in exchange for an
aggregate of 3,183,881 shares of Common Stock.
(d) Taki shall contribute all the issued and outstanding shares of
each of
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the TT Corporations to the Corporation in exchange for an aggregate of 1,061,293
shares of Common Stock.
(e) Mori shall contribute all the issued and outstanding shares of
each of Formal, First and FM Japan and all his shares in Full to the Corporation
in exchange for an aggregate of 875,567 shares of Common Stock.
(f) CM shall contribute all his shares in Full to the Corporation in
exchange for an aggregate of 92,863 shares of Common Stock.
(g) HM shall contribute all her shares in Full to the Corporation in
exchange for an aggregate of 92,863 shares of Common Stock.
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SECTION 1.2. Closing. The consummation of the exchanges described
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in Section 1.1 hereof (the "Closing") shall be held concurrently with the
closing of the Offering (such date being referred to herein as the "Closing
Date") at the offices of Proskauer Rose Goetz & Mendelsohn LLP, New York, New
York. Each party hereto agrees to use its best efforts promptly to satisfy the
conditions to the obligations of such party in order to expedite the Closing.
SECTION 1.3. Closing Deliveries.
------------------
Subject to the conditions to the respective obligations of the parties
hereto, on the Closing Date:
(a) Karan, Weiss and the KW Trusts shall deliver, or cause to be
delivered, to the Corporation: (i) share certificates representing all their
shares in each of the DK Corporations, duly endorsed in blank or accompanied by
stock powers duly endorsed in blank, in each case in proper form for transfer,
with signatures guaranteed by a commercial bank located in the City of New York
or a member firm of the New York Stock Exchange, Inc., and with all stock
transfer and any other required documentary stamps affixed thereto; (ii) except
as otherwise provided in Section 4.4 hereof, all the books and records of the DK
Corporations, including, but not limited to, all minute books and stock transfer
ledgers, all accounting records and copies of all tax returns filed for taxable
periods ending prior to the Closing Date; (iii) a list of all the bank accounts
of the DK Corporations and the signatories thereon; (iv) a list of the directors
and officers of the DK Corporations and all resignations of officers and
directors of the DK Corporations requested by the Corporation; (v) a duly
executed certificate stating that each of them has satisfied all of the
conditions set forth in Section 1.3(g) hereof; and (vi) an opinion of counsel
dated the Closing Date in the form annexed hereto as Exhibit A.
(b) Gabrielle shall deliver, or cause to be delivered, to the
Corporation: (i) a duly executed Assignment of its 50% partnership interest in
Studio; (ii) a duly executed certificate stating that it has satisfied all the
conditions set forth in Section 1.3(g) hereof;
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and (iii) an opinion of counsel dated the Closing Date in the form annexed
hereto as Exhibit A.
(c) In addition to the actions taken with respect to the assignment or
transfer of HK (as described in the second WHEREAS clause hereof, Takihyo shall
deliver, or cause to be delivered, to the Corporation: (i) a duly executed
Assignment of its 30% partnership interest in each of the Donna Karan Companies
(other than HK); (ii) a duly executed certificated stating that it has satisfied
all the conditions set forth in Section 1.3(g) hereof; and (iii) an opinion of
counsel dated the Closing Date in the form annexed hereto as Exhibit B.
(d) Each of Mori, CM and HM shall deliver, or cause to be delivered,
to the Corporation: (i) their share certificates in the FM Corporations which
together represent all the issued and outstanding shares in each of the FM
Corporations, duly endorsed in blank or accompanied by stock powers duly
endorsed in blank, in each case in proper form for transfer, with signatures
guaranteed by a commercial bank located in the City of New York or a member firm
of the New York Stock Exchange, Inc., and with all stock transfer and any other
required documentary stamps affixed thereto; (ii) except as otherwise provided
in Section 4.4 hereof, all the books and records of the FM Corporations,
including, but not limited to, all minute books and stock transfer ledgers, all
accounting records and copies of all tax returns filed for taxable periods
ending prior to the Closing Date; (iii) a list of all the bank accounts of the
FM Corporations and the signatories thereon; (iv) a list of the directors and
officers of the FM Corporations and all resignations of directors and officers
of the FM Corporations requested by the Corporation; (v) a duly executed
certificate stating that they have satisfied all the conditions set forth in
Section 1.3(g) hereof; and (vi) an opinion of counsel dated the Closing Date in
the form annexed hereto as Exhibit B.
(e) Taki shall deliver, or cause to be delivered, to the Corporation:
(i) share certificates representing all the issued and outstanding shares in
each of the TT Corporations, duly endorsed in blank or accompanied by stock
powers duly endorsed in blank, in each case in proper form for transfer, with
signatures guaranteed by a commercial bank located in the City of New York or a
member firm of the New York Stock Exchange, Inc., and with all stock transfer
and any other required documentary stamps affixed thereto; (ii) all the books
and records of the TT
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Corporations, including, but not limited to, all minute books and stock transfer
ledgers, all accounting records and copies of all tax returns filed for taxable
periods ending prior to the Closing Date; (iii) a list of all the bank accounts
of the TT Corporations and the signatories thereon; (iv) a list of the directors
and officers of the TT Corporations and all resignations of directors and
officers of the TT Corporations requested by the Corporation; (v) a duly
executed certificate stating that he has satisfied all the conditions set forth
in Section 1.3(g) hereof; and (vi) an opinion of counsel dated the Closing Date
in the form annexed hereto as Exhibit B.
(f) The Corporation shall issue and deliver, or cause to be issued and
delivered: (i) a certificate representing shares 3,605,744 of Common Stock to
Karan; (ii) a certificate representing 961,532 shares of Common Stock to Weiss;
(iii) a certificate representing 48,077 shares of Common Stock to the
Karan/Weiss Trust; (iv) a certificate representing 192,306 shares of Common
Stock to the Karan Trust; (v) a certificate representing 498,808 shares of
Common Stock to Gabrielle; (vi) a certificate representing 3,183,881 shares of
Common Stock to Takihyo; (vii) a certificate representing 1,061,293 shares of
Common Stock to Taki; (viii) a certificate representing 875,567 shares of Common
Stock to Mori; (ix) a certificate representing 92,863 shares of Common Stock to
CM; (x) a certificate representing 92,863 shares of Common Stock to HM; (xi) an
opinion of counsel dated the Closing Date in the form annexed hereto as Exhibit
E to Takihyo and the Stockholders; and (xii) a duly executed certificate stating
that it has satisfied all the conditions set forth in Section 1.3(g) hereof to
Takihyo and the Stockholders.
(g) Each party hereto shall deliver a certificate (the "Bring-Down
Certificate") stating that its representations and warranties contained herein
or in the Disclosure Schedule are true in all material respects as of and at the
Closing Date with the same effect as though made at the Closing Date, except (i)
for changes permitted or contemplated
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by this Agreement; (ii) to the extent that any representation or warranty is
made herein as of a specified date, in which case such representation or
warranty shall be true in all respects as of such specified date and (iii) to
the extent set forth in such certificate. Each party's Bring-Down Certificate
shall further state that such party has performed in all material respects all
obligations and complied in all material respects with all covenants and other
agreements required by this Agreement to be performed or complied with by it
before the Closing Date.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. Representations and Warranties of Karan and Weiss.
--------------------------------------------------
Karan and Weiss jointly and severally represent, warrant and agree,
and for purposes of Section 2.1(n), each of Gabrielle, Karan, Weiss and the KW
Trusts represent and warrant severally, but not jointly, as follows:
(a) Corporate Organization. Gabrielle is a corporation duly
----------------------
organized, validly existing and in good standing under the laws of the State of
New York and has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. Each of the DK Corporations
is a corporation duly organized, validly existing and in good standing under the
laws of the State of New York and has all requisite corporate power and
authority to own its properties and carry on its business as the same is now
being conducted and each is, or on the Closing Date will be, duly qualified to
do business in each jurisdiction in which the nature of its business or
properties makes such qualification necessary, except where the failure to be so
qualified would not have a materially adverse effect on its business. Complete
and correct copies of the Certificate of Incorporation and By-laws of Gabrielle
and each of the DK Corporations have been delivered to the Corporation.
(b) Capitalization of DK Corporations; Title to Shares. The
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authorized capital stock of each of the DK Corporations consists of 400 shares
of Common Stock, no par value per share, of which 200 shares are voting and 200
shares are non-voting. None of the non-voting shares of Common Stock are
outstanding, and the following number of voting shares of Common Stock are
outstanding, all of which have been validly issued, are fully paid and
nonassessable, have not been issued in violation of any preemptive rights of
stockholders and are owned beneficially and of record by Karan, Weiss and the KW
Trusts, free and clear of any liens, claims, encumbrances or other contractual
restrictions of any kind:
[Download Table]
Karan/Weiss Karan
Karen Weiss Trust Trust
----- ----- ----------- -----
Gabby 75 20 1 4
DK Store 75 20 1 4
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[Download Table]
DK Shoe 75 20 1 4
GJI 75 20 1 4
No options, warrants or other rights to acquire, sell or issue shares of capital
stock of any of the DK Corporations (whether upon conversion of other securities
or otherwise) are outstanding. The contribution and delivery of the shares in
the DK Corporations by Karan, Weiss and the KW Trusts to the Corporation as
contemplated by this Agreement will transfer good title to all such shares to
the Corporation, free and clear of all security interests, liens, claims,
encumbrances and other contractual restrictions of any kind.
(c) Validity of Agreement. Each of Gabrielle, Karan, Weiss and the KW
---------------------
Trusts has all requisite power and authority to execute, deliver and perform
this Agreement and each of the Closing Documents (as defined in Section 8.4
hereof) to which it is a party and to perform the transactions herein
contemplated. The execution and delivery of this Agreement and each of the
Closing Documents to which Gabrielle is a party by Gabrielle and the performance
of the transactions herein contemplated have been duly authorized by the Board
of Directors of Gabrielle and shareholders of Gabrielle and no further corporate
action on the part of Gabrielle is necessary to authorize this Agreement and the
performance of such transactions. All necessary proceedings have been duly taken
by Karan, Weiss, and the KW Trusts to authorize the execution, delivery and
performance by each such person or entity of this Agreement and each of the
Closing Documents to which it is a party. This Agreement and each Major Document
to which such person is a party have been duly authorized and executed and, on
the Closing Date will be, duly delivered by Gabrielle, Karan, Weiss and the KW
Trusts and, assuming due authorization, execution and delivery hereof and
thereof by the other parties to this Agreement and to each of the Major
Documents, constitute the valid and binding agreements of Gabrielle, Karan,
Weiss and the KW Trusts enforceable in accordance with their terms. Each other
Closing Document to which such person is a party has been duly authorized and,
on the Closing Date, will be duly executed and delivered by Gabrielle, Karan,
Weiss and The KW Trusts and, assuming due authorization, execution and delivery
hereof and thereof by the other parties thereto will constitute the valid and
binding agreements of Gabrielle, Karan, Weiss and the KW Trusts enforceable in
accordance with their terms.
(d) No Conflict or Violation. No consent, authorization, approval,
------------------------
order, license, certificate or permit of or from or declaration or filing with
any federal, state, local or governmental authority or any court or other
tribunal is required for the execution, delivery or performance by each of the
DK Corporations, Gabrielle, Karan, Weiss and the KW Trusts of this Agreement and
each of the Closing Documents to which it is a party. No consent of any party
to any contract, agreement, instrument, lease, license, arrangement or
understanding to which any of the DK Corporations, Gabrielle, Karan, Weiss or
the KW Trusts is a party or to which any of their respective properties or
assets is subject, is required for the execution, delivery or
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performance of this Agreement and each of the Closing Documents to which it is a
party except for such consents as will be obtained prior to the Closing Date;
and the execution, delivery and performance of this Agreement and each of such
Closing Documents will not violate, result in the breach of, conflict with or
(with or without the giving of notice or the passage of time or both) entitle
any party to terminate or call a default under any such contract, agreement,
instrument, lease, license, arrangement or understanding, or violate or result
in a breach of any term of the Certificate of Incorporation or By-Laws of any of
the DK Corporations or violate, result in a breach of or conflict with any law,
rule, regulation, order, judgment or decree binding on any of the DK
Corporations, Gabrielle, Karan, Weiss or the KW Trusts or to which any of their
respective operations, businesses, properties or assets are subject or result in
the creation of any mortgage, pledge, lien, charge or encumbrance upon Gabrielle
or any of the assets of any of the DK Corporations or the loss of any license or
other contractual right with respect thereto.
(e) Tax Matters. For purposes of this Agreement, "Tax" means any
-----------
tax imposed under Subtitle A of the Internal Revenue Code of 1986 as amended
(the "Code") and any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, capital stock, occupation, property, environmental or windfall
profit tax, premium, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign); "Returns" means all Tax returns, statements, reports and
forms (including estimated tax or information returns and reports, or filing
extensions with respect thereto) required to be filed with any Taxing Authority
in connection with the determination, assessment, collection or administration
of any Tax; "Overlap Period" means any taxable period beginning on or before and
ending after the Closing Date; and "Post-Closing Tax Period" means (1) any
taxable period beginning after the Closing Date and (2) the portion of any
Overlap Period beginning immediately after the Closing Date and ending at the
close of the last day of such Overlap Period.
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(i) All Returns with respect to (A) any tax period ending on or before
the close of the Closing Date and (B) the portion of any Overlap Period
beginning on the first day of such Overlap Period and ending at the close of the
Closing Date ("Pre-Closing Tax Period") by each DK Corporation, have, to the
extent required to be filed on or before the date hereof, been filed when due in
accordance with all applicable laws;
(ii) except for state and local taxes due and payable with respect to
any Pre-Closing Tax Period beginning on or after January 1, 1996, all Taxes due
and payable by, or attributable to, each DK Corporation with respect to any Pre-
Closing Tax Period, other than Taxes relating to income from operations of any
of the Donna Karan Companies that is attributable to the Closing Date, have been
timely paid, or withheld and remitted to the appropriate Taxing Authority;
(iii) except as disclosed in Section 2.1(e) of the Disclosure
Schedule, none of the DK Corporations has granted any extension or waiver of the
statute of limitations period applicable to any Return, which period (after
giving effect to such extension or waiver) has not yet expired;
(iv) except as disclosed in Section 2.1(e) of the Disclosure
Schedule, none of the DK Corporations has received any written notice of any
claim, audit, action, suit, proceeding, or investigation with respect to any of
the DK Corporations with respect to any Pre-Closing Tax Period;
(v) there are no pending written requests for rulings or
determinations in respect of any Tax by any of the DK Corporations with any
Taxing Authority;
(vi) none of the property owned or used by any of the DK Corporations
is subject to a tax benefit transfer lease executed in accordance with Section
168(f)(8) of the Internal Revenue Code of 1954, as amended;
(vii) none of the property owned or used by any of the DK
Corporations is subject to a lease, other than a "true" lease for federal income
tax purposes;
(viii) none of the property owned by any of the DK Corporations is
"tax-exempt use property" within the meaning of Section 168(h) of the Code;
(ix) none of the DK Corporations has entered into or will it enter
into any agreement or consent pursuant to Section 341(f) of the Code;
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(x) there are no liens for Taxes upon the assets of any of the DK
Corporations, except liens for current Taxes not yet due or payable;
(xi) none of the DK Corporations is subject to withholding under
Section 1445 of the Code with respect to any transaction contemplated hereby;
(xii) none of the DK Corporations or Donna Karan Companies will be
required to include any adjustment in taxable income for any Post-Closing Tax
Period under Section 481 of the Code (or any similar provision of the Tax laws
of any jurisdiction) as a result of a change in method of accounting for a Pre-
Closing Tax Period made by any DK Corporation or any of the Donna Karan
Companies or pursuant to the provisions of any agreement entered into with any
Taxing Authority with regard to the Tax liability of such DK Corporation or such
Donna Karan Company for any Pre-Closing Tax Period (including, without
limitation, any request made by any of the Donna Karan Companies before the
Closing Date to change its method of accounting, whenever such change shall be
determined by the Internal Revenue Service to be effective);
(xiii) without the prior written consent of the Corporation, none of
the DK Corporations shall between the date hereof and the Closing Date, to the
extent it may affect or relate to the Corporation, make or change any tax
election, change any annual tax accounting period, adopt or change any method of
tax accounting, file any amended Return, enter into any closing agreement,
settle any Tax claim or assessment, surrender any right to claim a Tax refund,
or take or omit to take any other action, if any such action or omission would
have the effect of increasing the Tax liability or reducing any Tax benefit of
the Corporation.
(f) Absence of Certain Changes or Events. Except as disclosed in
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Section 2.1(f) of the Disclosure Schedule, since their formation, the DK
Corporations have not owned or operated any business other than their respective
interests in the Donna Karan Companies and Gabby's equity interest in HK which
Gabby holds as nominee.
(g) Real Estate. None of the DK Corporations directly owns any real
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property and none has any direct leasehold interest in real property.
(h) Litigation. Except as disclosed in Section 2.1(h) of the
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Disclosure Schedule, there is no lawsuit or legal, administrative or regulatory
proceeding or investigation pending or threatened against any DK Corporation.
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(i) Employees; Benefit Plans. None of the DK Corporations has any
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employees nor is it a party to any agreement with any person relating to the
performance of services on behalf of such corporation. None of the DK
Corporations is a direct party to any qualified or non-qualified employee
benefit plan or collective bargaining agreement.
(j) Liabilities. Except as otherwise set forth in Section 2.1(e)
-----------
hereof, to the best knowledge of Karan and Weiss, no DK Corporation has any
liabilities or obligations of any nature, whether absolute, accrued, contingent
or otherwise, except as specifically disclosed in Section 2.1(j) of the
Disclosure Schedule.
(k) Estimated Taxes. As of the date hereof, each DK Corporation has
---------------
paid over, or applied, and, as of the Closing Date, will have paid over, or
applied, to the relevant state and local taxing authorities as a deposit of its
estimated taxes for the Pre-Closing Tax Periods beginning on or after January 1,
1996 (the "Estimated Pre-Closing Tax Period Taxes") the amount of Estimated Pre-
Closing Tax Period Taxes as disclosed in Section 2.1(k)-1 or Section 2.1(k)-2,
respectively, of the Disclosure Schedule, provided that the parties agree that
each of DK Corporations shall deliver Section 2.1(k)-2 on or prior to the
Closing Date and, after such delivery, "Estimated Pre-Closing Tax Period Taxes"
shall be as set forth on Schedule 2.1(k)-2 of the Disclosure Schedule.
(l) Title to Assets. The sole assets of the DK Corporations are their
---------------
respective partnership interests in the Donna Karan Companies and Gabby's 50%
equity interest in HK. Except as disclosed in Section 2.1(1) of the Disclosure
Schedule, each of the DK Corporations has good and marketable title to all its
assets, free and clear of all security interests, liens, claims, encumbrances
and other contractual restrictions of any kind. The transfer and delivery of
the 50% equity interest in Studio by Gabrielle to the Corporation as
contemplated by this Agreement and the Assignment referred to in Section 1.3(b)
will transfer good title to all such interest to the Corporation, free and clear
of all security interests, liens, claims, encumbrances and other contractual
restrictions of any kind.
(m) Agreements. Except as disclosed in Section 2.1(m) of the
----------
Disclosure Schedule, none of the DK Corporations is a party to any written or
oral agreement.
(n) Acquisition for Investment Purposes. Each of Gabrielle, Karan,
-----------------------------------
Weiss and the KW Trusts hereby represents and warrants severally, but not
jointly, that (i) such party is acquiring the Common Stock for its own account,
for investment and not with a view to distribution thereof within the meaning of
applicable Federal and State securities laws; (ii) each of them understands that
the Common Stock acquired pursuant hereto has not been registered pursuant to
applicable securities laws and that such Common Stock must be held indefinitely
unless a subsequent disposition thereof is registered pursuant to applicable
securities laws or is exempt from the registration
14
requirements thereof; (iii) each of them acknowledges that the Restructuring,
including the issuance of the Common Stock pursuant to this Agreement, is
intended by the parties hereto to qualify as an integrated plan pursuant to
Section 351 of the Code and each of them agrees to report the transactions
contemplated hereunder consistent with said intention on all applicable returns
required to be filed with all relevant taxing authorities; (iv) none of them
has, and on or prior to the Closing Date will have, entered into a binding
commitment or agreement with any party (other than a party to this Agreement) to
dispose of any shares of Common Stock received by it pursuant to the terms of
this Agreement, provided, however, that the parties to this Agreement agree that
-------- -------
the entering into of any arrangement or agreement among or between the
Underwriters or the parties to this Agreement, in connection with the Offering
(including, but not limited to, the Registration Statement and any document
which is an exhibit thereto), does not, and will not, constitute such a binding
commitment or agreement.
(o) Validity of S Corporations. As of the close of the day before
--------------------------
the Closing Date, each of the DK Corporations is, and has been for every taxable
year since the date of its incorporation, a valid S corporation (as defined in
Section 1361 et seq. of the Code, and regulations promulgated thereunder).
-------
SECTION 2.2. Representations and Warranties of Takihyo, Taki, Mori,
------------------------------------------------------
HM and CM.
----------
Except as otherwise qualified below, (A) Takihyo, Taki, and Mori
jointly and severally represent, warrant and agree with respect to Takihyo,
(B) Mori, HM, and CM, (but not Takihyo or Taki) jointly and severally represent,
warrant and agree with respect to Mori, HM, CM, and Full, (C) Mori (but not
Takihyo, Taki, HM or CM) represents, warrants and agrees with respect to the FM
Corporations other than Full (the "Other FM Corporations"), and (D) Taki (but
not Takihyo, Mori, HM or CM) represents, warrants and agrees with respect to
Taki and the TT Corporations, as follows:
(a) Corporate Organization. Takihyo is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to enter into this Agreement
and to perform its obligations hereunder. Each of the TT Corporations, Full and
each of the Other FM Corporations is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and has
all requisite corporate power and authority to own its properties and carry on
its business as the same is now being conducted and each is, or on the Closing
Date will be, duly qualified to do business in each jurisdiction in which the
nature of its business or properties makes such qualification necessary, except
where the failure to be so qualified would not have a
15
materially adverse effect on its business. Complete and correct copies of the
Certificate of Incorporation and By-laws of Takihyo and each of the TT
Corporations, Full and each of the Other FM Corporations have been delivered to
the Corporation.
(b) Capitalization of TT Corporations and FM Corporations; Title to
---------------------------------------------------------------
Shares. The authorized capital stock of each of the TT Corporations, Full and
------
each of the Other FM Corporations consists of the following number of shares of
common stock, $1.00 par value per share, of which the following number of shares
are outstanding, all of which have been validly issued, are fully paid and
nonassessable, have not been issued in violation of any preemptive rights of
stockholders and are owned beneficially and of record by Taki, in the case of
the TT Corporations, and the Mori Family, in the case of the FM Corporations,
as set forth below, free and clear of any liens, claims, encumbrances or other
contractual restrictions of any kind:
[Download Table]
Authorized Issued and Outstanding
---------- ----------------------
Taki
----
Tolara 100 100
Tomio 20,000 100
Tangents 2,000 100
TT Japan 20,000 100
Mori CM HM
---- -- --
Full 100 80 10 10
Formal 20,000 100
First 2,000 100
FM Japan 20,000 100
No options, warrants or other rights to acquire, sell or issue shares of capital
stock of any of the TT Corporations, Full or any of the Other FM Corporations
(whether upon conversion of other securities or otherwise) are outstanding. The
contribution and delivery of the shares in the TT Corporations by Taki and the
contribution and delivery of the shares in Full and each of the Other
Corporations by the Mori Family, to the Corporation as contemplated by this
Agreement will transfer good title to all such shares to the Corporation, free
and clear of all security interests, liens, claims, encumbrances and other
contractual restrictions of any kind.
(c) Validity of Agreement. Each of Taki, Mori, HM, CM and Takihyo has
---------------------
full power and authority to execute and deliver
16
this Agreement and each of the Closing Documents to which it is a party and to
perform the transactions herein contemplated. The execution and delivery of this
Agreement by Takihyo and the performance of the transactions herein contemplated
have been duly authorized by the Board of Directors and shareholders of Takihyo,
the execution and delivery of each of the other Closing Documents to which
Takihyo is a party have been duly authorized by the Board of Directors of
Takihyo, and no further corporate action on the part of Takihyo is necessary to
authorize this Agreement and the performance of such transactions. All necessary
proceedings have been duly taken by Taki, Mori, HM and CM to authorize the
execution, delivery and performance by each such person of this Agreement and
each of the Closing Documents to which it is a party. This Agreement and each
Major Document to which such person is a party have been duly authorized and
executed and, on the Closing Date will be, duly delivered by Takihyo, Taki,
Mori, HM and CM, and assuming due authorization, execution and delivery hereof
and thereof by the other parties to this Agreement and to each of the Closing
Documents, constitute the valid and binding agreements of Takihyo, Taki, Mori,
HM and CM enforceable in accordance with their terms. Each other Closing
Document to which such person is a party has been duly authorized and, on the
Closing Date, will be duly executed and delivered by Takihyo, Taki, Mori, HM and
CM and, assuming due authorization, execution and delivery hereof and thereof by
the other parties thereto, will constitute the valid and binding agreements of
Takihyo, Taki, Mori, HM and CM enforceable in accordance with their terms.
(d) No Conflict or Violation. No consent, authorization, approval,
------------------------
order, license, certificate or permit of or from or declaration or filing with
any federal, state, local or governmental authority or any court or other
tribunal is required for the execution, delivery or performance by each of the
TT Corporations, Full, the Other FM Corporations, Taki, Mori, HM, CM and Takihyo
of this Agreement and the Closing Documents to which it is a party. No consent
of any party to any contract, agreement, instrument, lease, license, arrangement
or understanding to which any of the TT Corporations, Full, the Other FM
Corporations, Taki, Mori, HM, CM or Takihyo is a party or to which any of their
respective properties or assets is subject, is required for the execution,
delivery or performance of this Agreement and each of the Closing Documents to
which it is a party, except for such consents as will be obtained prior to the
Closing Date; and the execution, delivery and performance of this Agreement and
each of such Closing Documents to which it is a party will not violate, result
in the breach of, conflict with or (with or without the giving of notice or the
passage of time or both) entitle any party to terminate or call a default under
any such contract, agreement, instrument, lease, license, arrangement or
understanding, or violate or result in a breach of any term of the Certificate
of Incorporation or By-Laws of any of the TT Corporations, Full or the Other FM
Corporations or violate, result in a breach of or conflict with any law, rule,
regulation, order, judgment or decree binding on any of the TT Corporations,
Full, the Other Corporations, Taki, Mori, HM, CM or Takihyo or to which any
of their respective operations, businesses, properties or assets are subject or
result in the creation of any mortgage, pledge, lien, charge or encumbrance upon
any of the assets of any of the TT Corporations, Full or the Other FM
17
Corporations or the loss of any license or other contractual right with respect
thereto.
(e) Tax Matters.
-----------
(i) All Returns with respect to any Pre-Closing Tax Period by
each of the TT Corporations, Full and the Other FM Corporations, have, to the
extent required to be filed on or before the date hereof, been filed when due in
accordance with all applicable laws;
(ii) except for state and local taxes due and payable with
respect to any Pre-Closing Tax Period beginning on or after January 1, 1996, all
Taxes due and payable by, or attributable to, each TT Corporation, Full and the
Other FM Corporations with respect to any Pre-Closing Tax Period, other than
Taxes relating to income from operations of any of the Donna Karan Companies
that is attributable to the Closing Date, have been timely paid, or withheld and
remitted to the appropriate Taxing Authority;
(iii) except as set forth on Section 2.2(e) of the Disclosure
Schedule, none of the TT Corporations, Full or the Other FM Corporations has
granted any extension or waiver of the statute of limitations period applicable
to any Return, which period (after giving effect to such extension or waiver)
has not yet expired;
(iv) except as set forth on Section 2.2(e) of the Disclosure
Schedule, none of the TT Corporations, Full or the Other FM Corporations has
received any written notice of any claim, audit, action, suit, proceeding, or
investigation against or with respect to any of the TT Corporations, Full or the
Other FM Corporations with respect to any Pre-Closing Tax Period;
(v) there are no pending written requests for rulings or
determinations in respect of any Tax by any of the TT Corporations, Full or the
Other FM Corporations with any Taxing Authority;
(vi) none of the property owned or used by any of the TT
Corporations, Full or the Other FM Corporations is subject to a tax benefit
transfer lease executed in accordance with Section 168(f)(8) of the Code;
18
(vii) none of the property owned or used by any of the TT
Corporations, Full or the Other FM Corporations is subject to a lease, other
than a "true" lease for federal income tax purposes;
(viii) none of the property owned by any of the TT Corporations,
Full or the Other FM Corporations is "tax-exempt use property" within the
meaning of Section 168(h) of the Code;
(ix) none of the TT Corporations, Full or the Other FM
Corporations has entered into or will it enter into any agreement or consent
pursuant to Section 341(f) of the Code;
(x) there are no liens for Taxes upon the assets of any of the
TT Corporations, Full or the Other FM Corporations, except liens for current
Taxes not yet due or payable;
(xi) none of the TT Corporations, Full or the Other FM
Corporations is subject to withholding under Section 1445 of the Code with
respect to any transaction contemplated hereby;
(xii) none of the TT Corporations, Full, the Other FM
Corporations, the Corporation or Donna Karan Companies will be required to
include any adjustment in taxable income for any Post-Closing Tax Period under
Section 481 of the Code (or any similar provision of the Tax laws of any
jurisdiction) as a result of a change in method of accounting for a Pre-Closing
Tax Period made by any TT Corporation, Full, any of the Other FM Corporations or
any of the Donna Karan Companies, or pursuant to the provisions of any agreement
entered into with any Taxing Authority with regard to the Tax liability of such
TT Corporation, Full or of the Other FM Corporation or any such Donna Karan
Companies for any Pre-Closing Tax Period (including, without limitation, any
request made by any of the Donna Karan Companies before the Closing Date to
change its method of accounting, whenever such change shall be determined by the
Internal Revenue Service to be effective);
(xiii) without the prior written consent of the Corporation, none
of the TT Corporations, Full or the Other FM Corporations shall between the date
hereof and the Closing Date, to the extent it may affect or relate to the
Corporation, make or change any tax election, change any annual tax accounting
period, adopt or change any method of tax accounting, file any amended Return,
enter into any closing agreement, settle any Tax claim or assessment, surrender
any right to claim a Tax refund, or take or omit to take any other action, if
any such action or omission would have the effect of increasing the Tax
liability or reducing any Tax benefit of the Corporation.
(f) Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
Section 2.2(f) of the Disclosure Schedule, since their formation, none of the TT
Corporations, Full or the Other FM Corporations has
19
owned or operated any business other than their respective interests in the
Donna Karan Companies (other than HK).
(g) Real Estate. None of the TT Corporations, Full or the Other
-----------
FM Corporations directly owns any real property and none has any direct
leasehold interest in real property.
(h) Litigation. Except as disclosed in Section 2.2(h) of the
----------
Disclosure Schedule, there is no lawsuit or legal, administrative or regulatory
proceeding or investigation pending or threatened against Takihyo, any TT
Corporation, Full or any Other FM Corporation.
(i) Employees; Benefit Plans. None of the TT Corporations, Full or
------------------------
any of the Other FM Corporations has any employees nor is it a party to any
agreement with any person relating to the performance of services on behalf of
such Corporation. None of the TT Corporations, Full or any of the Other FM
Corporations is a direct party to any qualified or non-qualified employee
benefit plan or collective bargaining agreement.
(j) Liabilities. Except as otherwise set forth in Section 2.2(e)
-----------
hereof, to the best knowledge of Taki, no TT Corporation has, and to the best
knowledge of Mori, no FM Corporation, and, to the best knowledge of HM and CM,
Full does not have, any liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise, except as specifically disclosed in
Section 2.2(j) of the Disclosure Schedule.
(k) Estimated Taxes. As of the date hereof, Full, each of the Other
---------------
FM Corporations and each TT Corporation has paid over, or applied, and, as of
the Closing Date, will have paid over, or applied, to the relevant state and
local taxing authorities as a deposit of its estimated taxes for the Pre-Closing
Tax Periods beginning on or after January 1, 1996 (the "Estimated Pre-Closing
Tax Period Taxes") the amount of Estimated Pre-Closing Tax Period Taxes
disclosed in Section 2.2(k)-1 or Section 2.2(k)-2, respectively, of the
Disclosure Schedule, provided that the parties agree that Full, each of Other FM
Corporations and each TT Corporation shall deliver Section 2.2(k)-2 on or prior
to the Closing Date and, after such delivery, "Estimated Pre-Closing Tax Period
Taxes" shall be as set forth on Section 2.2(k)-2 of the Disclosure Schedule.
(l) Title to Assets. The sole assets of the TT Corporations, Full and
---------------
the Other FM Corporations are their respective partnership interests in the
Donna Karan Companies (other than HK). Except as disclosed in Section 2.2(l) of
the Disclosure Schedule, each of the TT Corporations, Full and each of the Other
FM Corporations has good and marketable title to all its assets, free and clear
of all security interests, liens, claims, encumbrances and other contractual
restrictions of any kind. The contribution and delivery of the 30% equity
interests in each of the Donna Karan Companies by Takihyo to the Corporation as
contemplated by this Agreement and the Assignment referred to in Section 1.3(c)
hereof will transfer good title to all such
20
interests to the Corporation, free and clear of all security interests, liens,
claims, encumbrances and other contractual restrictions of any kind.
(m) Agreements. Except as disclosed in Section 2.2(m) of the
----------
Disclosure Schedule, none of the TT Corporations, Full or any of the Other FM
corporations is a party to any written or oral agreement.
(n) Acquisition for Investment Purposes. Each of Takihyo, Taki, Mori,
-----------------------------------
HM and CM hereby represents and warrants severally, but not jointly, that (i)
such party is acquiring the Corporation's Common Stock for its own account, for
investment and not with a view to distribution thereof within the meaning of
applicable Federal and State securities laws; (ii) each of them understands that
the Common Stock acquired pursuant hereto has not been registered pursuant to
applicable securities laws and that such Common Stock must be held indefinitely
unless a subsequent disposition thereof is registered pursuant to applicable
securities laws or is exempt from the registration requirements thereof; (iii)
each of them acknowledges that the Restructuring, including the issuance of the
Common Stock pursuant to this Agreement, is intended by the parties hereto to
qualify as an integrated plan pursuant to Section 351 of the Code and each of
them agrees to report the transactions contemplated hereunder consistent with
said intention on all applicable Returns required to be filed with all relevant
Taxing Authorities; and (iv) none of them has, and on or prior to the Closing
Date none of them will have, entered into a binding commitment or agreement with
any party (other than a party to this Agreement) to dispose of any shares of
Common Stock received by it pursuant to the terms of this Agreement, provided,
--------
however, that the parties to this Agreement agree that the entering into of any
-------
arrangement or agreement among or between the Underwriters or the parties to
this Agreement, in connection with the Offering (including, but not limited to,
the Registration Statement and any document which is an exhibit thereto), does
not, and will not, constitute such a binding commitment or agreement.
(o) Validity of S Corporations. As of the close of the day before
--------------------------
the Closing Date, Full, each of the Other FM Corporations and each of the TT
Corporations is, and has been for every taxable year since the date of its
incorporation, a valid S corporation (as defined in Section 1361 et seq. of the
-------
Code, and regulations promulgated thereunder).
(p) Partnership Status. Each of Takihyo, Taki, Mori, HM and CM hereby
------------------
represents and warrants jointly and severally that each of TFC and TDC is, and
each of Takihyo, Taki and Mori hereby represents and warrants jointly and
severally that each of TFT Store, TFT Shoe and TFT Japan is, and, in each such
case, has been for every taxable year since the date of its formation and, in
each such case, will be on the date of its liquidation, a partnership for
federal
21
income tax purposes.
SECTION 2.3. Representations and Warranties of the Corporation. The
------------------------------------- -----------
Corporation represents, warrants and agrees as follows:
(a) Corporate Organization. It is a corporation duly organized,
----------------------
validly existing, and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to enter into this Agreement
and the Closing Documents and to perform its obligations hereunder. Complete
and correct copies of its Certificate of Incorporation, its proposed Amended and
Restated Certificate of Incorporation and its Bylaws have been delivered to
Takihyo and the Stockholders.
(b) Authorization and Validity of Agreement. The execution and
---------------------------------------
delivery of this Agreement and the Closing Documents by the Corporation and the
performance of the transactions herein contemplated have been duly authorized by
its Board of Directors and no further corporate action on the part of the
Corporation is necessary to authorize this Agreement and the performance of such
transactions. This Agreement and the Major Documents have been duly executed
and delivered by the Corporation and, assuming due authorization, execution and
delivery by the other parties hereto, constitute the valid and binding
agreements of the Corporation, enforceable in accordance with their terms. Each
other Closing Document to which the Company is a party has been duly authorized
and, on the Closing Date, will be duly executed and delivered by the Company
and, assuming due authorization, execution and delivery hereof and thereof by
the other parties thereto, will constitute the valid and binding agreements of
the Company enforceable in accordance with their terms.
(c) No Conflict or Violation. No consent, authorization, approval,
------------------------
order, license, certificate or permit of or from or declaration or filing with
any federal, state, local or governmental authority or any court or other
tribunal is required for the execution, delivery or performance by the
Corporation of this Agreement and the Closing Documents to which it is a party
(except filings under the Securities and Exchange Act of 1933 which have been or
will be made before the Closing Date and consents under "blue sky" or securities
laws which have been obtained prior to the Effective Date). No consent of any
party to any material contract, agreement, instrument, lease, license,
arrangement or understanding to which the Corporation is a party or to which any
of its respective properties or assets are subject, is required for the
execution, delivery or performance of this Agreement and the Closing Documents
to which it is a party except for such consents as will be obtained prior to the
Closing Date; and the execution, delivery and performance of this Agreement and
such Closing Documents to which it is a party will not violate, result in the
breach of, conflict with or (with or without the giving of notice or the passage
of time or both) entitle any party to terminate or call a default under any such
contract, agreement, instrument, lease, license, arrangement
22
or understanding, or violate or result in a breach of any term of the
Certificate of Incorporation or By-Laws of the Corporation or violate, result in
a breach of or conflict with any law, rule, regulation, order, judgment or
decree binding on the Corporation or to which any of its respective operations,
businesses, properties or assets are subject or result in the creation of any
mortgage, pledge, lien, charge or encumbrance upon any of the assets of any of
the Corporation or the loss of any license or other contractual right with
respect thereto.
(d) Tax Treatment of the Restructuring. The Corporation acknowledges
----------------------------------
that the Restructuring, including the issuance of the Common Stock pursuant to
this Agreement, is intended to qualify as an integrated plan pursuant to Section
351 of the Code and that it shall treat the transactions contemplated hereunder
consistent with said intention on all applicable Returns required to be filed
with all relevant Taxing Authorities and with respect to any matter related
thereto.
SECTION 2.4. Survival.
--------
Each of the representations and warranties made by the parties in this
Article II (including statements in the Disclosure Schedule, insofar as the
Disclosure Schedule relates to such representations and warranties) shall
survive the Closing indefinitely.
ARTICLE III
ACTIONS BEFORE THE CLOSING DATE
The parties covenant to take the following actions between the date
hereof and the Closing Date:
SECTION 3.1. Access to Records.
-----------------
Except as otherwise provided in Section 4.4 hereof, each of the
Stockholders shall grant to the Corporation and its agents and attorneys
reasonable access during normal business hours to the properties and financial
records of the DK Corporations, the TT Corporations and the FM Corporations
(collectively, the "Acquired Companies") and furnish to the Corporation such
additional data and information as it or its agents or attorneys may from time
to time reasonably request.
23
SECTION 3.2. No Public Announcement.
----------------------
No party hereto other than the Corporation shall make any public
announcement concerning the transactions contemplated by this Agreement without
the prior approval of the other parties, which approval shall not be
unreasonably withheld. Notwithstanding the foregoing, in the event any such
public announcement is required by law to be made by the party proposing to make
the same, such party may make such announcement but shall use its best efforts
to consult in good faith with the other parties before the making of such public
announcement.
SECTION 3.3. TM Liquidations.
---------------
On the day prior to the Closing Date, Takihyo, Mori and Taki will
cause the TM Liquidations to take place.
SECTION 3.4. Conduct of Business.
-------------------
Each of the Stockholders covenants that the business of the Donna
Karan Companies shall be conducted only in the ordinary course, consistent with
the present conduct of its business, and agree to use his, her or its best
efforts to maintain, preserve and protect the assets and goodwill of the Donna
Karan Companies from the date hereof through the Closing Date. Taki covenants
that the business of each of the TT Corporations shall be conducted only in the
ordinary course, consistent with the present conduct of its business, and agrees
to use his best efforts to maintain, preserve and protect the assets and
goodwill of such corporations from the date hereof through the Closing Date.
Each of Mori, HM and CM covenants that the business of Full, and Mori covenants
that the business of the other FM Corporations shall be conducted only in the
ordinary course, consistent with the present conduct of its business, and agrees
to use his or her best efforts to maintain, preserve and protect the assets and
goodwill of such corporation on the date hereof through the Closing Date. Each
of Karan and Weiss covenants that the business of each of the DK Corporations
shall be conducted only in the ordinary course, consistent with the present
conduct of its business, and agrees to use his or her best efforts to maintain,
preserve and protect the assets and goodwill of the DK Corporations from the
date hereof through the Closing Date. The Stockholders shall not, without the
prior written consent of the Corporation, take or commit to be taken, or cause
to be taken or committed to be taken, on behalf of themselves or the Donna Karan
Companies, the TT Corporations, the FM Corporations, or the DK Corporations any
action which would cause any of the representations and warranties made by any
of them to be inaccurate from the date hereof through the Closing Date.
24
ARTICLE IV
ACTIONS AFTER THE CLOSING DATE
The parties covenant to take the following actions after the Closing
Date:
SECTION 4.1. Further Information.
-------------------
Except as otherwise provided in Section 4.4 hereof, following the
Closing, each party shall afford, and the Corporation shall cause the Donna
Karan Companies to afford, to each of the other parties, their counsel and
accountants, during normal business hours, reasonable access to the books,
records and other data of the Acquired Companies and the Donna Karan Companies
in its possession with respect to periods prior to the Closing and the right to
make copies and extracts therefrom, to the extent that such access may be
reasonably required by the requesting party (i) to facilitate the investigation,
litigation and final disposition of any claims which may have been or may be
made against any party or its Affiliates that relate to any of the Acquired
Companies, or (ii) for any other reasonable business purpose.
SECTION 4.2. Record Retention.
----------------
Except as otherwise provided in Section 4.4 hereof, the Corporation
agrees that for a period of not less than three years following the Closing Date
it shall not, and shall not permit the Acquired Companies or the Donna Karan
Companies to, destroy or otherwise dispose of any of those books, records or
other documents held by any of them and relating to their properties,
liabilities or operations before the Closing Date except in a manner consistent
with policies approved by counsel for the Corporation in light of applicable
statutes of limitation.
SECTION 4.3. Further Assurances.
------------------
Each party shall cooperate with the others, and execute and deliver,
or cause to be executed and delivered, all such other instruments, including
instruments of conveyance, assignment and transfer, and take all such other
actions as such party may reasonably be requested to take by the other parties
hereto from time to time, consistent with the terms of this Agreement, in order
to effectuate the provisions and purposes of this Agreement.
SECTION 4.4. Tax Matters.
-----------
(a) Pre-Closing Tax Period Returns.
------------------------------
25
(i) Subsidiaries.
------------
(A) Each Stockholder or its designated representatives shall
prepare and file, or cause to be prepared or filed, at its own expense, all
1995 federal, state and local Returns of the FM Corporations, the TT
Corporations and the DK Corporations (each such corporation, a "Subsidiary"),
all 1996 federal S corporation Returns of each Subsidiary and all 1996 state and
local Returns of each subsidiary reflecting its status as an S corporation. At
least thirty (30) days prior to the due date of any such Return, the Stockholder
shall cause such Return to be delivered to the Corporation for review by it and
its representatives. If any position reflected on such Return is inconsistent
with such Subsidiary's past filing practices and positions, then such Return
shall not be filed without the prior written consent of the Corporation (which
consent may not be unreasonably withheld). For purposes of this Agreement, the
"due date" of a Return shall mean the earlier of (A) the date on which the
Return is required to be filed under applicable law (including extensions) and
(B) the actual filing date of such Return.
(B) In the event of a dispute between the Corporation and any
Stockholder as to the taking of any position reflected on any Return described
in Section 4.4(a)(i)(A) hereof, the parties shall consult with each other and
attempt to resolve their dispute. If such dispute cannot be resolved by them,
it shall be referred to a nationally recognized accounting firm that is
designated by the Corporation and such Stockholders and represents none of the
parties (the "Tax Arbitrator"). Each of the Corporation and the Stockholders
shall present its position to the Tax Arbitrator which shall decide which
position shall be adopted. The Tax Arbitrator shall not be entitled to adopt
any other position, unless the Corporation and such Stockholders so agree in
writing. The decision of the Arbitrator shall be final and binding, and its
fees and costs shall be paid by the party or parties whose position(s) is not
adopted by the Tax Arbitrator. Each party shall bear its own legal and other
advisory expenses incurred in connection with such arbitration.
(C) With respect to Returns of the Subsidiaries that relate to
any Pre-Closing Tax Period, other than Returns described in Section 4.4(a)(i)(A)
hereof, if the Corporation shall cause a Subsidiary to take a position on such a
Return that, to the best of the knowledge of the management of the Corporation,
is inconsistent with a past filing practice or
26
position reflected in a Return of such Subsidiary relating to any Pre-Closing
Tax Period and for which the statute of limitations has not yet expired, then
the Corporation shall promptly notify the Stockholders of such position. The
Corporation shall promptly provide the Stockholders with a copy of any filed
Pre-Closing Tax Returns of the Subsidiaries, other than Returns described in
Section 4.4(a)(i)(A) hereof.
(ii) Donna Karan Companies.
---------------------
(A) The Corporation shall prepare and file, or cause to be
prepared or filed, at its own expense, all Returns of the Donna Karan Companies
relating to any Pre-Closing Tax Period that are not required to be filed
(reflecting extensions) prior to the Closing Date (collectively with the Returns
described in Section 4.4(a)(i), the "Pre-Closing Tax Returns").
(B) In the case of Pre-Closing Tax Returns of any of the Donna
Karan Companies that are federal, New York State, New York City or New Jersey
partnership information Returns, the Corporation shall be responsible for the
initial preparation of all such Returns and shall consult with the Stockholders,
Takihyo and Gabrielle (each such person, a "Previous Holder") or their
designated representatives on a regular basis in connection therewith as to (1)
allocation of items of income, gain, deduction and loss for each of the Donna
Karan Companies between the Pre-Closing Tax Period and Post-Closing Tax Period
of such Donna Karan Company, and (2) any filing position inconsistent with such
Donna Karan Company's past filing practice. The Corporation shall provide each
Previous Holder or its designated representatives with a final draft of each
such Pre-Closing Tax Return for each of the Donna Karan Companies no later than
thirty (30) days prior to the earlier of the (1) due date of such Return, and
(2) the due date (including extensions) of the Pre-Closing Tax Returns of those
Subsidiaries that hold a direct or indirect interest in such Donna Karan
Company. Each of the Subsidiaries agrees to file for such filing extensions as
are allowable under law with respect to its Pre-Closing Returns so that the
Returns of the Donna Karan Companies may be adequately and timely prepared. The
Corporation agrees not to allow the Donna Karan Companies to take any position
on any such Pre-Closing Tax Return that is inconsistent with such Donna Karan
Company's past filing practices and positions unless failing to take such an
inconsistent position would, in the opinion of the Corporation's outside
accountant, more likely than not be subject to a penalty under applicable law.
(C) In the event of a dispute between the Corporation and the
Previous Holders as to an allocation of income, gain, loss or deduction between
periods or any position
27
with respect to any Pre-Closing Tax Return described in Section 4.4(a)(ii)(B)
hereof, the parties shall consult with each other and attempt to resolve their
dispute. If such dispute cannot be resolved by them, it shall be referred to the
Tax Arbitrator under the procedures described in Section 4.4(a)(i)(B) hereof.
(D) With respect to Pre-Closing Tax Returns of the Donna Karan
Companies, other than Returns described in Section 4.4(a)(ii)(B) hereof, if the
Corporation shall cause a Donna Karan Company to take a position on such a
Return that, to the best of the knowledge of the management of the Corporation,
is inconsistent with a past filing practice or position reflected in a Pre-
Closing Tax Return of such Donna Karan Company for which the statute of
limitations has not yet expired, then the Corporation shall promptly notify the
Previous Holders of such position. The Corporation shall promptly provide the
Previous Holders with a copy of any filed Pre-Closing Tax Returns of the Donna
Karan Companies, other than Returns described in Section 4.4(a)(ii)(B) hereof.
(iii) Miscellaneous Definitions and Rights. For purposes of this
------------------------------------
Section 4.4, any references herein to (A) the "Taxpayers" shall mean the
Previous Holders and the Omega Beta Trust, and (B) the rights or obligations of
a Previous Holder or Taxpayer relate solely to that entity in which such
Previous Holder or Taxpayer holds or has held any direct or indirect ownership
interest. Notwithstanding anything to the contrary in this Agreement, for
purposes of this Section 4.4, where the interests of all Previous Holders are
involved, Taki, Mori CM, HM and Takihyo may act only through one agent appointed
by them with full power and authority to act on each of their behalf, including,
but not limited to, the authority to receive all payments and notices and
execute and deliver all documents as may be necessary ("TM Agent"), and Karan,
Weiss, Gabrielle and the KW Trusts may act only through one agent appointed by
them with full power and authority to act on each of their behalf, including,
but not limited to, the authority to receive all payments and notices and
execute and deliver all documents as may be necessary ("DK Agent"). Except as
otherwise specified herein, each party shall be responsible for its own costs
incurred (including, without limitation, professional fees) in connection with
any actions taken with respect to the provisions of this Section 4.4.
(b) Cooperation.
-----------
(i) Corporation; Donna Karan Companies; Subsidiaries. The
------------------------------------------------
Corporation shall, and shall cause the Donna Karan Companies and the
Subsidiaries to, cooperate with each Previous Holder or its designated
representatives (A) in the preparation of Pre-Closing Tax Returns and (B) with
respect to any matter described in Section 4.4(d) and Section 4.4(e). Such
28
cooperation shall include, without limitation, furnishing prior years Pre-
Closing Tax Returns or return preparation work papers illustrating previous
reporting practices or containing historical information relevant to the
preparation of such Pre-Closing Tax Returns, furnishing such other information
within the possession of the Corporation, the Donna Karan Companies or the
Subsidiaries, requested by such Previous Holder or its designated
representatives as is relevant to the preparation of the Returns, provision of
powers of attorney necessary for the purpose of signing Returns and defending
any audit or examination, immediately forwarding to the Taxpayers copies of any
notices or forms or other communications received from or sent to any Taxing
Authority which relate to the Pre-Closing Tax Returns or any Pre-Closing Tax
Period (or any Tax Audit or Tax Adjustment thereof (as defined below)) to the
extent that either the Previous Holder could have an indemnification obligation
under Section 7.1 hereof with respect to such Return, Tax Audit or Tax
Adjustment or any Taxpayer could have personal liability because of the status
of a Subsidiary as an S corporation, and providing documents relating to rulings
or other determinations by any Taxing Authority and records concerning the
ownership and tax basis of property, which the Corporation, the Donna Karan
Companies or the Subsidiaries may possess. The Corporation shall, and shall
cause the Donna Karan Companies and the Subsidiaries to, make their respective
accountants, employees and facilities available on a mutually convenient basis
to provide explanations of any documents or information provided hereunder.
(ii) Previous Holders. Each Previous Holder shall cooperate with the
----------------
Corporation (A) in the preparation of, and in connection with any post-closing
matters relating to, all Pre-Closing Tax Returns and (B) with respect to any
matter described in Section 4.4(d). Such cooperation shall include, without
limitation, immediately forwarding to the Corporation copies of any notices or
forms or other communications received from or sent to any Taxing Authority
which relate to the Pre-Closing Tax Returns or any Pre-Closing Period (or any
audit or examination thereof), and providing documents relating to rulings or
other determinations by any taxing authority and records concerning the
ownership and tax basis of property, which such Previous Holders may possess.
The Previous Holders shall make their respective accountants, employees and
facilities available on a mutually convenient basis to provide explanations of
any documents or information provided hereunder. Notwithstanding anything to
the contrary in this Agreement, no Taxpayer (or any of their respective
accountants, employees, affiliates or
29
representatives) shall have any obligation to disclose to the Corporation or the
Donna Karan Companies (or any of their respective accountants, employees,
affiliates or representatives) any information relating to the personal tax
returns, tax positions or tax situations of any Taxpayer (or any affiliate or
family member thereof).
(c) Books and Records. For a period of ten (10) years from the date
-----------------
hereof, the Corporation shall, and shall cause its affiliates, the Donna Karan
Companies and the Subsidiaries to, retain all Pre-Closing Tax Returns, books and
records of the Donna Karan Companies and Subsidiaries for all Pre-Closing Tax
Periods, and shall allow the Previous Holders or their designated
representatives to examine and make copies of such Returns, books and records.
Thereafter, the Corporation may dispose of any such material unless it has first
received in writing from the a Previous Holder or its designated representatives
a request for specified Returns, books and records which the Corporation shall
then preserve or furnish copies of to such Previous Holder or its designated
representatives.
(d) Tax Audits and Adjustments.
--------------------------
(i) Pre-Closing Tax Returns of Subsidiaries.
---------------------------------------
(A) With respect to any Pre-Closing Tax Return of any
Subsidiary for which a Previous Holder could have an indemnification obligation
under Section 7.1 hereof or Taxpayer could have personal liability because of
the status of a Subsidiary as an S corporation, the Previous Holder or its
designated representatives shall have the sole right to control and settle any
audit or examination by any Taxing Authority ("Tax Audit") and contest and
defend against any assessment, notice of deficiency, or other adjustment or
proposed adjustment ("Tax Adjustment"), provided, however, if the resolution of
-------- -------
any issue arising with respect to such Tax Audit or Tax Adjustment could have a
material adverse effect on the amount or timing of the Tax liability of, or
attributable to, such Subsidiary (or any affiliate) in any Post-Closing Tax
Period, the Previous Holder shall promptly notify the Corporation in writing and
shall afford the Corporation the opportunity to control jointly the conduct and
resolution of the portion of such Tax Audit or Tax Adjustment that could have
the effect of increasing the Tax liabilities of, or attributable to, the
Subsidiary (or any affiliate) in a Post-Closing Tax Period.
(B) If the Corporation shall decline in writing to
participate in the control of the conduct of such Tax Audit or Tax Adjustment,
the Previous Holder shall have the right to control the conduct of such Tax
Audit or Tax Adjustment, provided that the Previous Holder shall not resolve
such Tax
30
Audit or Tax Adjustment without the Corporation's written consent, which shall
not be unreasonably withheld.
(ii) Pre-Closing Tax Returns of Donna Karan Companies. With
------------------------------------------------
respect to any Tax Audit or Tax Adjustment of any Pre-Closing Tax Return of any
Donna Karan Company, the Corporation and Previous Holders (or their designated
representatives) shall jointly control the conduct and resolution of any Tax
Audit and any Tax Adjustment; provided, however, that if the resolution of any
-------- -------
issue arising with respect to a Tax Audit or Tax Adjustment described in this
Section 4.4(d)(ii) has no impact, directly or indirectly, on the ultimate Tax
liability of the Corporation or any Subsidiary in a Post-Closing Tax Period,
then the Previous Holder shall have sole control of the conduct and resolution
of such Tax Audit or Tax Adjustment; provided, further, however, that if the
-------- ------- -------
resolution of any issue arising with respect to a Tax Audit or Tax Adjustment
described in this Section 4.4(d)(ii) has no impact, directly or indirectly, on
the ultimate Tax liability of any Subsidiary in a Pre-Closing Tax Period or any
Taxpayer, then the Corporation shall have sole control of the conduct and
resolution of such Tax Audit or Tax Adjustment.
(iii) Arbitration. In the event of a dispute between the Previous
-----------
Holders and the Corporation regarding the conduct or resolution of any Tax Audit
or Tax Adjustment described in Section 4.4(d)(i) and Section 4.4(d)(ii) hereof
in which they share joint control of the conduct and resolution, such dispute
shall be referred to the Tax Arbitrator. Each of the Previous Holders and the
Corporation shall present its position to the Tax Arbitrator which shall decide
which position shall be adopted. The Tax Arbitrator shall not be entitled to
adopt any other position, unless such Previous Holders and the Corporation so
agree in writing. The decision of the Tax Arbitrator shall be final and binding.
The fees and costs of the Tax Arbitrator shall be paid by the party or parties
whose position(s) is not adopted by the Tax Arbitrator. Each party shall bear
its own legal and other advisory expenses incurred in connection with such
arbitration.
(e) Post-Closing Tax Returns; Amended Returns for Pre-Closing Tax
-------------------------------------------------------------
Periods.
-------
(i) Post-Closing Tax Returns. If the Corporation shall cause a
------------------------
Subsidiary or a Donna Karan Company to take a position on a Return or amended
Return for a Post-Closing Tax Period that, to the best of the knowledge of the
management of the Corporation, is inconsistent with a past filing practice or
position reflected in a Pre-Closing Tax Return of such Subsidiary or such Donna
Karan Company for which the statute of limitations
31
has not yet expired, then the Corporation shall promptly notify the Previous
Holders of such position.
(ii) Amended Returns for Pre-Closing Tax Periods.
-------------------------------------------
(A) The Corporation shall not cause a Subsidiary or Donna
Karan Company to file an amended Pre-Closing Tax Return, unless the Corporation
is notified by its outside accountants that, in the opinion of such accountants,
it is more likely that not that the Corporation would incur a penalty under
applicable law if such amended Return were not filed. In that event, the
Corporation shall provide the Previous Holders with a final draft of such
amended Return no later than sixty (60) days prior to the due date for filing
such amended Return for review by the Previous Holders and their advisors.
(B) In the event of a dispute between the parties regarding
an issue described in Section 4.4(e)(ii)(A), the dispute shall be referred to a
Tax Arbitrator and resolved under the same procedures described in Section
4.4(d)(iii) hereof with respect to a Tax Audit or Tax Adjustment.
(f) Refunds and Credits. The Taxpayers shall be entitled to any
-------------------
refunds or credits of any Taxes attributable to or arising in any Pre-Closing
Tax Periods (other than state or local Taxes for Pre-Closing Tax Periods of the
Subsidiaries beginning on or after January 1, 1996) with respect to the
Subsidiaries (or for which the Taxpayers could otherwise be liable for under the
provisions of this Agreement relating to Taxes); provided, however, that this
-------- -------
Section 4.4(f) shall not obligate the Corporation to file for any refund or file
any amended Return; provided, further, however, that to the extent that any such
-------- ------- -------
refund or credit of any Taxes attributable to or arising in any Pre-Closing Tax
Period ending before January 1, 1996 gives rise to a tax detriment after
December 31, 1995 as a result of a timing adjustment, the amount of the refund
or credit to which the Taxpayers are entitled under this Section 4.4(f) shall be
reduced by the amount of such tax detriment ("Tax Detriment Amount"). The
Corporation shall, immediately upon the receipt or application by the
Corporation, the Donna Karan Companies, the Subsidiaries, or any affiliates
thereof of any refunds or credits described in the previous sentence, forward to
the Taxpayers such refunds or credits or reimburse them for the application of
such refunds or credits, together with any related interest received or
credited, reduced by any Tax Detriment Amount. The Taxpayers acknowledge that
they are not entitled to payment of any refund or credit of any Taxes to the
extent such refund or credit, as disclosed in Section 2.1(k) or 2.2(k) of the
Disclosure Schedule, was applied in calculating the additional amount of
32
cash payment due for second quarter 1996 estimated Taxes, of any of the
Subsidiaries.
(g) Tax Periods; Allocation of Income and Loss. The Corporation and
------------------------------------------
the Previous Holders agree that if the Corporation, the Donna Karan Companies
and the Subsidiaries are permitted but not required under any applicable U.S.
state, U.S. local or foreign income tax law to treat the Closing Date as the
last day of a taxable period, the Corporation, the Donna Karan Companies and the
Subsidiaries shall not treat such date as the last day of a taxable period. In
the case of all Taxes other than those based on or measured by property or
capital, the amount of Taxes attributable to such period shall be determined
based on a daily proration of income and expenses between the periods or based
on an interim closing of the books, as the Corporation shall elect. The parties
agree that Takihyo's interests in the profits and losses of the Donna Karan
Companies (other than Studio) shall terminate as of the close of the day
immediately preceding the Closing Date. No allocation of profits and losses from
any of the Donna Karan Companies (other than Studio) shall be made to Takihyo
for any period beginning on or after the Closing Date. To the extent required by
law, the parties shall cooperate in executing, or causing to be executed, any
amendments to the partnership agreements of the Donna Karan Companies (other
than Studio) to reflect the allocation described above. However, notwithstanding
anything to the contrary above, if Takihyo is treated by any Taxing Authority
as being allocated any profits of the Donna Karan Companies (other than Studio)
attributable to the Closing Date, then a distribution shall be made to Takihyo
in an amount equal to 53.185% of the net income so allocated to Takihyo for the
Closing Date. In the case of Taxes based on, or measured by, property or capital
(including, but not limited to, any ad valorem and real and personal property
-- -------
Taxes) the amount of Taxes attributable to the period ending on the Closing Date
shall be equal to the total amount of such Taxes for the taxable period in
question multiplied by a fraction the numerator of which is the number of days
in such period through the Closing Date and the denominator of which is the
total number of days in such period.
(h) New York Real Estate Transfer/Gains Taxes. The Corporation shall
-----------------------------------------
timely pay, and indemnify and hold harmless each of the other parties hereto
from and against, all New York
33
State and New York City real estate transfer taxes and New York State real
property transfer gains taxes (including penalties and interest) that may accrue
or be assessed against such party on account of (i) the contribution of an
interest in any of the Donna Karan Companies or the Subsidiaries pursuant to
this Agreement, or (ii) the issuance of Common Stock pursuant to this Agreement
in connection with the Offering. Each party hereto shall cooperate with the
Corporation in preparing, signing and filing all applicable tax returns required
to be filed with respect to the above-described events. The indemnity under this
Section 4.4 shall be subject to the notice and claim provisions of Article VII
hereof.
(i) Other Transfer Taxes. Except as provided in Section 4.4(h), all
--------------------
transfer, documentary, sales, use, stamp, registration, value added and other
such taxes and fees (including any penalties and interest) incurred in
connection with this Agreement shall be paid by each of the Donna Karan
Companies, the DK Corporations, the TT Corporations and the FM Corporations when
due, and those entities will, at their own expense, file all necessary Tax
returns and other documentation with respect to all such Taxes and fees, and, if
required by applicable law, the Corporation will join in the execution of any
such Tax returns and other documentation.
ARTICLE V
EFFECTIVENESS
This agreement shall be effective upon or simultaneous with the
consummation of the Offering.
ARTICLE VI
TERMINATION AND REMEDIES
SECTION 6.1. Termination.
-----------
Notwithstanding anything in this Agreement to the contrary:
(a) Mutual Consent. This Agreement may be terminated by the mutual
--------------
consent in writing of all the parties hereto.
(b) Default. If, notwithstanding the terms of this Agreement, a party
-------
hereto shall fail or refuse to consummate the transactions contemplated herein
or to take any other action referred to herein necessary to consummate the
transactions contemplated herein, then a non-defaulting party, after affording
the defaulting party a one (1) day period after notice in which
34
to cure such breach or default, shall have the right, in addition to the other
rights specified in Section 6.2 hereof, to terminate this Agreement by written
notice given to the defaulting party hereto. If any party hereto (other than the
Corporation) includes information in its Bring-Down Certificate pursuant to
Section 1.3(g)(iii) (the "Disclosing Party"), the Corporation shall have the
right to terminate this Agreement by written notice given to the Disclosing
Party if any member of the Board of Directors of the Corporation (ofter than the
members of the Board who are affiliated with the Disclosing Party) shall so
request in writing.
SECTION 6.2. Remedies.
--------
(a) Specific Performance. Subject to compliance with the terms of
--------------------
Section 6.2(d) hereof, any party desiring to proceed with the Closing despite
any failure or refusal of the other party hereto of the type described in
Section 6.1(b) hereof shall have the right to pursue the remedy of specific
performance.
(b) Damages. Subject to compliance with the terms of Section 6.2(d)
-------
hereof, if this Agreement is terminated pursuant to Section 6.1(b) hereof, and
if the failure or refusal referred to in Section 6.1(b) hereof constitutes a
breach of this Agreement, the breaching party shall be responsible for and shall
pay to any non-defaulting party all damages and reasonable out-of-pocket costs
and expenses suffered and sustained by any non-defaulting party.
(c) Effect of Termination. Except as set forth in Section 6.2(a) or
---------------------
Section 6.2(b) hereof, any termination of this Agreement by any party hereto
shall have the effect of causing this Agreement thereupon to become void and of
no further force or effect whatsoever, and thereupon no party hereto will have
any rights, duties, liabilities or obligations of any kind or nature whatsoever
against any other party hereto based upon either this Agreement or the
transactions contemplated hereby, except in each case the obligations of the
Corporation for expenses incurred by it and such attorneys' fees it has
otherwise agreed to pay on behalf of the Stockholders in connection with the
transactions contemplated by this Agreement and the obligations of each party
with respect to confidentiality set forth in Section 8.1 hereof.
(d) Cure Period. Any party seeking any form of relief referred to in
-----------
Sections 6.2(a) or (b) hereof shall, as a condition to the right to seek such
relief, afford the defaulting party hereto with a one (1) day period to effect
reasonable cure of such breach or default.
(e) Attorneys' Fees. In any action, suit, or other proceeding under
---------------
or to enforce any provision of this Agreement, the prevailing party shall be
entitled to recover its reasonable attorneys' fees and other out-of-pocket
expenses from the losing party.
35
ARTICLE VII
INDEMNIFICATION
SECTION 7.1. General.
-------
Except as otherwise limited by this Article VII or as otherwise
provided in Section 4.4 hereof, from and after the Closing Date, each party
hereto shall indemnify and hold the other parties hereto harmless from and
against any and all losses, damages, costs and expenses (including but not
limited to court costs and reasonable outside attorneys' and accountants' fees),
as and when incurred and whether or not involving a third party, actually
suffered or incurred by it or any assignee or successor of any of the foregoing
(hereinafter "Loss") arising out of or resulting from any information included
by such party in its Bring-Down Certificate pursuant to Section 1.3(g)(iii) or
any breach of (i) any representation or warranty made by such party to another
party contained in Article II hereof; provided, however, that such obligation to
indemnify and hold harmless shall not apply unless the party seeking
indemnification shall have given timely written notice to the breaching party of
such breach of representation or warranty in accordance with Section 7.2 hereof,
or (ii) any other covenant or agreement by any party contained in this
Agreement. Except as otherwise limited by this Article VII, from and after the
Closing Date, the Corporation shall indemnify and hold Karan, Weiss, Taki and
Mori harmless from and against any and all losses, as and when incurred and
whether or not involving a third party, with respect to alleged violations of
law resulting from acts or omissions allegedly taken or made by any of them (a)
on or prior to the Closing Date based on the allegation that, when acting as
partners of the Corporation's predecessors, he or she was acting as an officer
or director of the Corporation or its predecessors with respect to acts or
omissions that are of a nature customarily performed by officers or directors of
a corporation, and (b) after the Closing Date based on the allegation that he or
she was a director of the Corporation, whether or not he or she was in fact a
director of the Corporation at the time of the alleged act or omission, in each
case, assuming such person seeking indemnification had acted properly; provided,
--------
however, that such obligation to indemnify and hold harmless shall not apply
-------
unless the party seeking indemnification shall have given timely written notice
to the Corporation in accordance with Section 7.2 hereof. With respect to
indemnification sought by the Corporation pursuant to this Section 7.1 for a
breach by a party of the representation or warranty made in Section 2.1(e)(xii)
or Section 2.2(e)(xii) hereof, insofar as such breach relates to the Section 481
adjustment to any of the Donna Karan Companies in a period after the Closing
Date, the amount of such indemnification from a party shall be limited to the
amount of the distribution to such party to the extent of the amount of such
party's allocable share of
36
the Section 481 adjustment for the Donna Karan Companies, less any applicable
Taxes imposed on such party (and on such party's direct or indirect owners).
SECTION 7.2. Claims.
------
The party seeking indemnification hereunder shall promptly give the
breaching party or the Corporation, as the case may be, written notice of any
matter which the party seeking indemnification has determined has given or could
give rise to a right of indemnification under this Agreement stating the amount
of the Loss, if known, and method of computation thereof, all with reasonable
particularity and containing a reference to the provisions of this Agreement in
respect of which such right of indemnification is claimed. The obligations and
liabilities of the breaching party or the Corporation, as the case may be, under
this Article VII with respect to a Loss arising from claims of any third party
that are subject to the indemnification provided for in this Article VII
("Third-Party Claims") shall be governed by and be contingent upon the following
additional terms and conditions: if the party seeking indemnification shall
receive notice of any Third-Party Claim, it shall give the breaching party or
the Corporation, as the case may be, prompt written notice thereof and shall
permit the breaching party or the Corporation, as the case may be, at its
option, to participate in the defense of such Third-Party Claim by counsel of
its own choosing and at its expense. If, however, the breaching party or the
Corporation, as the case may be, acknowledges in writing its obligation to
indemnify the damaged party or the Corporation, as the case may be, hereunder
against any Loss that may result from such Third-Party Claim, then the breaching
party, or the Corporation, as the case may be, shall be entitled, at its option,
to assume and control the defense of such Third-Party Claim at its expense and
through counsel of its choice if it gives prompt written notice of its intention
to do so to the damaged party. However, if the damaged party elects not to
defend against any such Third-Party Claim, then it shall promptly so notify the
breaching party or the Corporation, as the case may be, and in such event, the
breaching party or the Corporation, as the case shall be, shall thereupon again
be entitled, at its option, to assume and control the defense of such Third-
Party Claim at its expense and through counsel of its choice. If the breaching
party or the Corporation, as the case shall be, exercises its right to undertake
the defense against any such Third-Party Claim as provided above, the damaged
party shall cooperate with the breaching party or the Corporation, as the case
shall be, in such defense and make available to the breaching party or the
Corporation, as the case shall be, at the breaching party's or the
Corporation's, as the case shall be, expense, all pertinent records, materials
and information in their possession or under their control relating thereto as
is reasonably required by the breaching party. Similarly, if the
37
damaged party is conducting the defense against any such Third-Party Claim, the
breaching party or the Corporation, as the case shall be, shall cooperate with
it in such defense and make available to it all such records, materials and
information in its possession or under its control relating thereto as is
reasonably required by the damaged party. No such Third-Party Claim may be
settled by the breaching party or the Corporation, as the case shall be, without
the written consent of the damaged party except where the settlement thereof
involves the payment of money only and the damaged party is totally indemnified
by the breaching party or the Corporation, as the case shall be, for such
payment. The damaged party shall not, without the written consent of the
breaching party or the Corporation, as the case shall be, settle any Third-Party
Claim which is being defended in good faith by the breaching party or the
Corporation, as the case shall be.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1. Confidentiality.
---------------
All information given by any party hereto to any other party shall be
considered confidential and shall be used only for the purposes intended.
Notwithstanding the foregoing, the parties agree that the Corporation may
describe the terms of this agreement in the Corporation's Registration Statement
filed with the Securities and Exchange Commission and file this Agreement as an
exhibit thereto, and the Corporation may also use such information to the extent
necessary to enable it to run the businesses of the Donna Karan Companies and
the Acquired Companies in the ordinary course.
SECTION 8.2. Successors and Assigns; No Third-Party Beneficiaries.
----------------------------------------------------
This Agreement shall inure to the benefit of, and be binding upon, the
parties hereto and their respective successors and assigns; provided, however,
-------- -------
that no party shall assign or delegate any of the obligations created under this
Agreement without the prior written consent of the other parties. Nothing in
this Agreement shall confer upon any person or entity not a party to this
Agreement, or the legal representatives of such person or entity, any rights or
remedies of any nature or kind whatsoever under or by reason of this Agreement.
38
SECTION 8.3. Notices.
-------
All notices and other communications given or made pursuant hereto
shall be deemed to have been given or made if in writing and delivered
personally, sent by registered or certified mail (postage prepaid, return
receipt requested) or sent via facsimile to the parties at the following
addresses:
(a) If to Gabrielle, Karan, Weiss, the KW Trusts or the Corporation,
to:
550 Seventh Avenue
New York, NY 10018
Attention: Stephan Weiss
Facsimile: (212) 789-1506
(b) If to Takihyo, Taki, Mori, CM or HM to:
c/o Takihyo Inc.
205 West 39th Street
New York, New York 10018
Attention: Frank R. Mori
Facsimile: (212) 626-6354
or to such other persons or at such other addresses as shall be furnished by
either party by like notice to the other, and such notice or communication shall
be deemed to have been given or made as of the date so delivered or mailed. No
change in any of such addresses shall be effective insofar as notices under this
Section 8.3 are concerned unless such changed address is located in the United
States of America and notice of such change shall have been given to the other
parties hereto as provided in this Section 8.3.
SECTION 8.4. Entire Agreement.
----------------
This Agreement, together with the exhibits hereto, represents the
entire agreement and understanding of the parties with reference to the
transactions set forth herein and no representations or warranties have been
made in connection with this Agreement other than those expressly set forth
herein or in the exhibits, certificates and other documents delivered in
accordance herewith (the "Closing Documents"). This Agreement supersedes all
prior negotiations, discussions, correspondence, communications, understandings
and agreements among the parties relating to the subject matter of this
Agreement and all prior drafts of this Agreement, all of which are merged into
this Agreement. No prior drafts of this Agreement and no words or phrases from
any such prior drafts shall be admissible into evidence in any action or suit
involving this Agreement.
39
all of which shall terminate on the date the Restructuring is completed.
SECTION 8.5. Waivers and Amendments.
----------------------
Any party may by written notice to the others (a) extend the time for
the performance of any of the obligations or other actions of the others; (b)
waive any inaccuracies in the representations or warranties of the others
contained in this Agreement; (c) waive compliance with any of the covenants of
the others contained in this Agreement; (d) waive performance of any of the
obligations of the others created under this Agreement; or (e) waive fulfillment
of any of the conditions to its own obligations under this Agreement; provided
however, that no waiver by any party to this Agreement shall be construed as a
waiver by any other party to this Agreement. The waiver by any party hereto of
a breach of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach, whether or not similar. This Agreement may
not be amended, modified or supplemented, unless consented to in writing by each
of the parties hereto and Morgan Stanley & Co. Incorporated.
SECTION 8.6. Severability.
------------
This entire Agreement shall be void if any provision of this Agreement
is invalid, illegal, unenforceable or inapplicable to any party or circumstance
to which it is intended to be applicable.
SECTION 8.7. Titles and Headings.
-------------------
The Article and Section headings and the Table of Contents contained
in this Agreement are solely for convenience of reference and shall not affect
the meaning or interpretation of this Agreement or of any term or provision
hereof.
SECTION 8.8. Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall be considered
one and the same agreement.
SECTION 8.9. Convenience of Forum; Consent to Jurisdiction.
---------------------------------------------
Each party to this Agreement, acting for and for its respective
successors and assigns, without regard to domicile, citizenship or residence,
hereby expressly and irrevocably elects as the sole judicial forum for the
adjudication of any matters arising under or in connection with this Agreement,
and consents and subjects itself to the jurisdiction of, the courts of the
40
State of New York located in New York City, and/or the United States District
Court for the Southern District of New York, in respect of any matter arising
under this Agreement. Service of process, notices and demands of such courts may
be made upon any party to this Agreement by personal service at any place where
it may be found or giving notice to such party as provided in Section 8.3
hereof.
SECTION 8.10. Governing Law.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York without giving effect to
principles of conflict of laws.
SECTION 8.11. Advice of Legal Counsel.
-----------------------
Each party acknowledges and represents that, in executing this
Agreement, such party has had the opportunity to seek the advice of legal
counsel and that such party has read and understood all the terms and provisions
of this Agreement. Further, this Agreement shall not be construed against any
party by reason of its preparation or having drafted this Agreement.
SECTION 8.12. Miscellaneous.
-------------
For purposes of Articles VI and VII hereof, Gabrielle, Karan, Weiss
and the KW Trusts shall be treated as one party and Takihyo, Taki, Mori, CM and
HM shall be treated as one party.
SECTION 8.13. Action and Disputes by Takihyo, Taki and the Mori
-------------------------------------------------
Family.
------
In taking any action required or permitted under this Agreement, the
Mori Family shall act in unison through Mori, individually, as an agent for the
Mori Family, and Takihyo shall act through Taki or Mori, individually, as an
agent for Takihyo. Takihyo, Taki and the Mori Family hereby agree among
themselves and individually with the Corporation to the payment of the Offering
consideration described in Article I hereof in the proportions set forth
therein. Takihyo agrees to the appointment of Taki and Mori as its
representative to act as its agent, individually under this Agreement and the
Closing Documents to which it is a party, and CM and HM agree to the appointment
of Mori as their representative to act as their agent under this Agreement and
the Closing Documents to which they are a party. Taki and Mori severally agree
to act as agents for Takihyo under this Agreement and the Closing Documents to
which it is a party, and Mori agrees to act as agent for the Mori Family under
this Agreement and the Closing Documents to which any of them is a party.
Takihyo, Taki, Mori, CM and HM agree that they will not bring any claim against
the Corporation relating to (i) its
41
payment of the Offering consideration in the proportions set forth therein, (ii)
its taking actions under this Agreement pursuant to the actions or instructions
of Taki or Mori as agents for Takihyo, or Mori as agent for the Mori Family, or
(iii) the actions of Taki or Mori as the agents for Takihyo, or the actions of
Mori as the agent for the Mori Family, under the Closing Documents, and shall,
jointly and severally, indemnify and hold harmless the Corporation and its
affiliates against any losses or expenses incurred by the Corporation in
connection with any claim or action brought by Takihyo, Taki or the Mori Family
in violation of this Section 8.13.
SECTION 8.14. Action and Disputes by Gabrielle, Karan, Weiss and
--------------------------------------------------
the KW Trusts.
--------------
In taking any action required or permitted under this Agreement,
Karan, Weiss and the KW Trusts shall act in unison through Weiss, individually,
as an agent for each of them and Gabrielle shall act through Karan or Weiss,
individually, as an agent for Gabrielle. Gabrielle, Karan, Weiss and the KW
Trusts hereby agree among themselves and individually with the Corporation to
the payment of the Offering consideration described in Article I hereof in the
proportions set forth therein. Gabrielle agrees to the appointment of Karan and
Weiss as its representative to act as its agent, individually under this
Agreement and the Closing Documents to which it is a party, and Karan, Weiss and
each of the KW Trusts agrees to the appointment of Weiss as their representative
to act as their agent under this Agreement and the Closing Documents to which
any of them is a party. Karan and Weiss severally agree to act as agents for
Gabrielle under this Agreement and the Closing Documents to which it is a party,
and Weiss agrees to act as agent for Karan, Weiss and the KW Trusts under this
Agreement and the closing Documents to which any of them is a party. Gabrielle,
Karan, Weiss and the KW Trusts agree that they will not bring any claim against
the Corporation relating to (i) its payment of the Offering consideration in the
proportions set forth therein, (ii) its taking actions under this Agreement
pursuant to the actions or instructions of Karan or Weiss as agents for
Gabrielle or Weiss as agent for Karan, Weiss and the KW Trusts, or (iii) the
actions of Karan or Weiss as the agents for Gabrielle, or the actions of Weiss
as the agent for Karan, Weiss and the KW Trusts under the Closing Documents, and
shall, jointly and severally, indemnify and hold harmless the Corporation and
its affiliates against any losses or expenses incurred by the Corporation in
connection with any claim or action brought by Gabrielle, Karan, Weiss or the KW
Trusts in violation of this Section 8.14.
42
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
DONNA KARAN INTERNATIONAL INC.
By:
------------------------------------
Name:
Title:
GABRIELLE STUDIO, INC.
By:
------------------------------------
Name:
Title:
TAKIHYO INC.
By:
------------------------------------
Name: Frank R. Mori
Title: President
---------------------------------------
Donna Karan
---------------------------------------
Stephan Weiss
TRUST UNDER TRUST AGREEMENT FOR THE
BENEFIT OF LISA WEISS KEYES, COREY
WEISS AND GABRIELLE KARAN
By:
------------------------------------
Stephan Weiss, as trustee
TRUST UNDER TRUST AGREEMENT FOR THE
BENEFIT OF DONNA KARAN
By:
------------------------------------
Stephan Weiss, as trustee
43
[Signature Page to Agreement and Plan of Contribution]
-----------------------------
Tomio Taki
-----------------------------
Frank R. Mori
-----------------------------
Christopher Mori
-----------------------------
Heather Mori
44
Exhibit A
---------
[Opinion of Counsel to Gabrielle,
Karan, Weiss, and KW Trusts]
(i) Gabrielle is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York and has all requisite
corporate power and authority to enter into the Agreement and to perform its
obligations thereunder.
(ii) The outstanding capital stock of each of the DK Corporations set
forth below, to the knowledge of such counsel, is owned beneficially and of
record by Karan, Weiss and the KW Trusts, free and clear of any liens, claims,
encumbrances or other contractual restrictions of any kind of which such counsel
has actual knowledge [subject to the release of the pledge of shares and the
release of the grant of the security interests pursuant to the Credit Agreement-
-this clause to be eliminated in the opinion to be rendered on the Closing
Date]:
[Download Table]
Issued and Outstanding
---------------------------------
Karan/Weiss Karan
Karan Weiss Trust Trust
----- ----- ----------- ------
Gabby 75 20 1 4
DK Store 75 20 1 4
DK Shoe 75 20 1 4
GJI 75 20 1 4
[Subject to the release of the pledge of shares and the release of the grant of
the security interests pursuant to the Credit Agreement and --this clause to be
eliminated in the opinion to be rendered on the Closing Date] [a]ssuming the
Corporation was a bona fide purchaser within the meaning of the New York Uniform
Commercial Code and purchased such shares and interests without notice of any
adverse claims thereto, the contribution and delivery of the shares in the DK
Corporations by Karan, Weiss and the KW Trusts to the Corporation as
contemplated by the Agreement will transfer good title to such shares to the
Corporation, free and clear of all security interests, liens, claims or
encumbrances and free and clear of other contractual restrictions of any kind of
which such counsel has actual knowledge
other than any lien, security interest, pledge, charge, encumbrance, agreement
or voting trust created by the Corporation or to which the Corporation is
subject.
(iii) Each of Gabrielle, Karan, Weiss and the KW Trusts has all
requisite power and authority to execute, deliver and perform the Agreement and
the Closing Documents to which it is a party and to perform the transactions
therein contemplated. All necessary proceedings have been duly taken to
authorize the execution, delivery and performance by each of Gabrielle, Karan,
Weiss and the KW Trusts of the Agreement and the Closing Documents to which it
is a party. The Agreement and the Closing Documents have been duly authorized
by Gabrielle and have been duly executed and delivered by each of Gabrielle,
Karan, Weiss and the KW Trusts and, assuming due authorization, execution and
delivery by the other parties thereto, constitute the valid and binding
agreements of each of Gabrielle, Karan, Weiss and the KW Trusts, enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws relating to or affecting enforcement of creditors' rights
generally, and except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
(iv) [Subject to the release of the pledge of shares and the release
of the grant of the security interests pursuant to the Credit Agreement,--this
clause to be eliminated in the opinion to be rendered on the Closing Date] [n]o
consent, authorization, approval, order, license, certificate or permit of or
from or declaration or filing with any Federal or New York State authority or,
to the knowledge of such counsel, any court or other tribunal is required for
the execution, delivery or performance of the Agreement by each of Gabrielle,
Karan, Weiss and the KW Trusts and the Closing Documents to which it is a party.
Except for such consents which were obtained prior to the Closing Date, no
consent of any party to any material contract, agreement, instrument, lease,
license, arrangement or understanding to which any of Gabrielle, Karan, Weiss or
the KW Trusts is a party or to which any of their respective properties or
assets are subject and of which such counsel has actual knowledge, is required
for the execution, delivery or performance of this Agreement and the Closing
Documents to which it is a party; and the execution, delivery and performance of
the Agreement and such Closing
Documents will not violate, result in the breach of, conflict with or (with or
without the giving of notice or the passage of time or both) entitle any party
to terminate or call a default under any such material contract, agreement,
instrument, lease, license, arrangement or understanding, or violate, result in
a breach of or conflict with any term of the Certificate of Incorporation or By-
Laws of Gabrielle violate, result in the breach of or conflict with the trust
agreement for any of the KW Trusts, or violate, result in a breach of or
conflict with any law, rule or regulation, or, to the knowledge of such counsel,
any order, judgment or decree binding on any of Gabrielle, Karan, Weiss or any
of the KW Trusts or to which any of their respective operations, businesses,
properties or assets are subject or result in the creation of any mortgage,
pledge, lien, charge or encumbrance upon Gabrielle or the loss of any license.
(v) [Subject to the release of the pledge of shares and the release of
the grant of the security interests pursuant to the Credit Agreement and--this
clause to be eliminated in the opinion to be rendered on the Closing Date]
[a]ssuming the Corporation was a bona fide purchaser within the meaning of the
New York Uniform Commercial Code and purchased such shares and interests without
notice of any adverse claims thereto, the contribution and delivery of the 50%
equity interest in Studio by Gabrielle to the Corporation as contemplated by the
Agreement and the Assignment will transfer good title to all of such interest to
the Corporation, free and clear of contractual restrictions of any kind of which
such counsel has actual knowledge and free and clear of all other security
interests, liens, claims and encumbrances other than any lien, security
interest, pledge, charge, encumbrance, agreement or voting trust created by the
Corporation or to which the Corporation is subject.
[The opinion(s) in the last sentence of paragragh (iii) to be delivered other
than on the Closing Date shall be required only to address the valid execution
and delivery of the Agreement and the Major Documents.]
Exhibit B
---------
[Opinion of Counsel to Takihyo, Taki, Mori, HM and CM]
(i) Takihyo is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to enter into the Agreement and to perform its
obligations thereunder. Each of the TT Corporations and the FM Corporations is
a corporation duly incorporated, validly existing and in good standing under the
laws of the State of New York and has all requisite corporate power and
authority to own its properties and carry on its business as the same is now
being conducted, and each is duly qualified to do business in each jurisdiction
in which the nature of its business or properties makes such qualification
necessary, except where the failure to be so qualified would not have a
materially adverse effect on its business.
(ii) The authorized capital stock of each of the TT Corporations and
the FM Corporations consists of the number of shares of common stock, $1.00 par
value per share, set forth below, of which the number of shares set forth below
are outstanding, all of which have been validly issued, are fully paid and
nonassessable, and, to the knowledge of such counsel, have not been issued in
violation of any preemptive rights of stockholders. Such shares are owned
beneficially and of record by Taki, in the case of the TT Corporations, and the
Mori Family, in the case of the FM Corporations, free and clear of any liens,
claims, encumbrances or other contractual restrictions of any kind of which such
counsel has actual knowledge[, subject to the release of the pledge of such
shares and the release of the grant of security interests pursuant to the Credit
Agreement--this clause to be eliminated in the opinion rendered on the Closing
Date]:
[Download Table]
Issued and Outstanding
----------------------
Authorized Taki
---------- ----
Tolara 100 100
Tomio 20,000 100
Tangents 2,000 100
TT Japan 20,000 100
Mori CM HM
---- -- --
Full 100 80 10 10
Formal 20,000 100
First 2,000 100
FM Japan 20,000 100
Such counsel has no actual knowledge that any options, warrants or other rights
to acquire, sell or issue shares of capital stock of any of the TT Corporations
or the FM Corporations (whether upon conversion of other securities or
otherwise) are outstanding. [Subject to the release of the pledge of shares and
the release of security interests pursuant to the Credit Agreement and--this
clause to be eliminated in the opinion rendered on the Closing Date] [a]ssuming
the Corporation was a bona fide purchaser within the meaning of the New York
Uniform Commercial Code and purchased such shares and interest without notice of
any adverse claims thereto, the contribution and delivery of the shares in the
TT Corporations by Taki, and the contribution and delivery of the shares in the
FM Corporations by the Mori Family, to the Corporation as contemplated by the
Agreement will transfer good title to all of such shares to the Corporation,
free and clear of all security interests, liens, claims or encumbrances and free
and clear of other contractual restrictions of any kind of which such counsel
has actual knowledge and other than any lien, security interest, pledge, charge,
encumbrance, agreement or voting trust created by the Corporation or to which
the Corporation is subject.
(iii) Each of Taki, Mori, HM, CM and Takihyo has full power and
authority to execute and deliver the Agreement and the Closing Documents to
which it is a party and to perform the transactions therein contemplated. The
execution and delivery of the Agreement and the performance of the transactions
therein contemplated have been duly authorized by the Board of Directors and
shareholders of Takihyo and the execution and delivery of
2
each of the other Closing Documents to which Takihyo is a party have been duly
authorized by the Board of Directors, and no further corporate action on the
part of Takihyo is necessary to authorize the Agreement and the performance of
such transactions. All necessary proceedings have been duly taken by Taki, Mori,
HM and CM to authorize the execution, delivery and performance by such person of
the Agreement and each of the Closing Documents to which such person is a party.
The Agreement and such Closing Documents have been duly executed and delivered
by Takihyo, Taki, Mori, HM and CM, and assuming due authorization, execution and
delivery by the other parties thereto, constitute the valid and binding
agreements of Takihyo, Taki, Mori, HM and CM enforceable in accordance with
their terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws relating to or affecting enforcement of creditors' rights generally, and
except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(iv) No consent, authorization, approval, order, license, certificate
or permit of or from or declaration or filing with any Federal or New York State
authority or, to the knowledge of such counsel, any court or other tribunal is
required for the execution, delivery or performance by each of the TT
Corporations, the FM Corporations, Taki, Mori, HM, CM and Takihyo of the
Agreement and the Closing Documents to which it is a party. Except such
consents which have been obtained and are in full force and effect, no consent
of any party to any material contract, agreement, instrument, lease, license,
arrangement or understanding to which any of the TT Corporations, the FM
Corporations, Taki, Mori, HM, CM or Takihyo is a party or to which any of their
respective properties or assets are subject and of which such counsel has actual
knowledge, is required for the execution, delivery or performance of the
Agreement and the Closing Documents to which it is a party; and the execution,
delivery and performance of the Agreement and such Closing Documents to which it
is a party will not violate, result in the breach of, conflict with or (with or
without the giving of notice or the passage of time or both) entitle any party
to terminate or call a default under any such material contract, agreement,
instrument, lease, license, arrangement or understanding of which such counsel
has actual knowledge, or violate or result in a breach of any term of the
Certificate of Incorporation or By-Laws of any of the TT Corporations or the FM
Corporations or violate, result in a breach of or conflict with any law, rule or
regulation or, to the knowledge of such counsel, any order, judgment or decree
binding on any of the TT Corporations, the FM Corporations, Taki, Mori, HM, CM
or Takihyo or to which any of their respective operations, businesses,
properties or assets are subject or result in the creation of any mortgage,
pledge, lien, charge or encumbrance upon any of the
3
assets of any of the TT Corporations or the FM Corporations or the loss of any
license.
(v) Except as disclosed in Sections 2.2(h) and 2.2(j) of the
Disclosure Schedule, such counsel has no actual knowledge that there is any
lawsuit or legal, administrative or regulatory proceeding or investigation
pending or threatened against Takihyo, any TT Corporation or any FM Corporation.
(vi) [Subject to the release of the pledge of shares and the release
of security interests pursuant to the Credit Agreement and--this clause to be
eliminated in the opinion rendered on the Closing Date] [a]ssuming the
Corporation was a bone fide purchaser within the meaning of the New York Uniform
Commercial Code and purchased such shares and interest without notice of any
adverse claims thereto, the contribution and delivery of the 30% equity
interests in each of the Donna Karan Companies by Takihyo to the Corporation as
contemplated by the Agreement and the Assignment will transfer good title to all
of such interests to the Corporation, free and clear of all security interests,
liens, claims, or encumbrances and free and clear of other contractual
restrictions of any kind of which such counsel has actual knowledge and other
than any lien, security interest, pledge, charge, encumbrance, agreement or
voting trust created by the Corporation or to which the Corporation is subject.
[The opinion(s) in the last sentence of paragraph (iii) to be delivered other
than on the Closing Date shall be required only to address the valid execution
and delivery of the Agreement and the Major Documents.]
4
Exhibit C
---------
[Opinion of Counsel to the Corporation]
(i) The Corporation is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to enter into the Agreement and the
Closing Documents and to perform its obligations thereunder.
(ii) The execution and delivery of the Agreement and the Closing
Documents by the Corporation and the performance of the transactions therein
contemplated have been duly authorized by its Board of Directors and no further
corporate action on the part of the Corporation is necessary to authorize the
Agreement and the performance of such transactions. The Agreement and the
Closing Documents have been duly executed and delivered by the Corporation and,
assuming due authorization, execution and delivery by the other parties thereto,
constitute the valid and binding agreements of the Corporation, enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws relating to or affecting enforcement of creditors' rights
generally, and except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
(iii) No consent, authorization, approval, order, license,
certificate or permit of or from or declaration or filing with any Federal or
New York State authority or, to the knowledge of such counsel, any court or
other tribunal is required for the execution, delivery or performance by the
Corporation of the Agreement and the Closing Documents to which it is a party
(except filings under the Securities Act of 1933 which have been or will be made
before the Closing Date and consents under "blue sky" or securities laws which
have been obtained prior to the Effective Date). No consent of any party to any
contract, agreement, instrument, lease, license, arrangement or understanding to
which the Corporation is a party or to which any of its properties or assets are
subject and of which such counsel has actual knowledge, is required for the
execution, delivery or performance of the Agreement and the Closing Documents to
which it is a party except for such consents which were obtained prior to the
Closing Date; and the execution, delivery and performance of the Agreement and
such Closing Documents to which it is a party will not violate, result in the
breach of, conflict with or (with or without the giving of notice or the passage
of time or both) entitle any party to terminate or
call a default under any such contract, agreement, instrument, lease, license,
arrangement or understanding, or violate or result in a breach of any term of
the Certificate of Incorporation or By-Laws of the Corporation or violate,
result in a breach of or conflict with any law, rule or regulation or, to the
knowledge of such counsel, any order, judgment or decree binding on the
Corporation or to which any of its operations, businesses, properties or assets
are subject or result in the creation of any mortgage, pledge, lien, charge or
encumbrance upon any of the assets of any of the Corporation or, to the
knowledge of such counsel, the loss of any license.
[The opinion(s) in the last sentence of paragraph (iii) to be delivered other
than on the Closing Date shall be required only to address the valid execution
and delivery of the Agreement and the Major Documents.]
2
Exhibit F
---------
[To be prepared]
Dates Referenced Herein
| Referenced-On Page |
|---|
| This ‘S-1/A’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| Filed on: | | 6/10/96 | | 3 | | | | | None on these Dates |
| | 4/17/96 | | 2 |
| | 1/1/96 | | 12 | | 32 |
| | 12/31/95 | | 32 |
| List all Filings |
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