<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1997
REGISTRATION NO. 333-26999
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ANVIL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2253 13-3801705
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
228 EAST 45TH STREET
NEW YORK, NEW YORK 10017
TELEPHONE: (212) 476-0300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
COPY TO:
<TABLE>
<S> <C>
BERNARD GELLER, PRESIDENT DENNIS M. MYERS
ANVIL HOLDINGS, INC. KIRKLAND & ELLIS
228 EAST 45TH STREET 200 EAST RANDOLPH DRIVE
NEW YORK, NEW YORK 10017 CHICAGO, ILLINOIS 60601
TELEPHONE: (212) 476-0300 (312) 861-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. /X/
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT (1) PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
13% Series B Senior Exchangeable Preferred Stock
due 2009....................................... $57,500,000(3) 100% $57,500,000(3) $8,334(4)
13% Subordinated Exchange Debentures due 2009.... $57,500,000(3) (2) (2) None
</TABLE>
(1) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee.
(2) No further fee is payable pursuant to Rule 457(i).
(3) Includes the maximum amount of pay-in-kind dividends payable over the entire
period in which pay-in-kind dividends may be paid.
(4) A registration fee of $9,091 has already been paid by the Registrant in its
original filing on May 13, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 27, 1997
PROSPECTUS
JULY , 1997
ANVIL HOLDINGS, INC.
OFFER TO EXCHANGE ITS 13% SERIES B SENIOR EXCHANGEABLE
PREFERRED STOCK DUE 2009 FOR ANY AND ALL OF ITS OUTSTANDING 13% SERIES A SENIOR
EXCHANGEABLE PREFERRED STOCK DUE 2009
THE PREFERRED EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED.
Anvil Holdings, Inc., a Delaware corporation ("Holdings"), hereby offers
(the "Preferred Exchange Offer"), upon the terms and conditions set forth in
this Prospectus (the "Prospectus") and the accompanying Letter of Transmittal
(the "Letter of Transmittal"), to exchange $1,000 liquidation preference of its
Series B 13% Senior Exchangeable Preferred Stock due 2009, (the "New Senior
Preferred Stock"), registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this Prospectus
is a part, for each $1,000 liquidation preference of its outstanding 13% Senior
Exchangeable Preferred Stock due 2009 (the "Old Senior Preferred Stock"), of
which $30,000,000 aggregate liquidation preference is outstanding. The form and
terms of the New Senior Preferred Stock are the same as the form and terms of
the Old Senior Preferred Stock (which they replace), except that the New Senior
Preferred Stock will bear a Series B designation and will have been registered
under the Securities Act and, therefore, will not bear legends restricting their
transfer and will not contain certain provisions relating to liquidated damages
which were included in the terms of the Old Senior Preferred Stock in certain
circumstances relating to the timing of the Preferred Exchange Offer. The New
Senior Preferred Stock will evidence the same equity as the Old Senior Preferred
Stock (which they replace) and will be issued under and be entitled to the
benefits of a Certificate of Designation (the "Certificate of Designation"). The
Old Senior Preferred Stock and the New Senior Preferred Stock are sometimes
referred to herein collectively as the "Senior Preferred Stock." See "The
Preferred Exchange Offer" and "Description of Securities--Senior Preferred
Stock."
Each share of New Senior Preferred Stock will have, as the Old Senior
Preferred Stock (which they replace) has, a liquidation preference of $25 per
share. Dividends on the Senior Preferred Stock will accrue in each period ending
on March 15, June 15, September 15 and December 15 of each year at a rate of 13%
per annum of the liquidation preference. On or before March 15, 2002, Holdings
may, at its option, pay dividends in cash or in additional fully paid and
non-assessable shares of Senior Preferred Stock having an aggregate liquidation
preference equal to the amount of such dividends. Thereafter, dividends may be
paid in cash only.
On any scheduled dividend payment date, Holdings may, at its option, but
subject to certain conditions, exchange all but not less than all of the shares
of Senior Preferred Stock then outstanding for Holdings' 13% Subordinated
Exchange Debentures due 2009 (the "Exchange Debentures"). See "Description of
Securities-- Senior Preferred Stock--Exchange." The Exchange Debentures will
bear interest at a rate of 13% per annum, payable semi-annually in arrears on
March 15 and September 15 of each year, commencing with the first such date to
occur after the date of exchange. On or before March 15, 2002, Holdings may, at
its option, pay interest in cash or in additional Exchange Debentures having an
aggregate principal amount equal to the amount of such interest. Thereafter,
interest may be paid in cash only.
The Senior Preferred Stock and the Exchange Debentures will be redeemable at
the option of Holdings, in whole or in part, at any time on or after March 15,
2002, at the redemption prices set forth herein, plus, in the case of the Senior
Preferred Stock, an amount in cash equal to all accumulated and unpaid dividends
per share to the date of redemption, or in the case of Exchange Debentures, an
amount in cash equal to all accrued and unpaid interest thereon to the date of
redemption. In addition, at the option of Holdings, the Senior Preferred Stock
and the Exchange Debentures may be redeemed in whole, but not in part, at any
time at the redemption price set forth herein, plus, in the case of the Senior
Preferred Stock, an amount in cash equal to all accumulated and unpaid dividends
per share to the date of redemption, or in the case of Exchange Debentures, an
amount in cash equal to all accrued and unpaid interest thereon to the date of
redemption, with the proceeds of a Public Equity Offering.
(COVER CONTINUED ON FOLLOWING PAGE)
--------------------------
SEE "RISK FACTORS," BEGINNING ON PAGE 17, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD SENIOR
PREFERRED STOCK IN THE PREFERRED EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
(COVER PAGE CONTINUED)
Upon the occurrence of a Change of Control (as defined), each holder of
Senior Preferred Stock and the Exchange Debentures will have the right to
require Holdings to purchase all or any part of such holder's Senior Preferred
Stock or Exchange Debentures at an offer price in cash equal to 101% of the
liquidation preference or aggregate principal amount (as the case may be)
thereof, plus, in the case of the Senior Preferred Stock, an amount in cash
equal to all accumulated and unpaid dividends per share to the date of purchase,
or in the case of the Exchange Debentures, an amount in cash equal to all
accrued and unpaid interest thereon to the date of purchase. In the event of a
Change of Control, there can be no assurance that Holdings will have, or will
have access to, sufficient funds to repurchase the Senior Preferred Stock or the
Exchange Debentures or to pay the holders of the Senior Preferred Stock or the
Exchange Debentures. See "Risk Factors--Subordination of Securities to Current
and Future Obligations," "--Change of Control Provisions; Limitations on Rights
of Repayment," "Description of Securities--Senior Preferred Stock--Certain
Covenants," "--Repurchase at the Option of the Holders--Change of Control,"
"--Exchange Debentures--Certain Covenants" and "--Mandatory Offers to Purchase
Exchange Debentures-- Change of Control."
Holdings will accept for exchange any and all Old Senior Preferred Stock
validly tendered and not withdrawn prior to 5:00 p.m., New York City time on
, 1997, unless extended by Holdings in its sole discretion (the
"Expiration Date"). Tenders of Old Senior Preferred Stock may be withdrawn at
any time prior to 5:00 p.m. on the Expiration Date. The Preferred Exchange Offer
is subject to certain customary conditions. The Old Senior Preferred Stock were
sold by Holdings on March 14, 1997 as a part of 30,000 Units, with each Unit
consisting of 40 shares of Old Senior Preferred Stock and 13 shares of Holdings
Class B Common Stock, par value $0.01 per share value (the "Class B Common
Stock"), to the Initial Purchaser (as defined) and to certain accredited
investors with the Initial Purchaser acting as agent, in a transaction not
registered under the Securities Act in a private placement pursuant to the
exemption contained in Section 4(2) of the Securities Act (the "Initial Units
Offering"). The Initial Purchaser subsequently placed the Units and the
underlying Old Senior Preferred Stock with qualified institutional buyers in
reliance upon Rule 144A under the Securities Act and with a limited number of
institutional accredited investors in reliance upon Rule 501(a) under the
Securities Act. Accordingly, the Old Senior Preferred Stock may not be
reoffered, resold or otherwise transferred in the United States unless
registered under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available. The New Senior
Preferred Stock are being offered hereunder in order to satisfy the obligations
of Holdings under the Preferred Stock Registration Rights Agreement (as defined)
entered into by Holdings and the Initial Purchaser in connection with the
Initial Units Offering. See "The Preferred Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, Holdings believes the
New Senior Preferred Stock issued pursuant to the Preferred Exchange Offer may
be offered for resale, resold and otherwise transferred by any holder thereof
(other than any such holder that is an "affiliate" of Holdings within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Senior Preferred Stock are acquired in the ordinary course of such
holder's business and such holder has no arrangement or understanding with any
person to participate in the distribution of such New Senior Preferred Stock.
Each holder of Old Senior Preferred Stock accepting the Preferred Exchange Offer
is required to represent to Holdings that (i) the New Senior Preferred Stock are
to be acquired by the holder or the person receiving such New Senior Preferred
Stock, whether or not such person is the holder, in the ordinary course of
business, (ii) the holder or any such other person (other than a broker-dealer)
is not engaging and does not intend to engage, in the distribution of the New
Senior Preferred Stock, (iii) the holder or any such other person has no
arrangement or understanding with any person to participate in the distribution
of the New Senior Preferred Stock, (iv) neither the holder nor any such other
person is an "affiliate" of Holdings within the meaning of Rule 405 under the
Securities Act, and (v) the holder or any such other person acknowledges that if
such holder or other person participates in the Preferred Exchange Offer for the
purpose of distributing the New Senior Preferred Stock it must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the New Senior Preferred Stock and cannot rely on
those no-action letters. See "The Preferred Exchange Offer--Resale of the New
Senior Preferred Stock." Each broker-dealer (a "Participating Broker-Dealer")
that receives New Senior Preferred Stock for its own account pursuant to the
Preferred Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Senior Preferred Stock. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of New Senior Preferred Stock received
in exchange for Old Senior Preferred Stock where such Old Senior Preferred Stock
were acquired by such Participating Broker-Dealer as a result of marketmaking
activities or other trading activities. Holdings has agreed that, for a period
of 180 days after the Expiration Date, it will make this Prospectus available to
any Participating Broker-Dealer for use in connection with any such resale. See
"Plan of Distribution."
Holders of Old Senior Preferred Stock not tendered and accepted in the
Preferred Exchange Offer will continue to hold such Old Senior Preferred Stock
and will be entitled to all the rights and benefits and will be subject to the
limitations applicable thereto under the Certificate of Designation and with
respect to transfer under the Securities Act. Holdings will pay all the expenses
incurred by it incident to the Preferred Exchange Offer. See "The Preferred
Exchange Offer."
There has not previously been any public market for the Old Senior Preferred
Stock or the New Senior Preferred Stock. Holdings does not intend to list the
New Senior Preferred Stock on any securities exchange or to seek approval for
quotation through any automated quotation system. The Old Senior Preferred Stock
is currently eligible for trading in the Private Offerings, Resales and Trading
through Automated Linkages ("PORTAL") market. However, there can be no assurance
that an active market for the New Senior Preferred Stock will develop. See "Risk
Factors-- Absence of a Public Market Could Adversely Affect the Value of the
Senior Preferred Stock." Moreover, to the extent that Old Senior Preferred Stock
are tendered and accepted in the Preferred Exchange Offer, the trading market
for untendered and tendered but unaccepted Old Senior Preferred Stock could be
adversely affected.
Concurrent with the Initial Units Offering, Holdings' wholly owned
subsidiary, Anvil Knitwear, Inc., a Delaware corporation ("Anvil"), sold
$130,000,000 aggregate principal amount of its 10 7/8% Senior Notes due 2007
(the "Old Senior Notes") (the "Initial Offering" and, together with the Initial
Units Offering, the "Initial Offerings").
ii
<PAGE>
Concurrent with the Preferred Exchange Offer, Anvil is offering (the
"Exchange Offer") to exchange $1,000 principal amount of its Series B 10 7/8%
Senior Notes due 2007 (the "New Senior Notes") for each $1,000 principal amount
of its outstanding Old Senior Notes. The New Senior Notes and the Old Senior
Notes are sometimes referred to herein collectively as the "Senior Notes." The
Exchange Offer and the Preferred Exchange Offer are sometimes referred to herein
collectively as the "Exchange Offers." See "Summary--Concurrent Exchange Offer."
The Old Senior Notes, the New Senior Notes, the New Senior Preferred Stock, the
Old Senior Preferred Stock and the Exchange Debentures are sometimes referred to
herein collectively as the "Securities."
The New Senior Preferred Stock will be available initially in book-entry
form and Holdings expects that the New Senior Preferred Stock issued pursuant to
this Preferred Exchange Offer will be issued in the form of a global
certificate, which will be deposited with, or on behalf of, The Depository Trust
Company (the "Depositary") and registered in its name or in the name of Cede &
Co., its nominee, except with respect to institutional "accredited investors"
(within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act)
who will receive New Senior Preferred Stock in certificated form. Beneficial
interests in the global certificate will be shown on, and transfer thereof will
be effected through, records maintained by the Depositary and its participants.
Market data used throughout this Prospectus were obtained from internal
surveys and industry publications. Industry publications generally indicate that
the information contained therein has been obtained from sources believed to be
reliable, but that the accuracy and completeness of such information is not
guaranteed. Holdings has not independently verified such market data. Similarly,
internal surveys, while believed to be reliable, have not been verified by any
independent source.
This Prospectus, including the documents incorporated by reference herein,
contains certain forward-looking statements. While Holdings believes these
statements are reasonable, investors should be aware that actual results could
differ materially from those projected by such forward-looking statements as a
result of the risk factors set forth in this Prospectus or other factors.
Prospective investors should consider carefully the risk factors as well as the
other information and data included in this Prospectus before tendering the Old
Senior Preferred Stock in exchange for the New Senior Preferred Stock. Holdings
cautions the reader, however, that the list of risk factors set forth herein may
not be exhaustive and that these or other factors could have an adverse effect
on the ability of Holdings to perform its dividend obligations under the Senior
Preferred Stock, and, if the Exchange Debentures are issued, its principal and
interest obligations thereon. See "Risk Factors."
--------------------------
ANVIL, COTTON DELUXE and the COTTON DELUXE design are registered trademarks
of Anvil.
iii
<PAGE>
AVAILABLE INFORMATION
Holdings has filed with the Commission a Registration Statement on Form S-4
(the "Preferred Exchange Offer Registration Statement," which term shall
encompass all amendments, exhibits, annexes and schedules thereto) pursuant to
the Securities Act, and the rules and regulations promulgated thereunder,
covering the New Senior Preferred Stock being offered hereby. This Prospectus
does not contain all the information set forth in the Preferred Exchange Offer
Registration Statement. For further information with respect to Holdings and the
Preferred Exchange Offer, reference is made to the Preferred Exchange Offer
Registration Statement. Statements made in this Prospectus as to the contents of
any contract, agreement or other document, referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Preferred Exchange Offer Registration Statement, reference
is made to the exhibit for a more complete description of the document or matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. The Preferred Exchange Offer Registration Statement, including
the exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at the Regional Offices of the Commission at 7 World
Trade Center, 13th Floor, New York, New York 10048 and at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of such site is http:// www.sec.gov.
As a result of the filing of the Preferred Exchange Offer Registration
Statement with the Commission, Holdings will become subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith will be required to file periodic reports and
other information with the Commission. The obligation of Holdings to file
periodic reports and other information with the Commission will be suspended if
the New Senior Preferred Stock are held of record by fewer than 300 holders as
of the beginning of any fiscal year of Holdings other than the fiscal year in
which the Preferred Exchange Offer Registration Statement is declared effective.
Holdings has agreed pursuant to the Certificate of Designation that, whether or
not it is required to do so by the rules and regulations of the Commission, for
so long as any of the Senior Preferred Stock remain outstanding, it will furnish
to the holders of the Senior Preferred Stock (within 15 days after it is or
would have been required to file with the Commission) and file with the
Commission (unless the Commission will not accept such a filing) (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if Holdings was
required to file such forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and, with respect to the
annual information only, a report thereon by Holdings' certified independent
accountant and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if Holdings was required to file such reports. In
addition, for so long as any of the Senior Preferred Stock remain outstanding,
Holdings agrees to furnish to the holders of the Senior Preferred Stock or any
prospective transferee of any such holder, upon their request, the information
required to be delivered by Rule 144A(d)(4) under the Securities Act.
iv
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. ANVIL
HOLDINGS, INC. ("HOLDINGS") WAS FORMED TO ACQUIRE SUBSTANTIALLY ALL OF THE
ASSETS OF THE ANVIL KNITWEAR DIVISION (THE "PREDECESSOR") OF MCGREGOR
CORPORATION ("MCGREGOR") AS OF JANUARY 28, 1995 (THE "ACQUISITION"). UNLESS THE
CONTEXT OTHERWISE REQUIRES, ALL REFERENCES TO THE "COMPANY" IN THIS PROSPECTUS
SHALL MEAN HOLDINGS AND ITS CONSOLIDATED SUBSIDIARIES, INCLUDING ANVIL KNITWEAR,
INC. ("ANVIL"). WHERE THE CONTEXT SO REQUIRES, REFERENCES TO THE "COMPANY" IN
RELATION TO PERIODS PRIOR TO THE ACQUISITION SHALL MEAN THE PREDECESSOR.
FINANCIAL STATEMENTS PRESENTED HEREIN REFLECT THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE COMPANY OR THE COMBINED FINANCIAL STATEMENTS OF THE
PREDECESSOR. HOLDINGS' SOLE ASSET IS THE CAPITAL STOCK OF ANVIL. THE FISCAL YEAR
OF THE COMPANY ENDS ON THE SATURDAY CLOSEST TO JANUARY 31. FISCAL YEARS ARE
IDENTIFIED HEREIN ACCORDING TO THE CALENDAR YEAR IN WHICH THEY BEGIN. FOR
EXAMPLE, THE FISCAL YEAR ENDED FEBRUARY 1, 1997 IS REFERRED TO HEREIN AS "FISCAL
1996."
THE COMPANY
Anvil Knitwear, Inc. is a leading designer, manufacturer and marketer of
high quality activewear for sale principally into the "imprinted" or "decorated"
segment of the U.S. apparel industry. The Company offers an extensive line of
activewear products designed for men, women and children, including short and
long sleeve T-shirts, classic button and collar knit sport shirts (known as
"plackets"), collarless short and long sleeve knit shirts (known as "henleys"),
fleeced sweatshirts, athletic shorts and caps. The Company markets and sells its
products primarily to distributors and screen printers under the ANVIL and
COTTON DELUXE brand names as well as under private labels. Prior to their
ultimate resale to the consumer, the Company's products typically are printed or
embroidered with logos, designs or characters. The Company believes that its
strong operating performance is due to: (i) its broad range of high quality
products; (ii) its strong relationships with customers and suppliers; (iii) its
flexible, vertically integrated manufacturing operations; (iv) its commitment to
controlling costs and improving manufacturing processes; and (v) the strong
growth of the activewear market. For the fiscal year ended February 1, 1997, the
Company generated net sales and EBITDA of $204.2 million and $32.6 million,
respectively. See "Business-- General," "-- Products," "--Sales and Marketing"
and "--Customers."
The Company has achieved significant increases in net sales and EBITDA in
recent years. From fiscal 1991 through fiscal 1996, the Company's net sales grew
from $124.6 million to $204.2 million, representing a compound annual growth
rate ("CAGR") of 10.4%. The yearly growth rates for the Company's net sales
during this period were as follows: fiscal 1992--13.1%; fiscal 1993--6.8%;
fiscal 1994--13.0%; fiscal 1995--13.8%; and fiscal 1996--5.6%. EBITDA grew from
$15.5 million to $32.6 million, representing a CAGR of 16.0%. This improvement
resulted primarily from the Company's operating leverage, management's
initiatives to reduce costs and improve productivity and the Company's
successful introduction of higher priced products. In addition, net income grew
during this period from $6.3 million to $10.3 million, representing a CAGR of
10.3%. See "Business--General" "-- Products."
The Company offers high quality activewear in a variety of styles, colors,
fabric weights and blends, enabling it to serve effectively a number of market
niches as well as the traditional T-shirt market. The Company works closely with
its distributor and screen printer customers to meet their needs for style and
color innovation. The Company continues to compete successfully by: (i)
targeting niche products on which larger competitors have not traditionally
focused; (ii) responding quickly to market developments; and (iii) regularly
introducing new products. In addition, the Company has made significant
investments to modernize and expand its domestic manufacturing and distribution
facilities in order to improve quality, reduce costs, manage inventories and
shorten production cycles. See "Business--General," "-- Products," "--Sales and
Marketing," and "--Customers" and "--Manufacturing Operations and Facilities."
1
<PAGE>
The Company operates primarily in the U.S. imprinted activewear market,
which accounted for approximately $13.8 billion of retail sales and $6.7 billion
of factory level sales in 1995. From 1990 through 1995, industry retail dollar
sales and unit sales of imprinted activewear (T-shirts, knit shirts, fleecewear
and athletic shorts) in the U.S. market grew at CAGRs of 8.0% and 5.7%,
respectively. The yearly growth rates for industry retail dollar sales during
this period were as follows: 1991--8.9%; 1992--11.6%; 1993--9.2%; 1994--5.2%;
and 1995--5.2%. The yearly growth rates for industry unit sales during this
period were as follows: 1991--6.9%; 1992--7.5%; 1993-- 7.0%; 1994--5.5%; and
1995--1.8%. From fiscal 1990 through fiscal 1995, the Company's net sales and
unit sales increased at CAGRs of 12.7% and 9.3%, respectively. The yearly growth
rates for the Company's net sales during this period were as follows: fiscal
1991--16.8%; fiscal 1992--13.1%; fiscal 1993--6.8%; fiscal 1994--13.0%; and
fiscal 1995--13.8%. The yearly growth rates for the Company's unit sales during
this period were as follows: fiscal 1991--17.3%; fiscal 1992-- 11.1%; fiscal
1993--5.6%; fiscal 1994--6.5%; and fiscal 1995--5.6%. The Company believes sales
of activewear products has been driven primarily by: (i) the increased consumer
preference for comfortable apparel selections; (ii) more flexible dress codes,
including the greater acceptance of casual wear in the workplace; and (iii) the
heightened emphasis on physical fitness. In addition, activewear products have
registered a number of significant improvements in product characteristics that
have contributed to enhanced consumer appeal, including improvements in fabric
weight, blends and construction as well as increased offerings of size, color
and style. See "Business--Industry."
The activewear market is characterized by low fashion risk relative to many
other apparel markets. While substantial opportunity exists for product
innovation and differentiation, basic garment styles are generally not driven by
trends or fads. The industry is also characterized by certain barriers to entry,
including: (i) significant capital expenditures required for vertically
integrated production; (ii) strong supplier relationships; and (iii) established
customer relationships. Furthermore, the Company believes that the relatively
low labor portion of the cost of manufacturing activewear and the short delivery
times required by distributors and screen printers have impeded the penetration
of imports. See "Business-- Industry."
BUSINESS STRATEGY
The Company's objective is to continue to increase net sales and EBITDA by
implementing the following key elements of its business strategy:
/ / OFFER A BROAD RANGE OF HIGH QUALITY PRODUCTS. The Company offers high
quality activewear in a wide variety of styles, colors, fabric weights
and blends, enabling it to serve effectively a number of market niches.
During the past five years, the Company has strengthened its position in
the activewear market by successfully introducing higher priced products
to supplement its traditional T-shirt offerings. From fiscal 1991
through fiscal 1996, the Company's gross sales of henleys and plackets,
both higher priced products, increased at a CAGR of 51.8%. The yearly
growth rates for henleys and plackets during this period were as
follows: fiscal 1992--91.3%; fiscal 1993--59.1%; fiscal 1994--58.9%;
fiscal 1995--30.1%; and fiscal 1996--23.8%. In addition, the Company
expects to continue to expand its product offerings under its ANVIL and
COTTON DELUXE brands, capitalizing on the growth in the higher priced
branded products segment of the activewear market. Furthermore, the
Company is working closely with third parties to market complementary
imprintable products, such as caps, bags, carryalls and jackets, through
the Company's established distribution channels. See
"Business--Products."
/ / ENHANCE AND EXPAND CUSTOMER RELATIONSHIPS. The Company continually seeks
to strengthen and expand its customer relationships by promoting the
Company's: (i) broad product offerings; (ii) ability to design
customized products; (iii) quick, reliable delivery; and (iv) ability to
accommodate modifications to customer orders. The Company's direct
salesforce focuses on developing strong relationships with distributors,
who have accounted for an increasing percentage of activewear sales in
recent years. In fiscal 1996, sales to distributors accounted for
approximately
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64% of the Company's net sales and from fiscal 1994 through fiscal 1996
sales to distributors accounted for, on average, approximately 56% of
the Company's net sales. In the Company's experience, distributors place
larger purchase orders, purchase a broader product mix, maintain higher
inventory levels and develop more predictable order and re-order
patterns than certain of its other customers. The Company estimates that
distributors resell products to approximately 20,000 smaller screen
printers and embroiderers. The Company's expanded product offerings have
enabled it to more effectively service distributors and satisfy the
disparate preferences of consumers. See "Business--Customers."
/ / FLEXIBLE, VERTICALLY INTEGRATED MANUFACTURING OPERATIONS. The Company is
a vertically integrated manufacturer (i.e., performing substantially all
of the manufacturing processes required to produce its products) which
knits (exclusively from purchased yarn), bleaches, dyes, finishes, cuts
and sews its activewear products at its efficient manufacturing
facilities. The Company believes that being vertically integrated allows
it to maintain a competitive cost structure, minimize delivery time and
provide consistent, high quality products. The Company's manufacturing
flexibility enables it to complete smaller volume production runs
efficiently, respond quickly to customer needs and accommodate last
minute modifications to customer orders. The Company reduces inventory
risk by maintaining a supply of goods in a "greige" (undyed and
unbleached) state until relatively late in the production process and by
turning its finished goods inventory (costs of sales divided by ending
finished goods inventory) frequently (for example, approximately 7.6
times in fiscal 1996). In addition, the Company typically is able to
deliver specialized products to its customers within four to five weeks
of receiving an order and believes its turnaround time to be generally
shorter than that typically achieved by its competitors delivering
similar specialized products. See "Business-- Manufacturing Operations
and Facilities."
/ / CONTINUE TO CONTROL COSTS AND IMPROVE MANUFACTURING. From fiscal 1991
through fiscal 1996, the Company invested approximately $42 million to
modernize and expand its domestic manufacturing and distribution
facilities in order to improve quality, reduce costs, manage inventories
and shorten production cycles. The Company believes it can continue to
improve its operating efficiency by: (i) increasing the use of offshore
sewing operations; (ii) utilizing its 660,000 square foot centralized
distribution facility to deliver its products in a more cost efficient
manner; and (iii) opportunistically redesigning manufacturing processes
to shorten production cycles and improve inventory management. The
Company believes that it manages its working capital and inventory
better than any of its primary publicly-traded competitors. See
"Business--Manufacturing Operations and Facilities."
/ / CAPITALIZE ON THE GROWTH OF THE ACTIVEWEAR MARKET. From 1990 through
1995, industry retail dollar sales and unit sales of imprinted
activewear (T-shirts, knit shirts, fleecewear and athletic shorts) in
the U.S. market grew at CAGRs of 8.0% and 5.7%, respectively. The yearly
growth rates for industry retail dollar sales during this period were as
follows: 1991--8.9%; 1992--11.6%; 1993-- 9.2%; 1994--5.2%; and
1995--5.2%. The yearly growth rates for industry unit sales during this
period were as follows: 1991--6.9%; 1992--7.5%; 1993--7.0%; 1994--5.5%;
and 1995--1.8%. From fiscal 1990 through fiscal 1995, the Company's net
sales and unit sales increased at CAGRs of 12.7% and 9.3%, respectively.
The yearly growth rates for the Company's net sales during this period
were as follows: fiscal 1991--16.8%; fiscal 1992--13.1%; fiscal
1993--6.8%; fiscal 1994-- 13.0%; and fiscal 1995--13.8%. The yearly
growth rates for the Company's unit sales during this period were as
follows: fiscal 1991--17.3%; fiscal 1992--11.1%; fiscal 1993--5.6%;
fiscal 1994-- 6.5%; and fiscal 1995--5.6%. The Company believes the sale
of activewear products has been driven primarily by: (i) the increased
consumer preference for comfortable apparel selections; (ii) more
flexible dress codes, including the greater acceptance of casual wear in
the workplace; and (iii) the heightened emphasis on physical fitness. In
addition, the Company believes that it has identified significant growth
opportunities in several international markets, including certain
markets in Europe, South America and Japan. See "Business--Industry."
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THE RECAPITALIZATION
On February 12, 1997, Holdings, Anvil VT, Inc., Vestar Equity Partners, L.P.
("Vestar"), 399 Venture Partners, Inc. and certain of its employees and
affiliates (collectively, "399 Venture"), the Management Investors and Culligan
International Company, Leonard Lieberman, Peter H. Rothschild and the Seelig
Family Lifetime Trust (collectively, the "Existing Stockholders") and Bruckmann,
Rosser, Sherrill & Co., L.P. and certain of its employees and affiliates
(collectively, "BRS") entered into a Recapitalization Agreement (as amended, the
"Recapitalization Agreement"). Pursuant to the Recapitalization Agreement: (i)
Holdings redeemed and repurchased a substantial portion (i.e., 82.8%) of its
outstanding shares of capital stock; (ii) 399 Venture and the Management
Investors reinvested a portion of their old shares of common stock of Holdings
(the "Retained Shares"), which converted into shares of Class A Common Stock,
$0.01 par value per share ("Class A Common"), and Class B Common; (iii) 399
Venture exchanged a portion of its old preferred stock for 3,333 Units; and (iv)
BRS purchased shares of Class A Common and Class B Common. As of June 15, 1997,
399 Venture, BRS and the Management Investors owned 38.0%, 38.0% and 14.0%,
respectively, of the issued and outstanding capital stock of the Company. The
Class A Common and the Class B Common are sometimes collectively referred to
herein as the "Common Stock." See "The Recapitalization."
The Company used approximately $225.5 million to complete the
Recapitalization, including the payment of related fees and expenses. In order
to finance the Recapitalization: (i) Anvil issued $130.0 million in aggregate
principal amount of Old Senior Notes in the Initial Offering; (ii) Holdings
issued 30,000 Units, consisting of an aggregate of 1.2 million shares of Old
Senior Preferred Stock and 390,000 shares of Class B Common, in the Initial
Units Offering for gross proceeds of $26.7 million; (iii) Anvil borrowed
approximately $33.3 million under a $55.0 million amended and restated credit
agreement (the "New Credit Agreement"); and (iv) 399 Venture, the Management
Investors and BRS, collectively, contributed in the form of equity securities
and cash an aggregrate of approximately $35.5 million to Holdings (the "Equity
Contribution"). See "Use of Proceeds."
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THE INITIAL UNITS OFFERING
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OLD SENIOR PREFERRED STOCK.... The Old Senior Preferred Stock were sold by Holdings on
March 14, 1997 as a part of 30,000 Units, with each Unit
consisting of 40 Shares of Old Senior Preferred Stock and 13
Shares of Class B Common, to Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ," the "Initial Purchaser") and
to certain accredited investors with the Initial Purchaser
acting as agent, pursuant to a Purchase Agreement, dated as
of March 11, 1997 (the "Units Purchase Agreement") and in a
private placement pursuant to the exemption from
registration contained in Section 4(2) of the Securities
Act. The Initial Purchaser subsequently resold the Units and
their underlying Old Senior Preferred Stock to qualified
institutional buyers pursuant to Rule 144A under the
Securities Act and to a limited number of institutional
accredited investors pursuant to Rule 501(a) of the
Securities Act.
CONCURRENT INITIAL OFFERING... Concurrent with the Initial Units Offering, Anvil sold
$130,000,000 aggregate principal amount of its Old Senior
Notes, on March 14, 1997 to DLJ, Wasserstein Perella
Securities, Inc. ("Wasserstein") and NationsBanc Capital
Markets, Inc. ("NationsBanc") (collectively, the "Initial
Purchasers"), pursuant to a Purchase Agreement (the
"Purchase Agreement"), dated as of March 11, 1997 and in a
private placement pursuant to the exemption from
registration contained in Section 4(2) of the Securities
Act.
PREFERRED STOCK REGISTRATION
RIGHTS AGREEMENT............ Pursuant to the Units Purchase Agreement, Holdings and the
Initial Purchaser entered into a Registration Rights
Agreement, dated as of March 14, 1997 (the "Preferred Stock
Registration Rights Agreement"), which grants the holders of
the Old Senior Preferred Stock certain exchange and
registration rights. The Preferred Exchange Offer is
intended to satisfy such exchange rights which terminate
upon the consummation of the Preferred Exchange Offer.
THE PREFERRED EXCHANGE OFFER
SECURITIES OFFERED............ $30,000,000 aggregate liquidation preference of 13% Series B
Senior Exchangeable Preferred Stock due 2009 of Holdings.
THE EXCHANGE OFFER............ $1,000 liquidation preference of New Senior Preferred Stock
in exchange for each $1,000 liquidation preference of Old
Senior Preferred Stock. As of the date hereof, $30,000,000
aggregate liquidation preference of Old Senior Preferred
Stock are outstanding. Holdings will issue the New Senior
Preferred Stock to holders on or promptly after the
Expiration Date.
Based on an interpretation by the staff of the Commission
set forth in no-action letters issued to third parties,
Holdings believes that New Senior Preferred Stock issued
pursuant to the Preferred Exchange Offer in exchange for Old
Senior Preferred Stock may be offered for resale, resold and
otherwise transferred by any holder thereof (other
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than any such holder which is an "affiliate" of Holdings
within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that
such New Senior Preferred Stock are acquired in the ordinary
course of such holder's business and that such holder does
not intend to participate and has no arrangement or
understanding with any person to participate in the
distribution of such New Senior Preferred Stock. Each holder
accepting the Preferred Exchange Offer is required to
represent to Holdings in the Letter of Transmittal that,
among other things, the New Senior Preferred Stock will be
acquired by the holder in the ordinary course of business
and the holder does not intend to participate and has no
arrangement or understanding with any person to participate
in the distribution of such New Senior Preferred Stock.
Any Participating Broker-Dealer that acquired Old Senior
Preferred Stock for its own account as a result of
market-making activities or other trading activities may be
a statutory underwriter. Each Participating Broker-Dealer
that receives New Senior Preferred Stock for its own account
pursuant to the Preferred Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any
resale of such New Senior Preferred Stock. The Letter of
Transmittal states that by so acknowledging and by
delivering a prospectus, a Participating Broker-Dealer will
not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with
resale of New Senior Preferred Stock received in exchange
for Old Senior Preferred Stock where such Old Senior
Preferred Stock were acquired by such Participating
Broker-Dealer as a result of market-making activities or
other trading activities. Holdings has agreed that, for a
period of 180 days after the Expiration Date, it will make
this Prospectus available to any Participating Broker-Dealer
for use in connection with any such resale. See "Plan of
Distribution."
Any holder who tenders in the Preferred Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the New Senior Preferred
Stock could not rely on the position of the staff of the
Commission enunciated in no-action letters and, in the
absence of an exemption therefrom, must comply with the
registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
Failure to comply with such requirements in such instance
may result in such holder incurring liability under the
Securities Act for which the holder is not indemnified by
Holdings.
EXPIRATION DATE............... 5:00 p.m., New York City time, on , 1997 unless
the Preferred Exchange Offer is extended, in which case the
term "Expiration Date" means the latest date and time to
which the Preferred Exchange Offer is extended.
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ACCRUED DIVIDENDS ON THE NEW
SENIOR PREFERRED STOCK AND
THE OLD SENIOR PREFERRED
STOCK....................... Each share of New Senior Preferred Stock will accrue
dividends from its issuance date. Holders of Old Senior
Preferred Stock that are accepted for exchange will receive
accrued dividends thereon to, but not including, the
issuance date of the New Senior Preferred Stock. Dividends
on the Old Senior Preferred Stock accepted for exchange will
cease to accrue upon issuance of the New Senior Preferred
Stock.
Dividends accrue in each period ending on March 15, June 15,
September 15 and December 15 of each year.
CONDITIONS TO THE EXCHANGE
OFFER....................... The Preferred Exchange Offer is subject to the following
conditions, which may be waived by Holdings: (i) no action
or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the
Preferred Exchange Offer which might materially impair the
ability of Holdings to proceed with the Preferred Exchange
Offer or materially impair the contemplated benefits of the
Preferred Exchange Offer to Holdings; (ii) no law, statute,
rule, regulation or interpretation by the staff of the
Commission is proposed, adopted or enacted, which might
materially impair the ability of Holdings to proceed with
the Preferred Exchange Offer or materially impair the
contemplated benefits of the Preferred Exchange Offer to
Holdings; and (iii) no governmental approval has been
obtained, which is necessary for the consummation of the
Preferred Exchange Offer. See "The Preferred Exchange
Offer--Conditions."
PROCEDURES FOR TENDERING OLD
SENIOR PREFERRED STOCK...... Each holder of Old Senior Preferred Stock wishing to accept
the Preferred Exchange Offer must complete, sign and date
the accompanying Letter of Transmittal, or a facsimile
thereof or transmit an Agent's Message (as defined) in
connection with a book-entry transfer, in accordance with
the instructions contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, such facsimile
or such Agent's Message, together with the Old Senior
Preferred Stock and any other required documentation to the
Exchange Agent (as defined) at the address set forth herein.
By executing the Letter of Transmittal or Agent's Message,
each holder will represent to Holdings that, among other
things, the New Senior Preferred Stock acquired pursuant to
the Preferred Exchange Offer are being obtained in the
ordinary course of business of the person receiving such New
Senior Preferred Stock, whether or not such person is the
holder, that neither the holder nor any such other person
(i) has any arrangement or understanding with any person to
participate in the distribution of such New Senior Preferred
Stock, (ii) is engaging or intends to engage in the
distribution of such New Preferred Stock, or (iii) is an
"affiliate," as defined under Rule 405 of the Securities
Act, of Holdings. See "The Preferred Exchange
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Offer--Purpose and Effect of the Preferred Exchange Offer"
and "--Procedures for Tendering."
UNTENDERED OLD SENIOR
PREFERRED STOCK............. Following the consummation of the Preferred Exchange Offer,
holders of Old Senior Preferred Stock eligible to
participate but who do not tender their Old Senior Preferred
Stock will not have any further exchange rights and such Old
Senior Preferred Stock will continue to be subject to
certain restrictions on transfer. Accordingly, the liquidity
of the market for such Old Senior Preferred Stock could be
adversely affected.
CONSEQUENCES OF FAILURE TO
EXCHANGE.................... The Old Senior Preferred Stock that are not exchanged
pursuant to the Preferred Exchange Offer will remain
restricted securities. Accordingly, such Old Senior
Preferred Stock may be resold only (i) to Holdings, (ii)
pursuant to Rule 144A or Rule 144 under the Securities Act
or pursuant to some other exemption under the Securities
Act, (iii) outside the United States to a foreign person
pursuant to the requirements of Rule 904 under the
Securities Act, or (iv) pursuant to an effective
registration statement under the Securities Act. See "The
Preferred Exchange Offer--Consequences of Failure to
Exchange."
SHELF REGISTRATION
STATEMENT................... If any holder of the Old Senior Preferred Stock (other than
any such holder which is an "affiliate" of Holdings within
the meaning of Rule 405 under the Securities Act) is not
eligible under applicable securities laws to participate in
the Preferred Exchange Offer, and such holder has provided
information regarding such holder and the distribution of
such holder's Old Senior Preferred Stock to Holdings for use
therein, Holdings has agreed to register the Old Senior
Preferred Stock on a shelf registration statement (the
"Shelf Registration Statement") and use its best efforts to
cause it to be declared effective by the Commission as
promptly as practical on or after the consummation of the
Preferred Exchange Offer. Holdings has agreed to maintain
the effectiveness of the Shelf Registration Statement for,
under certain circumstances, a maximum of three years, to
cover resales of the Old Senior Preferred Stock held by any
such holders.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS........... Any beneficial owner whose Old Senior Preferred Stock are
registered in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to tender
should contact such registered holder promptly and instruct
such registered holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering its Old
Senior Preferred Stock, either make appropriate arrangements
to register ownership of the Old Senior Preferred Stock in
such owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered
ownership may take considerable time. Holdings will keep the
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Preferred Exchange Offer open for not less than twenty
business days in order to provide for the transfer of
registered ownership.
GUARANTEED DELIVERY
PROCEDURES.................. Holders of Old Senior Preferred Stock who wish to tender
their Old Senior Preferred Stock and whose Old Senior
Preferred Stock are not immediately available or who cannot
deliver their Old Senior Preferred Stock, the Letter of
Transmittal or any other documents required by the Letter of
Transmittal to the Exchange Agent (or comply with the
procedures for book-entry transfer) prior to the Expiration
Date must tender their Old Senior Preferred Stock according
to the guaranteed delivery procedures set forth in "The
Preferred Exchange Offer--Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS............. Tenders may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
ACCEPTANCE OF OLD SENIOR
PREFERRED STOCK AND DELIVERY
OF NEW PREFERRED STOCK...... Holdings will accept for exchange any and all Old Senior
Preferred Stock which are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on the
Expiration Date. The New Senior Preferred Stock issued
pursuant to the Preferred Exchange Offer will be delivered
promptly following the Expiration Date. See "The Preferred
Exchange Offer--Terms of the Preferred Exchange Offer."
USE OF PROCEEDS............... There will be no cash proceeds to Holdings from the exchange
pursuant to the Preferred Exchange Offer. See "Use of
Proceeds."
FEDERAL INCOME TAX
CONSEQUENCES................ In the opinion of Kirkland & Ellis, counsel to Holdings, the
exchange pursuant to the Preferred Exchange Offer should not
be a taxable event for federal income tax purposes. See
"Certain Federal Income Tax Consequences."
EXCHANGE AGENT................ United States Trust Company of New York.
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THE NEW SENIOR PREFERRED STOCK
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GENERAL...................... The form and terms of the New Senior Preferred Stock are the
same as the form and terms of the Old Senior Preferred Stock
(which they replace) except that (i) the New Senior
Preferred Stock bear a Series B designation, (ii) the New
Senior Preferred Stock have been registered under the
Securities Act and, therefore, will not bear legends
restricting the transfer thereof, and (iii) the holders of
New Senior Preferred Stock will not be entitled to certain
rights under the Preferred Stock Registration Rights
Agreement, including the provisions providing for liquidated
damages in certain circumstances relating to the timing of
the Preferred Exchange Offer, which rights will terminate
when the Preferred Exchange Offer is consummated. See "The
Preferred Exchange Offer--Purpose and Effect of the
Preferred Exchange Offer." The New Senior Preferred Stock
will evidence the same equity as the Old Senior Preferred
Stock and will be entitled to the benefits of the
Certificate of Designation. See "Description of
Securities--Senior Preferred Stock." The Old Senior
Preferred Stock and the New Senior Preferred Stock are
sometimes referred to herein collectively as the "Senior
Preferred Stock."
DIVIDENDS.................... Dividends on the Senior Preferred Stock will accrue in each
period ending on March 15, June 15, September 15 and
December 15 of each year at a rate of 13% per annum of the
liquidation preference. On or before March 15, 2002,
Holdings may, at its option, pay dividends in cash or in
additional fully paid and non-assessable shares of Senior
Preferred Stock having an aggregate liquidation preference
equal to the amount of such dividends. Thereafter, dividends
may be paid in cash only.
LIQUIDATION PREFERENCE....... $25 per share.
RANKING...................... The New Senior Preferred Stock will, as the Old Senior
Preferred Stock (which they replace), rank senior in right
of payment with respect to all Junior Securities (as
defined) and PARI PASSU in right of payment with respect to
all Parity Securities (as defined). The New Senior Preferred
Stock will rank junior to all Indebtedness and other
obligations of Holdings and its subsidiaries, including
Anvil. See "Risk Factors--Subordination of Securities to
Current and Future Obligations" and "Description of
Securities--Senior Preferred Stock."
OPTIONAL REDEMPTION.......... The Senior Preferred Stock will be redeemable at the option
of Holdings, in whole or in part, at any time on or after
March 15, 2002, at the redemption prices set forth herein,
plus an amount in cash equal to all accumulated and unpaid
dividends per share to the date of redemption.
In addition, the Senior Preferred Stock may be redeemed, in
whole or in part, at the option of Holdings, at any time, at
the redemption price set forth herein, plus an amount in
cash equal to all accumulated and unpaid dividends per share
to the date of redemption, with the proceeds of a Public
Equity Offering (as defined). See "Description of
Securities--Senior Preferred Stock--Optional Redemption."
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CHANGE OF CONTROL............ Upon the occurrence of a Change of Control (as defined),
each holder of Senior Preferred Stock will have the right to
require Holdings to purchase all or any part of such
holder's Senior Preferred Stock at an offer price in cash
equal to 101% of the liquidation preference thereof, plus an
amount in cash equal to all accumulated and unpaid dividends
per share to the date of purchase. Except as described under
"Description of Securities--Senior Preferred Stock--
Repurchase at the Option of Holders--Change of Control," the
certificate of designations pursuant to which the Old Senior
Preferred Stock was issued (the "Certificate of
Designation") does not contain provisions that permit the
holder of Senior Preferred Stock to require Holdings to
redeem the Senior Preferred Stock in the event of a
takeover, recapitalization or similar restructuring,
including an issuer recapitalization or similar transaction
with management. Consequently, the Change of Control
provisions will not afford any protection in a highly
leveraged transaction, including such a transaction
initiated by Holdings, management of Holdings or an
affiliate of Holdings, if such transaction does not result
in a Change of Control. See "Description of
Securities--Senior Preferred Stock-- Repurchase at the
Option of Holders--Change of Control."
COVENANTS.................... The Certificate of Designation contains certain covenants
that limit the ability of Holdings to redeem or repurchase
Junior Securities or Parity Securities and pay dividends
thereon, to merge or consolidate with any other entity, to
sell assets and to enter into transactions with affiliates.
The Certificate of Designation also requires Holdings to
deliver certain reports and information to the holders of
the Senior Preferred Stock. See "Description of
Securities--Senior Preferred Stock--Certain Covenants."
EXCHANGE FEATURE............. On any scheduled dividend payment date, Holdings may, at its
option, but subject to certain conditions, exchange all but
not less than all of the shares of Senior Preferred Stock
then outstanding for Holdings' Exchange Debentures. See
"Description of Securities--Senior Preferred
Stock--Exchange."
THE EXCHANGE DEBENTURES
SECURITIES................... 13% Subordinated Exchange Debentures due 2009 of Holdings.
MATURITY..................... March 15, 2009.
INTEREST..................... The Exchange Debentures will bear interest at a rate of 13%
per annum, payable semi-annually in arrears on March 15, and
September 15 of each year, commencing with the first such
date to occur after the date of exchange. On or before March
15, 2002, Holdings may, at its option, pay interest in cash
or in additional Exchange Debentures having an aggregate
principal amount equal to the amount of such interest.
Thereafter, interest may be paid in cash only.
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RANKING...................... The Exchange Debentures will be unsecured obligations of
Holdings, subordinate to all existing and future Senior
Indebtedness (as defined) and to any Indebtedness of
Holdings' subsidiaries, including the Senior Notes and the
New Credit Agreement. As of May 3, 1997, the aggregate
amount of outstanding Senior Indebtedness was approximately
$156.5 million. See "Risk Factors--Subordination of
Securities to Current and Future Obligations" and
"Description of Securities--Exchange Debentures."
OPTIONAL REDEMPTION.......... The Exchange Debentures will be redeemable at the option of
Holdings, in whole or in part, at any time on or after March
15, 2002, at the redemption prices set forth herein, plus
accrued and unpaid interest thereon to the date of
redemption. In addition, at the option of Holdings, the
Exchange Debentures may be redeemed, in whole or in part, at
any time at the redemption price set forth herein, plus
accrued and unpaid interest thereon to the date of
redemption, with the proceeds of a Public Equity Offering.
See "Description of Securities--Exchange
Debentures--Optional Redemption."
CHANGE OF CONTROL............ Upon the occurrence of a Change of Control, each holder of
Exchange Debentures will have the right to require Holdings
to purchase all or any part of such holder's Exchange
Debentures at an offer price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid
interest thereon to the date of purchase. Except as
described under "Description of Securities-- Exchange
Debentures--Repurchase at the Option of Holders-- Change of
Control," the indenture pursuant to which the Exchange
Debentures will be issued (the "Exchange Debenture
Indenture") does not contain provisions that permit the
holder of Exchange Debentures to require Holdings to
purchase or redeem the Exchange Debentures in the event of a
takeover, recapitalization or similar restructuring,
including an issuer recapitalization or similar transaction
with management. Consequently, the Change of Control
provisions will not afford any protection in a highly
leveraged transaction, including such a transaction
initiated by Holdings, management of Holdings or an
affiliate of Holdings, if such transaction does not result
in a Change of Control. See "Description of
Securities--Exchange Debentures--Repurchase at the Option of
Holders--Change of Control."
CERTAIN COVENANTS............ The Exchange Debenture Indenture contains covenants that,
among other things, limit the ability of Holdings and its
Restricted Subsidiaries to: (i) incur additional
indebtedness and issue preferred stock; (ii) repay certain
other indebtedness; (iii) pay dividends or make certain
other distributions; (iv) repurchase equity interests; (v)
consummate certain Asset Sales; (vi) enter into certain
transactions with affiliates; (vii) enter into sale and
leaseback transactions; (viii) incur liens; (ix) merge or
consolidate with any other person; or (x) sell assign,
transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of Holdings. In addition,
under certain circumstances, Holdings will be required to
offer to purchase Exchange Debentures at a price equal to
100% of the principal amount thereof, plus accrued and
unpaid interest to the date of
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purchase with the proceeds of certain Asset Sales (as
defined). See "Description of Securities--Exchange
Debentures--Certain Covenants" and "--Repurchase at the
Option of Holders--Asset Sales."
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CONCURRENT EXCHANGE OFFER
Concurrent with the Preferred Exchange Offer, Anvil is offering to exchange
$1,000 principal amount of its New Senior Notes for each $1,000 principal amount
of its outstanding Old Senior Notes. The New Senior Notes will be, as the Old
Senior Notes (which they replace) are, fully and unconditionally guaranteed on a
senior unsecured basis by Holdings and Cottontops, Inc., a Delaware corporation
("Cottontops"), a subsidiary of Anvil.
RISK FACTORS
Prospective investors should carefully consider the factors set forth under
"Risk Factors," as well as the other information set forth in this Prospectus
before tendering the Old Senior Preferred Stock in exchange for the New Senior
Preferred Stock. The risks of investing in the Senior Preferred Stock include,
among other things, the foregoing factors: (i) Holdings and Anvil have
substantial leverage and debt service obligations; (ii) the Senior Preferred
Stock is subordinated to current and future obligations of Holdings and Anvil;
(iii) there are risks associated with the Company's current holding company
structure; (iv) the Company and the holders of Securities are restricted by the
terms of the Company's indebtedness including change of control provisions and
provisions relating to limitations on rights of repayment; (v) the executive
officers, directors and existing stockholders of the Company realized
substantial benefits pursuant to the Recapitalization; (vi) the Company is
subject to both domestic and international competition; (vii) a significant
disruption in the Company's supply and price of yarn could have a material
adverse effect on the Company's results of operations; (viii) the Company is
dependent upon the efforts, relationships and abilities of its senior
management; (ix) the Company is subject to increasingly stringent environmental
standards; (x) the Company is controlled by two principal stockholders; (xi) the
absence of a public market could adversely affect the value of the Senior
Preferred Stock; (xii) the failure to follow the Preferred Exchange Offer
procedures could adversely affect the holders of the Senior Preferred Stock;
(xiii) the Company is subject to fraudulent transfer laws in relation to the
incurrence of its indebtedness; and (xiv) there may be tax consequences to the
holders of the Senior Preferred Stock and Exchange Debentures upon distribution
and a potential for unplanned deemed dividend income to such holders.
------------------------
Anvil and Holdings were incorporated under the laws of the State of Delaware
on November 23, 1994 and December 16, 1994, respectively. Anvil and Holdings
were formed to acquire substantially all of the assets of the Anvil Knitwear
division of McGregor, which was completed as of January 28, 1995. The aggregate
acquisition price was approximately $105 million, plus acquisition costs. The
Acquisition was a leveraged buyout transaction led by Vestar Equity Partners
Inc., L.P. was funded with the proceeds of $20 million of preferred stock, $6.4
million of common stock, $52.5 million of long-term bank debt, $7.5 million in
subordinated notes and $25.5 million with a revolving line of credit. The
principal executive offices of Anvil and Holdings are located at 228 East 45th
Street, New York, New York 10017, and their telephone number is (212) 476-0300.
13
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS AND UNITS IN THOUSANDS)
The following summary historical financial data were derived from the
historical financial statements of the Predecessor and the Company and the
unaudited pro forma financial data were derived from the "Pro Forma Financial
Statements" of the Company. The historical combined financial statements of the
Predecessor for fiscal years 1992 and 1994 and the five and seven month periods
ended June 30, 1993 and January 29, 1994, respectively, were audited by KPMG
Peat Marwick LLP. The historical consolidated financial statements of the
Company for fiscal years 1995 and 1996 were audited by Deloitte & Touche LLP.
The financial data as of May 3, 1997 and for the three months ended May 3, 1997
and April 27, 1996 have been derived from the Company's unaudited consolidated
financial statements which, in the opinion of management, contain all
adjustments, consisting of normal recurring adjustments, necessary for fair
presentation of the financial condition and results of operations for each
period. The results of operations for the three months ended May 3, 1997 are not
necessarily indicative of the operating results that may be expected for the
full year. The financial statements presented herein reflect the consolidated
financial statements of the Company or the combined financial statements of the
Predecessor. Holdings' sole asset is the capital stock of Anvil. The Old Senior
Notes surrendered in exchange for the New Senior Notes will be retired and
canceled and cannot be reissued. Likewise, the Old Senior Preferred Stock
surrendered in exchange for the New Senior Preferred Stock will be returned and
canceled and cannot be reissued. Accordingly, neither the issuance of the New
Senior Notes nor the New Senior Preferred Stock will result in any increase or
decrease in the indebtedness of the Company. As such, no effect has been given
to the Exchange Offers in the pro forma financial data included herein. The
information contained in this table should be read in conjunction with "Selected
Historical Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Unaudited Pro Forma Financial Statements"
and the combined and consolidated financial statements and the notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR(1) THE COMPANY(1)
------------------------------------------------ -----------------------------------
FISCAL YEAR FIVE SEVEN THREE
ENDED MONTHS MONTHS FISCAL YEAR ENDED MONTHS
----------- ENDED ENDED --------------------------------- ENDED
JAN. 31, JUNE 30, JAN. 29, JAN. 28, JAN. 27, FEB. 1, -----------
1993 1993 1994(2) 1995(2) 1996 1997
----------- ----------- ----------- --------- --------- ----------- APRIL 27,
1996
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................. $ 140,839 $ 75,743 $ 74,691 $ 169,923 $ 193,389 $ 204,154 $ 58,552
Gross profit.............................. 24,112 14,546 12,283 38,017 43,666 47,341 11,716
Selling, general and administrative
expenses................................ 11,103 5,788 6,632 14,704 17,778 21,678 5,276
Operating income (loss)................... 13,009 8,703 (1,066) 9,878 25,152 24,705 6,237
Net income (loss)......................... 8,073 4,972 (3,338) 1,057 10,154 10,325 2,448
OTHER DATA:
EBITDA(3)................................. $ 16,329 $ 10,617 $7,830 $ 28,639 $ 31,615 $ 33,550 $ 8,017
Cash provided by (used in):
Operating activities.................... (4,186 ) 21,919 (996 ) 13,654 7,163 23,811 1,967
Investing activities.................... (9,242 ) (3,003 ) (4,764 ) (7,888) (7,703) (6,519 ) (564)
Financing activities.................... 13,376 (18,813 ) 4,125 (5,313) 775 (16,997 ) (227)
Depreciation and amortization............. 3,320 1,914 8,896 18,761 6,463 7,287 1,962
Capital expenditures...................... 9,372 3,003 4,764 7,888 7,703 4,815 564
Ratio of earnings to fixed charges(6)..... -- -- -- -- 2.9x 3.1x 3.3x
Ratio of earnings to fixed charges and
preferred stock dividends(6)............ -- -- -- -- 2.4x 2.6x 2.6x
SELECTED OPERATING DATA:
Dozens of units sold...................... 4,187 2,198 2,224 4,711 4,973 5,319
Unit growth............................... 11.1% * * 6.5% 5.6% 7.0%
Net sales growth.......................... 13.0% * * 13.0% 13.8% 5.6%
<CAPTION>
MAY 3, 1997
-----------
(UNAUDITED)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................. $ 60,288
Gross profit.............................. 14,429
Selling, general and administrative
expenses................................ 6,128
Operating income (loss)................... (2,864)
Net income (loss)......................... (6,467)
OTHER DATA:
EBITDA(3)................................. $ 9,979
Cash provided by (used in):
Operating activities.................... 1,732
Investing activities.................... (1,231 )
Financing activities.................... (959 )
Depreciation and amortization............. 2,139
Capital expenditures...................... 1,231
Ratio of earnings to fixed charges(6)..... --
Ratio of earnings to fixed charges and
preferred stock dividends(6)............ --
SELECTED OPERATING DATA:
Dozens of units sold......................
Unit growth...............................
Net sales growth..........................
</TABLE>
*SEE FOOTNOTE 2. (FOOTNOTES APPEAR ON NEXT PAGE)
14
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR(1) THE COMPANY(1)
------------------------------------------------ -----------------------------------
FISCAL YEAR FIVE SEVEN THREE
ENDED MONTHS MONTHS FISCAL YEAR ENDED MONTHS
----------- ENDED ENDED --------------------------------- ENDED
JAN. 31, JUNE 30, JAN. 29, JAN. 28, JAN. 27, FEB. 1, -----------
1993 1993 1994(2) 1995(2) 1996 1997
----------- ----------- ----------- --------- --------- ----------- APRIL 27,
1996
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA DATA:
Cash interest expense(4)......................................................................... $ 16,752
Ratio of EBITDA to cash interest expense(4)...................................................... 2.0x
Ratio of net debt to EBITDA(5)................................................................... 4.8x
Ratio of earnings to fixed charges(6)............................................................ 1.4x
Ratio of earnings to fixed charges and preferred stock dividends(6).............................. 1.3x
Pro forma net income (loss) per share (7):
Class A Common Stock:
Net income..................................................................................... $ 12.20
-----------
-----------
Class B Common Stock:
Net loss....................................................................................... $ (.90)
-----------
-----------
Weighted average shares outstanding:
Class A Common Stock............................................................................. 290
-----------
-----------
Class B Common Stock............................................................................. 3,590
-----------
-----------
<CAPTION>
MAY 3, 1997
-----------
(UNAUDITED)
<S> <C>
PRO FORMA DATA:
Cash interest expense(4)............ $ 4,071
Ratio of EBITDA to cash interest exp 2.5x
Ratio of net debt to EBITDA(5)......
Ratio of earnings to fixed charges(6 1.8x
Ratio of earnings to fixed charges a 1.5x
Pro forma net income (loss) per shar
Class A Common Stock:
Net income........................ $ 3.53
-----------
-----------
Class B Common Stock:
Net loss.......................... $ .00
-----------
-----------
Weighted average shares outstanding:
Class A Common Stock................ 290
-----------
-----------
Class B Common Stock................ 3,590
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
AS OF FEBRUARY AS OF MAY
1, 1997 3, 1997
--------------- -----------
ACTUAL
ACTUAL -----------
---------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................................................................... $ 1,863 $ 1,405
Total assets.................................................................................... 136,832 142,588
Total debt (including the discount on the Senior Notes)......................................... 68,594 156,500
Preferred stock (liquidation value)............................................................. 25,582 30,488
Total stockholders' equity (deficiency)......................................................... 43,386 (64,613)
</TABLE>
- ------------------------
(FOOTNOTES FROM PRIOR PAGE)
(1) The periods prior to and including January 28, 1995 reflect the combined
financial data of the Predecessor, which was acquired by the Company as of
January 28, 1995 from McGregor, a wholly owned subsidiary of Astrum
International Corp. ("Astrum"). The periods beginning January 29, 1995
reflect the consolidated financial data of the Company after the
Acquisition. Because of the revaluation of the assets and liabilities
acquired and the related impact to the consolidated statements of
operations, the financial statements of the Predecessor for the periods
prior to January 29, 1995 are not comparable to those of the Company
subsequent to that date although the information regarding net sales is
comparable with net sales reported for other periods.
(2) In connection with Astrum's emergence from its Chapter 11 bankruptcy
proceeding, the Predecessor adopted "fresh-start" accounting (the
Predecessor was not a party to Astrum's Chapter 11 bankrupty proceeding).
Accordingly, effective June 30, 1993, the assets of the Predecessor were
recorded at their fair market values with the excess of the reorganization
value over the fair value of the assets recorded as an intangible asset. As
a result of these adjustments, the financial statements for the seven months
ended January 29, 1994 and for the year ended January 28, 1995 are not
comparable to the prior periods. The Company has omitted unit growth and net
sales growth for the five and seven month periods ended June 30, 1993 and
January 29, 1994, respectively, because such periods may not be comparable
to the other periods presented.
(3) EBITDA is defined as operating income plus depreciation and amortization.
The fiscal 1996 EBITDA excludes a non-cash charge of $0.6 million for the
estimated loss on disposal of certain fixed assets and in the three month
period ended May 3, 1997 excludes non-recurring items of $10.9 million of
charges for special compensation. EBITDA is not a measure of performance
under generally accepted accounting principles ("GAAP"). EBITDA should not
be considered in isolation or as a substitute for net income, cash flows
from operating activities and other income or cash flow statement data
prepared in accordance with GAAP, or as a measure of profitability or
liquidity. Management believes, however, that EBITDA represents a useful
measure of assessing the performance of the Company's ongoing operating
activities as it reflects earnings trends of the Company without the impact
of purchase accounting applied in connection with the Acquisition. In
addition, management believes EBITDA is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness and is
used by the Company's creditors in assessing debt covenant compliance.
EBITDA should not be construed as an indication of the Company's operating
performance or as a measure of liquidity. EBITDA does not take into account
the Company's debt service requirements and other commitments and,
accordingly, is not necessarily indicative of amounts that may be available
for discretionary uses. The EBITDA measure presented in this Prospectus may
not be comparable to other similarly titled measures of other companies.
(4) Cash interest expense was calculated assuming an interest rate of 10.875% on
the Senior Notes and 8.0% on borrowings under the New Credit Agreement. See
"Unaudited Pro Forma Financial Statements." Management believes that the
ratio of EBITDA to cash interest expense is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness.
(5) Net debt represents total debt less cash and cash equivalents and was
calculated based on pro forma debt balances as of February 1, 1997.
Management believes that the ratio of net debt to EBITDA is a widely
accepted financial indicator of a company's ability to service and/or incur
indebtedness. The calculation of the ratio of net debt to EBITDA is not
meaningful on a quarterly basis.
15
<PAGE>
(6) Earnings used in computing the historical and pro forma ratio of earnings to
fixed charges consist of income before provision for income taxes plus fixed
charges. Fixed charges consist of interest expense on all indebtedness
(including amortization of deferred debt issuance costs) and a portion of
operating lease rental expense that is representative of the interest factor
(approximately 1/3). The calculation of these ratios is not meaningful for
the Predecessor as its interest expense and rental expense were DE
MINIMUS. Preferred stock dividends consist of dividends paid and dividends
accumulated in arrears on preferred stock and Class A common. Earnings were
insufficent to cover fixed charges and fixed charges and preferred stock
dividends by $2,938 and $4,298, respectively, for the three months ended May
3, 1997.
(7) Pro forma net income (loss) per share is computed by dividing net income
(loss) applicable to each class of Common Stock by the average number of
shares of such stock outstanding, as follows (in thousands):
<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS
FEBRUARY 1, ENDED
1997 MAY 3, 1997
--------------- -----------
<S> <C> <C>
Pro forma net income............................................................ $ 4,416 $ 2,136
Less: preferred dividends....................................................... (4,094) (1,108)
Class A common preference..................................................... (3,798) (1,025)
--------------- -----------
Net (loss) income applicable to common stockholders............................. $ (3,476) $ 3
--------------- -----------
--------------- -----------
Preference per Class A common share............................................. $ 13.10 $ 3.53
Net loss per common share....................................................... (.90) .00
--------------- -----------
Net income per Class A common share............................................. $ 12.20 $ 3.53
--------------- -----------
--------------- -----------
Net loss per Class B common share............................................... $ (0.90) $ .00
--------------- -----------
--------------- -----------
</TABLE>
16
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS OF THE SECURITIES SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS
PROSPECTUS BEFORE TENDERING THE OLD SENIOR PREFERRED STOCK IN EXCHANGE FOR THE
NEW SENIOR PREFERRED STOCK.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS; CONSEQUENCES TO HOLDERS
Anvil and Holdings incurred substantial indebtedness and debt service
obligations in connection with the Recapitalization. As of May 3, 1997, Holdings
had total consolidated indebtedness of approximately $156.5 million (including
the discount on the Senior Notes), Senior Preferred Stock with an aggregate
liquidation preference of $30.5 million and a stockholders' deficiency of
approximately $64.6 million. As of May 3, 1997, Anvil had total consolidated
indebtedness of approximately $156.5 million (including the discount on the
Senior Notes) and a stockholder's deficiency of approximately $64.6 million. The
Company's earnings were insufficient to cover fixed charges by $2.9 million for
the quarter ended May 3, 1997 and its earnings were insufficient to cover fixed
charges and preferred stock dividends by $4.3 million for the same period. In
addition, Anvil had approximately $28.5 million, subject to an asset based
formula, available under the New Credit Agreement, and all borrowings under such
facility are guaranteed by Holdings and secured by substantially all of Anvil's
assets and a pledge by Holdings of all of the capital stock of Anvil. Subject to
certain restrictions under the New Credit Agreement, the Senior Indenture and,
if the Exchange Debentures are issued, the Exchange Debenture Indenture, Anvil
and its subsidiaries may incur additional indebtedness (including additional
secured indebtedness and senior indebtedness) from time to time. The New Credit
Agreement and the Senior Indenture do not contain limitations on the ability of
Holdings to incur additional indebtedness and, if the Exchange Debentures are
issued, the Exchange Debenture Indenture will permit Holdings and its
subsidiaries to incur additional indebtedness, subject to certain restrictions.
Holdings has outstanding Senior Preferred Stock with an aggregate liquidation
preference of $30.5 million at May 3, 1997 which, subject to certain conditions,
may be exchanged for Exchange Debentures. On or before March 15, 2002, Holdings
may pay dividends on the Senior Preferred Stock in cash or in additional shares
of Senior Preferred Stock; thereafter, all dividends must be paid in cash.
Similarly, if the Exchange Debentures are issued, Holdings will be able to pay
interest thereon in cash or in additional Exchange Debentures on or before March
15, 2002; thereafter, all interest must be paid in cash. See "Use of Proceeds,"
"Capitalization," "Description of Securities--Senior Notes," "--Senior Preferred
Stock" and "--Exchange Debentures."
The level of indebtedness and dividend obligations could have important
consequences to holders of the Securities, including, but not limited to, the
following: (i) a substantial portion of cash flow from operations must be
dedicated to debt service and dividend obligations and will not be available for
other purposes; (ii) additional debt financing in the future for working
capital, capital expenditures or acquisitions may be limited; (iii) the level of
indebtedness could limit flexibility in reacting to changes in the operating
environment and economic conditions generally; and (iv) the level of
indebtedness and debt service obligations could have a material adverse impact
on the ability of Anvil and Holdings to pay the holders of Securities.
The ability of Anvil and Holdings (as the case may be) to pay principal and
interest on the Senior Notes and, if issued, the Exchange Debentures, to satisfy
their other debt obligations, and to pay cash dividends on the Senior Preferred
Stock will depend upon future operating performance, which will be affected by
prevailing economic conditions and financial, business and other factors,
certain of which are beyond their control, as well as the availability of
revolving credit borrowings under the New Credit Agreement. If operating cash
flow of Anvil and Holdings is insufficient to meet their operating expenses, to
service their debt requirements as they become due and to pay cash dividends on,
and the mandatory redemption price for, the Senior Preferred Stock to the extent
required by the Certificate of Designation related thereto, Anvil and Holdings
may be required to refinance a portion of the principal of the Senior Notes and,
if issued, the Exchange Debentures prior to their maturity. If Anvil and
Holdings are unable to
17
<PAGE>
service their indebtedness, and, in the case of Holdings, to pay dividends on
the Senior Preferred Stock or the mandatory redemption price therefor, they will
be forced to take actions such as reducing or delaying capital expenditures,
selling assets, restructuring or refinancing their indebtedness or seeking
additional equity capital. There can be no assurance that any of these remedies
can be effected on satisfactory terms, if at all. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations-- Liquidity and
Capital Resources," "Description of Securities--Senior Notes," "--Senior
Preferred Stock" and "--Exchange Debentures."
SUBORDINATION OF SECURITIES TO CURRENT AND FUTURE OBLIGATIONS
The New Senior Notes will be, as the Old Senior Notes (which they replace)
are, senior unsecured obligations of Anvil and will, as the Old Senior Notes
(which they replace), rank PARI PASSU in right of payment with all senior
Indebtedness of Anvil. The New Senior Notes will, as the Old Senior Notes (which
they replace), effectively rank junior to any secured Indebtedness of Anvil,
including Indebtedness incurred under the New Credit Agreement, to the extent of
the value of the assets securing such indebtedness and will be, as the Old
Senior Notes (which they replace) are, structurally subordinated to any
Indebtedness of Anvil's subsidiaries. The New Senior Notes will be, as the Old
Senior Notes (which they replace) are, fully and unconditionally guaranteed on a
senior unsecured basis by Holdings. The Guarantee effectively ranks junior to
any secured Indebtedness of Holdings, including Indebtedness incurred under the
New Credit Agreement, to the extent of the value of the assets securing such
indebtedness and is structurally subordinated to any Indebtedness of Holdings'
subsidiaries. The New Senior Preferred Stock will rank senior in right of
payment with respect to all Junior Securities and PARI PASSU in right of payment
with respect to all Parity Securities. The New Senior Preferred Stock will, as
the Old Senior Preferred Stock (which they replace), rank junior to all
Indebtedness and other obligations of Holdings and its subsidiaries, including
Anvil (the issuer of the Senior Notes). The Exchange Debentures, if issued, will
be unsecured obligations of Holdings and will be subordinated in right of
payment to all existing and future Senior Indebtedness of Holdings and to any
Indebtedness of Holdings' subsidiaries. As of May 3, 1997, the aggregate
principal amount of outstanding Indebtedness of Anvil and its subsidiaries to
which the Senior Notes were effectively junior was approximately $26.5 million,
the aggregate principal amount of outstanding Indebtedness of Holdings and its
subsidiaries to which the Senior Preferred Stock or the Exchange Debentures, if
issued, would have been junior would have been approximately $156.5 million
(including the discount on the Senior Notes). In addition, Anvil would have had
approximately $28.5 million available, subject to an asset based formula, under
the New Credit Agreement and all borrowings under such facility are guaranteed
by Holdings and secured by substantially all of Anvil's assets and a pledge by
Holdings of all the capital stock of Anvil. Subject to certain restrictions
under the New Credit Agreement and the Senior Indenture, Anvil and its
subsidiaries may incur additional indebtedness (including additional secured
indebtedness and senior indebtedness) from time to time. The New Credit
Agreement and the Senior Indenture do not contain limitations on the ability of
Holdings to incur additional indebtedness and, if the Exchange Debentures are
issued, the Exchange Debenture Indenture will permit Holdings and its
subsidiaries to incur additional indebtedness, subject to certain restrictions.
See "Description of Securities--Senior Notes," "--Senior Preferred Stock,"
"--Exchange Debentures" and "Description of Certain Indebtedness."
Upon any dividend, liquidation or any other distribution by Holdings,
holders of Class A Common will be entitled to be paid out of the assets of
Holdings then available for distribution, a preference equal to $100 per share
(the "Class A Preference") before any distribution is paid on any other class of
Common Stock, including the Class B Common offered in the Initial Units
Offering. The Class A Preference accretes at a rate of 12.5% per annum. Only
after satisfaction of all liabilities, the payment of the liquidation preference
of any outstanding shares of preferred stock and the payment of the Class A
Preference, will the holders of shares of Class B Common be entitled to share
ratably with all other classes of Common Stock in the distribution of all of
Holdings' assets remaining available for distribution. See "Description of
Capital Stock--Common Stock."
18
<PAGE>
RISKS ASSOCIATED WITH HOLDING COMPANY STRUCTURE
Holdings is a holding company that conducts substantially all of its
business through its direct and indirect subsidiaries, including Anvil. As a
holding company, Holdings is dependent on dividends or other intercompany
transfers of funds from its subsidiaries to meet its debt service and other
obligations, including its obligations under the Guarantee, the Senior Preferred
Stock and, if issued, the Exchange Debentures. The New Credit Agreement and the
Senior Indenture contain certain restrictions on the ability of Anvil and its
subsidiaries to make dividends and other distributions to Holdings. In addition,
under the terms of the Senior Indenture and the Exchange Debenture Indenture
(collectively, the "Indentures"), Anvil and its subsidiaries may incur certain
indebtedness pursuant to agreements that may restrict the ability to make such
dividends or other intercompany transfers necessary to service Holdings' debt
and/or dividend obligations. Any failure by Holdings to satisfy its obligations
with respect to the Exchange Debentures, if issued, at maturity (with respect to
payments of principal) or prior thereto (with respect to payments of interest or
required repurchases) would constitute a default under the Exchange Debenture
Indenture and the New Credit Agreement and could cause a default under
agreements governing other indebtedness of Holdings and its subsidiaries,
including the Senior Indenture. Any failure by Holdings to satisfy its
obligations under the Senior Preferred Stock would permit the holders thereof
only to elect certain Directors to Holdings' Board of Directors. The Exchange
Debentures, if issued, will be obligations exclusively of Holdings and will not
be guaranteed by any of Holdings' subsidiaries. In addition, because Holdings
conducts its business through its subsidiaries, all existing and future
indebtedness and other obligations of Holdings and its subsidiaries (including
the Senior Notes and borrowings under the New Credit Agreement) will be
effectively senior to the Senior Preferred Stock and, if issued, the Exchange
Debentures. Consequently, Holdings' cash flow and ability to service its debt,
including the Exchange Debentures and the Guarantee, and to pay cash dividends
on the Senior Preferred Stock are dependent upon the earnings of its
subsidiaries and the distribution of those earnings to Holdings, or upon loans,
advances or other payments made by its subsidiaries to Holdings. See
"Description of Securities-- Senior Notes," "--Senior Preferred Stock" and
"--Exchange Debentures."
RESTRICTIONS IMPOSED BY CERTAIN COVENANTS
The Senior Indenture restricts, among other things, Anvil's and its
Restricted Subsidiaries' (as defined in the Senior Indenture) ability to pay
dividends or make certain other restricted payments, including the payment of
cash dividends on or the redemption of its capital stock, to incur additional
indebtedness, to encumber or sell assets, to enter into transactions with
affiliates, to enter into certain guarantees of indebtedness, to make restricted
investments, to merge or consolidate with any other entity and to transfer or
lease all or substantially all of their assets. The Exchange Debenture Indenture
contains similar restrictions applicable to Holdings and its Restricted
Subsidiaries (as defined in the Exchange Debenture Indenture) and the
Certificate of Designation contains certain restrictions on Holdings' ability,
directly or indirectly, to make certain junior payments and Restricted
Investments (as defined in the Certificate of Designation), to enter into
transactions with affiliates or to merge or consolidate with any other entity or
to transfer or lease all or substantially all of its assets. In addition, the
New Credit Agreement contains certain other and more restrictive covenants and
prohibits Anvil and its subsidiaries from prepaying other indebtedness,
including the Senior Notes and the Exchange Debentures, and from redeeming the
Senior Preferred Stock. The New Credit Agreement also requires Anvil to maintain
specified financial ratios and satisfy certain financial condition tests,
including (i) an average funded debt to consolidated EBITDA ratio test, (ii) a
consolidated fixed charge coverage ratio test and (iii) a consolidated interest
coverage ratio test. Anvil's ability to meet those financial ratios and tests
can be affected by events beyond its control, and there can be no assurance that
Anvil will meet those tests. See "Description of Securities--Senior Notes,"
"--Senior Preferred Stock," "--Exchange Debentures" and "Description of Certain
Indebtedness--New Credit Agreement."
19
<PAGE>
The ability of Anvil and Holdings to comply with the covenants contained in
the New Credit Agreement, the Indentures and the Certificate of Designation (as
the case may be) may be affected by events beyond their control, including
prevailing economic, financial and industry conditions. The breach of any
covenant or restriction could result in a default which would permit the secured
lenders or the holders of the Senior Notes (as the case may be) to declare all
amounts borrowed thereunder to be due and payable, together with accrued and
unpaid interest, and the commitments of the secured lenders to make further
extensions of credit under the New Credit Agreement could be terminated. If
Anvil or Holdings was unable to repay their indebtedness to their secured
lenders, the secured lenders could proceed against any or all of the collateral
securing such indebtedness, which collateral consists of the capital stock and
substantially all of the assets of Anvil. The inability of Anvil and Holdings
(as the case may be) to pay principal and interest on the Senior Notes, and if
issued, the Exchange Debentures, to satisfy their other debt obligations, or to
pay cash dividends on the Senior Preferred Stock could have a material adverse
effect on the Company's financial condition and results of operations.
CHANGE OF CONTROL PROVISIONS; LIMITATIONS ON RIGHTS OF REPAYMENT
Upon the occurrence of a Change of Control, each holder of Senior Notes,
Senior Preferred Stock and, if issued, Exchange Debentures, will have the right
to require Anvil or Holdings (as the case may be) to purchase all or part of
such holder's Senior Notes, Senior Preferred Stock or Exchange Debentures (as
the case may be) at a repurchase price equal to 101% of the aggregate principal
amount or the liquidation preference (as the case may be) plus accrued and
unpaid interest or dividends (as the case may be). The repurchase of the Senior
Notes, Senior Preferred Stock or, if issued, the Exchange Debentures, in
relation to a Change of Control constitute a default under the New Credit
Agreement. In addition, the Change of Control purchase feature of the Senior
Notes, the Senior Preferred Stock and, if issued, the Exchange Debentures may in
certain circumstances discourage or make more difficult a sale or takeover of
Anvil or Holdings and, thus, the removal of incumbent management. See
"Description of Securities--Senior Notes," "--Senior Preferred Stock,"
"--Exchange Debentures" and "Description of Certain Indebtedness."
The holders of the Senior Notes, the Senior Preferred Stock and, if issued,
the Exchange Debentures have limited rights to require the repurchase or
redemption of the Senior Notes, the Senior Preferred Stock and the Exchange
Debentures in the event of a takeover, recapitalization or similar
restructuring, including a recapitalization or similar transaction with
management. Consequently, the Change of Control provisions will not afford any
protection in a highly leveraged transaction, including such a transaction
initiated by Anvil or Holdings, management of Anvil or Holdings or an affiliate
of Anvil or Holdings, if such transaction does not result in a Change of
Control. In addition, the New Credit Agreement provides that certain change of
control events with respect to Holdings and/or Anvil constitutes a default
thereunder permitting the lending parties thereto to accelerate the Indebtedness
thereunder. In addition, certain events that may obligate Anvil or Holdings to
offer to repay all outstanding obligations under the New Credit Agreement may
not constitute a Change of Control under the Senior Indenture, the Certificate
of Designation or the Exchange Debenture Indenture. Furthermore, neither Anvil
nor Holdings may have sufficient resources to repay Indebtedness under the New
Credit Agreement and may have insufficient resources to repurchase tendered
Securities. Furthermore, any future credit agreements or other agreements
relating to senior Indebtedness to which Anvil or Holdings become a party may
contain similar restrictions and provisions.
In the event a Change of Control occurs at a time when Anvil and/or Holdings
is directly or indirectly prohibited from purchasing Securities, Anvil and/or
Holdings could seek the consent of its creditors to the purchase of Securities
or could attempt to refinance the indebtedness that contains such prohibition.
If Anvil and/or Holdings do not obtain such a consent or refinance such
indebtedness, the purchase of Securities would remain prohibited. The failure by
Anvil or Holdings (as the case may be) to purchase tendered Securities would
constitute a breach of the Senior Indenture, the Certificate of Designation and/
20
<PAGE>
or the Exchange Debenture Indenture which would, in turn, constitute a default
under the New Credit Agreement and could lead to the acceleration of the
indebtedness thereunder. In any such event, the security granted in respect of
the New Credit Agreement, the legal and structural subordination of the Senior
Preferred Stock and the structural and contractual subordination of the Exchange
Debentures would likely result in the holders of the Securities receiving less
ratably than other creditors.
In addition, the terms of the Senior Notes include provisions similar to
those contained in the Exchange Debentures enabling holders thereof to require
Anvil to repurchase all or any part of such securities under circumstances
constituting a Change of Control. However, Anvil and Holdings may not have
sufficient resources to repurchase tendered Exchange Debentures and/or Senior
Notes and any such failure may constitute a default under the terms of the New
Credit Agreement, the Senior Notes, the Senior Indenture, the Exchange
Debentures and the Exchange Debenture Indenture. Again, in any such event, the
structural and contractual subordination of the Exchange Debentures and the
security granted in respect of the New Credit Agreement would likely result in
the holders of the Exchange Debentures receiving less ratably than other
creditors of Holdings. See "Description of Securities--Senior Notes-- Mandatory
Offers to Purchase Senior Notes--Change of Control," and "--Exchange
Debentures-- Mandatory Offers to Purchase Exchange Debentures--Change of
Control."
SUBSTANTIAL BENEFITS OF RECAPITALIZATION TO EXECUTIVE OFFICERS, DIRECTORS AND
EXISTING STOCKHOLDERS
In connection with the Recapitalization, Holdings redeemed and repurchased
substantially all of its outstanding shares of capital stock. Vestar, Culligan
International Company ("Culligan") and 399 Venture, the principal stockholders
of Holdings immediately prior to the Recapitalization, received proceeds in
aggregate amounts of approximately $47.9 million, $41.1 million and $7.2
million, respectively, in connection with such repurchases. Members of
management (including certain then-existing Directors) who held shares of
capital stock of Holdings received proceeds in an aggregate amount of
approximately $17.7 million in connection with such repurchases. Furthermore,
the Company's four senior executives received an aggregate of approximately $5.3
million pursuant to the terms of the Company's Phantom Equity Plan, an aggregate
of approximately $470,000 representing transaction fees in connection with the
Recapitalization and an aggregate of $500,000 representing a transaction bonus
awarded in connection with the Recapitalization (the "Management Bonus"). See
"Management," "Security Ownership of Certain Beneficial Owners and Management"
and "Certain Relationships and Related Transactions."
DOMESTIC AND INTERNATIONAL COMPETITION
The domestic activewear industry is highly competitive. The Company faces
competition principally from large vertically integrated U.S.-based
manufacturers of activewear, which are generally larger than the Company and
have greater financial and other resources. There can be no assurances that the
Company can continue to compete successfully with such competitors. In addition,
certain competitors have greater vertical integration than the Company insofar
as certain of such competitors spin their own yarn, which under certain market
conditions may give them a competitive advantage. Prices for the Company's
products are typically determined by market conditions. To remain competitive,
the Company reviews and adjusts its pricing structure from time to time in
response to industry-wide price changes. To the extent that the Company may be
obligated to adjust its pricing policies to meet competition, the Company's
financial performance may be adversely affected by price reductions implemented
by significant competitors or by the failure of such competitors to increase
prices in line with increases in the Company's costs and expenses.
The Company also faces competition from foreign manufacturers of activewear
who generally have substantially lower labor costs than domestic manufacturers.
Historically, the Company has benefited from quotas and tariffs imposed by the
United States on the importation of apparel. The General Agreement on Tariffs
and Trade ("GATT"), which became effective on January 1, 1995, requires a
complete phase-out of all existing quotas over a ten-year period. The phase-out
of such quotas is scheduled to take place in four
21
<PAGE>
stages as follows (expressed in a percentage of total imports): 16% in 1995; 17%
in 1999; 18% in 2003; and 49% in 2005. To date, no products manufactured by the
Company have been subject to quota reductions under GATT. The products that will
be subject to quota eliminations in 1999 and 2003 have not yet been selected. In
addition to the phasing-out of the use of quotas, GATT also requires that the
United States reduce tariffs on textile and apparel imports over the same
ten-year period. To date, the United States has not lowered such tariffs.
Although the Company believes that it is less susceptible to import competition
than many other textile and apparel manufacturers due to the capital intensive
nature of its vertically integrated business, its focus on high-quality,
relatively low labor content of its products and its rapid delivery
capabilities, no assurance can be given that the elimination or substantial
reduction of quotas and tariffs as contemplated by GATT will not have a material
adverse effect on the Company's results of operations or that the Company can
continue to compete successfully with such competitors. See
"Business--Competition."
SUPPLY AND PRICE OF YARN
The principal raw material used by the Company in the production of its
products is cotton yarn. Unlike certain of its competitors, the Company does not
spin its own yarn. Instead, the Company obtains substantially all of its yarn
from five domestic yarn suppliers pursuant to purchase orders for quantities
ranging from 30 days' to one year's supply, based upon the Company's
expectations as to yarn prices and levels of supply. The Company does not have
and does not typically enter into long-term supply contracts (more than one
year) relating to cotton yarn. In fiscal 1996, one yarn supplier accounted for
approximately 35% of the Company's total yarn purchases. Although to date the
Company has always been able to obtain sufficient quantities of yarn for its
manufacturing processes, a significant disruption in the ability or willingness
of the Company's yarn suppliers to deliver a sufficient quantity of quality yarn
or any other interruption in the Company's ability to obtain yarn could have a
material adverse effect on the Company's results of operations.
The price of cotton yarn used by the Company in its manufacturing operations
is subject to volatility. The Company is sensitive to fluctuations in cotton
yarn prices as cotton yarn is the largest component of the manufacturing cost of
its products. Although the Company generally attempts to pass on any increase in
raw materials prices to its customers, no assurance can be given that the
Company will be successful in passing on such price increases in the future.
DEPENDENCE UPON SENIOR MANAGEMENT
The Company is dependent on the personal efforts, relationships and
abilities of its senior management team, who on average have more than 20 years
of experience in the apparel industry. At the time of the Acquisition, the
Company entered into four-year employment agreements with Bernard Geller, its
Chief Executive Officer and Jacob Hollander, Anthony Corsano and William H.
Turner, each an executive officer. The loss of services of any of the members of
the Company's senior management team could have a material adverse effect on the
future performance of the Company. The Company does not maintain "key man"
insurance on any of the members of its senior management team. In addition, the
Company believes that its success is dependent on its ability to attract and
retain additional qualified employees, and the failure to recruit such other
skilled personnel could have a material adverse effect on the Company's
financial condition and results of operations. See "Management--Employment
Agreements."
ENVIRONMENTAL CONSIDERATIONS
Apparel manufacturers such as the Company have become subject to
increasingly stringent environmental standards imposed by federal, state and
local environmental laws and regulations. The Company has made, and will
continue to make, expenditures to comply with such environmental standards. The
Company regularly reviews its procedures and policies for compliance with
environmental laws. Based upon the Company's experience to date, the cost of
compliance with environmental laws has not had, and
22
<PAGE>
is not expected to have a material adverse effect on the Company's financial
condition, liquidity or results of operations. However, future events, such as
changes in existing laws and regulations, may give rise to additional compliance
costs that could have a material adverse effect on the Company's financial
condition or results of operations. See "Business--Environmental Matters."
CONTROL BY PRINCIPAL STOCKHOLDERS
399 Venture and BRS together own shares of Common Stock that represent
approximately 76% of voting power of the outstanding Common Stock. In addition,
pursuant to the Stockholders Agreement (as defined), 399 Venture, BRS and the
Management Investors have agreed to vote all of their shares of Common Stock for
the election of directors designated by certain stockholders, including 399
Venture and BRS. As a result, 399 Venture and BRS together have the effective
voting power to elect a majority of the Directors of the Company and generally
exercise control over the business, policies and affairs of the Company.
Furthermore, the Stockholders Agreement contains certain restrictions on the
transfer by the holders of Common Stock (other than holders of Class B Common
issued in the Initial Units Offering), including certain participation rights
and rights of first refusal for the Company and certain holders to purchase the
shares of Common Stock prior to transfer by any other current holder, which
could prevent or cause a change of control of the Company. See "Security
Ownership of Certain Beneficial Owners and Management--Stockholders Agreement."
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF THE SENIOR
PREFERRED STOCK
The Old Senior Preferred Stock were issued to, and Holdings believes are
currently owned by, a relatively small number of beneficial owners. Prior to the
Preferred Exchange Offer, there has not been any public market for the Old
Senior Preferred Stock. The Old Senior Preferred Stock have not been registered
under the Securities Act and will be subject to restrictions on transferability
to the extent that they are not exchanged for New Senior Preferred Stock by
holders who are entitled to participate in this Preferred Exchange offer. The
holders of Old Senior Preferred Stock (other than any such holder that is an
"affiliate" of Holdings within the meaning of Rule 405 under the Securities Act)
who are not eligible to participate in the Preferred Exchange Offer are entitled
to certain registration rights, and Holdings is required to file a Shelf
Registration Statement with respect to such Old Senior Preferred Stock. The New
Senior Preferred Stock will constitute a new issue of securities with no
established trading market. Holdings does not intend to list the New Senior
Preferred Stock on any national securities exchange or seek the admission
thereof to trading in the National Association of Securities Dealers Automated
Quotation System. The Initial Purchaser has advised Holdings that it currently
intends to make a market in the New Senior Preferred Stock, but they are not
obligated to do so and may discontinue such market making at any time. In
addition, such market making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act and may be limited during the Preferred
Exchange Offer and the pendency of the Shelf Registration Statement.
Accordingly, no assurance can be given that an active public or other market
will develop for the New Senior Preferred Stock or as to the liquidity of the
trading makret for the New Senior Preferred Stock. If a trading market does not
develop or is not maintained, holders of the New Senior Preferred Stock may
experience difficulty in reselling the New Senior Preferred Stock or may be
unable to sell them at all. If a market for the New Senior Preferred Stock
develops, any such market may be discontinued at any time.
If a public trading market develops for the New Senior Preferred Stock,
future trading prices of such securities will depend on many factors including,
among other things, prevailing interest rates, the market for similar securities
and other factors, including the financial condition of Holdings, the New Senior
Preferred Stock may trade at a discount from their principal amount. If the
Senior Preferred Stock trades at a discount, Holdings might experience
difficulty in arranging additional financings of this type in the future.
23
<PAGE>
FAILURE TO FOLLOW PREFERRED EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT
HOLDERS
Issuance of the New Senior Preferred Stock in exchange for the Old Senior
Preferred Stock pursuant to the Preferred Exchange Offer will be made only after
a timely receipt by Holdings of such Old Senior Preferred Stock, a properly
completed and duly executed Letter of Transmittal or Agent's Message (as
defined) and all other required documents. Therefore, holders of the Old Senior
Preferred Stock desiring to tender such Old Senior Preferred Stock in exchange
for New Senior Preferred Stock should allow sufficient time to ensure timely
delivery. Holdings is under no duty to give notification of defects or
irregularities with respect to the tenders of Old Senior Preferred Stock for
exchange. Old Senior Preferred Stock that are not tendered or are tendered but
not accepted will, following the consummation of the Preferred Exchange Offer,
continue to be subject to the existing restrictions upon transfer thereof, and
upon consummation of the Preferred Exchange Offer, certain registration rights
under the Preferred Stock Registration Rights Agreement will terminate. In
addition, any holder of Old Senior Preferred Stock who tenders in the Preferred
Exchange Offer for the purpose of participating in a distribution of the New
Senior Preferred Stock may be deemed to have received restricted securities, and
if so, will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Senior Preferred Stock for its own account
in exchange for Old Senior Preferred Stock, where such Old Senior Preferred
Stock were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Senior Preferred Stock. See
"Plan of Distribution." To the extent that Old Senior Preferred Stock are
tendered and accepted in the Preferred Exchange Offer, the trading market for
untendered and tendered but unaccepted Old Senior Preferred Stock could be
adversely affected. See "The Preferred Exchange Offer."
FRAUDULENT TRANSFER CONSIDERATIONS
Under fraudulent transfer law, if a court were to find in a lawsuit by an
unpaid creditor or representative of creditors of Anvil or Holdings, that Anvil
or Holdings received less than fair consideration or reasonable equivalent value
for incurring the indebtedness represented by the Senior Notes or the Guarantees
and, if issued, the Exchange Debentures, and, at the time of such incurrence,
Anvil or Holdings (as the case may be) (i) was insolvent or was rendered
insolvent by reason of such incurrence, (ii) was engaged or about to engage in a
business or transaction for which its remaining property constituted
unreasonably small capital or (iii) intended to incur, or believed it would
incur, debts beyond it ability to pay as such debts mature, such court could,
among other things, (a) void all or a portion of Anvil's obligations to the
holders of Senior Notes and the Guarantees and, if issued, Holdings' obligations
to the holders of the Exchange Debentures and/or (b) subordinate Anvil's
obligations to the holders of the Senior Notes or Holdings' obligations under
the Guarantees and, if issued, Holdings' obligations to the holders of the
Exchange Debentures to other existing and future indebtedness of Anvil or
Holdings (as the case may be) the effect of which would be to entitle such other
creditors to be paid in full before any payment could be made on the Senior
Notes or the Guarantees and, if issued, the Exchange Debentures. The measure of
insolvency for purposes of determining whether a transfer is avoidable as a
fraudulent transfer varies depending upon the law of the jurisdiction which is
being applied. Generally, however, a debtor would be considered insolvent if the
sum of all of its liabilities were greater than the value of all of its property
at a fair valuation, or if the present fair saleable value of the debtor's
assets were less than the amount required to repay its probable liability on its
debts as they become absolute and mature. There can be no assurance as to what
standard a court would apply in order to determine solvency.
Management believes the Senior Notes and the Guarantees were issued without
the intent to hinder, defraud or delay creditors, for proper purposes and in
good faith. Management believes that Anvil and Holdings received equivalent
value at the time the indebtedness under the Senior Notes and the Guarantee was
incurred. As of May 3, 1997, the Company had a stockholders' deficiency of
approximately $64.6 million. See "Capitalization," "Pro Forma Financial Data"
and "Management's Discussion and
24
<PAGE>
Analysis of Financial Condition and Results of Operations." Management believes
that, for purposes of the Federal Bankruptcy Code and state fraudulent transfer
or conveyance laws, Anvil and Holdings are and will be solvent, will have
sufficient capital for carrying on their business and will be able to pay their
debts as they mature. These beliefs are based upon the Company's operating
history, management's analysis of cash flows, the estimated fair value of the
Company's assets and the Company's estimated liabilities. In determining the
estimated fair value of the Company's assets, the Board of Directors utilized a
written report of an expert in appraisals as to the equity value of Holdings and
as to certain other valuation and solvency matters. The various factors
considered by the Board as enumerated above, supported the Board's conclusions
regarding the sufficiency of the Company's capital and no one factor was given
more significance than others by the Board in reaching its conclusions. As a
result of the uncertainty of the application of fraudulent transfer or
conveyance law in transactions similar to the Recapitalization, including the
distribution to stockholders, there can be no assurance that a court passing on
any of the foregoing issues would agree with management's views.
TAX CONSEQUENCES OF DISTRIBUTIONS WITH RESPECT TO THE SENIOR PREFERRED STOCK AND
EXCHANGE DEBENTURES; POTENTIAL FOR UNPLANNED DEEMED DIVIDEND INCOME
Holdings believes, based on advice from its tax counsel, that if the
redemption price of the Senior Preferred Stock exceeds its issue price by more
than a DE MINIMIS amount, such excess may be treated as a constructive
distribution with respect to the Senior Preferred Stock of additional stock over
the term of the Senior Preferred Stock using a constant interest rate method
similar to that used for accruing original issue discount. As a result of the
allocation of a portion of the purchase price of the Units to the Class B
Common, the Senior Preferred Stock initially purchased by holders may have a
redemption price that exceeds its issue price by more than a DE MINIMIS amount,
resulting in such constructive distributions. In addition, because the issue
price of the Senior Preferred Stock distributed in lieu of payments of cash
dividends will be equal to the fair market value of the Senior Preferred Stock
at the time of distribution, it is possible, depending on its fair market value
at that time, that such Senior Preferred Stock will be issued with a redemption
premium large enough to be considered a dividend as described above. In such
event holders would be required to include such premium in income as a
distribution over some period in advance of receiving the cash attributable to
such income, and such Senior Preferred Stock might trade separately, which might
adversely affect the liquidity of the Senior Preferred Stock.
Holdings may, at its option and under certain circumstances, issue Exchange
Debentures in exchange for the Senior Preferred Stock. Any such exchange will be
a taxable event to holders of the Senior Preferred Stock. Furthermore, the
Exchange Debentures may in certain circumstances be treated as having been
issued with original issue discount ("OID") for federal income tax purposes. In
such event, holders of Exchange Debentures will be required to include such OID
(as ordinary income) in income over the life of the Exchange Debentures, in
advance of the receipt of the cash attributable to such income.
25
<PAGE>
THE RECAPITALIZATION
On February 12, 1997, Holdings, Anvil VT, Inc., Vestar, 399 Venture, the
Management Investors, the other Existing Stockholders and BRS entered into the
Recapitalization Agreement. Pursuant to the Recapitalization Agreement: (i)
Holdings redeemed a substantial portion (i.e., 83.3%) of its outstanding
preferred stock (the "Old Preferred Stock") and repurchased a substantial
portion (i.e., 82.8%) of its old common stock (the "Old Common Stock"); (ii) 399
Venture and the Management Investors reinvested 1,770,672 shares of Old Common
Stock, which converted into 167,516 shares of Class A Common and, 1,848,446
shares of Class B Common; (iii) 399 Venture exchanged 33,330 shares of its Old
Preferred Stock for 3,333 Units; and (iv) BRS purchased 117,645 shares of Class
A Common and 1,298,152 shares of Class B Common at a price equal to
approximately $10.50 per share (with no discounts). As part of the
Recapitalization, the Company also: (i) repaid all of Anvil's outstanding
borrowings under its existing credit agreement (the "Old Credit Agreement");
(ii) repaid a subordinated promissory note issued to Culligan in connection with
Acquisition (the "Subordinated Note"); (iii) made payments to the Management
Investors pursuant to the Phantom Equity Plan; (iv) paid the Management Bonus;
and (v) paid fees and expenses related to the Recapitalization. The foregoing
transactions together with the related financing transactions discussed below
are collectively referred to herein as the "Recapitalization." See "Use of
Proceeds."
The Company used approximately $225.5 million to complete the
Recapitalization, including the payment of related fees and expenses. In order
to finance the Recapitalization: (i) Anvil issued $130.0 million in aggregate
principal amount of Old Senior Notes in the Offering; (ii) Holdings issued
30,000 Units, consisting of an aggregate of 1,200,000 shares of Old Senior
Preferred Stock and 390,000 shares of Class B Common, in the Initial Units
Offering for gross proceeds of $26.7 million; (iii) Anvil borrowed approximately
$33.3 million under the New Credit Agreement; and (iv) 399 Venture, BRS and the
Management Investors made the Equity Contribution of $35.5 million to Holdings.
The Equity Contribution was comprised of: (i) a cash investment of $13.1 million
and reinvestment of $0.5 million of equity securities by BRS; (ii) the
reinvestment of $16.9 million of equity securities by 399 Venture; and (iii) the
reinvestment of $5.0 million of equity securities by the Management Investors.
See "Description of Securities--Senior Notes," "--Senior Preferred Stock" and
"Description of Certain Indebtedness."
The capital structure of Holdings as reflected in its historical
consolidated financial statements consists of three classes of Old Common Stock
(Classes A, B and C) and three classes of Old Preferred Stock (Classes A, B and
C). The various classes of Old Common Stock and Old Preferred Stock were
substantially identical except with respect to voting and conversion rights. In
connection with the Recapitalization, Holdings filed with the Secretary of State
of Delaware a Restated Certificate of Incorporation, which, among other things,
sets forth the terms of the Common Stock and the Senior Preferred Stock.
Holdings has outstanding 290,000 shares of Class A Common and 3,590,000 shares
of Class B Common. The Class A Common is nonvoting and is entitled to the Class
A Preference upon any distribution by Holdings to holders of its capital stock
(whether by dividend, liquidation distribution or otherwise). The Class B Common
entitles the holder thereof to one vote per share. See "Security Ownership of
Certain Beneficial Owners and Management," "Description of Securities--Senior
Preferred Stock" and "Description of Capital Stock."
399 Venture, BRS and the Management Investors own (and owned, prior to the
completion of the Recapitalization) the following shares of capital stock of
Holdings:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
SHARES BENEFICIALLY OWNED (POST-RECAPITALIZATION)
(PRE-RECAPITALIZATION) --------------------------- PERCENTAGE OF VOTING POWER
--------------------------- CLASS A CLASS B ----------------------------------------------
NAME OLD COMMON OLD PREFERRED COMMON COMMON PRE-RECAPITALIZATION POST-RECAPITALIZATION
- ----------------------- ------------ ------------- ------------- ------------ --------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
399 Venture............ 1,792,511 41,249 122,484 1,351,553 17.0% 38.0%
BRS.................... 77,489 1,783 122,484 1,351,553 0.7 38.0
Management Investors... 2,100,000 4,400 45,032 496,894 19.5 14.0
------------ ------ ------------- ------------ --- ---
Total............ 3,970,00 47,432 290,000 3,200,000 37.2% 90.0%
</TABLE>
26
<PAGE>
USE OF PROCEEDS
(IN MILLIONS, EXCEPT SHARE DATA)
The Preferred Exchange Offer is intended to satisfy certain of Holdings's
obligations under the Preferred Stock Registration Rights Agreement. Holdings
will not receive any cash proceeds from the issuance of the New Senior Preferred
Stock offered hereby. In consideration for issuing the New Senior Preferred
Stock contemplated in this Prospectus, Holdings will receive Old Senior
Preferred Stock in like liquidation preference, the form and terms of which are
the same as the form and terms of the New Senior Preferred Stock (which replace
the Old Senior Preferred Stock), except as described herein.
The proceeds from the Initial Offerings were approximately $156.7 million
before deducting commissions and estimated expenses thereof. The proceeds from
the Initial Offerings, together with borrowings of approximately $33.3 million
under the New Credit Agreement and proceeds from the Equity Contribution of
$35.5 million, were used to: (i) repay all outstanding borrowings under the Old
Credit Agreement; (ii) repay the Subordinated Note; (iii) redeem or exchange all
of the outstanding shares of the Old Preferred Stock (including all accrued
dividends thereon); (iv) repurchase all of Holdings' Old Common Stock (other
than the Retained Shares); (v) make payments to the Company's senior management
team pursuant to the Company's Phantom Equity Plan; (vi) pay the Management
Bonus; and (vii) pay the fees and expenses of the Recapitalization. The New
Credit Agreement permits borrowings of up to $55.0 million for working capital
and for general corporate purposes, including future acquisitions. Certain
former stockholders of Holdings received a significant portion of the net
proceeds of the Initial Offerings. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources,"
"Description of Certain Indebtedness" and "Certain Relationships and Related
Transactions."
The following table sets forth the sources and uses of funds relating to the
Recapitalization:
<TABLE>
<S> <C>
SOURCES OF FUNDS:
Borrowings under the New Credit Agreement......................... $33.3
Old Senior Notes due 2007 (including the original issue
discount)....................................................... 130.0
Units (1)......................................................... 26.7
Equity Contribution............................................... 35.5
---------
Total sources................................................. $ 225.5
---------
---------
USES OF FUNDS:
Repay borrowings under the Old Credit Agreement (2)............... $ 61.3
Repay the Subordinated Note (3)................................... 9.6
Redeem or exchange the Old Preferred Stock (4).................... 26.1
Repurchase shares of Old Common Stock (5)......................... 91.6
Payment under the Phantom Equity Plan (6)......................... 5.3
Payment of Management Bonus (7)................................... 0.5
Retained Shares (8)............................................... 19.1
Fees and expenses (9)............................................. 12.0
---------
Total uses.................................................... $ 225.5
---------
---------
</TABLE>
- --------------------------
(1) In connection with the Initial Units Offering, Holdings offered 30,000
Units, each consisting of 40 shares of Old Senior Preferred Stock with a
liquidation preference of $25.00 per share and 13 shares of Class B Common.
Accordingly, an aggregate of 1,200,000 shares of Old Senior Preferred Stock
and 390,000 shares of Class B Common were issued in the Initial Units
Offering.
(2) Borrowings under the Old Credit Agreement as of March 14, 1997 consisted of:
(i) $30.5 million principal amount of a tranche A term loan that matures
quarterly in varying amounts from April 29, 1995 through February 3, 2001
27
<PAGE>
(the "Tranche A Term Loan"), and $15.8 million principal amount of a tranche
B term loan that matures quarterly in varying amounts from April 29, 1995
through February 2, 2002 (the "Tranche B Term Loan," together with the
Tranche A Term Loan, the "Term Loans"), and (ii) $14.4 million principal
amount of revolving credit loans that mature on January 30, 2001, subject to
certain required temporary interim reductions and $0.2 million of accrued
interest. As of February 1, 1997, the weighted average interest rate with
respect to all borrowings under the Old Credit Agreement was approximately
8%.
(3) The Subordinated Note was issued by Holdings to Culligan in the principal
amount of $7.5 million in connection with the Acquisition. The Subordinated
Note would have matured on January 30, 2005 or earlier upon a change in
ownership of Holdings (as defined therein) and bore interest, payable
semiannually, at 10% per annum if paid in cash, or at 12% per annum if such
interest payments are deferred by Holdings. See "Certain Relationships and
Related Transactions."
(4) The Old Preferred Stock was issued by Holdings to finance a portion of the
Acquisition. Dividends on the Old Preferred Stock accrued at a rate of 12.5%
per annum on the sum of the liquidation value of the Old Preferred Stock
($100 per share) plus all accumulated and unpaid dividends thereon,
compounded quarterly. Pursuant to the Recapitalization Agreement, 399
Venture exchanged 33,330 shares of its Old Preferred Stock for 3,333 Units
included in the Initial Units Offering.
(5) Pursuant to the Recapitalization Agreement, Holdings agreed to repurchase
Old Common Stock at a purchase price equal to approximately $10.50 per
share. All Old Common Stock held by the Existing Stockholders was redeemed,
except for the Retained Shares. The aggregate repurchase amount for the Old
Common Stock was net of the payment of: (i) the price to be paid by the
Management Investors in connection with the exercise of the currently
outstanding options and (ii) the repayment of certain loans made to certain
Management Investors in connection with their original purchase of the Old
Common Stock.
(6) In connection with the Acquisition, the Company and the Management Investors
entered into a Phantom Equity Plan. The Phantom Equity Plan provided that
the Management Investors were entitled to a cash payment upon certain
events, including the Recapitalization. See "Management--Phantom Equity
Plan."
(7) As part of the Recapitalization, the Company agreed to pay the Company's
senior management team a transaction bonus of $500,000 in the aggregate.
(8) Pursuant to the Recapitalization Agreement, 399 Venture, BRS and the
Management Investors reinvested a portion of their shares of Old Common
Stock, having a value of $13.6 million, $0.5 million and $5.0 million,
respectively, which converted into shares of Class A Common, Class B Common
and Old Senior Preferred Stock.
(9) Includes discounts, commissions and fees and expenses incurred in connection
with the Recapitalization and the New Credit Agreement. A portion of such
fees was paid in the form of dividends to holders of Class C Common.
28
<PAGE>
CAPITALIZATION
(IN THOUSANDS)
The following table sets forth the unaudited consolidated capitalization of
the Company as of May 3, 1997 which reflects the Recapitalization which was
completed on March 14, 1997. The Old Senior Notes surrendered in exchange for
the New Senior Notes will be retired and canceled and cannot be reissued.
Likewise, the Old Senior Preferred Stock surrendered in exchange for the New
Senior Preferred Stock will be retired and canceled and cannot be reissued.
Accordingly, neither the issuance of the New Senior Notes nor the New Senior
Preferred Stock will result in any increase or decrease in the indebtedness of
the Company. As such, no effect has been given to the Exchange Offers in this
capitalization table. This table should be read in conjunction with "Use of
Proceeds," "Selected Historical Financial Data" and "Unaudited Pro Forma
Financial Statements" and the financial statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF
MAY 3, 1997
-----------
ACTUAL
-----------
<S> <C>
Cash and cash equivalents........................................................ $ 1,405
-----------
-----------
Total debt:
Revolving credit facility borrowings under the New Credit Agreement............ $ 26,500
10 7/8% Senior Notes due 2007 (including the original issue discount).......... 130,000
-----------
Total debt................................................................. 156,500
13% Senior Exchangeable Preferred Stock due 2009 (at liquidation value).......... 30,488
Total stockholders' deficiency................................................... (64,613)
-----------
Total capitalization....................................................... $ 122,375
-----------
-----------
</TABLE>
DIVIDEND POLICY
Holdings is not required to pay cash dividends on the Senior Preferred Stock
until after March 15, 2002. Holdings intends to retain future earnings, if any,
for use in its business and does not anticipate paying any cash dividends on the
Senior Preferred Stock for any period ending on or prior to March 15, 2002 or on
the Common Stock. In addition, the terms of the Senior Indenture and the New
Credit Agreement limit the amount of cash dividends Anvil may distribute to
Holdings to pay dividends with respect to the Senior Preferred Stock, the Common
Stock and other equity securities both before and after that date. Further,
holders of Class A Common are entitled to the Class A Preference upon a
distribution by Holdings to holders of its capital stock (whether by dividend,
liquidation or other distribution). See "Description of Securities--Senior
Notes--Certain Covenants," "--Senior Preferred Stock--Dividends" and
"Description of Certain Indebtedness."
29
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS AND UNITS IN THOUSANDS)
Set forth below are the selected historical financial data of the
Predecessor and the Company as of the dates and for the periods shown. The
selected historical financial data of the Predecessor for fiscal years 1992 and
1994 and the five and seven month periods ended June 30, 1993 and January 29,
1994, respectively, were derived from the combined financial statements of the
Predecessor for such periods, which were audited by KPMG Peat Marwick LLP. The
selected historical financial data of the Company for fiscal years 1995 and 1996
were derived from the consolidated financial statements for such periods, which
were audited by Deloitte & Touche LLP. The financial data as of May 3, 1997 and
for the three months ended May 3, 1997 and April 27, 1996 have been derived from
the Company's unaudited consolidated financial statements which, in the opinion
of management, contain all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial condition and
results of operations for such period. The results of operations for the three
months ended May 3, 1997 are not necessarily indicative of the operating results
that may be expected for the full year. The financial statements presented
herein reflect the consolidated financial statements of the Company or the
combined financial statements of the Predecessor. Holdings' sole asset is the
capital stock of Anvil. The information presented below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the combined and consolidated financial
statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR (1) THE COMPANY (1)
-------------------------------------------------- ----------------------------------------------
SEVEN
FISCAL YEAR FIVE MONTHS MONTHS FISCAL YEAR ENDED
ENDED ENDED ENDED ---------------------------------
JAN. 31, JUNE 30, JAN. 29, JAN. 28, JAN. 27, FEB. 1,
1993 1993 1994 (2) 1995 (2) 1996 1997
----------- ----------- ----------- ----------- --------- ---------
THREE MONTHS ENDED
------------------------
APRIL 27, MAY 3,
1996 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................... $ 140,839 $ 75,743 $ 74,691 $ 169,923 $ 193,389 $ 204,154 $ 58,552 $ 60,288
Cost of goods sold............ 116,727 61,197 62,408 131,906 149,723 156,813 46,836 45,859
----------- ----------- ----------- ----------- --------- --------- ----------- -----------
Gross profit.................. 24,112 14,546 12,283 38,017 43,666 47,341 11,716 14,429
Selling, general and
administrative expenses..... 11,103 5,788 6,632 14,704 17,778 21,678 5,276 6,128
Special compensation (3)...... -- -- -- -- -- -- -- 10,915
Amortization of intangible
assets...................... -- 55 6,717 13,435 736 958 203 250
----------- ----------- ----------- ----------- --------- --------- ----------- -----------
Operating income (loss)....... 13,009 8,703 (1,066) 9,878 25,152 24,705 6,237 (2,864)
Other income (expense):
Interest income and other--
net....................... 244 6 88 2,451 616 415 (447) (178)
Interest expense............ (188) (74) (107) (227) (8,844) (7,912) (1,710) (3,142)
----------- ----------- ----------- ----------- --------- --------- ----------- -----------
Income (loss) before
provision for income
taxes, extraordinary item
and cumulative effect of
change in accounting
principle................. 13,065 8,635 (1,085) 12,102 16,924 17,208 4,080 (6,184)
Provision (benefit) for
income taxes.............. 5,845 3,663 2,253 11,045 6,770 6,883 1,632 (2,474)
----------- ----------- ----------- ----------- --------- --------- ----------- -----------
Income (loss) before
extraordinary item and
cumulative effect of change
in accounting principle..... 7,220 4,972 (3,338) 1,057 10,154 10,325 2,448 (3,710)
Extraordinary item--loss on
extinguishment of debt, net
of $1,838 tax benefit (4)... -- -- -- -- -- -- -- (2,757)
Cumulative effect of change in
accounting principle (5).... (853) -- -- -- -- -- -- --
----------- ----------- ----------- ----------- --------- --------- ----------- -----------
Net income (loss)............. $ 8,073 $ 4,972 $ (3,338) $ 1,057 $ 10,154 $ 10,325 $ 2,448 $ (6,467)
----------- ----------- ----------- ----------- --------- --------- ----------- -----------
----------- ----------- ----------- ----------- --------- --------- ----------- -----------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR (1) THE COMPANY (1)
-------------------------------------------------- -----------------------------------
SEVEN
FISCAL YEAR FIVE MONTHS MONTHS FISCAL YEAR ENDED
ENDED ENDED ENDED ---------------------------------
JAN. 31, JUNE 30, JAN. 29, JAN. 28, JAN. 27, FEB. 1,
1993 1993 1994 (2) 1995 (2) 1996 1997
----------- ----------- ----------- ----------- --------- --------- THREE MONTHS
ENDED
-------------
APRIL 27,
1996
-------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA (6).................... $ 16,329 $ 10,617 $ 7,830 $ 28,639 $ 31,615 $ 33,550 $ 8,017
Cash provided by (used in)....
Operating activities........ (4,186) 21,919 (996) 13,654 7,163 23,811 1,967
Investing activities........ (9,242) (3,003) (4,764) (7,888) (7,703) (6,519) (564)
Financing activities........ 13,376 (18,813) 4,125 (5,313) 775 (16,997) (959)
Depreciation and
amortization................ 3,320 1,914 8,896 18,761 6,463 7,287 1,962
Capital expenditures.......... 9,372 3,003 4,764 7,888 7,703 4,815
Ratio of earnings to fixed
charges (7)................. -- -- -- -- 2.9x 3.1x 3.3x
Ratio of earnings to fixed
charges and preferred stock
dividends (7)............... -- -- -- -- 2.4x 2.6x 2.6x
SELECTED OPERATING DATA:
Dozens of units sold.......... 4,187 2,198 2,224 4,711 4,973 5,319
Unit growth................... 11.1% * * 6.5% 5.6% 7.0%
Net sales growth.............. 13.0% * * 13.0% 13.8% 5.6%
INCOME (LOSS) PER COMMON SHARE: (9)
Class A Common Stock:
Net income................................................................................. $ 12.20
---------
---------
Class B Common Stock:
Net income................................................................................. $ (.90)
---------
---------
Weighted average shares used in computation of pro forma income (loss) per share:
Class A Common............................................................................. 290
---------
---------
Class B Common............................................................................. 3,590
---------
---------
<CAPTION>
MAY 3,
1997
-------------
(UNAUDITED)
<S> <C>
OTHER DATA:
EBITDA (6).................... $ 9,979
Cash provided by (used in)....
Operating activities........ 1,732
Investing activities........ (1,231)
Financing activities........ (227)
Depreciation and
amortization................ 2,139
Capital expenditures..........
Ratio of earnings to fixed
charges (7).................
Ratio of earnings to fixed
charges and preferred stock
dividends (7)...............
SELECTED OPERATING DATA:
Dozens of units sold..........
Unit growth...................
Net sales growth..............
INCOME (LOSS) PER COMMON SHARE
Class A Common Stock:
Net income.................. $ 3.53
-------------
-------------
Class B Common Stock:
Net income.................. $ .00
-------------
-------------
Weighted average shares used i
Class A Common.............. 290
-------------
-------------
Class B Common.............. 3,590
-------------
-------------
</TABLE>
*SEE FOOTNOTE 2.
<TABLE>
<CAPTION>
PREDECESSOR (1) THE COMPANY (1)
--------------------------------- ---------------------------------
JAN. 31, JAN. 29, JAN. 28, JAN. 27 FEB. 1,
1993 1994(2) 1995(2) 1996 1997
----------- --------- --------- --------- --------- MAY 3,
1997
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents............................... $ 2,078 $ 546 $ 999 $ 1,568 $ 1,863 $ 1,405
Total assets............................................ 82,315 110,956 109,141 136,527 136,832 142,588
Total debt.............................................. -- -- -- 84,457 68,594 156,500
Preferred stock (liquidation value)..................... -- -- -- 22,620 25,582 30,488
Total stockholders' equity (deficiency) (8)............. 67,230 91,759 87,503 33,008 43,386 (64,613)
</TABLE>
- ------------------------------
(1) The periods prior to and including January 28, 1995 reflect the combined
financial data of the Predecessor, which was acquired by the Company as of
January 28, 1995 from McGregor. The periods beginning January 29, 1995
reflect the consolidated financial data of the Company after the
Acquisition. Because of the revaluation of the assets and liabilities
acquired and the related impact to the consolidated statements of
operations, the financial statements of the Predecessor (other than net
sales) for the periods prior to January 29, 1995 are not comparable to those
of the Company subsequent to that date.
(2) In connection with Astrum's emergence from Chapter 11 bankruptcy
proceedings, the Predecessor adopted "fresh-start" accounting (the
Predecessor was not a party to Astrum's Chapter 11 bankruptcy proceeding).
Accordingly, effective June 30, 1993, the assets by the Predecessor were
recorded at their fair market values with the excess of the reorganization
value over the fair value of the assets recorded as an intangible asset. As
a result of the adjustments, the financial statements as of and for the year
ended January 28, 1995 and the seven months ended January 29, 1994 are not
comparable to prior periods. The Company
31
<PAGE>
has omitted unit growth and net sales growth for the five and seven month
periods ended June 30, 1993 and January 29, 1994, respectively, because such
periods may not be comparable to the other periods presented.
(3) In connection with the Recapitalization, the Company recorded a special
charge in the three months ended May 3, 1997 for compensation related to the
exercise of options by members of management, payment of a special
transaction bonus to members of management and payments under a then
existing equity buy-out plan to members of management. These charges
aggregated $10,915, and are considered by management to be nonrecurring in
nature.
(4) In connection with the Recapitalization and refinancing, the Company
recorded an extraordinary charge of $2,757, net of an income tax benefit, in
the three months ended May 3, 1997, as a result of losses incurred in
connection with the early extinguishment of debt.
(5) Cumulative effect of change in accounting principle relates to the
Predecessor's adoption of Statement of Financial Accounting Standards No.
109, effective February 2, 1992.
(6) EBITDA is defined as operating income plus depreciation and amortization.
The fiscal 1996 EBITDA excludes a non-cash charge of $0.6 million for the
estimated loss on disposal of certain fixed assets and in the three month
period ended May 3, 1997 excludes non-recurring items of $10.9 million for
charges to special compensation. EBITDA is not a measure of performance
under GAAP. EBITDA should not be considered in isolation or as a substitute
for net income, cash flows from operating activities and other income or
cash flow statement data prepared in accordance with GAAP, or as a measure
of profitability or liquidity. Management believes, however, that EBITDA
represents a useful measure of assessing the performance of the Company's
ongoing operating activities as it reflects earnings trends of the Company
without the impact of purchase accounting applied in connection with the
Acquisition. In addition, management believes EBITDA is a widely accepted
financial indicator of a company's ability to service and/or incur
indebtedness and is used by the Company's creditors in assessing debt
covenant compliance. EBITDA should not construed as an indication of the
Company's operating performance or as a measure of liquidity. EBITDA does
not take into account the Company's debt service requirements and other
commitments and, accordingly, is not necessarily indicative of amounts that
may be available for discretionary uses. The EBITDA measure presented in
this Prospectus may not be comparable to other similarly titled measures of
other companies.
(7) Earnings used in computing the historical and pro forma ratio of earnings to
fixed charges consist of income before provision for income taxes, net of an
income tax benefit, plus fixed charges. Fixed charges consist of interest
expense on all indebtedness (including amortization of deferred debt
issuance costs) and a portion of operating lease rental expense that is
representative of the interest factor (approximately 1/3). The calculation
of these ratios is not meaningful for the Predecessor as its interest
expense and rental expense were DE MINIMUS. Preferred stock dividends
consist of dividends paid and dividends accumulated in arrears on preferred
Stock and Class A Common. Earnings were insufficient to cover fixed charges
and fixed charges and preferred stock dividends by $2,938 and $4,298,
respectively, for the three months ended May 3, 1997.
(8) Stockholder's equity for the Predecessor represents McGregor's investment in
the Predecessor.
(9) Pro forma net income (loss) per share is computed by dividing net income
(loss) applicable to each class of Common Stock by the average number of
shares of such stock outstanding, as follows (in thousands):
<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS
FEBRUARY 1, ENDED
1997 MAY 3, 1997
--------------- -----------
<S> <C> <C>
Pro forma net income............................................... $ 4,416 $ 2,136
Less: preferred dividends.......................................... (4,094) (1,108)
Class A common preference........................................ (3,798) (1,025)
--------------- -----------
Net (loss) income applicable to common stockholders................ $ (3,476) $ 3
--------------- -----------
--------------- -----------
Preference per Class A common share................................ $ 13.10 $ 3.53
Net loss per common share.......................................... (.90) .00
--------------- -----------
Net income per Class A common share................................ $ 12.20 $ 3.53
--------------- -----------
--------------- -----------
Net loss per Class B common share.................................. $ (0.90) $ .00
--------------- -----------
--------------- -----------
</TABLE>
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion provides information with respect to the results of
operations of the Company for the three months ended May 3, 1997 and April 27,
1996, the fiscal years ended February 1, 1997 and January 27, 1996 and of the
Predecessor for the year ended January 28, 1995. As of January 28, 1995, the
Company acquired the assets and assumed certain liabilities of the Anvil
Knitwear division of McGregor in the Acquisition. Because of the revaluation of
the assets and liabilities of the Predecessor and the related impact on cost of
sales and expenses, the financial statements of the Predecessor for the periods
prior to January 29, 1995 are not comparable to those of the Company for
subsequent periods. In addition, as a result of adjustments made when the
Predecessor adopted "fresh-start" accounting in connection with Astrum's
emergence from its Chapter 11 bankruptcy proceeding, the financial statements of
the Predecessor for the years ended January 28, 1995 and January 29, 1994 are
not comparable to the Predecessor's financial statements for other years. The
following information should be read in conjunction with "Selected Historical
Financial Data" and the combined and consolidated financial statements and the
notes thereto included elsewhere in this Prospectus.
The aggregate purchase price of the Acquisition of $105.0 million (plus fees
and expenses of $6.9 million) was funded with $6.4 million of common equity,
$20.0 million of preferred equity, $52.5 million of long-term bank debt, $7.5
million of a subordinated note and $25.5 million of revolving credit facility
borrowings. The Acquisition was led by: (i) Vestar; (ii) an affiliate of 399
Venture; and (iii) the Management Investors. In addition, Culligan retained a
30.6% ownership interest in Holdings. As a result, in allocating the purchase
price of the net assets acquired in the Acquisition, the net assets were valued
at the sum of (i) their carryover cost basis to the extent of 30.6% plus (ii)
their estimated fair market value to the extent of the new ownership interest of
69.4%.
RESULTS OF OPERATIONS
The Company's results of operations are affected by numerous factors,
including competition, general economic conditions, raw material costs, mix of
products sold and plant utilization. Certain activewear products of the type
manufactured by the Company are generally available from multiple sources and
the Company's customers often purchase products from more than one source. To
remain competitive, the Company reviews and adjusts its pricing structure from
time to time in response to industry-wide price changes. In the basic T-shirt
market, for example, the Company does not lead its competitors in setting the
current pricing structure and modifies its prices to the extent necessary to
remain competitive with prices set by its larger competitors in this segment.
The Company has been able to mitigate pricing pressures by: (i) increasing
its average product margin by continuing to introduce new higher priced
products; (ii) continuing to improve and modernize its manufacturing processes
in order to reduce production costs; and (iii) moving a portion of its sewing
operations offshore in January 1996 to Honduras to take advantage of lower wage
rates. The gross profit margins of the Company's products vary significantly.
Accordingly, the Company's overall gross profit margin is affected by its
product mix. In addition, plant utilization levels are important to
profitability due to the capital intensive nature of the Company's textile
operations.
The largest component of the Company's cost of goods sold is the cost of
cotton yarn. Unlike certain of its competitors, the Company does not spin its
own yarn. Instead, the Company obtains substantially all of its yarn from five
yarn suppliers, generally placing orders for quantities ranging from 30 days' to
one year's supply depending upon management's expectations regarding future yarn
prices and levels of supply. Yarn prices fluctuate from time to time principally
as a result of competitive conditions in the yarn market and supply and demand
for raw cotton. The Company adjusts the timing and size of its purchase orders
for cotton yarn in an effort to minimize fluctuations in its raw material costs
resulting from changes in yarn
33
<PAGE>
prices. Historically, the Company has been successful in mitigating the impact
of fluctuating yarn prices. See "Risk Factors--Supply and Price of Yarn" and
"Business--Raw Materials."
The Company seeks to minimize inventory risk by maintaining a supply of
goods in a "greige" (undyed and unbleached) state until relatively late in the
production process and by turning its finished goods inventory frequently (for
example, approximately 7.8 times in fiscal 1996). The Company believes these
efforts have been a major contributing factor to Anvil's ability to compete
successfully in the imprinted activewear market.
The following table sets forth, for each of the periods indicated, certain
statement of operations data, expressed as a percentage of net sales, for the
Predecessor for the year ended January 28, 1995 and the Company for the years
ended January 27, 1996 and February 1, 1997 and for the three months ended April
27, 1996 and May 3, 1997:
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
------------- ----------------------------------------------------
FISCAL YEAR ENDED
---------------------------------------
JAN. 28, JAN. 27, FEB. 1,
1995 1996 1997
------------- ----------- ----------- THREE MONTHS ENDED
--------------------------
APRIL 27, MAY 3, 1997
1996 -----------
------------- (UNAUDITED)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................................... 77.6 77.4 76.8 80.0 76.1
----- ----- ----- ----- -----------
Gross profit......................................... 22.4 22.6 23.2 20.0 23.9
Selling, general and administrative expenses......... 8.7 9.2 10.6 9.0 10.2
Special compensation................................. -- -- -- -- 18.1
Amortization of intangible assets.................... 7.9 0.4 0.5 0.3 0.4
----- ----- ----- ----- -----------
Operating income (loss).............................. 5.8 13.0 12.1 10.7 (4.8)
Interest and other income (expense), net............. 1.4 0.3 0.2 (0.8) (0.3)
Interest expense..................................... (0.1) (4.6) (3.9) (2.9) (5.2)
----- ----- ----- ----- -----------
Income (loss) before provision for income taxes and
extraordinary item................................. 7.1 8.8 8.4 7.0 (10.3)
Provision (benefit) for income taxes................. 6.5 3.5 3.4 2.8 (4.1)
----- ----- ----- ----- -----------
Income (loss) before extraordinary item.............. 0.6 5.3 5.0 4.2 (6.2
Extraordinary item--loss on extinguishment of debt,
net of $1,838 tax benefit.......................... -- -- -- -- (4.6)
----- ----- ----- ----- -----------
Net income (loss).................................... 0.6% 5.3% 5.0% 4.2% (10.8)%
----- ----- ----- ----- -----------
----- ----- ----- ----- -----------
OTHER DATA:
EBITDA (1)........................................... 16.9% 16.3% 16.4% 13.7% 16.6%
</TABLE>
- ------------------------
(1) EBITDA is defined as operating income plus depreciation and amortization.
The fiscal 1996 EBITDA excludes a non-cash charge of $0.6 million for the
disposal of certain fixed assets and in the three month period ended May 3,
1997 excludes non-recurring items of $10.9 million of charges for special
compensation. EBITDA is not a measure of performance under GAAP. EBITDA
should not be considered in isolation or as a substitute for net income,
cash flows from operating activities and other income or cash flow statement
data prepared in accordance with GAAP, or as a measure of profitability or
liquidity. Management believes, however, that EBITDA represents a useful
measure of assessing the perfomance of the Company's ongoing operating
activities as it reflects earnings trends of the Company without the impact
of purchase accounting applied in connection with the Acquisition. In
addition, management believes EBITDA is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness and is
used by the Company's creditors in assessing debt covenant compliance.
EBITDA should not be construed as an indication of the Company's operating
performance or as a measure of liquidity. EBITDA does not take into account
the Company's debt service requirements and other commitments and,
accordingly, is not necessarily indicative of amounts that may be available
for discretionary uses. The EBITDA measure presented in this Prospectus may
not be comparable to other similarly titled measures of other companies.
34
<PAGE>
COMPANY THREE MONTHS ENDED MAY 3, 1997 COMPARED TO COMPANY THREE MONTHS ENDED
APRIL 27, 1996
NET SALES for the three months ended May 3, 1997 increased $1.7 million, or
3.0%, to $60.3 million from $58.6 million for the three months ended April 27,
1996. This increase in net sales was primarily the result of a 5.2% increase in
sales volume (including $.6 million for a recently acquired subsidiary),
partially offset by a 2.3% decline in average selling price. The decline in
average selling price was primarily the result of lower T-shirt prices due to
competitive market conditions partially offset by a favorable change in product
mix to higher priced products such as plackets and henleys.
GROSS PROFIT for the three months ended May 3, 1997 increased by $2.7
million, or 23.2%, to $14.4 million from $11.7 million for the three months
ended April 27, 1996. Gross profit margin increased to 23.9% for the three
months ended May 3, 1997 from 20.0% in the comparable period of the prior year.
The improvement in gross profit margin was primarily the result of lower yarn
costs, manufacturing cost reductions, a favorable shift in product mix, and
volume improvements.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES for the three months ended May
3, 1997 increased by $.9 million, or 16.2% to $6.1 million from $5.3 million for
the three months ended April 27, 1996. As a percentage of net sales, selling,
general and administrative expenses increased to 10.2% from 9.0% in the three
months ended May 3, 1997 compared to the three months ended April 27, 1996. This
increase was primarily the result of higher selling expenses such as
advertising, travel, samples and selling materials, and higher general and
administrative expenses such as salaries and wages and legal and professional
fees. These increases were primarily the result of $.2 million for co-op
advertising to meet competition and promote sales of new products, $.3 million
caused by selling, general and administrative wage increases, $.1 million in
legal and professional expenses, and $.3 million for the inclusion of the
operating expenses of the recently acquired subsidiary.
INTEREST EXPENSE for the three months ended May 3, 1997 increased by $1.4
million, or 83.7%, to $3.1 million from $1.7 million for the three months ended
April 27, 1996. This increase in interest expense was the result of higher
borrowings in connection with the Recapitalization. Interest rates were also
higher during the current period compared to the same period in the prior year.
NET LOSS for the three months ended May 3, 1997 was $6.5 million compared
to net income of $2.4 million for the three months ended April 27, 1996. The net
effect of the factors discussed above were a small positive increase. However,
offsetting these factors in the current quarter were a charge of $10,915 for
"special compensation" (see Note 2 to the consolidated financial statements) and
an extraordinary loss of $2,757 (net of taxes) on extinguishment of debt (see
Note 2 to the consolidated financial statements).
COMPANY YEAR ENDED FEBRUARY 1, 1997 COMPARED TO COMPANY YEAR ENDED JANUARY 27,
1996
NET SALES for the year ended February 1, 1997 increased $10.8 million, or
5.6%, to $204.2 million from $193.4 million for the year ended January 27, 1996.
This increase in net sales was primarily the result of a 7.0% increase in sales
volume, partially offset by a 1.3% decline in average selling price. The decline
in average selling price was primarily the result of lower T-shirt prices due to
competitive market conditions partially offset by a favorable change in product
mix to higher priced products such as plackets and henleys.
GROSS PROFIT for the year ended February 1, 1997 increased by $3.7 million,
or 8.4%, to $47.3 million from $43.7 million for the year ended January 27,
1996. Gross profit margin increased to 23.2% for the year ended February 1, 1997
from 22.6% in the comparable period of the prior year. Gross profit for the year
ended January 27, 1996 was reduced by approximately $1.7 million (or 0.9% of net
sales) as a result of the increase in cost of goods sold due to the inventory
revaluation in connection with the Acquisition. The change in gross profit
margin (0.3% decrease after considering the inventory revaluation in fiscal
1995) was primarily the result of increased markdowns, increased sales promotion
expenses, and selling price reductions (principally on white T-shirts) offset by
the result of a favorable shift in product mix, lower yarn costs, manufacturing
costs reductions and volume improvements.
35
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES for the year ended February 1,
1997 increased by $3.9 million, or 21.9%, to $21.7 million from $17.8 million
for the year ended January 27, 1996. As a percentage of net sales, selling,
general and administrative expenses increased to 10.6% in fiscal 1996 from 9.2%
in fiscal 1995. This 1.4% increase, as a percentage of net sales, in selling,
general and administrative expenses was primarily the result of start-up costs
relating to the opening of the Company's 660,000 square foot distribution
facility in Dillon, South Carolina. This facility was acquired in November 1995
and became fully operational by the end of the first quarter of 1996. The
remainder of the increase was principally attributable to increases in
advertising and selling expenses related to increased efforts in the retail and
export markets, salaries related to administrative personnel and a charge for
the estimated loss on the disposal of certain fixed assets.
AMORTIZATION OF INTANGIBLE ASSETS for the year ended February 1, 1997
increased by $0.2 million to $1.0 million from $0.7 million for the year ended
January 27, 1996.
OPERATING INCOME for the year ended February 1, 1997 decreased by $0.5
million, or 1.8% to $24.7 million from $25.2 million for the year ended January
27, 1996 as a result of the factors described above.
INTEREST AND OTHER INCOME for the year ended February 1, 1997 decreased by
$0.2 million to $0.4 million from $0.6 million for the year ended January 27,
1996.
INTEREST EXPENSE for the year ended February 1, 1997 decreased by $0.9
million, or 10.5%, to $7.9 million from $8.8 million for the year ended January
27, 1996. This decrease in interest expense was the result of reduced borrowings
under the Old Credit Agreement and lower average interest rates.
PROVISION FOR INCOME TAXES for the year ended February 1, 1997 increased by
$0.1 million to $6.9 million from $6.8 million for the year ended January 27,
1996 due to an increase in pre-tax earnings. As a percentage of income before
provision for income taxes, income tax expense was approximately 40.0% in each
period.
NET INCOME for the year ended February 1, 1997 increased by $0.2 million,
or 1.7%, to $10.3 million from $10.2 million for the year ended January 27,
1996, as a result of the factors described above.
COMPANY YEAR ENDED JANUARY 27, 1996 COMPARED TO PREDECESSOR YEAR ENDED JANUARY
28, 1995
NET SALES for the year ended January 27, 1996 increased by $23.5 million,
or 13.8%, to $193.4 million from $169.9 million in the year ended January 28,
1995. This increase in net sales was the result of a 5.6% increase in sales
volume, principally due to increased sales of plackets, and an 8.0% increase in
average selling price, principally due to a favorable change in product mix
(including the introduction of a higher priced placket style) and higher selling
prices for plackets and henleys.
GROSS PROFIT for the year ended January 27, 1996 increased by $5.6 million,
or 14.9%, to $43.7 million from $38.0 million in the year ended January 28,
1995. Gross profit margin increased to 22.6% in fiscal 1995 from 22.4% in the
prior year. This increase in gross profit margin was primarily the result of a
higher utilization of plant capacity due to the Company's increased sales volume
and an increase in average selling price, the combination of which more than
offset the $1.7 million (or 0.9% of net sales) increase in cost of goods sold as
a result of the inventory revaluation in connection with the Acquisition.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES in fiscal 1995 increased by
$3.1 million, or 20.9%, to $17.8 million from $14.7 million in fiscal 1994. As a
percentage of net sales, selling, general and administrative expenses increased
to 9.2% in fiscal 1995 from 8.7% in fiscal 1994. Approximately one-half of this
increase was the result of an increase in compensation expense primarily due to
the Company's increased sales efforts. The remainder of this increase is
attributable to a combination of advertising expenses, start-up costs associated
with the Company's new distribution facility and management fees.
AMORTIZATION OF INTANGIBLE ASSETS for the year ended January 27, 1996
decreased $12.7 million to $0.7 million from $13.4 million in the year ended
January 28, 1995. Fiscal 1995 amortization of intangible assets
36
<PAGE>
for the Company is not comparable to the Predecessor due to the revaluation of
assets in connection with the Acquisition of the Predecessor in January 1995.
Fiscal 1994 amortization expense resulted from the reorganization value in
excess of fair value of assets related to the adoption of "fresh-start"
accounting in connection with Astrum's emergence from its Chapter 11 bankruptcy
proceeding.
OPERATING INCOME for the year ended January 27, 1996 increased by $15.3
million to $25.2 million from $9.9 million for the year ended January 28, 1995
as a result of the factors described above.
INTEREST AND OTHER INCOME for the year ended January 27, 1996 decreased by
$1.8 million to $0.6 million from $2.5 million for the year ended January 28,
1995. This decrease is attributable to the reversal into income in fiscal 1994
of approximately $2.5 million of expenses accrued in prior years that were no
longer required.
INTEREST EXPENSE for the year ended January 27, 1996 increased by $8.6
million to $8.8 million from $0.2 million for the year ended January 28, 1995.
The increase was the result of increased borrowings at the beginning of fiscal
1995 to finance the Acquisition in January 1995.
PROVISION FOR INCOME TAXES for the year ended January 27, 1996 decreased by
$4.3 million to $6.8 million from $11.0 million for the year ended January 28,
1995. As a percentage of income before provision for income taxes, income tax
expense was 40.0% and 91.3%, respectively. The percentage for the year ended
January 28, 1995 reflects non-deductible amortization of the reorganization
value described above.
NET INCOME for the year ended January 27, 1996 increased by $9.1 million to
$10.2 million from $1.1 million for the year ended January 28, 1995, as a result
of the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically utilized funds generated from operations and
borrowings under the Old Credit Agreement to meet working capital and capital
expenditure requirements. Net cash generated by operating activities for its
previous two fiscal years totaled approximately $7.2 million and $23.8 million,
respectively.
During its preceding two fiscal years, the Company made capital expenditures
of approximately $7.7 million and $4.8 million, respectively. The Company's
major capital expenditures related to: (i) the acquisition of the 660,000 square
foot distribution center in Dillon, South Carolina; (ii) the acquisition and
maintenance of machinery and equipment; and (iii) the acquisition of management
information systems hardware and software. Through May 3, 1997, the Company has
made $1.2 million in capital expenditures. The Company currently has no capital
commitments outside the ordinary course of business.
The Company's principal working capital requirements are financing accounts
receivable and inventories. As of May 3, 1997, the Company had working capital
of approximately $24.0 million, including approximately $32.9 million of
accounts receivable, approximately $30.3 million of inventories and
approximately $49.3 million in accounts payable, accrued expenses and revolving
credit loans.
The Company's Old Credit Agreement provided for term loans of $52.5 million,
of which approximately $46.3 million was outstanding as of February 1, 1997, and
a revolving credit facility, which, as amended, permitted borrowings of up to
$47.5 million (subject to borrowing base eligibility) to finance working
capital, letters of credit and other general corporate needs.
In connection with the Recapitalization, the Company refinanced its existing
indebtedness under the Old Credit Agreement. The New Credit Agreement provides
for borrowings of up to $55.0 million for working capital and other general
corporate purposes, and bears interest, at the Company's option, at LIBOR or
prime rate plus a margin. The indebtedness under the New Credit Agreement is
guaranteed by Holdings and certain subsidiaries and is secured by substantially
all of Anvil's assets and a pledge by Holdings of all of the capital stock of
Anvil. As of May 3, 1997, Anvil had borrowings of $26.5 million under the New
Credit Agreement and had $28.5 million of additional borrowing availability.
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<PAGE>
The New Credit Agreement requires the Company to meet certain financial
tests, including minimum levels of consolidated net worth, minimum levels of
consolidated EBITDA (as defined therein), minimum interest coverage and maximum
leverage ratio. The New Credit Agreement also contains covenants which, among
other things, limit: (i) the incurrence of additional indebtedness; (ii) the
payment of dividends; (iii) transactions with affiliates; (iv) asset sales,
acquisitions and mergers; (v) prepayments of other indebtedness; (vi) creation
of liens and encumbrances; and (vii) other matters customarily restricted in
such agreements. See "Description of Indebtedness--New Credit Agreement."
The Company's ability to satisfy its debt obligations, including, in the
case of Anvil, to pay principal and interest on the Senior Notes and, in the
case of Holdings, to pay principal and interest on the Exchange Debentures, if
issued, to perform its obligations under its guarantees and to pay cash
dividends on the Senior Preferred Stock, will depend upon the Company's future
operating performance, which will be affected by prevailing economic conditions
and financial, business and other factors, certain of which are beyond its
control, as well as the availability of revolving credit borrowings under the
New Credit Agreement. However, the Company may be required to refinance a
portion of the principal of the Senior Notes and, if issued, the Exchange
Debentures prior to their maturity and, if the Company is unable to service its
indebtedness, it will be forced to take actions such as reducing or delaying
capital expenditures, selling assets, restructuring or refinancing its
indebtedness, or seeking additional equity capital. There can be no assurance
that any of these remedies can be effected on satisfactory terms, if at all. See
"Risk Factors."
Holdings has no independent operations with its sole asset being the capital
stock of Anvil, which stock is pledged to secure the obligations under the New
Credit Agreement. As a holding company, Holdings' ability to pay cash dividends
on the Senior Preferred Stock or, if issued, principal and interest on the
Exchange Debentures is dependent upon the earnings of Anvil and its subsidiaries
and their ability to declare dividends or make other intercompany transfers to
Holdings. Under the terms of the Senior Indenture, Anvil may incur certain
indebtedness pursuant to agreements that may restrict its ability to pay such
dividends or other intercompany transfers necessary to service Holdings'
obligations, including its obligations under the terms of the Senior Preferred
Stock and, if issued, the Exchange Debentures. The Senior Note Indenture
restricts, among other things, Anvil's and certain of its subsidiaries' ability
to pay dividends or make certain other "restricted" payments, to incur
additional indebtedness, to encumber or sell assets, to enter into transactions
with affiliates, to enter into certain guarantees of indebtedness, to make
certain investments, to merge or consolidate with any other entity and to
transfer or lease all or substantially all of their assets. In addition, the New
Credit Agreement contains other and more restrictive covenants and prohibits
Anvil's subsidiaries from declaring dividends or making other intercompany
transfers to Anvil in certain circumstances.
The Company believes that based upon current levels of operations and
anticipated growth, funds generated from operations, together with other
available sources of liquidity, including borrowings under the New Credit
Agreement, will be sufficient over the next twelve months for the Company to
make anticipated capital expenditures, fund working capital requirements and
satisfy its debt service requirements.
SEASONALITY
The Company's business is not significantly seasonal as it manufactures and
sells a wide variety of activewear products that may be worn throughout the
year.
EFFECT OF INFLATION
Inflation generally affects the Company by increasing the interest expense
of floating rate indebtedness and by increasing the cost of labor, equipment and
raw materials. The Company does not believe that inflation has had any material
effect on the Company's business during the periods discussed herein.
38
<PAGE>
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 128, EARNINGS PER
SHARE, effective for interim and annual periods ending after December 15, 1997,
establishes standards for computing and presenting earnings per share ("EPS")
and simplifies the standards for computing EPS currently found in Accounting
Principles Board Opinion No. 15, EARNINGS PER SHARE. Common stock equivalents
under APB No. 15, with the exception of contingently issuable shares (shares
issuable for little or no cash consideration), are no longer included in the
calculation of primary, or basic EPS. Under SFAS No. 128, contingently issuable
shares are included in the calculation of basic EPS. The Company will report EPS
calculated in accordance with SFAS No. 128 commencing with the fourth quarter of
fiscal year ending January 31, 1998. This change in reporting EPS is not
expected to have a material effect on reported EPS.
SFAS No. 129, DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE, effective
for periods ending after December 15, 1997, establishes standards for disclosing
information about an entity's capital structure. This statement requires
disclosure of the pertinent rights and privileges of various securities
outstanding (stock, options, warrants, preferred stock, debt and participation
rights) including dividend and liquidation preferences, participant rights, call
prices and dates, conversion or exercise prices and redemption requirements.
Adoption of this statement will have no effect on the Company as it currently
discloses the information required.
39
<PAGE>
BUSINESS
GENERAL
Anvil Knitwear, Inc. is a leading designer, manufacturer and marketer of
high quality activewear for sale principally into the "imprinted" or "decorated"
segment of the U.S. apparel industry. The Company offers an extensive line of
activewear products designed for men, women and children, including short and
long sleeve T-shirts, classic button and collar knit sport shirts (known as
"plackets"), collarless short and long sleeve knit shirts (known as "henleys"),
fleeced sweatshirts, athletic shorts and caps. The Company markets and sells its
products primarily to distributors and screen printers under the ANVIL and
COTTON DELUXE brand names as well as under private labels. Prior to their
ultimate resale to the consumer, the Company's products typically are printed or
embroidered with logos, designs or characters. The Company believes that its
strong operating performance is due to: (i) its broad range of high quality
products; (ii) its strong relationships with customers and suppliers; (iii) its
flexible, vertically integrated manufacturing operations; (iv) its commitment to
controlling costs and improving manufacturing processes; and (v) the strong
growth of the activewear market. For the fiscal year ended February 1, 1997, the
Company generated net sales and EBITDA of $204.2 million and $32.6 million,
respectively.
The Company has achieved significant increases in net sales and EBITDA in
recent years. From fiscal 1991 through fiscal 1996, the Company's net sales grew
from $124.6 million to $204.2 million, representing a CAGR of 10.4%, The yearly
growth rates for the Company's net sales during this period were as follows:
fiscal 1992--13.1%; fiscal 1993--6.8%; fiscal 1994--13.0%; fiscal 1995--13.8%;
and fiscal 1996--5.6% EBITDA grew from $15.5 million to $32.6 million,
representing a CAGR of 16.0%. This improvement resulted primarily from the
Company's operating leverage, management's initiatives to reduce costs and
improve productivity and the Company's successful introduction of higher priced
products. In addition, net income grew during this period from $6.3 million to
$10.3 million, representing a CAGR of 10.3%.
The Company offers high quality activewear in a variety of styles, colors,
fabric weights and blends, enabling it to serve a number of market niches
effectively as well as to serve the traditional T-shirt market segment. The
Company works closely with its distributor and screen printer customers to meet
their needs for style and color innovation. The Company continues to compete
successfully by: (i) targeting niche products on which larger competitors have
not traditionally focused; (ii) responding quickly to market developments; and
(iii) regularly introducing new products. In addition, the Company has made
significant investments to modernize and expand its domestic manufacturing and
distribution facilities in order to improve quality, reduce costs, manage
inventories and shorten production cycles.
BUSINESS STRATEGY
The Company's objective is to continue to increase net sales and EBITDA by
implementing the following key elements of its business strategy:
/ / OFFER A BROAD RANGE OF HIGH QUALITY PRODUCTS. The Company offers high
quality activewear in a wide variety of styles, colors, fabric weights
and blends, enabling it to serve a number of market niches effectively.
During the past five years, the Company has strengthened its position in
the activewear market by successfully introducing higher priced products
to supplement its traditional T-shirt segment. From fiscal 1991 through
fiscal 1996, the Company's gross sales of henleys and plackets, both
higher priced products, increased at a CAGR of 51.8%. The yearly growth
rates for henleys and plackets during this period were as follows:
fiscal 1992--91.3%; fiscal 1993--59.1%; fiscal 1994--58.9%; fiscal
1995--30.1%; and fiscal 1996--23.8%. In addition, the Company expects to
continue to expand its product offerings under its ANVIL and COTTON
DELUXE brands, capitalizing on the growth in the higher priced branded
products segment of the activewear market. Furthermore, the Company is
working closely with third parties to market complementary imprintable
products, such as caps, bags, carryalls and jackets, through the
Company's established distribution channels.
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/ / ENHANCE AND EXPAND CUSTOMER RELATIONSHIPS. The Company continually seeks
to strengthen and expand its customer relationships by promoting the
Company's: (i) broad product offerings; (ii) ability to design
customized products; (iii) quick, reliable delivery; and (iv) ability to
accommodate modifications to customer orders. The Company's direct
salesforce focuses on developing strong relationships with distributors,
who have accounted for an increasing percentage of activewear sales in
recent years. In fiscal 1996, sales to distributors accounted for
approximately 64% of the Company's net sales and from fiscal 1994
through fiscal 1996 sales to distributors accounted for, on average,
approximately 56% of the Company's net sales. In the Company's
experience, distributors typically place larger purchase orders,
purchase a broader product mix, maintain higher inventory levels and
develop more predictable order and re-order patterns than certain of its
other customers. The Company estimates that distributors resell products
to approximately 20,000 smaller screen printers and embroiderers. The
Company's expanded product offerings have enabled it to more effectively
service distributors and satisfy the disparate preferences of consumers.
/ / FLEXIBLE, VERTICALLY INTEGRATED MANUFACTURING OPERATIONS. The Company is
a vertically integrated manufacturer (i.e., performing substantially all
of the manufacturing processes required to produce its products) which
knits (exclusively from purchased yarn), bleaches, dyes, finishes, cuts
and sews its activewear products at its efficient manufacturing
facilities. The Company believes that being vertically integrated allows
it to maintain a competitive cost structure, minimize delivery time and
provide consistent, high quality products. The Company's manufacturing
flexibility enables it to efficiently complete smaller volume production
runs, respond quickly to customer needs and accommodate last minute
modifications to customer orders. The Company reduces inventory risk by
maintaining a supply of goods in a "greige" (undyed and unbleached)
state until relatively late in the production process and by turning its
finished goods inventory (costs of sales divided by ending finished
goods inventory) frequently (for example, approximately 7.6 times in
fiscal 1996). In addition, the Company typically is able to deliver
specialized products to its customers within four to five weeks of
receiving an order and believes its turnaround time to be generally
shorter than that normally achieved by its competitors delivering
similar specialized products.
/ / CONTINUE TO CONTROL COSTS AND IMPROVE MANUFACTURING. From fiscal 1991
through fiscal 1996, the Company invested approximately $42 million to
modernize and expand its domestic manufacturing and distribution
facilities in order to improve quality, reduce costs, manage inventories
and shorten production cycles. The Company believes it can continue to
improve its operating efficiency by: (i) increasing the use of offshore
sewing operations; (ii) utilizing its 660,000 square foot centralized
distribution facility to deliver its products in a more cost efficient
manner; and (iii) opportunistically redesigning manufacturing processes
to shorten production cycles and improve inventory management. The
Company believes that it manages its working capital and inventory
better than any of its primary publicly-traded competitors.
/ / CAPITALIZE ON THE GROWTH OF THE ACTIVEWEAR MARKET. From 1990 through
1995, industry retail dollar sales and unit sales of imprinted
activewear (T-shirts, knit shirts, fleecewear and athletic shorts) in
the U.S. market grew at CAGRs of 8.0% and 5.7%, respectively. The yearly
growth rates for industry retail dollar sales during this period were as
follows: 1991--8.9%; 1992--11.6%; 1993--9.2%; 1994--5.2%; and
1995--5.2%. The yearly growth rates for industry unit sales during this
period were as follows: 1991--6.9%; 1992--7.5%; 1993--7.0%; 1994--5.5%;
and 1995--1.8%. From fiscal 1990 through fiscal 1995, the Company's net
sales and unit sales increased at CAGRs of 12.7% and 9.3%, respectively.
The yearly growth rates for the Company's net sales during this period
were as follows: fiscal 1991--16.8%; fiscal 1992--13.1%; fiscal
1993--6.8%; fiscal 1994--13.0%; and fiscal 1995--13.8%; The yearly
growth rates for the Company's unit sales during this period were as
follows: fiscal 1991--17.3%; fiscal 1992--11.1%; fiscal 1993--5.6%;
fiscal 1994--6.5%; and fiscal 1995--5.6%.The Company believes sales of
activewear products has been driven primarily by: (i) the increased
consumer preference for comfortable apparel selections;
41
<PAGE>
(ii) more flexible dress codes, including the greater acceptance of
casual wear in the workplace; and (iii) the heightened emphasis on
physical fitness. In addition, the Company believes that it has
identified significant growth opportunities in several international
markets, including certain markets in Europe, South America and Japan.
INDUSTRY
The Company is a participant in the domestic activewear market. In 1995 (the
latest period for which data is available), this market accounted for
approximately $16.5 billion in factory level sales. The Company focuses
primarily on the imprinted activewear segment of the activewear market, which
accounted for approximately $13.8 billion of retail sales and $6.7 billion of
activewear factory level sales in 1995. Imprinted activewear, which is either
branded or private label, typically is imprinted or embroidered with a logo,
design or character before it reaches the end-user. Branded products reach
end-users carrying the manufacturer's label, whereas products sold under a
private label reach the end-user carrying a customer's label. From 1990 through
1995, retail dollar sales and unit sales of imprinted activewear (T-shirts, knit
shirts, fleecewear and athletic shorts) grew at CAGRs of 8.0% and 5.7%,
respectively. The yearly growth rates for industry retail dollar sales during
this period were as follows: 1991--8.9%; 1992-- 11.6%; 1993--9.2%; 1994--5.2%;
and 1995--5.2%; The yearly growth rates for industry unit sales during this
period were as follows: 1991--6.9%; 1992--7.5%; 1993--7.0%; 1994--5.5%; and
1995--1.8%.From fiscal 1990 through fiscal 1995, the Company's net sales and
unit sales increased at CAGRs of 12.7% and 9.3%, respectively. The yearly growth
rates for the Company's net sales during this period were as follows: fiscal
1991--16.8%; fiscal 1992--13.1%; fiscal 1993--6.8%; fiscal 1994--13.0%; and
fiscal 1995--13.8%. The yearly growth rates for the Company's unit sales during
this period were as follows: fiscal 1991-- 17.3%; fiscal 1992--11.1%; fiscal
1993--5.6%; fiscal 1994--6.5%; and fiscal 1995--5.6%.
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The following tables set forth retail level dollar sales and industry unit
sales, respectively, for each of the Company's major product categories:
DOMESTIC IMPRINTED ACTIVEWEAR MARKET RETAIL SALES
(IN BILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
1990-1995
1990 1991 1992 1993 1994 1995 $ CAGR
--------- --------- --------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
T-shirts.................................. $ 5.0 $ 5.4 $ 5.8 $ 6.3 $ 6.9 $ 7.3 7.9%
Knit shirts............................... 1.5 1.6 1.8 1.9 2.1 2.4 10.3
Fleecewear................................ 2.2 2.4 2.7 3.0 2.9 3.1 7.2
Athletic shorts........................... 0.7 0.9 1.1 1.1 1.1 1.0 6.4
--------- --------- --------- --------- --------- --------- ---
Total................................. $ 9.4 $ 10.2 $ 11.4 $ 12.4 $ 13.1 $ 13.8 8.0%
--------- --------- --------- --------- --------- --------- ---
--------- --------- --------- --------- --------- --------- ---
</TABLE>
(IN MILLIONS OF DOZENS OF UNITS)
<TABLE>
<CAPTION>
1990-1995
1990 1991 1992 1993 1994 1995 UNITS CAGR
--------- --------- --------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
T-shirts.................................... 58.8 62.6 65.7 70.3 76.1 77.1 5.6%
Knit shirts................................. 8.2 9.1 9.6 10.2 10.4 12.4 8.6
Fleecewear.................................. 13.7 14.4 15.8 16.9 16.7 16.5 3.8
Athletic shorts............................. 6.8 7.5 9.4 10.1 10.2 9.4 6.7
--------- --------- --------- --------- --------- --------- ---
Total................................... 87.5 93.5 100.5 107.5 113.4 115.4 5.7%
--------- --------- --------- --------- --------- --------- ---
--------- --------- --------- --------- --------- --------- ---
</TABLE>
- ------------------------
SOURCE: THE CONTEXT GROUP
The Company believes that the long-term growth of the domestic activewear
market has been driven by: (i) the increased consumer preference for comfortable
apparel selections; (ii) more flexible dress codes, including the greater
acceptance of casual wear in the workplace; and (iii) the heightened emphasis on
physical fitness. Casual wear has become acceptable in a wider array of
settings. For example, many employers have adopted more flexible dress codes,
resulting in greater acceptance of knit shirts, sweatshirts and T-shirts.
Concurrent with this shift in consumer preferences, consumers' increased
participation in sports and their heightened focus on regular physical activity
have contributed to growth in the activewear market. For example, a study of
sports participation conducted by the National Sporting Goods Association
suggests that from 1987 to 1995 the number of people in the United States
participating in the 10 most popular sports increased by approximately 31
million people. In addition, activewear products have registered a number of
significant improvements in product characteristics that have contributed to
enhanced consumer appeal, including improvements in fabric weight, blends and
construction as well as increased offerings of size, color and style. The
Company believes that these trends should continue to generate demand for
activewear products for the foreseeable future.
The activewear market is characterized by low fashion risk compared to many
other apparel markets. While substantial opportunity exists for product
innovation and differentiation, basic garment styles are not generally driven by
trends or fads. The activewear industry is also characterized by certain
barriers to entry, including: (i) significant capital expenditures required for
vertically integrated production; (ii) strong supplier relationships; and (iii)
established customer relationships.
The primary distribution channel for activewear sales to the imprinted
segment of the activewear market is through distributors who, in turn, sell
their products primarily to, in the Company's estimation, approximately 20,000
smaller screen printers and embroiderers. Manufacturers of activewear for the
imprinted market, such as the Company, also sell directly to the major screen
printers and to retailers. In
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recent years, the Company has sold products primarily through distributors and
major screen printers, which represent approximately 80% of total industry
imprinted activewear sales.
The Company's net sales and profitability depend primarily on sales of
T-shirts and knit shirts (which includes plackets and henleys). Industry data
for 1995 suggest that the five largest domestic manufacturers of T-shirts for
sale into the imprinted activewear market through distributors and screen
printers (i.e., Fruit of the Loom, Inc.; Hanes Corporation, a division of Sara
Lee Corporation; Jerzees, a division of Russell Corporation; Oneita Industries,
Inc.; and Anvil) accounted for approximately 68% of 1995 T-shirt sales through
these distribution channels. In addition, in 1995, the five largest domestic
manufacturers of knit shirts for sale into the imprinted market through
distributors and screen printers (i.e., Jasper/Outer Banks; Crystal Springs;
Anvil; Stedman Corporation; and J. Corey Corporation) accounted for
approximately 61% of 1995 knit shirt sales through these distribution channels.
Competition among these manufacturers and smaller industry participants is
intense and is primarily based on price, quality, service and breadth of product
offerings. The Company's management believes that the Company competes favorably
in these and its other imprinted activewear product offerings.
Each of the Company's major categories of activewear products experiences
import competition. Industry data for 1995 suggest that imports accounted for
approximately 31% of all imprinted activewear unit sales. The Company believes
the threat of significant import competition in the domestic activewear market
segment to be lower than certain other market segments in the apparel industry
due in part to the relatively low labor content in activewear products. In
addition, domestic manufacturers serving the imprinted activewear market have
been able to differentiate themselves from foreign competitors by their ability
to meet the short delivery time requirements of distributors and screen
printers, especially with respect to niche products which have more styling
elements than basic black and white T-shirts. Furthermore, in an effort to
reduce the labor costs associated with the production of activewear items and to
compete more effectively with import competition, domestic manufacturers,
including the Company, have begun to move sewing operations offshore primarily
to countries located in Central and South America. See "Competition."
PRODUCTS
The Company's activewear products, which are designed for men, women and
children, include short and long sleeve T-shirts, tank tops, classic button and
collar knit sport shirts (known as "plackets") and collarless short and long
sleeve knit shirts (known as "henleys") as well as a variety of other niche
activewear products, such as fleeced sweatshirts, athletic shorts and caps. This
broad array of casual knitwear and athletic wear is marketed and sold by the
Company under its ANVIL and COTTON DELUXE brand names as well as under private
labels. The Company manufactures its products in a variety of fabrics and fabric
blends, principally in 100% pre-shrunk heavyweight and mediumweight jerseys and
also in combed cotton and polyester blend jerseys. The Company also offers its
activewear products in a broad array of colors ranging from black and white to a
variety of alternative shades such as bark, sand, slate blue, ivy and maroon.
Prior to their ultimate resale to the consumer, the Company's products typically
are printed or embroidered with logos, designs or characters.
44
<PAGE>
The following table sets forth certain information regarding sales of the
Company's activewear products:
SALES BY PRODUCT LINE
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
-------------------- ------------------------------------------
FISCAL YEAR ENDED
----------------------------------------------------------------
JAN. 28, 1995 JAN. 27, 1996 FEB. 1, 1997
-------------------- -------------------- --------------------
CATEGORY AMOUNT % AMOUNT % AMOUNT %
- --------------------------------------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic and Specialty T-shirts................................... $ 111.0 63.9% $ 116.8 58.0% $ 115.3 54.6%
Tank Tops, Plackets and Henleys................................ 53.8 31.0 67.1 33.3 80.0 37.9
Other Products................................................. 9.0 5.1 17.5 8.7 16.0 7.5
--------- --- --------- --- --------- ---
Gross sales................................................ $ 173.8 100% $ 201.4 100% 211.3 100%
--- --- ---
--- --- ---
Returns, discounts and allowances.............................. (3.9) (8.0) (7.1)
--------- --------- ---------
Net sales.................................................. $ 169.9 $ 193.4 $ 204.2
--------- --------- ---------
--------- --------- ---------
</TABLE>
BASIC AND SPECIALTY T-SHIRTS. Basic and speciality T-shirts are the
Company's principal products. The basic T-shirt was the first product introduced
by the Company in the early 1970s. In addition to basic T-shirts, the Company
also manufactures a variety of specialty T-shirts, which have additional
features such as double needle stitching and color blocking. From fiscal 1991
through fiscal 1996, the Company's gross sales of basic and specialty T-shirts
increased at a CAGR of approximately 3%.
TANK TOPS, PLACKETS AND HENLEYS. The Company began manufacturing and
selling tank tops in the late 1970s. The Company introduced its first line of
plackets in the early 1980s and its first line of henleys in the early 1990s.
Plackets include classic button and collar knit sport shirts which are produced
in both short and long sleeve versions. The Company's newest item in its placket
line is its pique knit golf shirt, which it introduced in the first quarter of
fiscal 1996. Henleys are three button collarless knit shirts, which are produced
in both short and long sleeve versions. The Company produces tank tops, plackets
and henleys in a broad range of colors, fabrics and weights. From fiscal 1991
through fiscal 1996, the Company's gross sales of tank tops, plackets and
henleys increased at a CAGR of approximately 38%.
OTHER PRODUCTS. The Company's other products include fleeced sweatshirts,
knit shorts and caps, most of which are produced in a variety of colors and
designs. In addition to products which it manufactures in-house, this category
includes those products which the Company purchases from other activewear
manufacturers to complement its activewear product line. From fiscal 1991
through fiscal 1996, the Company's gross sales of other products increased at a
CAGR of approximately 8%.
SALES AND MARKETING
The Company markets its activewear products primarily to a wide range of
distributors, screen printers and private label customers through a direct
salesforce comprised of approximately 16 salespersons, two regional sales
managers and a director of sales. The Company has one sales representative in
Europe. Each member of the salesforce receives a base salary and is eligible to
receive an incentive bonus payment.
The Company seeks to differentiate itself from other larger activewear
manufacturers by marketing niche products to its customers and encouraging its
customers to purchase a broader product mix. The Company believes that by
encouraging its customers to expand their product mix towards higher priced
products with more style elements, it has been able to compete effectively
against other companies that
45
<PAGE>
concentrate primarily on basic, lower priced T-shirts. The Company believes that
this strategy has enabled it to penetrate the large and middle-tier wholesale
imprinted T-shirt distributor market.
Although the Company's sales and marketing efforts historically have focused
on the domestic activewear market, the Company anticipates expanding its sales
efforts in international markets. In fiscal 1996, the Company's net sales
directly into international markets were a relatively insignificant portion of
the Company's aggregate net sales. The Company believes that it has identified
several international markets, including certain markets in Europe, South
America and Japan, which offer significant opportunities for increased sales.
CUSTOMERS
The Company sells its products primarily to distributors and screen
printers. The Company also sells a small percentage of its products to retail
buyers. The Company currently services over 500 customers, of which the top
twenty account for approximately 60% of the Company's net sales. No individual
customer accounts for more than 10% of the Company's net sales.
The Company has significantly increased its sales to distributors in recent
years. In fiscal 1996, sales to distributors accounted for approximately 64% of
the Company's net sales and from fiscal 1994 through fiscal 1996, sales to
distributors accounted for, on average, 56% of the Company's net sales. The
Company targets distributors in its sales efforts because distributors typically
place larger orders, purchase a broader product mix, maintain higher inventory
levels and establish more predictable order and re-order patterns than the
Company's other customers. The Company estimates that distributors resell
products to approximately 20,000 smaller screen printers and embroiderers
throughout the United States. Screen printers and private label customers
accounted for the remaining 36% of the Company's net sales in fiscal 1996.
RAW MATERIALS
The Company's primary raw material is cotton yarn. Unlike certain of its
competitors, the Company does not spin its own yarn. Instead, the Company
purchases substantially all of its yarn from five domestic spinners. No
individual spinner accounted for more than 35% of the Company's purchased yarn
in fiscal 1996. Other raw materials purchased by the Company include dyes and
other chemicals used in the dyeing and bleaching of fabrics.
The Company believes that it is one of the largest purchasers of yarn in its
industry segment and has a sound relationship with each of its suppliers. The
Company believes these relationships allow the Company to order precise
quantities of yarn at highly competitive prices, thereby permitting the Company
to minimize working capital requirements. The Company's relationships with its
suppliers help the Company's continued access to supplies of raw materials
during periods when yarn is in peak demand. As a result, the Company has never
experienced any significant shortages of raw materials.
The Company determines the size of its purchase orders for yarn based on its
estimate of future yarn prices and levels of supply and periodically places
large purchase orders as a means of fixing its raw materials costs. This
practice helps to insulate the Company from fluctuations in yarn prices. The
Company's purchase orders typically are for quantities of yarn ranging from 30
days' to one-year's supply.
Certain of the Company's primary competitors spin their own yarn. The
Company estimates that in-house yarn production could reduce overall yarn costs,
but believes that such reductions would not be realized consistently.
Furthermore, the Company has concluded that the benefits achieved by acquiring
in-house spinning capacity would not justify the investment required to achieve
that capacity. In addition, the Company believes that the quality of its
purchased yarn is at least equal to the quality of yarn produced by fully
integrated manufacturers in its industry market segment.
46
<PAGE>
MANUFACTURING OPERATIONS AND FACILITIES
The Company conducts its operations principally through seven manufacturing
facilities and a centralized distribution center. The Company utilizes a
vertically integrated manufacturing process, with fabric being knit, bleached
and dyed from purchased yarn at its two textile facilities and the cutting and
sewing of such fabric occurring at its five sewing facilities. The Company
utilizes offshore and domestic contractors as it deems necessary.
TEXTILE FACILITY OPERATIONS. The Company conducts textile operations at two
facilities owned by the Company located in Kings Mountain and Asheville, North
Carolina. The Company operates over 150 knitting machines at its textile
facilities where cotton yarn is knitted into tubes of basic fabric constructions
such as jersey and fleece. These tubes of fabric correspond in weight and
diameter to the various styles and sizes required to make the Company's
activewear products. The knitted fabric is then batched for bleaching and
dyeing. Substantially all of the Company's products are either bleached to
remove the ecru color of natural cotton or dyed for colored products. Each of
the Company's textile facilities contains computerized controls, dye simulators
and spectrometers and modern jet vessels to assist the Company in maintaining an
efficient and quality controlled environment for the dyeing and bleaching
process. The Company's in-house dyeing capabilities allow the Company to control
the stage in the production process at which the fabric will be dyed thereby
allowing it to maintain excess unfinished inventory available to respond quickly
to customized orders. The Company's textile facilities each operated at
approximately 80% of capacity for the quarter ending May 3, 1997. The Company
believes it has the capability to increase the operating capacity of its textile
facilities with only relatively modest capital expenditures.
SEWING FACILITY OPERATIONS. The Company conducts its sewing operations at
three facilities owned by the Company located in Whiteville, Red Springs, and
Gibson, North Carolina and in two leased facilities located in Mullins, South
Carolina and in Honduras. Fabric produced at the Company's textile operations is
shipped to the Company's sewing facilities where it is marked by hand from
design patterns, cut and then sewn. Sewn garments are first sorted by style,
color and size and then packaged. The Company's quality control personnel check
the sewn garments at varying stages of the manufacturing process and immediately
prior to such garments being placed into cartons.
During the quarter ending May 3, 1997, the Company's sewing facilities on
average operated at 85% capacity. The Company began its offshore sewing
operations in January 1996 at its leased facility in Honduras in order to take
advantage of lower wage rates. During the year ended February 1, 1997, 21% of
the Company's production (sewing hours) was sewn offshore (including in-house
production and outside sources), and the Company expects its percentage of
offshore sewing labor hours to continue to increase. As of May 3, 1997, outside
sources accounted for approximately 60% of the Company's offshore sewing hours.
With the increasing shift to offshore production, it is expected that one of the
Company's domestic sewing facilities will be closed in the second half of the
year.
DISTRIBUTION OPERATIONS. The Company performs all of its distribution
functions at its centralized distribution facility located in Dillon, South
Carolina. The Company acquired this 660,000 square foot facility in fiscal 1995
for an aggregate purchase price of $4.0 million and thereafter spent
approximately $2.0 million on subsequent improvements through February 1, 1997.
In the first quarter of fiscal 1996, the Company's centralized distribution
facility became fully operational, enabling the Company to consolidate its
formerly fragmented distribution operations and minimize distribution
inefficiencies. The Company's centralized distribution system also has enhanced
the Company's ability to provide efficient and responsive customer service and
to more efficiently manage inventory.
47
<PAGE>
The following table sets forth certain information regarding the Company's
facilities:
<TABLE>
<CAPTION>
APPROX. SQ.
LOCATION PRINCIPAL USE FT. OWNED/LEASED
- ----------------------------------- ----------------------------------- -------------- -------------
<S> <C> <C> <C>
New York, NY....................... Executive Offices 22,100 Leased(1)
Kings Mountain, NC................. Textile Facility 225,000 Owned
Asheville, NC...................... Textile Facility 175,000 Owned
Mullins, SC........................ Cut and Sew 149,000 Leased(2)
Whiteville, NC..................... Cut and Sew 104,000 Owned
Red Springs, NC.................... Sew 54,000 Owned
Gibson, NC......................... Sew 21,000 Owned
Dillon, SC......................... Distribution 660,000 Owned
Honduras........................... Sew 33,000 Leased(3)
</TABLE>
- ------------------------
(1) The lease for the Company's executive office space expires in 2002.
(2) The lease for this facility (including option periods) can be extended to
2012.
(3) The lease for this facility (including option periods) can be extended to
2003.
The Company also owns a 142,000 square foot manufacturing facility located
in Aynor, South Carolina, that is currently being held for sale. This facility
became excess space after the consolidation of certain operations in connection
with the Company's acquisition of its centralized distribution center.
From fiscal 1991 through fiscal 1996, the Company made aggregate capital
expenditures of approximately $42 million to maintain, modernize and update its
manufacturing facilities. The Company anticipates the level of capital
expenditures to continue at an annual rate of approximately $5.0 million. Recent
capital expenditures have improved the Company's ability to match colors, reduce
energy costs and control product shrinkage at its textile facilities. They also
have enabled the Company to improve its productivity and ability to develop new
products and styles through increased automation at its manufacturing
facilities.
The Company considers its owned and leased facilities and equipment to be in
good condition and suitable and adequate for the Company's current operations.
The Company's ongoing maintenance and improvement of its manufacturing
facilities enable it to accommodate anticipated sales growth.
MANAGEMENT INFORMATION SYSTEMS. The Company has a sophisticated, computer
based data collection and information processing system at each of its domestic
manufacturing facilities. This system is designed to improve piece-work
productivity, automate payroll, control work-in-process and improve supervisor
and management effectiveness by providing immediately accessible feedback
concerning sewing machine operator performance, current production and inventory
information and the location of lagging inventory bundles. In addition, among
other improvements made in connection with its new centralized distribution
facility, the Company installed an in-house radio frequency warehousing system.
The Company currently has plans to implement an advanced order processing,
allocation and customer service system which will provide the Company with
extensive inquiry and reporting capabilities for customer service personnel and
management and user defined allocation and shipping rules and immediate updates
concerning the status of customer orders. The Company believes that the proposed
system will allow it to service its customers more efficiently.
RECENT ACQUISITION
On January 31, 1997, the Company completed the acquisition of Cottontops, a
small marketer and distributor of activewear products which, prior to the
acquisition, supplied finished activewear products to the Company for
redistribution by the Company as well as directly into the retail market. The
aggregate amount of consideration payable in connection with this acquisition
(including the Company's assumption of certain liabilities) totaled $3.5
million, subject to a purchase price reduction for unsaleable inventory. At
48
<PAGE>
the time of the acquisition, the Company entered into a four-year employment
agreement with Tom Glennon.
COMPETITION
The imprinted activewear segment of the apparel market includes a number of
significant competitors and the activewear segment of the industry overall is
extremely competitive. Competition in this activewear segment of the apparel
industry is generally based upon price, quality, service and breadth of product
offerings. In response to market conditions and industry-wide adjustments in
price, the Company reviews and adjusts its product offerings and pricing
structure from time to time. The Company believes that its overall turnaround
time provides a competitive advantage and enables it to seek to continue to
capitalize on its timely responsiveness to its customers' requests. In addition,
the Company focuses on providing its customers with a broad array of branded and
private label niche products at competitive prices on a timely basis. By seeking
to promote and encourage a broader, higher priced product mix to its customers,
the Company believes it can continue to compete effectively in its market
segments.
The Company's principal domestic competitors include three large domestic
manufacturers of activewear (i.e., Fruit of the Loom, Inc.; Hanes Corporation, a
division of Sara Lee Corporation; and Jerzees, a division of Russell
Corporation), all of which are larger and have greater financial and other
resources than the Company. The Company also faces competition from foreign
manufacturers of activewear who generally have substantially lower labor costs
than domestic manufacturers. Historically, the Company has benefited from quotas
and tariffs imposed by the United States on the importation of apparel. The
Uruguay Round of GATT, which became effective on January 1, 1995, requires a
complete phase-out of all existing quotas over a ten-year period. The phase-out
of such quotas is scheduled to take place in four stages as follows (expressed
in a percentage of total imports): 16% in 1995; 17% in 1999; 18% in 2003; and
49% in 2005. To date, no products manufactured by the Company have been subject
to quota reductions under GATT. The products that will be subject to quota
eliminations in 1999 and 2003 have not yet been selected. In addition to the
phasing-out of the use of quotas, GATT also requires that the United States
reduce tariffs on textile/apparel imports over the same ten-year period. To
date, the United States has not lowered such tariffs.
Increased foreign competition has caused many domestic apparel manufacturers
to move a portion of their sewing operations offshore to lower costs. The
Company performs a portion of its sewing activities offshore, principally for
basic products which are less time sensitive to take advantage of lower offshore
wage rates. The Company's activewear products do not require a significant
amount of manual labor as compared with certain other items in the apparel
industry. For example, the Company estimates the sewing time required to produce
a dozen T-shirts is approximately 30 minutes, accounting for no more than one-
quarter of such product's overall production costs. For this reason, the Company
believes that its segment is less vulnerable to foreign competition than other
segments of the apparel industry, which tend to be more labor intensive. In
addition, the Company believes that its domestic knitting, bleaching and dyeing
operations will continue to provide it with a competitive advantage which should
help protect the Company from the negative effects of GATT. The Company believes
that imports pose a larger threat to the operations of manufacturers of lower
priced, lower quality, high volume products. The Company believes that its
current strategy of emphasizing higher quality, niche products and promoting a
broader product mix should enable it to compete with imported activewear
products.
EMPLOYEES
As of May 3, 1997, the Company employed a total of 231 full-time salaried
employees and 2,717 full-time and part-time hourly employees. Of the Company's
employees, 2,838 are involved in manufacturing, 54 in marketing and sales and 56
in finance and administration. Of the Company's 2,838 employees involved in
manufacturing, approximately 656 of such employees are employed at the Company's
textile facilities and 2,129 are employed at the Company's sewing facilities.
49
<PAGE>
None of the Company's employees are covered by a collective bargaining
agreement. The Company has not experienced any work stoppages and considers its
relations with its employees to be good.
INTELLECTUAL PROPERTY
The Company attempts to register its material trademarks and trade names.
The Company believes that it has developed strong brand awareness among its
targeted customer base and as a result regards its brand names as valuable
assets. The Company has registered or applied for trademark registrations for
ANVIL and COTTON DELUXE (and the COTTON DELUXE design) in the United States and
certain foreign countries.
ENVIRONMENTAL MATTERS
The Company, like other apparel manufacturers, is subject to federal, state
and local environmental and occupational health and safety laws and regulations.
While there can be no assurance that the Company is at all times in complete
compliance with all such requirements, the Company believes that any
noncompliance is unlikely to have a material adverse effect on the Company. The
Company has made, and will continue to make, expenditures to comply with
environmental and occupational health and safety requirements. The Company
currently does not anticipate material capital expenditures for environmental
control equipment in fiscal 1997 or fiscal 1998. As is the case with
manufacturers in general, if a release of hazardous substances occurs on or from
the Company's properties or any associated offsite disposal location, or if
contamination from prior activities is discovered at any of the Company's
properties, the Company may be held liable. While the amount of such liability
could be material, the Company endeavors to conduct its operations in a manner
that reduces such risks.
Prior to the Acquisition, groundwater contamination was discovered at the
Asheville, North Carolina facility. In 1990, Winston Mills, Inc., a subsidiary
of McGregor, entered into an Administrative Order on Consent ("AOC") with the
North Carolina Department of Environment, Health and Natural Resources ("DEHNR")
concerning such contamination. Since that time, McGregor has been conducting
investigation and corrective action under DEHNR oversight and has remained
responsible to the DEHNR with respect to the contamination that is subject to
the AOC. While the total cost of the cleanup at the facility will depend upon
the extent of contamination and the corrective action approved by the DEHNR,
preliminary cleanup cost estimates range from $1.0 to $4.0 million. McGregor
continues to be a party to the Asheville, North Carolina facility's hazardous
waste permit and Culligan, an affiliate of McGregor, has guaranteed McGregor's
obligations under the AOC. McGregor also contractually agreed to fully indemnify
the Company with respect to the contamination as part of the terms of the
Acquisition. This indemnity is guaranteed by Culligan and by Astrum (now known
as Samsonite Corporation) in the event Culligan is unable to perform its
guarantor obligations. The Company could be held responsible for the cleanup of
this contamination if McGregor and Culligan were to become unable to fulfill
their obligations to DEHNR and the Company was not successful in obtaining
indemnification for the clean-up from either McGregor, Culligan or Astrum.
McGregor also agreed to fully indemnify the Company for any costs associated
with certain other environmental matters identified at the time of the
Acquisition. The Company believes that, even if McGregor were unable to fulfill
its indemnification obligations, these other matters would not have a material
adverse effect on the Company. McGregor also agreed to indemnify the Company,
subject to certain limitations, with respect to environmental liabilities that
arise from events that occurred or conditions in existence prior to the
Acquisition. Culligan and Astrum have also guaranteed McGregor's obligations
under these indemnities.
LEGAL PROCEEDINGS
The Company is a party to various litigation matters incidental to the
conduct of it business. The Company does not believe that the outcome of any of
the matters in which it is currently involved will have a material adverse
effect on the financial condition or results of operations of the Company. See
"Environmental Matters."
50
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN KEY EMPLOYEES OF ANVIL
The following sets forth certain information with respect to the Directors,
executive officers and certain key employees of Anvil. The Board of Directors of
Holdings is identical to that of Anvil.
<TABLE>
<CAPTION>
NAME AGE (1) POSITION
- ------------------------------------------ ----------- ------------------------------------------------------------
<S> <C> <C>
Bernard Geller............................ 63 Chief Executive Officer, Chairman of the Board and Director
Jacob Hollander........................... 55 Executive Vice President, Chief Administrative Officer,
Secretary, General Counsel and Director
Anthony Corsano........................... 37 Executive Vice President of Sales and Marketing
William H. Turner......................... 49 Executive Vice President of Manufacturing
Pasquale Branchizio....................... 58 Vice President of Finance
Bruce C. Bruckmann........................ 43 Director
Stephen F. Edwards........................ 33 Director
David F. Thomas........................... 47 Director
John D. Weber............................. 33 Director
</TABLE>
- ------------------------
(1) All ages are as of December 31, 1996.
BERNARD GELLER has served as the Chief Executive Officer of Anvil,
President of Holdings and has been a Director of Anvil and Holdings since the
Acquisition. Since the Recapitalization, Mr. Geller has served as Chairman of
the Board of Anvil and Holdings. From 1989 to 1995, Mr. Geller served as
Chairman of the Predecessor. From 1986 to 1989, Mr. Geller served as President
of McGregor's Anvil division, and from 1975 to 1986, as Controller and then
President of the Predecessor. Before joining the Predecessor, Mr. Geller was
with Union Underwear Co., Inc., a subsidiary of Fruit of the Loom, Inc., where
he worked for 14 years, principally as the company's controller.
JACOB HOLLANDER has served as Executive Vice President, Chief
Administrative Officer, Secretary and General Counsel of Anvil and Vice
President, Secretary and General Counsel of Holdings since the Acquisition.
Since the Recapitilization, Mr. Hollander has served as a Director of Anvil and
Holdings. From 1991 to 1995, Mr. Hollander served as Vice President and General
Counsel of Astrum. From 1985 to 1990, Mr. Hollander served as Vice President and
General Counsel of McGregor and Faberge, Incorporated, and from 1987 to 1989,
Mr. Hollander also served as Vice President and General Counsel of Elizabeth
Arden, Inc. During 1990, Mr. Hollander provided legal consulting services to the
Unilever group of companies and to McGregor. Prior to its acquisition by
McGregor, Mr. Hollander was Vice President of Faberge, Incorporated.
ANTHONY CORSANO has served as Executive Vice President of Sales and
Marketing of Anvil since the Acquisition. From 1993 to 1995, Mr. Corsano served
as Vice President of Sales and Marketing of the Predecessor. From 1988 to 1993,
Mr. Corsano served as Vice President--Sales of the Predecessor and from 1985 to
1988 Mr. Corsano served as National Sales Manager of the Predecessor.
WILLIAM H. TURNER has served as Executive Vice President of Manufacturing
of Anvil since the Acquisition. From 1992 to 1995, Mr. Turner served as
Executive Vice President of Manufacturing of the Predecessor. From 1985 to 1992,
Mr. Turner held the position of Vice President of Manufacturing (Cut and Sew) of
the Predecessor and from 1982 to 1985 he was the Predecessor's Plant Manager.
PASQUALE BRANCHIZIO has served as Vice President of Finance of Anvil and
Holdings since the Acquisition. From 1986 until 1995, Mr. Branchizio served as
Vice President of Finance of the Predecessor.
51
<PAGE>
From 1981 to 1986, Mr. Branchizio served as the Controller of the Predecessor.
Prior to that, Mr. Branchizio served as the Predecessor's Senior Accountant.
BRUCE C. BRUCKMANN has served as a Director of Anvil and Holdings since the
Recapitalization. Since 1994, Mr. Bruckmann has served as a principal of BRS.
From 1983 until 1994, Mr. Bruckmann served as an officer and subsequently a
Managing Director of Citicorp Venture Capital, Ltd. ("CVC"). CVC is an affiliate
of 399 Venture. Prior to joining CVC, Mr. Bruckmann was an associate at the New
York law firm of Patterson, Belknap, Webb & Tyler. Mr. Bruckmann is currently a
director of Jitney Jungles Stores of America, Inc., Mohawk Industries, Inc.,
AmeriSource Distribution Corporation, Chromcraft Revington Corporation and CORT
Business Services Corporation and a director of several private companies.
STEPHEN F. EDWARDS has served as a Director of Anvil and Holdings since the
Recapitalization. Since 1994, Mr. Edwards has served as a principal of BRS. From
1993 until 1994, Mr. Edwards served as an officer of CVC. From 1988 through
1991, he was an associate of CVC. Prior to joining CVC, Mr. Edwards worked with
Citicorp/Citibank in various corporate finance positions. Mr. Edwards is
currently a director of several private companies.
DAVID F. THOMAS has served as a Director of Anvil and Holdings since the
Recapitalization. Mr. Thomas has been President of 399 Venture since December
1994. In addition, Mr. Thomas has been a Managing Director of CVC for over five
years. Mr. Thomas is currently a director of Furnishings International, Inc.,
Galey & Lord, Inc. and a number of private companies.
JOHN D. WEBER has served as a Director of Anvil and Holdings since the
Recapitalization. Since 1994, Mr. Weber has been a Vice President at CVC and a
Vice President at 399 Venture. From 1992 until 1994, Mr. Weber worked at Putnam
Investments. Mr. Weber is currently a director of a number of private companies.
Directors are elected at the annual meeting of stockholders and each
director so elected holds office until the next annual meeting of stockholders
and until a successor is duly elected and qualified. There are no family
relations between any of the Directors or executive officers of Anvil and
Holdings.
Prior to the Recapitalization, the Boards of Holdings and Anvil were
controlled by Vestar. Following the Recapitalization, pursuant to the
Stockholders Agreement (as defined), 399 Venture, BRS and the Management
Investors agreed to vote their shares of Common Stock so that each of the Boards
of Holdings and Anvil have up to eight members, comprised of up to three members
of each Board designated by 399 Venture, three members of each Board designated
by BRS and two members of each Board designated by the Management Investors. The
Directors are designated by BRS are Messrs. Bruckmann and Edwards, the Directors
that are designated by 399 Venture are Messrs. Thomas and Weber, and the
Directors that are designated by the Management Investors are Messrs. Geller and
Hollander. See "Security Ownership of Certain Beneficial Owners and
Management--Stockholders Agreement."
COMPENSATION OF DIRECTORS
Directors of Anvil and Holdings will not receive compensation for services
rendered in that capacity, but will be reimbursed for any out-of-pocket expenses
incurred by them in connection with their travel to and attendance of board
meetings and committees thereof.
COMPENSATION OF EXECUTIVE OFFICERS
Compensation of all executive officers of the Company is fixed by the Board
and no executive officer is prevented from receiving compensation by virtue of
the fact that he is also a Director. The following table sets forth information
for the periods presented concerning the compensation for the Company's
52
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Chief Executive Officer and each of the three other most highly compensated
executive officers of the Company who were serving as executive officers of the
Company at the end of fiscal 1996 (collectively, the "Named Executive Officers")
for services rendered in all capacities to the Company during such period. The
Company has no other executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------------------------
NAME AND FISCAL OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (1) COMPENSATION (2) COMPENSATION (3)
- -------------------------------------------- ----------- ---------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Bernard Geller.............................. 1996 $ 396,000 $ 373,535(4) $ 15,924 $ 14,004
Chief Executive Officer
Jacob Hollander............................. 1996 275,000 135,000 9,651 7,897
Executive Vice President, Chief
Administrative Officer, Secretary and
General Counsel
Anthony Corsano............................. 1996 270,096 115,000 12,301 7,868
Executive Vice President of Sales and
Marketing
William H. Turner........................... 1996 179,519 170,000 4,353 7,491
Executive Vice President of Manufacturing
</TABLE>
- ------------------------
(1) The Company provides bonus compensation based on the Company's operating
performance. See "--Bonus Plan."
(2) None of the Named Executive Officers received any Other Annual Compensation
in an amount in excess of either $50,000 or 10% of such Named Executive
Officer's salary and bonus.
(3) All Other Compensation includes: (i) matching contributions under the
Company's Savings Plan relating to before-tax contributions made by each of
the Named Executive Officers in the following amounts: Mr. Geller--$6,750,
Mr. Hollander--$6,750, Mr. Corsano--$6,750; (ii) insurance premiums paid by
the Company with respect to term life insurance for the benefit of the Named
Executive Officers in the following amounts: Mr. Geller--$1,651, Mr.
Hollander--$1,147, Mr. Corsano--$1,118, and Mr. Turner--$741; and (iii) the
amount of premiums paid by the Company under a life insurance policy
designed to fund certain retirement benefits for Mr. Geller--$5,603.
(4) Includes a bonus payment of $100,535 received by Mr. Geller pursuant to an
agreement entered into at the time of the Acquisition.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has created two standing committees: (i) an Audit Committee and
(ii) a Compensation Committee. The Board may also establish other committees to
assist in the discharge of its responsibilities.
The Audit Committee reviews and, as it shall deem appropriate, recommends to
the Board internal accounting and financial controls for the Company and
accounting principles and auditing practices and procedures to be employed in
the preparation and review of financial statements of the Company. The Audit
Committee makes recommendations to the board concerning the engagement of
independent public accountants to audit the annual financial statements of the
Company and the scope of the audit to be undertaken by such accountants.
Deloitte & Touche LLP presently serves as the independent auditors of the
Company. Messrs. Weber, Edwards and Hollander have been appointed to the Audit
Committee.
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<PAGE>
The Compensation Committee reviews and, as it deems appropriate, recommends
to the Board policies, practices and procedures relating to the compensation of
managerial employees and the establishment and administration of employee
benefit plans. The Compensation Committee has and exercises all authority under
any employee stock option plans of the Company as the committee therein
specified (unless the Board resolution appoints any other committee to exercise
such authority), and otherwise advises and consults with the officers of the
Company as may be requested regarding managerial personnel policies. Messrs.
Thomas, Bruckmann and Geller have been appointed to the Compensation Committee.
OPTIONS EXERCISED IN LAST FISCAL YEAR/FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning options exercised
during the Company's last fiscal year and outstanding options for the Old Common
Stock as of the end of fiscal 1996 held by the Named Executive Officers. There
were no stock options granted by Holdings in fiscal 1996. All of the options
outstanding became fully vested pursuant to the Recapitalization Agreement. (See
"Old Stock Option Plan").
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE- MONEY OPTIONS AT
OPTIONS AT FISCAL FISCAL YEAR-END
YEAR-END --------------------------
SHARES ACQUIRED ----------------------- UNEXERCISABLE/EXERCISABLE
NAME ON EXERCISE VALUE REALIZED (1) UNEXERCISABLE/EXERCISABLE (2)
- ------------------------ --------------- ----------------------- ----------------------- --------------------------
<S> <C> <C> <C> <C>
Bernard Geller.......... 37,500 0 225,000/37,500 $ 2,218,500/369,750
Jacob Hollander......... 12,500 0 75,000/12,500 739,500/123,250
Anthony Corsano......... 12,500 0 75,000/12,500 739,500/123,250
William H. Turner....... 12,500 0 75,000/12,500 739,500/123,250
</TABLE>
- ------------------------
(1) Share of Old Common Stock acquired upon the exercise of such options were
not disposed of by such Named Executive Officers.
(2) Assumes a fair market value of the Old Common Stock at February 1, 1997
equal to $10.50 per share.
EMPLOYMENT AGREEMENTS
As of January 31, 1995, the Company entered into employment agreements with
Messrs. Geller, Hollander, Corsano and Turner (collectively, the "Employment
Agreements"). The Employment Agreements are for an initial term of four years
with automatic one year extensions unless terminated as set forth in the
Employment Agreements. The Employment Agreements provide for Messrs. Geller,
Hollander, Corsano and Turner (collectively, the "Executives") to serve in the
same or similar capacity with the Company as they did with the Predecessor. The
Employment Agreements provide for an initial annual base salary of $330,000,
$250,000, $235,000 and $150,000 for Messrs. Geller, Hollander, Corsano and
Turner, respectively. The Employment Agreements also provide each Executive with
customary fringe benefits and vacation periods as well as entitle the Executive
to participate in all of the Company's employee pension plans, welfare benefit
plans, tax deferred savings plans, or other welfare or retirement benefits, the
Bonus Plan and the Stock Option Plan. Each Executive's employment may be
terminated by the Company at any time with or without Cause (as defined below).
If such Executive is terminated by the Company without Cause or such Executive
resigns for Good Reason (as defined below), other than in connection with a
Strategic Sale (as defined below), the Executive will be entitled to receive his
base salary through the end of the term then in effect (the "Severance Period"),
plus any bonus that would have been payable to the Executive for the bonus year
in which the termination takes place. In addition, the Executive is entitled to
continue to participate in the Company's benefit plans through the end of the
fiscal year in which such termination occurs. Moreover, subject to certain
restrictions and at the discretion of the Company's Chief Executive Officer, if
the Executive is not engaged in regular employment at the end of the Severance
Period, the Company may make additional monthly payments to the Executive for up
to two
54
<PAGE>
years. If the Executive's employment terminates for any other reason, such
Executive will be entitled to only his base salary and benefits through the end
of the calendar month in which termination occurs, excluding bonuses.
Each of the Executives is subject to confidentiality, non-competition and
non-solicitation provisions. The non-competition provision provides that the
Executive is not to own, manage, control, participate in, consult with, render
services for, or in any manner engage in, any business that competes anywhere in
the world with the businesses of the Company and is enforceable for the term of
the Employment Agreement or during any period of time the Executive is receiving
payments thereunder unless the Company terminates the Executive without Cause or
the Executive resigns for Good Reason, in which case the provision expires upon
such termination.
"Cause" is defined in the Employment Agreements to mean: (i) a material
breach of the Employment Agreement by the Executive which is not cured within
thirty days of receipt of written notice from the Board; (ii) the Executive's
willful and repeated failure to comply with the lawful directives of the Board
or his superior officers(s) consistent with the terms of the Employment
Agreement; (iii) gross negligence or willful misconduct in the performance of
the Executive's duties under the Employment Agreement which results in material
injury to Holdings, Anvil or their subsidiaries; (iv) fraud committed by the
Executive with respect to Holdings, Anvil or their subsidiaries or (v)
indictment for a felony or a crime involving moral turpitude conviction of which
would materially injure relationships with customers, suppliers or employees or
otherwise cause material injury to the Company or its subsidiaries. "Good
Reason" is defined in the Employment Agreements to mean: (i) a material breach
of the Employment Agreement which is not cured within thirty days after the
Board's receipt of written notice from the Executive of non-compliance; (ii) the
assignment to the Executive of duties inconsistent with the Executive's
position, duties or responsibilities as in effect after the date of execution of
the Employment Agreements; (iii) the relocation by the Company of its executive
officers to a location outside a thirty mile radius around its current location
or (iv) upon a sale of the Company to a corporation or other legal entity that
is, or is part of a group of such entities, engaged in operating a material
business in competition with, or similar or related to the business of the
Company at the time of such a sale (a "Strategic Sale"). The Executive must give
a written notice of termination of his election to terminate employment for Good
Reason.
BONUS PLAN
The Company maintains an Executive Bonus Plan (the "Bonus Plan") which
provides annual incentive bonuses to certain management employees of the
Company. The Bonus Plan provides for an aggregate annual bonus pool equal to
4.0% of the Company's income before provision for income taxes (subject to
adjustment by the Board to exclude certain non-recurring items). The Chief
Executive Officer of the Company determines the allocation of the bonus pool
among the participants of the Bonus Plan.
In addition, the Management Investors received the Management Bonus
aggregating $500,000 pursuant to the Recapitalization Agreement.
OLD STOCK OPTION PLAN
At the time of the Acquisition, the Company adopted its 1995 Stock Option
Plan (the "Old Stock Option Plan"), which authorized the granting of options
relating to up to 600,000 shares of Old Common Stock. Pursuant to the Old Stock
Option Plan, the Management Investors were granted options in the following
aggregate amounts: Mr. Geller - 300,000; and Messrs. Hollander, Corsano and
Turner - 100,000 each. The exercise price of the options granted under the Old
Stock Option Plan was $0.64 per share. The Old Stock Option Plan provided that,
so long as a Management Investor is an employee of the Company, certain of such
options shall be subject to time and performance vesting. In general, the
options granted under the Old Stock Option Plan would vest and become
exercisable upon the sale of the Company or
55
<PAGE>
other event where Vestar received a 35% internal rate of return on its
investment in Holdings. All of the outstanding options became fully vested
pursuant to the Recapitalization Agreement.
NEW STOCK OPTION PLAN
Holdings has a stock option plan which authorizes the granting of options
for approximately 5.0% of the Common Stock on a fully diluted basis (the "New
Stock Option Plan"). The options under the New Stock Option Plan are granted to
certain members of management, which include the Named Executive Officers, and
are subject to time and performance vesting provisions. The exercise price of
such options is the fair market price for the Common Stock as of the date of
March 14, 1997.
PHANTOM EQUITY PLAN
At the time of the Acquisition, Holdings and certain members of the
Company's management entered into the Phantom Equity Plan (the "Phantom Equity
Plan"). Pursuant to the Phantom Equity Plan, such management members were
entitled to receive a cash payment equal to 5.0% of any excess of the aggregate
sale price over $100.0 million in the event of a sale of the Company. Pursuant
to the Recapitalization Agreement such management members received $5.3 million
as final payment under the Phantom Equity Plan and, upon the consummation of the
Recapitalization, the Phantom Equity Plan was terminated.
SAVINGS PLAN
At the time of the Acquisition, the Company adopted its Predecessor's
savings plan (the "Savings Plan"), which is qualified under Sections 401(a) and
401(k) of the Internal Revenue Code. Under the Savings Plan, eligible employees
may contribute up to 16% of their annual compensation, subject to certain
limitations. The Company matches 100% of the first 3.0% contributed by an
eligible employee and 50% of the next 3.0% contributed.
56
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of Anvil's issued and outstanding capital stock is owned by Holdings.
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of June 15, 1997 (i) any person or
group who beneficially owns more than five percent of any class of Holdings'
voting securities, (ii) each Named Executive Officer and Director and (iii) all
Directors and executive officers of Holdings as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
---------------------------------- PERCENTAGE
CLASS A COMMON CLASS B COMMON OF VOTING POWER (1)
---------------- ---------------- ---------------------
<S> <C> <C> <C>
Bruckmann, Rosser, Sherrill & Co., L.P. (2)............... %
126 East 56th Street 117,645 1,298,152 32.2
New York, New York 10022
399 Venture Partners, Inc. (3)............................ 97,751 1,078,634 30.0
399 Park Avenue, 14th Floor
New York, New York 10043
CCT Partners II, L.P. (4)................................. 17,250 190,347 5.3
399 Park Avenue, 14th Floor
New York, New York 10043
EXECUTIVE OFFICERS AND DIRECTORS:
Bernard Geller............................................ 22,516 248,447 6.9
Jacob Hollander........................................... 7,505 82,816 2.3
Anthony Corsano........................................... 7,505 82,816 2.3
William H. Turner......................................... 7,505 82,816 2.3
Bruce C. Bruckmann (5).................................... 120,065 1,324,852 36.9
Stephen F. Edwards (5).................................... 117,645 1,298,152 36.2
David F. Thomas (6)....................................... 100,946 1,113,884 31.0
John D. Weber (6)......................................... 98,171 1,083,271 30.2
Directors and executive officers
as a group (8 persons) (7).............................. 266,462 2,940,267 81.9
</TABLE>
- ------------------------
(1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. The Class B
Common is the only voting security of Holdings and entitles the holder
thereof to one vote per share. The Class A Common is nonvoting and is
entitled to the Class A Preference upon any distribution by Holdings.
(2) Excludes shares held individually by Mr. Bruckmann and another individual,
each of whom are principals of Bruckmann, Rosser, Sherrill & Co., L.P. ("BRS
& Co.").
(3) Excludes shares held individually by Messrs. Thomas and Weber and by certain
individuals (and affiliates thereof), each of whom are employed by 399
Venture Partners, Inc. ("399 Venture Partners").
(4) CCT Partners II, L.P. is a Delaware limited partnership, the limited
partners of which are certain employees of 399 Venture Partners.
(5) Includes shares held by BRS & Co. Messrs. Bruckmann and Edwards each
disclaim beneficial ownership of such shares. The address for such persons
is c/o BRS & Co., 126 East 56th Street, New York, New York 10022.
(6) Includes shares held by 399 Venture Partners. Messrs. Thomas and Weber each
disclaim beneficial ownership of such shares. The address for such persons
is c/o 399 Venture Partners, 399 Park Avenue, 14th floor, New York, New York
10043.
(7) Includes: (i) shares held by BRS & Co., which may be deemed to be owned
beneficially by Messrs. Bruckmann and Edwards, and (ii) shares held by 399
Venture Partners, which may be deemed to be owned beneficially by Messrs.
Thomas and Weber. Excluding the shares beneficially owned by
57
<PAGE>
BRS & Co. and 399 Venture Partners, the Directors and executive officers as
a group beneficially own 51,065 shares of Class A Common and 563,481 shares
of Class B Common, which represents approximately 15.7% of the voting power
of the Common Stock.
STOCKHOLDERS AGREEMENT
Pursuant to the Recapitalization, Holdings, 399 Venture, BRS and the
Management Investors entered into a Stockholders Agreement (the "Stockholders
Agreement"). The Stockholders Agreement provides: (i) that all parties thereto
will vote their shares of Common Stock so as to cause the Boards of Directors of
Anvil and Holdings each to consist of eight members, three of whom shall be
selected by 399 Venture, three of whom shall be selected by BRS and two of whom
shall be selected by the Management Investors; (ii) for certain restrictions on
transfer of the Common Stock including, but not limited to, provisions providing
that Holdings and certain holders of Common Stock will have limited rights of
first offer and certain limited participation rights in any proposed third party
sale of Common Stock by 399 Venture or BRS; (iii) that if Holdings authorizes
the issuance or sale of any Common Stock (other than as a dividend on the
outstanding Common Stock) to 399 Venture or BRS, Holdings will first offer to
sell to each of the other parties thereto a percentage of the shares of such
issuance, equal to the percentage of Common Stock held, respectively, by each of
them at the time of such issuance and (iv) that upon approval by the Board of
Directors of Holdings (or, under certain circumstances, 399 Venture or BRS) of a
sale of all or substantially all of the consolidated assets of Holdings or
substantially all the outstanding capital stock of Holdings (whether by merger,
consolidation or otherwise), each party thereto will consent to and raise no
objections against such sale and sell its Common Stock in such sale. In
reference to paragraph (iv) above, (A) at any time, both the holders of a
majority of 399 Venture Stockholder Shares (as defined) and the holders of BRS
Stockholder Shares (as defined), acting together as group may, and (B) after
March 14, 2001, either a majority of 399 Venture Stockholder Shares or the
holders of a majority of BRS Stockholder Shares may, require that Holdings enter
into, and the Board of Directors approve, such a sale. None of parties received
compensation for entering into the Stockholders Agreement. Deleware law (by
which the Stockholders Agreement is governed) explicitly allows transfer
limitations and voting arrangements of the nature contemplated by the
Stockholders Agreement. In reference to paragraph (iv) above, (A) at any time,
both the holders of a majority of 399 Venture Stockholder Shares (as defined)
and the holders of a majority of BRS Stockholder Shares (as defined), acting
together as group may, and (B) after March 14, 2001, either a majority of 399
Venture Stockholder Shares or the holders of a majority of BRS Stockholder
Shares may, require that Holdings enter into, and the Board of Directors
approve, such a sale. None of the parties received compensation for entering
into the Stockholders Agreement. The Stockholders Agreement is governed by
Delaware law which explicitly authorizes transfer limitations and voting
arrangements of the type and nature contemplated by the Stockholders Agreement.
REGISTRATION RIGHTS AGREEMENT
Pursuant to the Recapitalization, 399 Venture, BRS, the Management Investors
and the Initial Purchaser entered into a Registration Rights Agreement (the
"Equity Registration Rights Agreement") which inures to the benefit of the
transferees of the Class B Common initially issued in connection with the
Initial Units Offering, subject to the limitations set forth therein. The Equity
Registration Rights Agreement provides that, subject to certain conditions, 399
Venture and BRS each have the right to exercise a limited number of long-form
and shelf demand registrations, and an unlimited number of short-form demand
registrations under the Securities Act of their respective shares of Common
Stock. The Equity Registration Rights Agreement also provides for piggyback
registration rights, allowing the parties thereto to include their Common Stock
in any registration filed by Holdings other than pursuant to a registration
statement on Form S-8 or S-4 or any similar form or in connection with a
registration the primary purpose of which is to register debt securities (i.e.,
in connection with a so-called "equity kicker"). However, if the piggyback
registration is an underwritten primary registration on behalf of Holdings, and
the managing underwriters advise Holdings that in their opinion the aggregate
number of shares of
58
<PAGE>
Common Stock which the participants elect to include in such offering exceeds
the number which can be sold in such offering without adversely affecting the
marketability of such offering, the number of such shares sold in such offering
shall be allocated according to the following priority: (i) first, the
securities Holdings proposes to sell; (ii) second, the Common Stock requested to
be included in such registration, pro rata among the holders of such Common
Stock on the basis of the number of shares of Common Stock owned by each such
holder; and (iii) third, other securities requested to be included in such
registration.
In addition, the parties thereto (other than certain individual investors
and the Unit holders and successors) are, subject to certain conditions,
prohibited from selling their shares of Common Stock within 180 days after the
effectiveness of any demand registration or piggyback registration (except as
part of such underwritten registration) unless the underwriters managing the
registered offering otherwise agree.
59
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OLD MANAGEMENT AGREEMENT
In connection with the Acquisition, Anvil, Holdings, Anvil (Czech), Inc., a
wholly owned subsidiary of Anvil ("ACI"), affiliates of Vestar and 399 Venture
and Culligan entered into a Management Agreement (the "Old Management
Agreement"), whereby the affiliates of Vestar and 399 Venture and Culligan
agreed to provide certain advisory and consulting services in relation to the
affairs of Holdings, Anvil and ACI in connection with strategic financial
planning, the selection, supervision and retention of independent auditors, the
selection, retention and supervision of outside legal counsel, and the
selection, retention and supervision of investment bankers or other financial
advisors or consultants. In exchange for these services, affiliates of Vestar
and 399 Venture and Culligan were to receive an annual fee of $200,000, $120,000
and $180,000, respectively. In fiscal 1996, the Company made payments in the
aggregate amount of $292,000, and $180,000 under the Old Management Agreement to
the affiliate of Vestar and Culligan, respectively. The Old Management Agreement
was terminated pursuant to the Recapitalization Agreement.
MANAGEMENT AGREEMENT
Anvil, Holdings and BRS & Co. anticipate entering into a Management
Agreement (the "Management Agreement"), whereby BRS & Co. will agree to provide
certain advisory and consulting services in relation to the affairs of Anvil and
Holdings in connection with strategic financial planning, selection, supervision
and retention of independent auditors, the selection, retention and supervision
of outside legal counsel, and the selection, retention and supervision of
investment bankers or other financial advisors or consultants. In exchange for
these services BRS & Co. will receive, in addition to reasonable "out-of-pocket
expenses" (as defined in the Management Agreement), an annual fee of $250,000.
PROMISSORY NOTES
In connection with their purchase of Holdings' securities under the Stock
Purchase Agreement, Messrs. Geller and Corsano each borrowed $125,000 from
Holdings under promissory notes, each dated as of January 30, 1995 (the
"Promissory Notes"). The Promissory Notes accrued interest at a rate of 7.19%
per annum and would have matured on January 30, 2002. The largest aggregate
amount of indebtedness outstanding to any individual during the last fiscal year
was $133,988. The Promissory Notes were repaid pursuant to the Recapitalization
Agreement.
SUBORDINATED PROMISSORY NOTE
In connection with the Acquisition, Holdings issued the Subordinated Note in
the principal amount of $7.5 million to Culligan. Interest on the Subordinated
Note was paid by Holdings semi-annually at a rate of 10% per year if paid in
cash, or 12% if deferred by Holdings. Holdings has deferred the payment of
interest on the Subordinated Note since the date of its issuance. The principal
amount would have been due January 30, 2005 unless, (i) Holdings or any holders
of Common Stock sells or issues the Common Stock and such sale or issuance
results in (x) a person owning more than 50% of Holdings' Common Stock
outstanding or (y) a person possessing the power to elect a majority of the
board of directors of Holdings or (ii) there is sale of at least substantially
all of Holdings' or its subsidiaries' assets. The Subordinated Note and all
unaccrued and unpaid interest thereon was repaid by Holdings using a portion of
the net proceeds from the Initial Offerings.
TRANSACTION FEES
In connection with the Acquisition, affiliates of Vestar and 399 Venture
received transaction fees of $1.6 million and $.9 million, respectively, for
investment banking services rendered to the Company. In connection with the
Recapitalization, affiliates of BRS, 399 Venture and the Management Investors
60
<PAGE>
received transaction fees of approximately $1.27 million, $1.27 million and
$0.47 million, respectively, in the form of cash and dividends.
BENEFITS OF RECAPITALIZATION TO CERTAIN EXISTING STOCKHOLDERS AND NAMED
EXECUTIVE OFFICERS
In connection with the Recapitalization, Holdings redeemed all of its Old
Preferred Stock and repurchased all of its Old Common Stock (other than the
Retained Shares). Set forth below for those stockholders who, immediately prior
to the Recapitalization, owned more than five percent of Holdings' capital stock
and the Named Executive Officers of the Company is the aggregate amount paid to
such stockholder or Named Executive Officer in connection with such redemption
and repurchase:
<TABLE>
<CAPTION>
NAME
- ----------------------------------------------------------------- AGGREGATE AMOUNT
RECEIVED
-------------------
(IN MILLIONS)
<S> <C>
Vestar........................................................... $ 47.9
Culligan......................................................... 41.1
399 Venture...................................................... 7.2
Bernard Geller................................................... 8.8
Jacob Hollander.................................................. 2.9
Anthony Corsano.................................................. 2.9
William H. Turner................................................ 2.9
</TABLE>
The Named Executive Officers received an aggregate of approximately $5.8
million pursuant to the Phantom Equity Plan and the Management Bonus. In
addition, Mr. Geller's options to purchase 262,500 shares of Old Common Stock
and each of Messrs. Hollander's, Corsano's and Turner's options to purchase
87,500 shares of Old Common Stock issued pursuant to the Old Stock Option Plan
vested and became exercisable at $0.64 per share pursuant to the terms of the
Recapitalization Agreement.
61
<PAGE>
THE PREFERRED EXCHANGE OFFER
PURPOSE AND EFFECT OF THE PREFERRED EXCHANGE OFFER
The Old Senior Preferred Stock were originally sold by Holdings on March 14,
1997 to the Initial Purchaser and certain accredited investors with the Initial
Purchaser acting as agent, pursuant to the Units Purchase Agreement and in a
private placement pursuant to the exemption from registration contained in
Section 4(2) of the Securities Act. The Initial Purchaser subsequently resold
its portion of the Old Senior Preferred Stock to qualified institutional buyers
in reliance on Rule 144A under the Securities Act and to a limited number of
institutional accredited investors in reliance on Rule 501(a) under the
Securities Act. As a condition to the Units Purchase Agreement, Holdings entered
into the Preferred Stock Registration Rights Agreement with the Initial
Purchaser pursuant to which Holdings has agreed, for the benefit of the holders
of the Old Senior Preferred Stock, at Holdings' cost, to use its best efforts to
(i) file the Preferred Exchange Offer Registration Statement within 60 days
after the date of the original issue of the Old Senior Preferred Stock with the
Commission with respect to the Preferred Exchange Offer for the New Senior
Preferred Stock; (ii) use its best efforts to cause the Preferred Exchange Offer
Registration Statement to be declared effective under the Securities Act within
120 days after the date of the original issuance of the Old Senior Preferred
Stock and (iii) unless the Preferred Exchange Offer would not be permitted by
applicable law or Commission policy, commence the Preferred Exchange Offer and
use its best efforts to issue the New Senior Preferred Stock in exchange for the
Old Senior Preferred Stock on or prior to 150 days after the date of the
original issuance of the Old Senior Preferred Stock. Upon the Preferred Exchange
Offer Registration Statement being declared effective, Holdings will offer the
New Senior Preferred Stock in exchange for surrender of the Old Senior Preferred
Stock. Holdings will keep the Preferred Exchange Offer open for not less than 20
business days (or longer if required by applicable law) after the date on which
notice of the Preferred Exchange Offer is mailed to the holders of the Old
Senior Preferred Stock. For each Old Senior Preferred Stock surrendered to
Holdings pursuant to the Preferred Exchange Offer, the holder of such Old Senior
Preferred Stock will receive a New Senior Preferred Stock having a liquidation
preference equal to that of the surrendered Old Senior Preferred Stock.
Dividends on each Old Senior Preferred Stock will accrue from the date of its
original issue. Dividends on each New Senior Preferred Stock will accrue from
the date of its original issue.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the New Senior Preferred Stock will,
in general, be freely tradeable after the Preferred Exchange Offer without
further registration under the Securities Act. However, any purchaser of Old
Senior Preferred Stock who is an "affiliate" of Holdings or who intends to
participate in the Preferred Exchange Offer for the purpose of distributing the
New Senior Preferred Stock (i) will not be able to rely on the interpretation of
the staff of the Commission, (ii) will not be able to tender its Old Senior
Preferred Stock in the Preferred Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Old Senior Preferred Stock, unless
such sale or transfer is made pursuant to an exemption from such requirements.
As contemplated by these no-action letters and the Preferred Stock
Registration Rights Agreement, each holder accepting the Preferred Exchange
Offer is required to represent to Holdings in the Letter of Transmittal that (i)
the New Senior Preferred Stock are to be acquired by the holder or the person
receiving such New Senior Preferred Stock, whether or not such person is the
holder, in the ordinary course of business, (ii) the holder or any such other
person (other than a broker-dealer referred to in the next sentence) is not
engaging and does not intend to engage, in distribution of the New Senior
Preferred Stock, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Senior Preferred Stock, (iv) neither the holder nor any such other person is an
"affiliate" of Holdings within the meaning of Rule 405 under the Securities Act,
and (v) the holder or any such other person acknowledges that if such holder or
any other person participates in the Preferred Exchange Offer for the purpose of
distributing the New Senior Preferred Stock it must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any
62
<PAGE>
resale of the New Senior Preferred Stock and cannot rely on those no-action
letters. As indicated above, each Participating Broker-Dealer that receives New
Senior Preferred Stock for its own account in exchange for Old Senior Preferred
Stock must acknowledge that it (i) acquired the Old Senior Preferred Stock for
its own account as a result of market-making activities or other trading
activities, (ii) has not entered into any arrangement or understanding with
Holdings or any "affiliate" of Holdings (within the meaning of Rule 405 under
the Securities Act) to distribute the New Senior Preferred Stock to be received
in the Preferred Exchange Offer and (iii) will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Senior Preferred Stock. For a description of the procedures for resales by
Participating Broker-Dealers, see "Plan of Distribution."
In the event that (i) changes in the law or the applicable interpretations
of the staff of the Commission do not permit or require Holdings to effect such
a Preferred Exchange Offer, or (ii) if any holder of Transfer Restricted
Securities (as defined therein) notifies Holdings within 10 business days
following the consummation of the Preferred Exchange Offer that such holder (a)
is prohibit from law or Commission policy from participating in the Exchange
Offer, (b) may not resell the New Senior Preferred Stock to the public without
delivering a prospectus and the Prospectus contained in the Preferred Exchange
Offer Registration Statement is not appropriate or available for such resales or
(c) is a broker-dealer and holds Old Senior Preferred Stock acquired directly
from Holdings or one of its affiliates, then Holdings will (x) file the Shelf
Registration Statement covering resales of the Old Senior Preferred Stock, (1)
if pursuant to clause (i) above, within the earlier of 45 days after Holdings
determines it is not required to file the Preferred Exchange Offer Registration
Statement or 75 days after the original issue of the Old Senior Preferred Stock
or, (2) if pursuant to clause (ii) above, within 45 days after Holdings receives
notice, (y) use its reasonable best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act, (1) if pursuant to
clause (i) above, within 120 days after Holdings becomes obligated to file the
Shelf Registration Statement or, (2) if pursuant to clause (ii) above, within
120 days after Holdings receives notice and (z) use its reasonable best efforts
to keep effective the Shelf Registration Statement until the earlier of three
years after its effective date. Holdings will, in the event of the filing of the
Shelf Registration Statement, provide to each applicable holder of the Old
Senior Preferred Stock copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement has become effective and take certain other actions as are required to
permit unrestricted resale of the Old Senior Preferred Stock. A holder of the
Old Senior Preferred Stock that sells such Old Senior Preferred Stock pursuant
to the Shelf Registration Statement generally will be required to be named as a
selling security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Preferred Stock Registration Rights Agreement which are
applicable to such a holder (including certain indemnification obligations). In
addition, each holder of the Old Senior Preferred Stock will be required to
deliver information to be used in connection with the Shelf Registration
Statement and to provide comments on the Shelf Registration Statement within the
time periods set forth in the Preferred Stock Registration Rights Agreement in
order to have their Old Senior Preferred Stock included in the Shelf
Registration Statement and to benefit from the provisions set forth in the
following paragraph.
If (a) Holdings fails to file any of the Registration Statements required by
the Preferred Stock
Registration Rights Agreement on or before the date specified for such filing,
(b) any of such Registration Statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness, or (c)
Holdings fails to consummate the Preferred Exchange Offer within 30 days of the
date specified for such effectiveness with respect to the Preferred Exchange
Offer Registration Statement, or (d) the Shelf Registration Statement or the
Preferred Exchange Offer Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the period specified in the Preferred
Stock Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), the sole remedy available to
holders of the Old Senior Preferred Stock will be the immediate assessment of
liquidated damages as
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follows: during the first 90-day period immediately following the occurrence of
such Registration Default, in an amount equal to $.05 per week per $1,000
liquidation preference of the Transfer Restricted Securities (as defined
therein) held by any holder of Transfer Restricted Securities (a "Holder") for
so long as the Registration Default continues. The amount of liquidated damages
payable to each Holder shall increase by an additional $.05 per week per $1,000
liquidation preference of Transfer Restricted Securities held by such Holder for
each subsequent 90-day period, up to a maximum amount of liquidated damages of
$.30 per week per $1,000 liquidation preference of Transfer Restricted
Securities held by such Holder. All accrued liquidated damages shall be paid by
Holdings as provided for in the Certificate of Designation (i) to the Global
Senior Preferred Stock Holder by wire transfer of immediately available funds
and (ii) to Holders of Certificated Securities by wire transfer to the accounts
specified by them or by mailing checks to their registered addresses if no such
accounts have been specified, as provided in the Certificate of Designation.
Following the cure of all Registration Defaults relating to any particular
Transfer Restricted Securities, the accrual of liquidated damages with respect
to such Transfer Restricted Securities will cease.
Holders of Old Senior Preferred Stock will be required to make certain
representations to Holdings (as described in the Preferred Stock Registration
Rights Agreement) in order to participate in the Preferred Exchange Offer and
will be required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Preferred Stock Registration
Rights Agreement in order to have their Old Senior Preferred Stock included in
the Shelf Registration Statement and benefit from the provisions regarding
Additional Investors set forth above.
The summary herein of certain provisions of the Preferred Stock Registration
Rights Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by, all the provisions of the Preferred Stock
Registration Rights Agreement, a copy of which is filed as an exhibit to the
Preferred Exchange Offer Registration Statement of which this Prospectus is a
part.
Following the consummation of the Preferred Exchange Offer, holders of the
Old Senior Preferred Stock who were eligible to participate in the Preferred
Exchange Offer but who did not tender their Old Senior Preferred Stock will not
have any further registration rights and such Old Senior Preferred Stock will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for such Old Senior Preferred Stock could be adversely
affected.
TERMS OF THE PREFERRED EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, Holdings will accept any and all Old Senior
Preferred Stock validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. Holdings will issue $1,000 liquidation
preference of New Senior Preferred Stock in exchange for each $1,000 liquidation
preference of outstanding Old Senior Preferred Stock accepted in the Preferred
Exchange Offer. Holders may tender some or all of their Old Senior Preferred
Stock pursuant to the Preferred Exchange Offer. However, Old Senior Preferred
Stock may be tendered only in integral multiples of $1,000.
The form and terms of the New Senior Preferred Stock are the same as the
form and terms of the Old Senior Preferred Stock except that (i) the New Senior
Preferred Stock bear a Series B designation and a different CUSIP Number from
the Old Senior Preferred Stock, (ii) the New Senior Preferred Stock have been
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof and (iii) the holders of the New Senior Preferred Stock
will not be entitled to certain rights under the Preferred Stock Registration
Rights Agreement, including the provisions providing for liquidated damages in
certain circumstances relating to the timing of the Preferred Exchange Offer,
all of which rights will terminate when the Preferred Exchange Offer is
terminated. The New Senior Preferred Stock will evidence the same equity as the
Old Senior Preferred Stock and will be entitled to the benefits of the
Certificate of Designation.
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As of the date of this Prospectus, $30,000,000 aggregate liquidation
preference of Old Senior Preferred Stock were outstanding. Holdings has fixed
the close of business on , 1997 as the record date for the Preferred
Exchange Offer for purposes of determining the persons to whom this Prospectus
and the Letter of Transmittal will be mailed initially.
Holders of Old Senior Preferred Stock do not have any appraisal or
dissenters' rights under the General Corporation Law of Delaware or the
Certificate of Designation in connection with the Preferred Exchange Offer.
Holdings intends to conduct the Preferred Exchange Offer in accordance with the
applicable requirements of the Exchange Act and the rules and regulations of the
Commission thereunder.
Holdings shall be deemed to have accepted validly tendered Old Senior
Preferred Stock when, as and if Holdings has given oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering holders for the purpose of receiving the New Senior Preferred Stock
from Holdings.
If any tendered Old Senior Preferred Stock are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, the certificates for any such unaccepted Old Senior
Preferred Stock will be returned, without expense, to the tendering holder
thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Senior Preferred Stock in the Preferred Exchange
Offer will not be required to pay brokerage commissions or fees or, subject to
the instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Old Senior Preferred Stock pursuant to the Preferred Exchange
Offer. Holdings will pay all charges and expenses, other than transfer taxes in
certain circumstances, in connection with the exchange fees and expenses.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless Holdings, in its sole discretion, extends the Preferred
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Preferred Exchange Offer is extended.
In order to extend the Preferred Exchange Offer, Holdings will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
Holdings reserves the right, in its sole discretion, (i) to delay accepting
any Old Senior Preferred Stock, to extend the Preferred Exchange Offer or to
terminate the Preferred Exchange Offer if any of the conditions set forth below
under "Conditions" shall not have been satisfied, by giving oral or written
notice of such delay, extension or termination to the Exchange Agent or (ii) to
amend the terms of the Preferred Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders.
DIVIDENDS ON THE NEW SENIOR PREFERRED STOCK
The New Senior Preferred Stock will accrue dividends from their date of
issuance. Holders of Old Senior Preferred Stock that are accepted for exchange
will accrue dividends thereon to, but not including, the date of issuance of the
New Senior Preferred Stock. Accrual of dividends on the Old Senior Preferred
Stock accepted for exchange will cease to accrue upon issuance of the New Senior
Preferred Stock.
Dividends accrue in each period ending on March 15, June 15, September 15
and December 15 of each year.
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PROCEDURES FOR TENDERING
Only a holder of Old Senior Preferred Stock may tender such Old Senior
Preferred Stock in the Preferred Exchange Offer. To tender in the Preferred
Exchange Offer, a holder must complete, sign and date the Letter of Transmittal,
or a facsimile thereof, have the signatures thereon guaranteed if required by
the Letter of Transmittal or transmit an Agent's Message in connection with a
book-entry transfer, and mail or otherwise deliver such Letter of Transmittal or
such facsimile, or Agent's Message, together with the Old Senior Preferred Stock
and any other required documents, to the Exchange Agent prior to 5:00 p.m., New
York City time, on the Expiration Date. To be tendered effectively, the Old
Senior Preferred Stock, Letter of Transmittal or an Agent's Message and other
required documents must be completed and received by the Exchange Agent at the
address set forth below under "Exchange Agent" prior to 5:00 p.m., New York City
time, on the Expiration Date. Delivery of the Old Senior Preferred Stock may be
made by book-entry transfer in accordance with the procedures described below.
Confirmation of such book-entry transfer must be received by the Exchange Agent
prior to the Expiration Date.
The term "Agent's Message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility tendering the Old Senior Preferred Stock that such
participant has received and agrees: (i) to participate in the Automated Tender
Option Program ("ATOP"); (ii) to be bound by the terms of the Letter of
Transmittal; and (iii) that Holdings may enforce such agreement against such
participant.
By executing the Letter of Transmittal or Agent's Message, each holder will
make to Holdings the representations set forth above in the third paragraph
under the heading "--Purpose and Effect of the Preferred Exchange Offer."
The tender by a holder and the acceptance thereof by Holdings will
constitute agreement between such holder and Holdings in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal or Agent's Message.
THE METHOD OF DELIVERY OF OLD SENIOR PREFERRED STOCK AND THE LETTER OF
TRANSMITTAL OR AGENT'S MESSAGE AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE
AGENT IS AT THE ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO
DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY
SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO
THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD
SENIOR PREFERRED STOCK SHOULD BE SENT TO HOLDINGS. HOLDERS MAY REQUEST THEIR
RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO
EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Senior Preferred Stock are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact the registered holder promptly and instruct
such registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined) unless the
Old Senior Preferred Stock tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of the
Medallion System (an "Eligible Institution").
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If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Senior Preferred Stock listed therein, such Old Senior
Preferred Stock must be endorsed or accompanied by a properly completed bond
power, signed by such registered holder as such registered holder's name appears
on such Old Senior Preferred Stock with the signature thereon guaranteed by an
Eligible Institution.
If the Letter of Transmittal or any Old Senior Preferred Stock or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, offices of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
evidence satisfactory to Holdings of their authority to so act must be submitted
with the Letter of Transmittal.
Holdings understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the Old
Senior Preferred Stock at the Book-Entry Transfer Facility (as defined in the
Letter of Transmittal) for the purpose of facilitating the Preferred Exchange
Offer, and subject to the establishment thereof, any financial institution that
is a participant in the Book-Entry Transfer Facility's system may make
book-entry delivery of Old Senior Preferred Stock by causing such Book-Entry
Transfer Facility to transfer such Old Senior Preferred Stock into the Exchange
Agent's account with respect to the Old Senior Preferred Stock in accordance
with the Book-Entry Transfer Facility's procedures for such transfer. Although
delivery of the Old Senior Preferred Stock may be effected through book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility,
unless an Agent's Message is received by the Exchange Agent, in compliance with
ATOP, an appropriate Letter of Transmittal properly completed and duly executed
with any required signature guarantee and all other required documents must in
each case be transmitted to and received or confirmed by the Exchange Agent at
its address set forth below on or prior to the Expiration Date, or, if the
guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Senior Preferred Stock and withdrawal of
tendered Old Senior Preferred Stock will be determined by Holdings in its sole
discretion, which determination will be final and binding. Holdings reserves the
absolute right to reject any and all Old Senior Preferred Stock not properly
tendered or any Old Senior Preferred Stock Holdings' acceptance of which would,
in the opinion of counsel for Holdings, be unlawful. Holdings also reserves the
right in its sole discretion to waive any defects, irregularities or conditions
of tender as to particular Old Senior Preferred Stock. Holdings' interpretation
of the terms and conditions of the Preferred Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Senior Preferred Stock must be cured within such time as Holdings shall
determine. Although Holdings intends to notify holders of defects or
irregularities with respect to tenders of Old Senior Preferred Stock, neither
Holdings, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Senior Preferred Stock will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Senior Preferred Stock received by the Exchange Agent
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned by the Exchange Agent to the
tendering holders, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Senior Preferred Stock and (i) whose
Old Senior Preferred Stock are not immediately available, (ii) who cannot
deliver their Old Senior Preferred Stock, the Letter of Transmittal or any other
required documents to the Exchange Agent or (iii) who cannot complete the
procedures for book-entry transfer, prior to the Expiration Date, may effect a
tender if:
(a) the tender is made through an Eligible Institution,
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(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Senior Preferred Stock and the liquidation preference of Old
Senior Preferred Stock tendered, stating that the tender is being made
thereby and guaranteeing that, within five New York Stock Exchange trading
days after the Expiration Date, the Letter of Transmittal (or facsimile
thereof) together with the certificate(s) representing the Old Senior
Preferred Stock (or a confirmation of book-entry transfer of such Preferred
Stock into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Old Senior Preferred Stock in proper form for transfer (or a confirmation of
book-entry transfer of such Old Senior Preferred Stock into the Exchange
Agent's account at the Book-Entry Transfer Facility), and all other
documents required by the Letter of Transmittal are received by the Exchange
Agent upon five New York Stock Exchange trading days after the Expiration
Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Senior Preferred Stock according to
the guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Senior Preferred Stock
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
To withdraw a tender of Old Senior Preferred Stock in the Preferred Exchange
Offer, a telegram, telex, letter or facsimile transmission notice of withdrawal
must be received by the Exchange Agent at its address set forth herein prior to
5:00 p.m., New York City time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Old
Senior Preferred Stock to be withdrawn (the "Depositor"); (ii) identify the Old
Senior Preferred Stock to be withdrawn (including the certificate number(s) and
liquidation preference of such Old Senior Preferred Stock, or, in the case of
Old Senior Preferred Stock transferred by book-entry transfer, the name and
number of the account at the Book-Entry Transfer Facility to be credited); (iii)
be signed by the holder in the same manner as the original signature on the
Letter of Transmittal by which such Old Senior Preferred Stock were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Old Senior Preferred
Stock register the transfer of such Old Senior Preferred Stock into the name of
the person withdrawing the tender and (iv) specify the name in which any such
Old Senior Preferred Stock are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by Holdings, whose
determination shall be final and binding on all parties. Any Old Senior
Preferred Stock so withdrawn will be deemed not to have been validly tendered
for purposes of the Preferred Exchange Offer and no New Senior Preferred Stock
will be issued with respect thereto unless the Old Senior Preferred Stock so
withdrawn are validly retendered. Any Old Senior Preferred Stock which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Preferred Exchange Offer. Properly
withdrawn Old Senior Preferred Stock may be retendered by following one of the
procedures described above under "--Procedures for Tendering" at any time prior
to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Preferred Exchange Offer, Holdings
shall not be required to accept for exchange, or exchange New Senior Preferred
Stock for, any Old Senior Preferred Stock, and
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may terminate or amend the Preferred Exchange Offer as provided herein before
the acceptance of such Old Senior Preferred Stock, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Preferred Exchange
Offer which, in the sole judgment of Holdings, might materially impair the
ability of Holdings to proceed with the Preferred Exchange Offer or any
material adverse development has occurred in any existing action or
proceeding with respect to Holdings or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the sole judgment
of Holdings, might materially impair the ability of Holdings to proceed with
the Preferred Exchange Offer or materially impair the contemplated benefits
of the Preferred Exchange Offer to Holdings; or
(c) any governmental approval has not been obtained, which approval
Holdings shall, in its sole discretion, deem necessary for the consummation
of the Preferred Exchange Offer as contemplated hereby.
If Holdings determines in its sole discretion that any of the conditions are
not satisfied, Holdings may (i) refuse to accept any Old Senior Preferred Stock
and return all tendered Old Senior Preferred Stock to the tendering holders,
(ii) extend the Preferred Exchange Offer and retain all Old Senior Preferred
Stock tendered prior to the expiration of the Preferred Exchange Offer, subject,
however, to the rights of holders to withdraw such Old Senior Preferred Stock
(see "--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Preferred Exchange Offer and accept all properly tendered Old
Senior Preferred Stock which have not been withdrawn.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
for the Preferred Exchange Offer. Questions and requests for assistance,
requests for additional copies of this Prospectus or of the Letter of
Transmittal and requests for Notice of Guaranteed Delivery should be directed to
the Exchange Agent addressed as follows:
<TABLE>
<CAPTION>
BY OVERNIGHT COURIER AND BY HAND AFTER 4:30
BY MAIL: P.M.:
<S> <C>
United States Trust Company of New York United States Trust Company of New York
P.O. Box 843 Cooper Station 770 Broadway-13th Floor
New York, New York 10276 New York, New York 10003
Attention: Corporate Trust Operations Attention: Corporate Trust Operations
(registered or certified mail recommended)
BY HAND BEFORE 4:30 P.M.:
United States Trust Company of New York FACSIMILE TRANSMISSION: (212) 420-6152
111 Broadway
New York, New York 10006
ATTENTION: Lower Level Corporate Trust Window CONFIRM BY TELEPHONE: (800) 548-6565
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by Holdings. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telegraph, telecopy, telephone or in person by officers and regular employees
of Holdings and its affiliates.
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Holdings has not retained any dealer-manager in connection with the
Preferred Exchange Offer and will not make any payments to brokers, dealers, or
others soliciting acceptances of the Preferred Exchange Offer. Holdings,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
The cash expenses to be incurred in connection with the Preferred Exchange
Offer will be paid by Holdings. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
ACCOUNTING TREATMENT
The New Senior Preferred Stock will be recorded at the same carrying value
as the Old Senior Preferred Stock, which is face value, as reflected in
Holdings' accounting records on the date of exchange. Accordingly, no gain or
loss for accounting purposes will be recognized by Holdings. The expenses of the
Preferred Exchange Offer will be expensed over the term of the New Senior
Preferred Stock.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Senior Preferred Stock that are not exchanged for New Senior
Preferred Stock pursuant to the Preferred Exchange Offer will remain restricted
securities. Accordingly, such Old Senior Preferred Stock may be resold only (i)
to Holdings (upon redemption thereof or otherwise), (ii) so long as the Old
Senior Preferred Stock are eligible for resale pursuant to Rule 144A, to a
person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably acceptable to Holdings), (iii) outside the
United States to a foreign person in a transaction meeting the requirements of
Rule 904 under the Securities Act, or (iv) pursuant to an effective registration
statement under the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States.
RESALE OF THE NEW SENIOR PREFERRED STOCK
With respect to resales of New Senior Preferred Stock, based on
interpretations by the staff of the Commission set forth in no-action letters
issued to third parties, Holdings believes that a holder or other person who
receives New Senior Preferred Stock, whether or not such person is the holder
(other than a person that is an "affiliate" of Holdings within the meaning of
Rule 405 under the Securities Act) who receives New Senior Preferred Stock in
exchange for Old Senior Preferred Stock in the ordinary course of business and
who is not participating, does not intend to participate, and has no arrangement
or understanding with any person to participate, in the distribution of the New
Senior Preferred Stock, will be allowed to resell the New Senior Preferred Stock
to the public without further registration under the Securities Act and without
delivering to the purchasers of the New Senior Preferred Stock a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if any
holder acquires New Senior Preferred Stock in the Preferred Exchange Offer for
the purpose of distributing or participating in a distribution of the New Senior
Preferred Stock, such holder cannot rely on the position of the staff of the
Commission enunciated in such no-action letters or any similar interpretive
letters, and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Further, each
Participating Broker-Dealer that receives New Senior Preferred Stock for its own
account in exchange for Old Senior Preferred Stock, where such Old Senior
Preferred Stock were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Senior
Preferred Stock.
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As contemplated by these no-action letters and the Preferred Stock
Registration Rights Agreement, each holder accepting the Preferred Exchange
Offer is required to represent to Holdings in the Letter of Transmittal that (i)
the New Senior Preferred Stock are to be acquired by the holder or the person
receiving such New Senior Preferred Stock, whether or not such person is the
holder, in the ordinary course of business, (ii) the holder or any such other
person (other than a broker-dealer referred to in the next sentence) is not
engaging and does not intend to engage, in the distribution of the New Senior
Preferred Stock, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Senior Preferred Stock, (iv) neither the holder nor any such other person is an
"affiliate" of Holdings within the meaning of Rule 405 under the Securities Act,
and (v) the holder or any such other person acknowledges that if such holder or
other person participates in the Preferred Exchange Offer for the purpose of
distributing the New Senior Preferred Stock it must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale of the New Senior Preferred Stock and cannot rely on those no-action
letters. As indicated above, each Participating Broker-Dealer that receives a
New Senior Preferred Stock for its own account in exchange for Old Senior
Preferred Stock must acknowledge that it will deliver a Prospectus in connection
with any resale of such New Senior Preferred Stock. For a description of the
procedures for such resales by Participating Broker-Dealers, see "Plan of
Distribution."
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DESCRIPTION OF SECURITIES
SENIOR NOTES
GENERAL
The New Senior Notes will be issued under the Senior Indenture. The terms of
the New Senior Notes include those stated in the Senior Indenture and those made
part of the Senior Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act") as in effect on the date of the Senior
Indenture. The form and terms of the New Senior Notes are the same as the form
and terms of the Old Senior Notes (which they replace) except that (i) the New
Senior Notes bear a Series B designation, (ii) the New Senior Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof, and (iii) the holders of New Senior Notes will
not be entitled to certain rights under the Registration Rights Agreement,
including the provisions providing for liquidated damages in certain
circumstances relating to the timing of the Exchange Offer, which rights will
terminate when the Exchange Offer is consummated. The New Senior Notes are
subject to all such terms, and holders of the New Senior Notes are referred to
the Senior Indenture and the Trust Indenture Act for a statement of them. The
following is a summary of the material terms and provisions of the New Senior
Notes. This summary does not purport to be a complete description of the New
Senior Notes and is subject to the detailed provisions of, and qualified in its
entirety by reference to, the New Senior Notes and the Senior Indenture
(including the definitions contained therein). A copy of the form of Senior
Indenture may be obtained from Anvil by any holder or prospective investor upon
request. Definitions relating to certain capitalized terms are set forth under
"--Certain Definitions" and throughout this description. Capitalized terms that
are used but not otherwise defined herein have the meanings assigned to them in
the Senior Indenture and such definitions are incorporated herein by reference.
The Old Senior Notes and the New Senior Notes are sometimes referred to herein
collectively as the "Senior Notes." Any descriptions of the Senior Notes
presented in the future tense shall refer to the New Senior Notes, where
appropriate.
The Senior Notes will be senior unsecured obligations of Anvil and will rank
senior in right of payment to all subordinated Indebtedness of Anvil and PARI
PASSU in right of payment with all existing and future senior Indebtedness
(including borrowings under the New Credit Agreement). The Senior Notes will be
effectively subordinated to all existing and future secured Indebtedness of
Anvil, including Indebtedness pursuant to the New Credit Agreement, to the
extent of the value of the assets securing such Indebtedness and the Senior
Notes will be structurally subordinated to Indebtedness of Anvil's Subsidiaries.
As of May 3, 1997, Anvil had approximately $156.5 million (including the
discount on the Senior Notes) of senior Indebtedness (including the Senior
Notes), approximately $26.5 million of which was secured indebtedness. In
addition, Anvil had approximately $28.5 million of availability, subject to an
asset based formula, under the New Credit Agreement and all borrowings
thereunder are secured. The Company has not issued, and does not have any
current firm arrangements to issue, any significant indebtedness to which the
Senior Notes would be senior. The Company does not have any current or pending
arrangements or agreements to incur any additional significant indebtedness to
which the Senior Notes would be subordinate.
Restrictions in the Senior Indenture on the ability of Anvil and its
Restricted Subsidiaries to incur additional Indebtedness, to make Asset Sales,
to enter into transactions with Affiliates and to enter into mergers,
consolidations or sales of all or substantially all of its assets, may make more
difficult or discourage a takeover of Anvil or Holdings, whether favored or
opposed by the management of Anvil and Holdings. While such restrictions cover a
variety of arrangements which have traditionally been used to effect highly
leveraged transactions, the Senior Indenture may not afford holders of Senior
Notes protection in all circumstances from the adverse aspects of a highly
leveraged transaction, reorganization, restructuring, merger or similar
transaction.
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As of the date hereof, Anvil has four Subsidiaries, all of which constitute
Restricted Subsidiaries for the purposes of the Senior Indenture. Under certain
circumstances, Anvil will be able to designate future Subsidiaries as
Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to many
of the restrictive covenants set forth in the Senior Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes will be limited in aggregate principal amount to $130.0
million and will mature on March 15, 2007. Interest on the Senior Notes will
accrue at the rate of 10 7/8% per annum and will be payable semi-annually in
arrears on March 15 and September 15, commencing on September 15, 1997, to
Holders of record on the immediately preceding March 1 and September 1. Interest
on the Senior Notes will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Principal, premium, if any, interest and Liquidated Damages on
the Senior Notes will be payable at the office or agency of Anvil maintained for
such purpose within the City and State of New York or, at the option of Anvil,
payment of interest and Liquidated Damages may be made by check mailed to the
Holders of the Senior Notes at their respective addresses set forth in the
register of Holders of Senior Notes; PROVIDED that all payments with respect to
Global Senior Notes and Certificated Securities the Holders of whom have given
wire transfer instructions to Anvil will be required to be made by wire transfer
of immediately available funds to the accounts specified by the Holders thereof.
Until otherwise designated by Anvil, Anvil's office or agency will be the office
of the Trustee maintained for such purpose. Anvil may change such office or
agency without prior notice to Holders of the Senior Notes, and Holdings or any
of its Subsidiaries may act as Paying Agent or Registrar. The Senior Notes will
be issued in denominations of $1,000 and integral multiples thereof.
HOLDINGS' GUARANTEE
Holdings has irrevocably and unconditionally guarantee on a senior unsecured
basis the performance and punctual payment when due, whether at stated maturity,
by acceleration or otherwise, of all obligations of Anvil under the Senior
Indenture and the Senior Notes, whether for principal of or interest on or
Liquidated Damages, if any, on the Senior Notes, expenses, indemnification or
otherwise (all such obligations guaranteed by Holdings being herein called the
"Guaranteed Obligations") with respect to Holdings. Holdings has no material
assets other than the common stock of Anvil, and, accordingly, its ability to
perform under its Guarantee will be dependent on the financial condition and net
worth of Anvil. Holdings covenants in the Senior Indenture to engage in no
businesses other than holding the capital stock of Anvil and other Persons
engaged in the same, similar, ancillary, complementary or related business to
the business in which Anvil is engaged and other activities incidental thereto,
including financing activities for the benefit of Anvil and such Persons.
The Guarantee is a continuing guarantee and shall (a) remain in full force
and effect until payment in full of all the Guaranteed Obligations, (b) be
binding upon Holdings and its successors, transferees and assigns and (c) inure
to the benefit of and be enforceable by the Trustee, the Holders and their
successors, transferees and assigns.
SUBSIDIARY GUARANTEES
Anvil's payment obligations under the Senior Notes will be guaranteed
pursuant to future guarantees (collectively, the "Subsidiary Guarantees") on a
senior basis by any Subsidiaries that become guarantors (collectively, the
"Subsidiary Guarantors") under the covenant entitled "--Additional Subsidiary
Guarantees." The obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee will be limited so as not to constitute a fraudulent conveyance under
applicable law. Cottontops is the sole Subsidiary Guarantor.
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The Senior Indenture provides that no Subsidiary Guarantor may consolidate
with or merge with or into (whether or not such Subsidiary Guarantor is the
surviving Person), another Person or entity whether or not affiliated with such
Subsidiary Guarantor unless (i) subject to the provisions of the following
paragraph, the Person formed by or surviving any such consolidation or merger
(if other than such Subsidiary Guarantor) assumes all the obligations of such
Subsidiary Guarantor pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee under the Senior Indenture; (ii)
immediately after giving effect to such transaction, no Default or Event of
Default exists; (iii) such Subsidiary Guarantor, or any Person formed by or
surviving any such consolidation or merger, (A) would have Consolidated Net
Worth (immediately after giving effect to such transaction) equal to or greater
than the Consolidated Net Worth of such Subsidiary Guarantor immediately
preceding the transaction and (B) would be permitted by virtue of Anvil's pro
forma Fixed Charge Coverage Ratio to incur, immediately after giving effect to
such transaction, at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the covenant described in
"--Incurrence of Indebtedness and Issuance of Preferred Stock"; and (iv) such
Subsidiary Guarantor delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel addressed to the Trustee with respect to the foregoing
matters; PROVIDED, HOWEVER, that the foregoing will not apply to the merger of
two or more Subsidiary Guarantors with and into each other or the merger of any
Subsidiary Guarantor into Anvil.
The Senior Indenture provides that in the event of a sale or other
disposition of all of the assets of any Subsidiary Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the capital
stock of any Subsidiary Guarantor, by way of merger, consolidation or otherwise,
then such Subsidiary Guarantor (in the event of a sale or other disposition of
all of the capital stock of such Subsidiary Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all of
the assets of such Subsidiary Guarantor) will be released and relieved of any
obligations under its Subsidiary Guarantee; provided that the Net Proceeds of
such sale or other disposition are applied in accordance with the applicable
provisions of the Senior Indenture. See "--Repurchase at the Option of
Holders--Asset Sales."
OPTIONAL REDEMPTION
Except as set forth below, the Senior Notes will not be redeemable at
Anvil's option prior to March 15, 2002. Thereafter, the Senior Notes will be
subject to redemption for cash at the option of Anvil, in whole or in part, upon
not less than 30 nor more than 60 days' notice to each holder of Senior Notes to
be redeemed, at the following redemption prices (expressed as percentages of
principal amount thereof) if redeemed during the 12-month period beginning on
March 15 of each of the years indicated below, in each case together with any
accrued and unpaid interest and Liquidated Damages thereon to the applicable
redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2002.............................................................................. 105.438%
2003.............................................................................. 103.625%
2004.............................................................................. 101.813%
2005 and thereafter............................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or before March 15, 2000,
Anvil may (but will not have the obligation to) redeem for cash up to 40% of the
original aggregate principal amount of the Senior Notes at a redemption price of
110% of the principal amount thereof, in each case plus any accrued and unpaid
interest and Liquidated Damages thereon to the redemption date, with the net
proceeds of a Public Equity Offering; PROVIDED that at least 60% of the original
aggregate principal amount of the Senior Notes remains outstanding immediately
after the occurrence of such redemption; and PROVIDED, FURTHER, that such
redemption will occur within 60 days of the date of the closing of such Public
Equity Offering.
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If less than all of the Senior Notes are to be redeemed at any time,
selection of Senior Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Senior Notes are listed, or, if the Senior Notes are not so
listed, on a pro rata basis, by lot or by such method as the Trustee will deem
fair and appropriate; PROVIDED that no Senior Notes of $1,000 or less will be
redeemed in part. Notices of redemption will be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Holder of
Senior Notes to be redeemed at its registered address. If any Senior Note is to
be redeemed in part only, the notice of redemption that relates to such Senior
Note will state the portion of the principal amount thereof to be redeemed. A
new Senior Note in principal amount equal to the unredeemed portion thereof will
be issued in the name of the Holder thereof upon cancellation of the original
Note. On and after the redemption date, interest will cease to accrue on Senior
Notes or portions of them called for redemption unless Anvil defaults in the
payment thereof.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders,"
Anvil is not required to make any mandatory redemption, purchase or sinking fund
payments with respect to the Senior Notes prior to the maturity date.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
The Senior Indenture provides that upon the occurrence of a Change of
Control, each Holder of Senior Notes will have the right to require Anvil to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Senior Notes pursuant to the offer described below (the "Change of
Control Offer") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon to the date of purchase (the "Change of Control Payment"). Within 30
days following any Change of Control, Anvil will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase Senior Notes pursuant to the procedures required by
the Senior Indenture and described in such notice. Anvil will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Senior Notes as a result of
a Change of Control.
The Change of Control Offer will remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Change of Control Offer
Period"). No later than five Business Days after the termination of the Offer
Period (the "Change of Control Purchase Date"), Anvil will purchase all Senior
Notes validly tendered and not properly withdrawn pursuant to the Change of
Control Offer. Payment for any Senior Notes so purchased will be made in the
same manner as interest payments are made on the Senior Notes.
If the Change of Control Purchase Date is on or after an interest record
date and on or before the related interest payment date, any accrued and unpaid
interest and Liquidated Damages will be paid to the Person in whose name a
Senior Note is registered at the close of business on such record date, and no
additional interest will be payable to Holders who tender Senior Notes pursuant
to the Change of Control Offer.
On the Change of Control Purchase Date, Anvil will, to the extent lawful,
(1) accept for payment all Senior Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Senior Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Senior Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Senior Notes or
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portions thereof being purchased by Anvil. The Paying Agent will promptly mail
to each Holder of Senior Notes so tendered the Change of Control Payment for
such Senior Notes and the Trustee will promptly authenticate and mail (or cause
to be transferred by book entry) to each Holder a new Senior Note equal in
principal amount to any unpurchased portion of the Senior Notes surrendered, if
any; provided that each such new Senior Note will be in a principal amount of
$1,000 or an integral multiple thereof. Anvil will publicly announce the results
of the Change of Control Offer on the Change of Control Purchase Date.
Except as described above, the Senior Indenture does not contain provisions
that permit the Holders of Senior Notes to require Anvil to redeem the Senior
Notes in the event of a takeover, recapitalization or similar restructuring,
including an issuer recapitalization or similar transaction with management.
Consequently, the Change of Control provisions will not afford any protection in
a highly leveraged transaction, including such a transaction initiated by Anvil,
management of Anvil or an Affiliate of Anvil, if such transaction does not
result in a Change of Control. In addition, the existence of the Holder's right
to require Anvil to repurchase such Holder's Senior Notes upon the occurrence of
a Change of Control may or may not deter a third party from seeking to acquire
Anvil or Holdings in a transaction that would constitute a Change of Control.
Anvil's ability to repurchase Senior Notes pursuant to a Change of Control
Offer may be limited by a number of factors. The New Credit Agreement provides
that certain change of control events with respect to Holdings and/or Anvil
would constitute a default thereunder permitting the lending parties thereto to
accelerate the Indebtedness thereunder. In addition, certain events that may
obligate Anvil to offer to repay all outstanding obligations under the New
Credit Agreement may not constitute a Change of Control under the Senior
Indenture. However, Anvil may not have sufficient resources to repay
Indebtedness under the New Credit Agreement and Anvil may not have sufficient
resources to repurchase tendered Senior Notes. Furthermore, any future credit
agreements or other agreements relating to senior Indebtedness to which Anvil
becomes a party may contain similar restrictions and provisions. In the event a
Change of Control occurs at a time when Anvil is directly or indirectly
prohibited from purchasing Senior Notes, Anvil could seek the consent of its
lenders to the purchase of Senior Notes or could attempt to refinance the
borrowings that contain such prohibition. If Anvil does not obtain such a
consent or repay such borrowings, the purchase of Senior Notes will remain
prohibited. The failure by Anvil to purchase tendered Senior Notes would
constitute a breach of the Senior Indenture which would, in turn, constitute a
default under the New Credit Agreement and could lead to the acceleration of the
indebtedness thereunder. In any such event, the security granted in respect of
the New Credit Agreement could result in the Holders of the Senior Notes
receiving less ratably than other creditors of Anvil.
In addition, the terms of the Senior Preferred Stock and Exchange Debentures
of Holdings include provisions similar to those contained in the Senior Notes
enabling holders thereof to require Holdings to repurchase all or any part of
such securities under circumstances constituting a Change of Control. However,
Holdings and Anvil may not have sufficient resources to repurchase tendered
shares of Senior Preferred Stock and/or Exchange Debentures and any such failure
may constitute a default under the terms of the New Credit Agreement, the Senior
Notes, the Senior Indenture and the Certificate of Designation or the Exchange
Debenture Indenture. Again, in any such event, the security granted in respect
of the New Credit Agreement could result in the Holders of the Senior Notes
receiving less ratably than other creditors of Anvil.
The definition of Change of Control includes a phrase relating to the sale,
lease or transfer of "all or substantially all" of the assets of Anvil and its
Restricted Subsidiaries, taken as a whole. Although there is a developing body
of case law interpreting the phrase "substantially all," there is no precise
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of Senior Notes to require Anvil to repurchase such Senior Notes as a
result of a sale, lease or transfer of less than all of the assets of Anvil and
its Restricted Subsidiaries taken as a whole to another Person or group may be
uncertain.
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ASSET SALES
The Senior Indenture provides that Anvil will not, and will not permit any
of its Restricted Subsidiaries to, engage in an Asset Sale in excess of $1.0
million unless (i) Anvil (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the fair
market value, and in the case of a lease of assets, a lease providing for rent
and other conditions which are no less favorable to Anvil (or the Restricted
Subsidiary, as the case may be) in any material respect than the then prevailing
market conditions (evidenced in each case by a resolution of the Board of
Directors of such entity set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests sold or otherwise disposed of, and
(ii) at least 75% (100% in the case of lease payments) of the consideration
therefor received by Anvil or such Restricted Subsidiary is in the form of cash
or Cash Equivalents; provided that the amount of (x) any liabilities (as shown
on Anvil's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto, excluding contingent liabilities and trade payables), of Anvil or
any Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Senior Notes, or any guarantee thereof) that are assumed by
the transferee of any such assets and (y) any notes or other obligations
received by Anvil or any such Restricted Subsidiary from such transferee that
are promptly, but in no event more than 30 days after receipt, converted by
Anvil or such Subsidiary into cash (to the extent of the cash received), will be
deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
Anvil may apply such Net Proceeds (a) to reduce permanently long-term
Indebtedness of a Restricted Subsidiary, (b) to reduce permanently Indebtedness
(and, in the case of revolving Indebtedness, to reduce permanently the
commitments) under the New Credit Agreement, or (c) to an investment in another
business, the making of a capital expenditure or the acquisition of other
tangible assets, in each case, in the same or a similar line of business as
Anvil was engaged in on the date of the Senior Indenture. Any Net Proceeds from
Asset Sales that are not applied or invested as provided in the preceding
sentence of this paragraph will be deemed to constitute "Excess Proceeds." On
the earlier of (i) the 366th day after an Asset Sale or (ii) such date as the
Board of Anvil or the Restricted Subsidiary determines not to apply the Net
Proceeds relating to such Asset Sale in the manner set forth in (a), (b) or (c),
if the aggregate amount of Excess Proceeds exceeds $5.0 million, Anvil will be
required to make an offer to all Holders of Senior Notes (an "Asset Sale Offer")
to purchase the maximum principal amount of Senior Notes that may be purchased
out of the Excess Proceeds, at an offer price in cash in an amount equal to 100%
of the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon to the date of purchase, in accordance with the procedures set
forth in the Senior Indenture. To the extent that the aggregate amount of Senior
Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds,
Anvil may use any remaining Excess Proceeds for general corporate purposes. If
the aggregate principal amount of Senior Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Senior Notes
to be purchased on a pro rata basis. Upon completion of such Asset Sale Offer,
the amount of Excess Proceeds shall be reset at zero.
The Asset Sale Offer will remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Asset Sale Offer Period"). No later
than five Business Days after the termination of the Asset Sale Offer Period
(the "Asset Sale Purchase Date"), Anvil will purchase the principal amount of
Senior Notes required to be purchased pursuant to this covenant (the "Asset Sale
Offer Amount") or, if less than the Asset Sale Offer Amount has been tendered,
all Senior Notes tendered in response to the Asset Sale Offer. Payment for any
Senior Notes so purchased will be made in the same manner as interest payments
are made on the Senior Notes.
If the Asset Sale Purchase Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid interest
and Liquidated Damages will be paid to the Person in whose name a Note is
registered at the close of business on such record date, and no additional
interest will be payable to Holders who tender Senior Notes pursuant to the
Asset Sale Offer.
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On or before the Asset Sale Purchase Date, Anvil will, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Asset Sale
Offer Amount of Senior Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Asset Sale Offer Amount has been tendered, all
Senior Notes tendered, and will deliver to the Trustee an Officers' Certificate
stating that such Senior Notes or portions thereof were accepted for payment by
Anvil in accordance with the terms of this covenant. Anvil, the Depositary or
the Paying Agent, as the case may be, will promptly (but in any case not later
than five days after the Asset Sale Purchase Date) mail or deliver to each
tendering Holder an amount equal to the purchase price of the Senior Notes
tendered by such Holder and accepted by Anvil for purchase, and Anvil will
promptly issue a new Senior Note, and the Trustee, upon delivery of an Officers'
Certificate from Anvil will authenticate and mail or deliver such new Senior
Note to such Holder, in a principal amount equal to any unpurchased portion of
the Senior Note surrendered. Any Senior Note not so accepted will be promptly
mailed or delivered by Anvil to the Holder thereof. Anvil will publicly announce
the results of the Asset Sale Offer on the Asset Sale Purchase Date.
Anvil will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Senior
Notes pursuant to any Asset Sale Offer.
If Anvil is required to make an Asset Sale Offer and Holdings has exchanged
its Senior Preferred Stock for Exchange Debentures, the Exchange Debenture
Indenture under which the Exchange Debentures are issued may require Holdings to
make a similar offer to purchase Exchange Debentures. If either Anvil or
Holdings was unable to purchase all of the Senior Notes or Exchange Debentures
it would then be required to repurchase, an Event of Default may result under
the Senior Indenture and/or the Exchange Debenture Indenture and any such Event
of Default may also constitute an event of default under the New Credit
Agreement. In any such event, the security granted in respect of the New Credit
Agreement could result in the Holders of the Senior Notes receiving less ratably
than other creditors of Anvil.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Senior Indenture provides that Anvil will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any distribution on account of Anvil's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving Anvil) (other
than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of Anvil or dividends or distributions payable to Anvil or
any Wholly Owned Subsidiary of Anvil); (ii) purchase, redeem or otherwise
acquire or retire for value any Equity Interests of Anvil or any direct or
indirect parent of Anvil or other Affiliate or Restricted Subsidiary of Anvil;
(iii) make any principal payment on, or purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness that is subordinated to the Senior
Notes, except in accordance with the scheduled mandatory redemption or repayment
provisions set forth in the original documentation governing such Indebtedness
(but not pursuant to any mandatory offer to repurchase upon the occurrence of
any event); or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless, at the time of and after giving effect to
such Restricted Payment:
(a) no Default or Event of Default will have occurred and be continuing
or would occur as a consequence thereof;
(b) Anvil would, at the time of such Restricted Payment and after giving
pro forma effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
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Coverage Ratio test set forth in the first paragraph of the covenant
described under "--Incurrence of Indebtedness and Issuance of Preferred
Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by Anvil and its Restricted Subsidiaries after the
date of the Senior Indenture, is less than the sum of, without duplication,
(i) 50% of the Consolidated Net Income of Anvil for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing
after the date of the Senior Indenture to the end of Anvil's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus (ii) to the
extent not included in the amount described in clause (i) above, 100% of the
aggregate net cash proceeds received after the date of the Senior Indenture
by Anvil from the issue or sale of, or from additional capital contributions
in respect of, Equity Interests of Anvil or of debt securities of Anvil or
any Subsidiary Guarantor that have been converted into, or cancelled in
exchange for, Equity Interests of Anvil (other than Equity Interests (or
convertible debt securities) sold to a Restricted Subsidiary or an
Unrestricted Subsidiary of Anvil and other than Disqualified Stock or debt
securities that have been converted into Disqualified Stock and less the
amount of any loans made pursuant to clause (vi) of the next succeeding
paragraph), plus (iii) 100% of any cash dividends received by Anvil or a
Wholly Owned Subsidiary that is a Subsidiary Guarantor after the date of the
Senior Indenture from an Unrestricted Subsidiary of Anvil, plus (iv) 100% of
the cash proceeds realized upon the sale of any Unrestricted Subsidiary
(less the amount of any reserve established for purchase price adjustments
and less the maximum amount of any indemnification or similar contingent
obligation for the benefit of the purchaser, any of its Affiliates or any
other third party in such sale, in each case as adjusted for any permanent
reduction in any such amount on or after the date of such sale, other than
by virtue of a payment made to such Person) following the date of the Senior
Indenture, plus (v) to the extent that any Restricted Investment that was
made after the date of the Senior Indenture is sold to an unaffiliated
purchaser for cash or otherwise liquidated or repaid for cash, the cash
proceeds realized with respect to such Restricted Investment (less the cost
of disposition, if any).
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the Senior
Indenture; (ii) the making of any Restricted Investment in exchange for, or out
of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of Anvil) of, or from substantially concurrent additional capital
contributions in respect of, Equity Interests of Anvil (other than Disqualified
Stock); (iii) the redemption, repurchase, retirement or other acquisition of any
Equity Interests of Anvil or any direct or indirect parent of Anvil in exchange
for, or out of the proceeds of, the substantially concurrent sale (other than to
a Subsidiary of Anvil) of, or from substantially concurrent additional capital
contributions in respect of, other Equity Interests of Anvil (other than any
Disqualified Stock); (iv) the defeasance, redemption or repurchase of
subordinated Indebtedness with the net cash proceeds from (X) an incurrence of
Permitted Refinancing Indebtedness or (Y) the substantially concurrent sale
(other than to a Subsidiary of Anvil) of, or from substantially concurrent
additional capital contributions in respect of, Equity Interests of Anvil (other
than Disqualified Stock); (v) the declaration or payment of any dividend to
Holdings for, or the direct repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of Anvil or any Restricted
Subsidiary of Anvil or Holdings held by any member of Anvil's (or any of its
Restricted Subsidiaries' or Holdings') management pursuant to any management
agreement, stock option agreement or plan or stockholders agreement; PROVIDED
that (X) the aggregate price paid for all such repurchased, redeemed, acquired
or retired Equity Interests will not exceed $1.0 million in any fiscal year
(plus any amount available for such payments hereunder since the date of the
Senior Indenture which have not been used for such purpose) or (Y) $5.0 million
in the aggregate (in each case, net of the cash proceeds received by Anvil from
subsequent reissuances of such Equity Interests to new members of management);
(vi) loans to members of management of Anvil or any Restricted Subsidiary the
proceeds of which are used for a concurrent purchase of Equity Interests of
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Holdings and a capital contribution in an amount equal to such proceeds to
Anvil; (vii) payments in connection with the application of the net proceeds of
the Recapitalization as set forth under "Use of Proceeds"; (viii) payments to
Holdings in respect of accounting, legal or other administrative expenses
incurred by Holdings relating to the operations of Anvil in the ordinary course
of business and in respect of fees and related expenses associated with
registration statements filed with the Commission and subsequent ongoing public
reporting requirements arising from the issuance of the Guarantee, the Senior
Preferred Stock and the Exchange Debentures; PROVIDED that the aggregate amount
of such payments does not exceed $500,000 in any fiscal year; (ix) so long as
Holdings files consolidated income tax returns which include Anvil, payments to
Holdings in an amount equal to the amount of income tax that Anvil would have
paid if it had filed consolidated tax returns on a separate-company basis; (x)
payments to Holdings in an amount sufficient to pay director's fees and the
reasonable expenses of its directors in an aggregate amount not to exceed
$125,000 per year (including indemnification obligations and professional fees
and expenses) and to pay salaries and other compensation of employees who
perform services for both Anvil and Holdings; (xi) payments to Holdings in an
amount not to exceed $200,000 in aggregate to enable Holdings to make payments
to holders of its Capital Stock in lieu of issuing fractional shares thereof;
(xii) in the event Holdings elects to issue the Exchange Debentures in exchange
for the Senior Preferred Stock, cash payments to Holdings in an amount necessary
to enable Holdings to make payments to the holders of the Senior Preferred Stock
(A) in lieu of issuing an Exchange Debenture in a principal amount less than
$1,000 and (B) any accrued and unpaid dividends in respect of the period from
the dividend payment date immediately preceding the exchange date to the
exchange date; (xiii) the making of any principal payment on, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is subordinated to the Senior Notes out of Excess Proceeds available for general
corporate purposes after consummation of purchases of Senior Notes pursuant to
an Asset Sale Offer; and (xiv) the repurchase of the Senior Preferred Stock or
the Exchange Debentures in connection with an offer required to be made therefor
in connection with a Change of Control provided that Anvil has previously paid
all amounts required to be paid in connection with any Change of Control Offer
for the Senior Notes; PROVIDED HOWEVER that in the case of any transaction
described in clauses (i), (ii), (iii), (iv) and (v) no Default or Event of
Default will have occurred and be continuing immediately after such transaction.
In determining the aggregate amount of Restricted Payments made after the date
of the Senior Indenture, 100% of the amounts expended pursuant to the foregoing
clauses (ii), (iii), (iv)(Y), (v) and (vi) shall be included in such calculation
and none of the amounts expended pursuant to the foregoing clauses (i), (iv)(X),
(vii), (viii), (ix), (x), (xi), (xii), (xiii) and (xiv) shall be included in
such calculation.
As of the date hereof and as of the issue date of the Senior Notes, all of
Anvil's Subsidiaries were Restricted Subsidiaries. The Board of Directors may
designate any Subsidiary to be an Unrestricted Subsidiary if such designation
would not cause a Default. For purposes of making such determination, all
outstanding Investments by Anvil and its Restricted Subsidiaries (except to the
extent repaid in cash) in the Subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation and will reduce the amount
available for Restricted Payments under the first paragraph of this covenant.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) will be the greater
of (i) book value or (ii) fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) on the date of the Restricted Payment of the asset(s) proposed to be
transferred by Anvil or such Restricted Subsidiary, as the case may be, pursuant
to the Restricted Payment. Not later than the date of making any Restricted
Payment, Anvil will deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which the
calculation required by this covenant were computed, which calculations may be
based upon Anvil's latest available financial statements.
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INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Senior Indenture provides that Anvil will not, and will not permit any
of its Restricted Subsidiaries and Unrestricted Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become directly
or indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Indebtedness) and that Anvil will
not issue any Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER, that
Anvil and its Restricted Subsidiaries may incur Indebtedness (including Acquired
Indebtedness) or issue shares of Disqualified Stock if: (i) the Fixed Charge
Coverage Ratio for Anvil's most recently ended four full fiscal quarters for
which internal financial statements are available immediately preceding the date
on which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been (A) any time prior to March 15, 1999, at least 2.00 to 1
and (B) thereafter, at least 2.25 to 1, in each case determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter period;
and (ii) no Default or Event of Default will have occurred and be continuing or
would occur as a consequence thereof; PROVIDED, that no guarantee may be
incurred pursuant to this paragraph unless the guaranteed Indebtedness is
incurred by Anvil or a Restricted Subsidiary pursuant to this paragraph.
The foregoing provisions will not apply to:
(i) the incurrence by Anvil and its Restricted Subsidiaries of
Indebtedness and letters of credit pursuant to the New Credit Agreement
(with letters of credit being deemed to have a principal amount equal to the
maximum potential liability of Anvil or the relevant Restricted Subsidiary
thereunder) in a maximum principal amount outstanding at any one time not to
exceed $55.0 million (or in the event of any refinancing of the Indebtedness
under the New Credit Agreement, the greater of $55.0 million or the
Borrowing Base) (1) less the amount of all mandatory principal payments
actually made by Anvil in respect of term loans thereunder (excluding any
such payments to the extent refinanced at the time of payment under a
replaced credit agreement) and (2) in the case of the revolving credit
facility, reduced by any required permanent repayments (which are
accompanied by a corresponding permanent commitment reduction) thereunder;
(ii) the incurrence by Anvil and its Restricted Subsidiaries of the
Existing Indebtedness;
(iii) the incurrence by Anvil of Indebtedness represented by the Senior
Notes and by the Restricted Subsidiaries of Indebtedness represented by the
Subsidiary Guarantees;
(iv) the incurrence by Anvil or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or Purchase Money Obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property used in the business of Anvil or such Restricted
Subsidiary, in an aggregate principal amount not to exceed $5.0 million at
any time outstanding;
(v) the incurrence by Anvil or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by the Senior Indenture to be incurred;
(vi) the incurrence by Anvil or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among Anvil and any of its Wholly Owned
Subsidiaries or between or among any Wholly Owned Subsidiaries; PROVIDED,
HOWEVER, that (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than a
Wholly Owned Subsidiary and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either Anvil or a Wholly Owned
Subsidiary will be deemed, in each case, to constitute an incurrence of such
Indebtedness by Anvil or such Subsidiary, as the case may be;
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(vii) the incurrence by Anvil or any of its Restricted Subsidiaries that
are Subsidiary Guarantors of Hedging Obligations that are incurred for the
purpose of fixing or hedging interest rate risk with respect to any floating
rate Indebtedness that is permitted by the Senior Indenture to be incurred;
(viii) the incurrence by Anvil and its Restricted Subsidiaries that are
Subsidiary Guarantors and its foreign subsidiaries that are Restricted
Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any
other clause of this paragraph) in an aggregate principal amount at any time
outstanding not to exceed $15.0 million; provided that such Indebtedness
incurred by foreign subsidiaries that are Restricted Subsidiaries shall not
exceed an aggregate principal amount at any time outstanding of $5.0
million;
(ix) the incurrence by Anvil's Unrestricted Subsidiaries of Non-Recourse
Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event will be deemed
to constitute an incurrence of Indebtedness by a Restricted Subsidiary of
Anvil;
(x) Indebtedness incurred by Anvil or any of its Restricted Subsidiaries
that are Subsidiary Guarantors arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from guarantees or letters of credit, surety bonds or performance bonds
securing the performance of Anvil or any of its Restricted Subsidiaries
pursuant to such agreements, in connection with the disposition of any
business, assets or Restricted Subsidiary of Anvil (other than guarantees or
similar credit support by Anvil or any of its Restricted Subsidiaries of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing such
acquisition), in a principal amount not to exceed 25% of the gross proceeds
(with proceeds other than cash or Cash Equivalents being valued at the fair
market value thereof as determined by the Board of Directors of Anvil in
good faith) actually received by Anvil or any of its Restricted Subsidiaries
in connection with such disposition; and
(xi) the incurrence by a Securitization Entity of Indebtedness in a
Qualified Securitization Transaction that is non-recourse to Anvil or any
Subsidiary of Anvil (except Standard Securitization Undertakings); PROVIDED,
HOWEVER, that the amount of Indebtedness outstanding under clause (i) above
and this clause (xi) shall not in the aggregate exceed $55.0 million at any
time outstanding (or in the event of a refinancing of the Indebtedness under
the New Credit Agreement, the greater of $55.0 million or the Borrowing
Base).
Notwithstanding any other provision of this covenant, a guarantee of
Indebtedness permitted by the terms of the Senior Indenture at the time such
Indebtedness was incurred will not constitute a separate incurrence of
Indebtedness.
SALE AND LEASEBACK TRANSACTIONS
The Senior Indenture provides that Anvil will not, and will not permit any
of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; PROVIDED that Anvil or any Subsidiary Guarantor may enter into a
sale and leaseback transaction if (i) Anvil or such Subsidiary Guarantor could
have (a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant
"--Incurrence of Additional Indebtedness and Issuance of Preferred Stock" and
(b) incurred a Lien to secure such Indebtedness pursuant to the covenant
"Liens," (ii) the net cash proceeds of such sale and leaseback transaction are
at least equal to the fair market value (as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the proceeds of such transaction are applied in
compliance with, the covenant under "Repurchase at the Option of Holders--Asset
Sales."
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LIENS
The Senior Indenture provides that Anvil will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Senior Indenture provides that Anvil will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i) (a) pay dividends or make any
other distributions to Anvil or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any Indebtedness owed to Anvil or any of
its Restricted Subsidiaries, (ii) make loans or advances to Anvil or any of its
Restricted Subsidiaries or (iii) transfer any of its properties or assets to
Anvil or any of its Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the date of the Senior Indenture, (b) the New Credit Agreement as in
effect as of the date of the Senior Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof; PROVIDED, that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the New Credit
Agreement as in effect on the date of the Senior Indenture, (c) the Senior
Indenture and the Senior Notes, (d) the Senior Preferred Stock, the Certificate
of Designation, the Exchange Debentures and the Exchange Debenture Indenture,
(e) applicable law, (f) any instrument governing Acquired Indebtedness or
Capital Stock of a Person acquired by Anvil or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Acquired Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired; PROVIDED that the Consolidated
EBITDA of such Person is not taken into account in determining whether such
acquisition was permitted by the terms of the Senior Indenture, (g) by reason of
customary non-assignment provisions in leases and licenses entered into in the
ordinary course of business and consistent with past practices, (h) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (i) agreements relating to the financing of the
acquisition of real or tangible personal property acquired after the date of the
Senior Indenture; PROVIDED, that such encumbrance or restriction relates only to
the property which is acquired and in the case of any encumbrance or restriction
that constitutes a Lien, such Lien constitutes a Purchase Money Lien, (j) any
restriction or encumbrance contained in contracts for sale of assets permitted
by the Senior Indenture in respect of the assets being sold pursuant to such
contract, or (k) Indebtedness or other contractual requirements of a
Securitization Entity in connection with a Qualified Securitization Transaction;
PROVIDED that such restrictions apply only to such Securitization Entity.
TRANSACTIONS WITH AFFILIATES
The Senior Indenture provides that Anvil will not, and will not permit any
of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of
any of its properties or assets to, or purchase any property or assets from, or
enter into or make any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less favorable to Anvil or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by Anvil or such
Restricted Subsidiary with an unrelated Person and (ii) Anvil delivers to the
Trustee (a) with respect to any Affiliate Transaction entered into after the
date of the Senior Indenture involving aggregate
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consideration in excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors
and (b) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $5.0 million, an opinion as to the fairness to Anvil
or such Restricted Subsidiary of such Affiliate Transaction from a financial
point of view issued by an investment banking firm of national standing;
PROVIDED that the following will not be deemed to be Affiliate Transactions: (p)
reasonable fees and compensation paid to, and indemnity provided on behalf of,
officers and directors of Holdings, Anvil or any Restricted Subsidiary as
determined in good faith by the appropriate Board of Directors or senior
management; (q) the provision of administrative or management services by Anvil
or any of its officers to Holdings or any of its Restricted Subsidiaries in the
ordinary course of business consistent with past practice; (r) transactions
between Anvil or one or more of its Restricted Subsidiaries and the relevant
Securitization Entity effected as part of a Qualified Securitization
Transaction; (s) any agreement as in effect as of the date of the Senior
Indenture (including, without limitation, the New Credit Agreement) or any
amendment thereto or any transactions contemplated thereby (including pursuant
to any amendment thereto) and any replacement agreement thereto so long as any
such amendment or replacement agreement is not more disadvantageous to the
Holders of Senior Notes in any material respect than the original agreement as
in effect on the date of the Senior Indenture; (t) payments or loans to
employees or consultants which are approved by the Board of Directors of Anvil
in good faith; (u) the existence of, or the performance by Anvil or any of its
Restricted Subsidiaries of its obligations under the terms of, any stockholders
agreement (including any registration rights agreement or purchase agreement
related thereto) to which it is a party as of the date of the Senior Indenture
and any similar agreement which it may enter into thereafter; PROVIDED, HOWEVER,
that the existence of, or the performance by Anvil or any of its Restricted
Subsidiaries of obligations under any similar agreement entered into after the
date of the Senior Indenture shall only be permitted by this clause (u) to the
extent that the terms of any such new agreement are not otherwise
disadvantageous to the Holders of the Senior Notes in any material respect; (v)
transactions with customers, clients, suppliers, joint venture partners or
purchasers or sellers of goods or services, in each case in the ordinary course
of business (including, without limitation, pursuant to joint venture
agreements) and otherwise in compliance with the terms of the Senior Indenture
which are at least as favorable as might reasonably have been obtained at such
time from an unaffiliated party; (w) any employment agreement entered into by
Anvil or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of Anvil or such Restricted Subsidiary
(including, without limitation, any such employment agreements entered into
prior to the date of the Senior Indenture), (x) transactions between or among
Anvil and/or its Wholly Owned Subsidiaries, (y) (i) the payment of customary
management, consulting and advisory fees and related expenses to 399 Venture and
BRS and their Affiliates not to exceed an aggregate of $750,000 per year and
(ii) payments by Anvil or any of its Restricted Subsidiaries to 399 Venture and
BRS and their Affiliates made pursuant to any financial advisory, financing,
underwriting or placement agreement or in respect of other investment banking
activities, including, without limitation, in connection with acquisitions or
divestitures which are approved by the Board of Directors of Anvil, Holdings or
such Restricted Subsidiary in good faith not to exceed an aggregate of $750,000
per year; and (z) transactions permitted by the covenant described in "--
Restricted Payments."
LINE OF BUSINESS
Anvil will not, and will not permit any Restricted Subsidiary to, engage in
any line of business which is not the same, similar, ancillary, complementary or
related to the businesses in which Anvil is engaged on the date of the Senior
Indenture.
ADDITIONAL SUBSIDIARY GUARANTEES
The Senior Indenture provides that all Restricted Subsidiaries of Anvil
substantially all of whose assets are located in the United States or that
conduct substantially all of their business in the United
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States will be Subsidiary Guarantors. In addition, the Senior Indenture provides
that Anvil will not, and will not permit any of the Subsidiary Guarantors to,
make any Investment in any Subsidiary that is not a Subsidiary Guarantor unless
either (i) such Investment is permitted by the covenant described under "--
Restricted Payments," or (ii) such Restricted Subsidiary executes a Subsidiary
Guarantee and delivers an opinion of counsel in accordance with the provisions
of the Senior Indenture.
REPORTS
The Senior Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Senior Notes are outstanding,
Holdings will furnish to the Holders of Senior Notes, within 15 days after it is
or would have been required to file such with the Commission, (i) all quarterly
and annual financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if Holdings was required to
file such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual information
only, reports thereon by the certified independent accountants of Holdings and
(ii) all current reports that would be required to be filed with the Commission
on Form 8-K if Holdings was required to file such reports. In addition, whether
or not required by the rules and regulations of the Commission, Holdings will
file copies of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, Holdings and Anvil have agreed, and the Subsidiary
Guarantors, if any, will agree, that, for so long as any Senior Notes remain
outstanding, they will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Senior Indenture provides that Anvil shall not, in a single transaction
or series of related transactions, consolidate or merge with or into (whether or
not Anvil is the surviving corporation), or directly and/or indirectly through
its Restricted Subsidiaries sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets determined on a
consolidated basis for Anvil and its Restricted Subsidiaries taken as a whole in
one or more related transactions, to another corporation, Person or entity
unless (i) Anvil is the surviving corporation or the entity or the Person formed
by or surviving any such consolidation or merger (if other than Anvil) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
Anvil) or the entity or Person to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made assumes all the obligations
of Anvil, under the Senior Notes and the Senior Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; (iv)
Anvil or the entity or Person formed by or surviving any such consolidation or
merger (if other than Anvil), or to which such sale, assignment, transfer,
lease, conveyance or other disposition will have been made (A) will have
Consolidated Net Worth immediately after the transaction equal to or greater
than the Consolidated Net Worth of Anvil immediately preceding the transaction
and (B) will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "--Incurrence
of Indebtedness and Issuance of Preferred Stock"; and (v) Anvil delivers to the
Trustee an Officers' Certificate and an Opinion of Counsel addressed to the
Trustee with respect to the foregoing matters; PROVIDED, HOWEVER, that the
requirement set forth in clause (iv) above shall not apply to a merger between
Anvil and any Wholly Owned Subsidiary or to any merger between Wholly Owned
Subsidiaries.
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EVENTS OF DEFAULT AND REMEDIES
The Senior Indenture provides that each of the following constitutes an
Event of Default: (i) default for 30 days in the payment when due of interest
on, or Liquidated Damages with respect to, the Senior Notes; (ii) default in
payment when due of the principal of or premium, if any, on the Senior Notes;
(iii) failure by Anvil to comply with the provisions described under the
captions "--Change of Control," "-- Asset Sales," "--Restricted Payments,"
"--Incurrence of Indebtedness and Issuance of Preferred Stock," "--Sale and
Leaseback Transactions" or "--Merger, Consolidation or Sale of Assets"; (iv)
failure by Anvil for 60 days after notice to comply with any of its other
agreements in the Senior Indenture or the Senior Notes; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by Anvil
or any of its Restricted Subsidiaries or Holdings (or the payment of which is
guaranteed by Anvil or any of its Restricted Subsidiaries or Holdings) whether
such Indebtedness or guarantee now exists, or is created after the date of the
Senior Indenture, which default (a) is caused by a failure to pay principal of
or premium, if any, or interest on such Indebtedness prior to the expiration of
the grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more; (vi) failure by Anvil or any of
its Restricted Subsidiaries or Holdings to pay final judgments aggregating in
excess of $3.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; (vii) except as permitted by the Senior Indenture, any
Subsidiary Guarantee will be held in any judicial proceeding to be unenforceable
or invalid or will cease for any reason to be in full force and effect or any
Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary
Guarantor, will deny or disaffirm its obligations under its Subsidiary
Guarantee; (viii) the Guarantee will be held in any judicial proceeding to be
unenforceable or invalid or will cease for any reason to be in full force and
effect or Holdings, or any Person acting on behalf of Holdings, will deny or
disaffirm its obligations under the Guarantee; and (ix) certain events of
bankruptcy or insolvency with respect to Holdings, Anvil or any of its
Significant Subsidiaries or group of Restricted Subsidiaries that, together,
would constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Senior Notes may
declare all the Senior Notes to be due and payable immediately. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to Holdings, Anvil, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Senior Notes will become due and payable
without further action or notice. Holders of the Senior Notes may not enforce
the Senior Indenture or the Senior Notes except as provided in the Senior
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest) if
it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Senior Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of Default and its
consequences under the Senior Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, premium and
Liquidated Damages, if any, on the Senior Notes.
Anvil is required to deliver to the Trustee annually a statement regarding
compliance with the Senior Indenture, and Anvil is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Anvil, as
such, will have any liability for any obligations of Anvil under the Senior
Notes, the Senior Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Senior Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Senior Notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Anvil may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Senior Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Senior Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Senior Notes when such payments are due from the
trust referred to below, (ii) Anvil's obligations with respect to the Senior
Notes concerning issuing temporary Senior Notes, registration of Senior Notes,
mutilated, destroyed, lost or stolen Senior Notes and the maintenance of an
office or agency for payment and money for security payments held in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee, and
Anvil's obligations in connection therewith and (iv) the Legal Defeasance
provisions of the Senior Indenture. In addition, Anvil may, at its option and at
any time, elect to have the obligations of Anvil released with respect to
certain covenants that are described in the Senior Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations will
not constitute a Default or Event of Default with respect to the Senior Notes.
In the event Covenant Defeasance occurs, certain events (not including
nonpayment, bankruptcy, receivership, rehabilitation and insolvency events)
described under "Events of Default" will no longer constitute an Event of
Default with respect to the Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
Anvil must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Senior Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages on
the outstanding Senior Notes on the stated maturity or on the applicable
redemption date, as the case may be, and Anvil must specify whether the Senior
Notes are being defeased to maturity or to a particular redemption date; (ii) in
the case of Legal Defeasance, Anvil will have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) Anvil has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Senior Indenture,
there has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such opinion of counsel will confirm that,
the Holders of the outstanding Senior Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance had
not occurred; (iii) in the case of Covenant Defeasance, Anvil will have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Senior
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such Covenant Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default will have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Senior Indenture) to which
Anvil or any of its Subsidiaries is a party or by which Anvil or any of its
Subsidiaries is bound (including, without
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limitation, the New Credit Agreement); (vi) Anvil must have delivered to the
Trustee an opinion of counsel to the effect that on the 91st day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (vii) Anvil must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by Anvil with the intent of
preferring the Holders of Senior Notes over the other creditors of Anvil with
the intent of defeating, hindering, delaying or defrauding creditors of Anvil or
others; and (viii) Anvil must deliver to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions precedent provided
for relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Senior Notes in accordance with the Senior
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and Anvil may
require a Holder to pay any taxes and fees required by law or permitted by the
Senior Indenture. Anvil is not required to transfer or exchange any Note
selected for redemption. Also, Anvil is not required to transfer or exchange any
Note for a period of 15 days before a selection of Senior Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Senior
Indenture or the Senior Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the Senior Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for Senior Notes), and any existing default or compliance with
any provision of the Senior Indenture or the Senior Notes may be waived with the
consent of the Holders of a majority in principal amount of the then outstanding
Senior Notes (including consents obtained in connection with a tender offer or
exchange offer for Senior Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Senior Notes held by a non-consenting Holder): (i) reduce
the principal amount of Senior Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the Senior
Notes (other than provisions relating to the covenants described above under the
caption "-- Repurchase at the Option of Holders"), (iii) reduce the rate of or
change the time for payment of interest on any Note, (iv) waive a Default or
Event of Default in the payment of principal of or premium, if any, or interest
on the Senior Notes (except a rescission of acceleration of the Senior Notes by
the Holders of at least a majority in aggregate principal amount of the Senior
Notes and a waiver of the payment default that resulted from such acceleration),
(v) make any Note payable in money other than that stated in the Senior Notes,
(vi) make any change in the provisions of the Senior Indenture relating to
waivers of past Defaults or the rights of Holders of Senior Notes to receive
payments of principal of or premium, if any, or interest on the Senior Notes,
(vii) waive a redemption payment with respect to any Note or (viii) make any
change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Senior
Notes, Anvil and the Trustee may amend or supplement the Senior Indenture or the
Senior Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Senior Notes in addition to or in place of certificated Senior
Notes, to provide for the assumption of Anvil's obligations to Holders of Senior
Notes in the case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of Senior Notes or that
does not adversely affect the legal rights under the Senior Indenture of any
such Holder, or to comply with requirements of the Commission in order to effect
or maintain the qualification of the Senior Indenture under the Trust Indenture
Act.
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CONCERNING THE TRUSTEE
The Senior Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of Anvil, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Senior
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Senior Indenture provides that in case an Event of
Default will occur (which will not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Senior
Indenture at the request of any Holder of Senior Notes, unless such Holder will
have offered to the Trustee security and indemnity satisfactory to it against
any loss, liability or expense.
BOOK-ENTRY, DELIVERY AND FORM
GLOBAL NOTES
Except as set forth in the next paragraph, the New Senior Notes will
initially be issued in the form of one or more Global Notes (collectively, the
"Global Note"). The Global Note will be deposited upon issuance (the "Closing
Date") with, or on behalf of, Depositary and registered in the name of Cede &
Co., as nominee of the Depositary (such nominee being referred to herein as the
"Global Note Holder").
Senior Notes that were issued as described below under "--Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Such Certificated Securities may, unless the
Global Note has previously been exchanged for Certificated Securities, be
exchanged by a QIB for an interest in the Global Note representing the principal
amount of Senior Notes being transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers, banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, the "Indirect Participants" or the
"Depositary's Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by or on behalf of the
Depositary only through the Depositary's Participants or the Depositary's
Indirect Participants.
Anvil expects that pursuant to procedures established by the Depositary (i)
upon deposit of the Global Note, the Depositary will credit the accounts of
Participants designated by the Exchange Agent with portions of the principal
amount of the Global Note and (ii) ownership of the Senior Notes evidenced by
the Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by the Depositary (with respect to the
interests of the Depositary's Participants), the Depositary's Participants and
the Depositary's Indirect Participants. Prospective investors are advised that
the laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer Senior Notes evidenced by the Global Note will be limited to such
extent.
So long as the Global Note Holder is the registered owner of any Senior
Notes, the Global Note Holder will be considered the sole Holder under the
Senior Indenture of any Senior Notes evidenced by
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the Global Note. Beneficial owners of Senior Notes evidenced by the Global Note
will not be considered the owners or Holders thereof under the Senior Indenture
for any purpose, including with respect to the giving of any directions,
instructions or approvals to the Trustee thereunder. Neither Anvil nor the
Trustee will have any responsibility or liability for any aspect of the records
of the Depositary or for maintaining, supervising or reviewing any records of
the Depositary relating to the Senior Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Senior Notes registered in the name of the
Global Note Holder on the applicable record date will be payable by the Trustee
to or at the direction of the Global Note Holder in its capacity as the
registered Holder under the Senior Indenture. Under the terms of the Senior
Indenture, Anvil and the Trustee may treat the persons in whose names Senior
Notes, including the Global Note, are registered as the owners thereof for the
purpose of receiving such payments. Consequently, neither Anvil nor the Trustee
has or will have any responsibility or liability for the payment of such amounts
to beneficial owners of Senior Notes. Anvil believes, however, that it is
currently the policy of the Depositary to immediately credit the accounts of the
relevant Participants with such payments, in amounts proportionate to their
respective holdings of beneficial interests in the relevant security as shown on
the records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Senior Notes will
be governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, investors may receive Certificated
Securities. In addition, if (i) Anvil notifies the Trustee in writing that the
Depositary is no longer willing or able to act as a depositary and Anvil is
unable to locate a qualified successor within 90 days or (ii) Anvil, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
Certificated Securities, then, upon surrender by the Global Note Holder of its
Global Note, Certificated Securities will be issued to each person that the
Global Note Holder and the Depositary identify as being the beneficial owner of
the related Senior Notes.
Neither Anvil nor the Trustee will be liable for any delay by the Global
Note Holder or the Depositary in identifying the beneficial owners of Senior
Notes and Anvil and the Trustee may conclusively rely on, and will be protected
in relying on, instructions from the Global Note Holder or the Depositary for
all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Senior Indenture requires that payments in respect of the Senior Notes
represented by the Global Note (including principal, premium, if any, interest
and Liquidated Damages, if any) be made by wire transfer of immediately
available funds to the accounts specified by the Global Note Holder. With
respect to Certificated Securities, Anvil will make all payments of principal,
premium, if any, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. Secondary trading in long-term notes and debentures of
corporate issuers is generally settled in clearing-house or next-day funds. In
contrast, the New Senior Notes represented by the Global Note are expected to
trade in the Depositary's Same-Day Funds Settlement System, and any permitted
secondary market trading activity in such Senior Notes will, therefore, be
required by the Depositary to be settled in immediately available funds. Anvil
expects that secondary trading in the Certificated Securities will also be
settled in immediately available funds.
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Holders of Senior Notes will be required to make certain representations to
Anvil (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Senior Notes
included in the Shelf Registration Statement.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Senior Indenture and
the foregoing summary of the terms of the Senior Notes. Reference is made to the
Senior Indenture for a full disclosure of all such terms, as well as any other
capitalized terms used herein for which no definition is provided.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary or is designated a Restricted
Subsidiary of such specified Person, including, without limitation, Indebtedness
incurred in connection with, or in contemplation of, such other Person merging
with or into or becoming a Subsidiary or Restricted Subsidiary of such specified
Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired
by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, which correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback,
including any disposition by means of a merger, consolidation or similar
transaction and including the issuance, sale or other transfer of any of the
capital stock of any Restricted Subsidiary of such person) other than to Anvil
or to any of its Wholly Owned Subsidiaries (including the receipt of proceeds of
insurance paid on account of the loss of or damage to any asset and awards of
compensation for any asset taken by condemnation, eminent domain or similar
proceeding, and including the receipt of proceeds of business interruption
insurance); and (ii) the issuance of Equity Interests in any Restricted
Subsidiaries or the sale of any Equity Interests in any Restricted Subsidiaries,
in each case, in one or a series of related transactions, PROVIDED, that
notwithstanding the foregoing, the term "Asset Sale" shall not include: (a) the
sale, lease, conveyance, disposition or other transfer of all or substantially
all of the assets of Anvil, as permitted pursuant to the covenant described
under "Merger, Consolidation or Sale of Assets," (b) the sale or lease of
equipment, inventory, accounts receivable or other assets in the ordinary course
of business consistent with past practice, (c) a transfer of assets by Anvil to
a Wholly Owned Subsidiary that is a Subsidiary Guarantor or by a Wholly Owned
Subsidiary that is a Subsidiary Guarantor to Anvil or to another Wholly Owned
Subsidiary that is a Subsidiary Guarantor, or by a Wholly Owned Subsidiary that
is not a Subsidiary Guarantor to another Wholly Owned Subsidiary that is not a
Subsidiary Guarantor, (d) an issuance of Equity Interests by a Wholly Owned
Subsidiary to Anvil or to another Wholly Owned Subsidiary that is a Subsidiary
Guarantor, or by a Wholly Owned Subsidiary that is not a Subsidiary Guarantor to
another Wholly Owned Subsidiary that is not a Subsidiary Guarantor, (e) the
surrender or waiver of contract rights or the settlement, release or surrender
of contract, tort or other claims of any kind, (f) the grant in the ordinary
course of business of any non-exclusive license of patents, trademarks,
registrations therefor and other similar intellectual property, (g) Permitted
Investments or (h) any cash dividend, distribution, Investment or payment made
pursuant to the first or second paragraph of the "Restricted Payments" covenant.
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"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of interest
implicit in such transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended).
"BOARD OF DIRECTORS" means the Board of Directors of Anvil, or any
authorized committee of the Board of Directors.
"BORROWING BASE" means, as of any date, an amount equal to the sum of (i)
85% of all Eligible Receivables, (ii) 60% of all Eligible Raw Materials
Inventory, (iii) 50% of Eligible Finished Goods Inventory and (iv) 50% of the
fair market value or, if acquired after the date of the Senior Indenture, the
acquisition cost, of appraised equipment and real property owned by Anvil and
its Restricted Subsidiaries, or such lesser amount as may then constitute the
"Borrowing Base" under the New Credit Agreement.
"BRS" means Bruckmann, Rosser, Sherrill & Co., L.P.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities no more than twelve
months from the date of acquisition, (b) U.S. dollar denominated (or foreign
currency fully hedged) time deposits, certificates of deposit, Eurodollar time
deposits or Eurodollar certificates of deposit of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of $100.0
million or (ii) any bank whose short-term commercial paper rating from S&P is at
least A-1 or the equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank being an "Approved Lender"), in each case with
maturities of not more than twelve months from the date of acquisition, (c)
commercial paper and variable or fixed rate notes issued by any Approved Lender
(or by the parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation rated A-2 (or the equivalent thereof) or
better by S&P or P-2 (or the equivalent thereof) or better by Moody's and
maturing within twelve months of the date of acquisition, (d) repurchase
agreements with a bank or trust company or recognized securities dealer having
capital and surplus in excess of $100.0 million for direct obligations issued by
or fully guaranteed by the United States of America in which Anvil shall have a
perfected first priority security interest (subject to no other Liens) and
having, on the date of purchase thereof, a fair market value of at least 100% of
the amount of repurchase obligations, and (e) interests in money market mutual
funds which invest solely in assets or securities of the type described in
subparagraphs (a), (b), (c) or (d) hereof.
"CHANGE OF CONTROL" means such time as (i) prior to the initial public
offering by Anvil or any direct or indirect parent of Anvil of its common stock
(other than a public offering pursuant to a registration statement on Form S-8),
Permitted Holders cease to have, directly or indirectly, in the aggregate at
least 51% of the voting power of the voting stock of Anvil or Holdings or any
other direct or indirect parent of Holdings ceases to own, directly or
indirectly, 100% of the voting power of the voting stock of Anvil (other
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than by reason of a merger of Holdings and Anvil) or (ii) after the initial
public offering by Anvil or any direct or indirect parent of Anvil of its common
stock (other than a public offering pursuant to a registration statement on Form
S-8), (A) any Schedule 13D, Form 13F or Schedule 13G under the Exchange Act, or
any amendment to such Schedule or Form, is received by Anvil or Holdings which
indicates that, or Anvil or Holdings otherwise becomes aware that, a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
has become, directly or indirectly, the "beneficial owner," by way of merger,
consolidation or otherwise, of 40% or more of the voting power of the voting
stock of Anvil or Holdings on a fully-diluted basis after giving effect to the
conversion and exercise of all outstanding warrants, options and other
securities of Anvil or Holdings, as the case may be (whether or not such
securities are then currently convertible or exercisable) and (B) such person or
group has become, directly or indirectly, the beneficial owner of a greater
percentage of the voting capital stock of Anvil, calculated on such
fully-diluted basis, than beneficially owned by the Permitted Holders, or (iii)
the sale, lease or transfer of all or substantially all of the assets of Anvil
to any person or group (other than the Permitted Holders or a Subsidiary
Guarantor), or (iv) during any period of two consecutive calendar years,
individuals who at the beginning of such period constituted the Board of
Directors of Anvil or Holdings (together with any new directors whose election
by the Board of Directors of Anvil or Holdings or whose nomination for election
by the shareholders of Anvil or Holdings, as the case may be, was approved by a
vote of a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved or was approved by the Permitted Holders)
cease for any reason to constitute a majority of the directors of Anvil or
Holdings, as the case may be, then in office.
"COMMISSION" means the Securities and Exchange Commission.
"CONSOLIDATED EBITDA" means, with respect to Anvil and its Restricted
Subsidiaries for any period, the sum of, without duplication, (i) the
Consolidated Net Income for such period, plus (ii) to the extent deducted from
Consolidated Net Income for such period, (x) the Fixed Charges for such period,
plus (y) non-cash dividends on Anvil's preferred stock, plus (iii) provision for
taxes based on income or profits for such period (to the extent such income or
profits were included in computing Consolidated Net Income for such period),
plus (iv) consolidated depreciation, amortization and other non-cash charges of
Anvil and its Restricted Subsidiaries required to be reflected as expenses on
the books and records of Anvil, minus (v) cash payments with respect to any
nonrecurring, non-cash charges previously added back pursuant to clause (iv),
and (vi) excluding the impact of foreign currency translations. Notwithstanding
the foregoing, the provision for taxes based on the income or profits of, and
the depreciation and amortization and other non-cash charges of, a Restricted
Subsidiary of a Person shall be added to Consolidated Net Income to compute
Consolidated EBITDA only to the extent that the Net Income of such Restricted
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to Anvil by such Restricted Subsidiary without
prior approval (that has not been obtained), pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to that Restricted Subsidiary or
its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Subsidiary
thereof that is a Subsidiary Guarantor, (ii) the Net Income of, or any dividends
or other distributions from, any Unrestricted Subsidiary, to the extent
otherwise included, shall be excluded, whether or not distributed to Anvil or
one of its Restricted Subsidiaries, (iii) the Net Income of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination
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permitted without any prior governmental approval (which has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, (iv)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, (v) the
cumulative effect of a change in accounting principles shall be excluded, (vi)
income or loss attributable to discontinued operations shall be excluded; (vii)
any increase in cost of sales or other write-offs resulting from the purchase
accounting treatment of any acquisitions shall be excluded; and (viii) all other
extraordinary, unusual or nonrecurring gains or losses shall be excluded.
"CONSOLIDATED NET WORTH" of a Person at any date means the amount by which
the assets of such Person and its consolidated Restricted Subsidiaries (less any
revaluation or other write-up subsequent to the date of the Senior Indenture in
any such assets (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern business made
within twelve months after the acquisition of such business)) exceed the sum of
(a) the total liabilities of such Person and its consolidated Restricted
Subsidiaries, plus (b) any Disqualified Stock of such Person or any consolidated
Restricted Subsidiaries of such Person issued to any Person other than such
Person or a Wholly Owned Subsidiary of such Person, in each case determined in
accordance with GAAP.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DEPOSITARY" means, with respect to the Senior Notes issuable or issued in
whole or in part in global form, the Person specified in the Senior Indenture as
the Depositary with respect to the Senior Notes, until a successor shall have
been appointed and become such Depositary pursuant to the applicable provision
of the Senior Indenture, and, thereafter, "Depositary" shall mean or include
such successor.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
on which is 91 days after the date that the Senior Notes mature.
"ELIGIBLE FINISHED GOODS INVENTORY" means, as of any date of determination,
the gross dollar value (valued at the lower of cost or fair market value (on a
first-in, first-out basis)) of all finished goods inventory (including for
purposes hereof, finished goods inventory which is in transit back to Anvil or
any Subsidiary Guarantor) of Anvil or any Subsidiary Guarantor less appropriate
reserves determined in accordance with GAAP applied on a consistent basis but
excluding in any event and without duplication, to the extent not treated
accordingly by GAAP, (i) inventory subject to any Lien (other than a Permitted
Lien), (ii) inventory which fails to meet standards for sale or use imposed by
governmental agencies, departments or divisions having regulatory authority over
such goods, (iii) inventory which is not useable or saleable at prices
approximating their cost (after taking into account, without duplication, the
amount of any reserves for obsolescence, unsaleability or decline in value),
(iv) inventory located outside of the United States (unless in transit back to
Anvil or any Subsidiary Guarantor), (v) inventory in the possession of domestic
contractors (other than Anvil or any Subsidiary Guarantor) or other third
parties, and (vi) all work in process.
"ELIGIBLE RAW MATERIALS INVENTORY" means, as of any date of determination,
the gross dollar value (valued at the lower of cost or fair market value (on a
first-in, first-out basis)) of all raw materials (including for purposes hereof,
uncut dyed or greige cloth) of Anvil or any Subsidiary Guarantor less
appropriate reserves determined in accordance with GAAP applied on a consistent
basis but excluding in any event, to the extent not treated accordingly by GAAP
and without duplication, (i) inventory subject to any Lien (other than a
Permitted Lien), (ii) inventory which fails to meet standards for sale or use
imposed
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by governmental agencies, departments or divisions having regulatory authority
over such goods, (iii) inventory which is not useable or saleable at prices
approximating their cost (after taking into account, without duplication, the
amount of any reserves for obsolescence, unsaleability or decline in value),
(iv) inventory located outside of the United States (unless in transit back to
Anvil or any Subsidiary Guarantor), (v) inventory in the possession of domestic
contractors (other than Anvil or any Subsidiary Guarantor) or other third
parties, and (vi) all work in process (except uncut dyed or greige cloth).
"ELIGIBLE RECEIVABLES" means, as of any date of determination, the aggregate
gross amount of all accounts receivable, receivables and obligations for payment
created or arising from the sale of inventory or the rendering of services in
the ordinary course of business, owned by or owing to Anvil or any Subsidiary
Guarantor, net of allowances and reserves for doubtful or uncollectible accounts
and sales adjustments consistent with Anvil's internal policies and in any event
in accordance with GAAP applied on a consistent basis, (hereinafter sometimes
referred to collectively as "Receivables"), but excluding, without duplications
in any event (i) Receivables subject to a Lien (other than a Permitted Lien),
(ii) Receivables which are outstanding more than 90 days from the due date of
the original invoice or more than 180 days from the date of shipment, (iii)
Receivables evidenced by notes, chattel paper or other instruments, unless such
notes, chattel paper or instruments have been delivered to and are in the
possession of such parties as may be specified in the New Credit Agreement, (iv)
Receivables with respect to which the account debtor is not solvent or is the
subject of a bankruptcy or insolvency proceedings of any kind, (v) Receivables
owing by an account debtor located outside of the United States (unless payment
for the goods shipped is secured by an irrevocable letter of credit in a form
and from an institution acceptable to such parties as may be specified in the
New Credit Agreement), (vi) Receivables which are contingent or subject to
offset, deduction, counterclaim, dispute or other defense to payment, in each
case to the extent of such offset, deduction, counterclaim dispute or other
defense, and (vii) Receivables arising out of transactions with Subsidiaries or
Affiliates of Anvil.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE OFFER" means the offer that may be made by Anvil pursuant to the
Registration Rights Agreement to exchange New Senior Notes for Senior Notes.
"EXISTING INDEBTEDNESS" means the Indebtedness of Anvil and its Restricted
Subsidiaries (other than Indebtedness under the New Credit Agreement) in
existence on the date of the Senior Indenture, until such amounts are repaid.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), and (ii) the consolidated interest expense of such
Person and its Restricted Subsidiaries that was capitalized during such period,
and (iii) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such guarantee or Lien is called upon), and (iv) the product of (a) all cash
dividend payments (and non-cash dividend payments in the case of a Person that
is a Restricted Subsidiary) on any series of preferred stock of such Person
payable to a party other than Anvil or a Wholly Owned Subsidiary, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, on a consolidated basis and in accordance
with
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GAAP, but excluding from the calculation of fixed charges amortization of
financing costs (except to the extent referred to in the parenthetical in clause
(i) of this definition).
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person and its Restricted
Subsidiaries for such period to the Fixed Charges of such Person and its
Restricted Subsidiaries for such period. In the event that Anvil or any of its
Restricted Subsidiaries incurs, assumes, guarantees or repays any Indebtedness
(other than the incurrence or repayment of revolving credit borrowings used for
working capital, except to the extent that a repayment is accompanied by a
permanent reduction in revolving credit commitments) or issues preferred stock
subsequent to the commencement of the four-quarter reference period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. For purposes of making the computation referred to above, (i)
acquisitions that have been made by Anvil or any of its Restricted Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and shall give
pro forma effect to the Consolidated EBITDA and Indebtedness of the Person which
is the subject of any such acquisition, and (ii) the Consolidated EBITDA
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, and (iii) the Fixed Charges attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Restricted Subsidiaries following the Calculation
Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Senior Indenture.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"HOLDER" means a Person in whose name a Senior Note is registered on the
Registrar's books.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in
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accordance with GAAP, as well as all indebtedness of others secured by a Lien on
any asset of such Person (whether or not such indebtedness is assumed by such
Person), the maximum fixed repurchase price of Disqualified Stock issued by such
Person in each case, if held by any Person other than Anvil or a Wholly Owned
Subsidiary of Anvil, and, to the extent not otherwise included, the guarantee by
such Person of any indebtedness of any other Person.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the books of such Person) or capital
contributions (excluding commission, travel, relocation and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP; provided that an acquisition
of assets, Equity Interests or other securities by Anvil for consideration
consisting of common equity securities of Anvil or of any direct or indirect
parent of Anvil shall not be deemed to be an Investment.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which federal offices
or banking institutions in the City of New York, in the city of the Corporate
Trust Office of the Trustee, or at a place of payment are authorized by law,
regulation or executive order to remain closed. If a payment date is a Legal
Holiday, payment may be made on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"LIQUIDATED DAMAGES" means all liquidated damages owing pursuant to the
Registration Rights Agreement.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, and before reduction for
non-cash preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries, (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by Anvil or any of
its Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP and net of any Purchase
Money Obligations relating to the assets comprising such Asset Sale.
"NEW CREDIT AGREEMENT" means, collectively, (i) that certain Amended and
Restated Credit Agreement, as in effect on the date of the Senior Indenture, by
and among Anvil, Holdings, the lenders that may
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be from time to time parties thereto and NationsBank, N.A., as administrative
agent, as the foregoing may from time to time be amended, renewed, supplemented
or otherwise modified at the option of the parties thereto, including increases
in the principal amount thereof (subject to such increases otherwise being in
conformity with the terms of the Senior Indenture) and (ii) after NationsBank,
N.A., as administrative agent, has acknowledged in writing that the Credit
Agreement described in clause (i) above has been terminated and all then
outstanding Indebtedness thereunder or with respect thereto have been repaid in
full in cash and discharged, any successors to or replacements of (as designated
by the Board of Directors of Anvil in its sole judgment, and evidenced by a
resolution) such Credit Agreement, as such successors or replacements may from
time to time be amended, renewed, supplemented, modified or replaced, including
increases in the principal amount thereof (subject to such increases otherwise
being in conformity with the terms of the Senior Indenture).
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither Anvil nor any
of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of Anvil or
any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of Anvil or
any of its Restricted Subsidiaries.
"NOTE CUSTODIAN" means the Trustee, as custodian with respect to the Global
Notes, or any successor entity thereto.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICER" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice President of such Person.
"PERMITTED HOLDERS" means, collectively, (i) BRS and its Affiliates, and
their respective employees and directors, (ii) 399 Venture and its Affiliates,
and their respective employees and directors, (iii) all full-time executive
officers of Holdings and its Subsidiaries who acquire Capital Stock of Holdings,
and (iv) with respect to any natural persons described in the foregoing clauses
(i) through (iii), (A) any spouse, lineal descendant (including by adoption and
stepchildren), or sibling of such natural persons and (B) any trust,
corporation, limited liability company or partnership, the beneficiaries,
members, stockholders or partners of which consist entirely of such natural
persons or the individuals described in clause (A) above.
"PERMITTED INVESTMENTS" means (a) any Investments in Anvil or in a Wholly
Owned Subsidiary of Anvil that is a Subsidiary Guarantor and that is engaged in
the same or a similar line of business as Anvil and its Restricted Subsidiaries
were engaged in on the date of the Senior Indenture and reasonable extensions or
expansions thereof; (b) any Investments in Cash Equivalents; (c) Investments by
Anvil or any Restricted Subsidiary of Anvil in a Person if as a result of such
Investment (i) such Person becomes a Wholly Owned Subsidiary of Anvil that is a
Subsidiary Guarantor that is engaged in the same or a similar line of business
as Anvil and its Restricted Subsidiaries were engaged in on the date of the
Senior Indenture and reasonable extensions or expansions thereof or (ii) such
Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, Anvil or a
Wholly Owned Subsidiary of Anvil that is a Subsidiary Guarantor and that is
engaged in the same or a similar line of business as Anvil and its Restricted
Subsidiaries were engaged in on the date of the Senior Indenture and reasonable
extensions or expansions thereof; (d) Investments made as a result of the
receipt of non-
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cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described under "--Asset Sales"; (e) Investments by
Anvil or any Restricted Subsidiary in cash in an aggregate amount not to exceed
$5.0 million outstanding at any one time; (f) stock, obligations or securities
received in settlement of debts created in the ordinary course of business and
owing to Anvil or any Subsidiary or in satisfaction of judgments or pursuant to
any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of Anvil's trade creditors or customers; (g) the contribution of
shares of stock or other equity securities of an Unrestricted Subsidiary to
another Subsidiary; (h) loans and advances to employees and officers of Anvil
and its Restricted Subsidiaries in the ordinary course of business not to exceed
an aggregate of $1.0 million at any one time outstanding; (i) accounts
receivable created or acquired in the ordinary course of business; (j) currency
agreements and interest swap obligations entered into in the ordinary course of
Anvil's or its Restricted Subsidiaries' businesses and otherwise in compliance
with the Senior Indenture; and (k) any Investment by Anvil or a Wholly Owned
Subsidiary of Anvil in a Securitization Entity or any Investment by a
Securitization Entity in any other Person in connection with a Qualified
Securitization Transaction; provided that any Investment in a Securitization
Entity is in the form of a Purchase Money Note or an Equity Interest.
"PERMITTED LIENS" means (i) Liens securing (a) Indebtedness permitted by
clauses (i), (ii), (iv) or (viii) under the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock" and (b) related Hedging
Obligations; (ii) Liens in favor of Anvil or any Wholly Owned Subsidiary that is
a Subsidiary Guarantor; (iii) Liens on property of a Person existing at the time
such Person is merged into or consolidated with Anvil or any Restricted
Subsidiary of Anvil; PROVIDED that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with Anvil; (iv)
Liens on property of a Person existing at the time such Person becomes a
Restricted Subsidiary of Anvil; (v) Liens on property existing at the time of
acquisition thereof by Anvil or any Restricted Subsidiary of Anvil, PROVIDED
that such Liens were in existence prior to the contemplation of such
acquisition; (vi) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vii) Liens existing on the date of
the Senior Indenture; (viii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded, PROVIDED that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; (ix) carriers',
warehousemen's, mechanics', materialmen's, repairmen's, or other similar Liens
arising in the ordinary course of business which are not overdue for a period of
more than 60 days or which are being contested in good faith by appropriate
proceedings diligently conducted; (x) statutory Liens of landlords or of
mortgagees of landlords arising by operation of law, provided that the rental
payments secured thereby are not yet due and payable; (xi) Liens incurred in the
ordinary course of business of Anvil or any Restricted Subsidiary of Anvil with
respect to obligations that do not exceed $1.5 million at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by Anvil or such Restricted Subsidiary; (xii)
nonconsensual Liens incurred in the ordinary course of business of any foreign
subsidiary that is a Restricted Subsidiary that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances of credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by such Restricted
Subsidiary; (xiii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security; (xiv) easements, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the business of Anvil
or any of its Restricted Subsidiaries; (xv) Purchase Money Liens (including
extensions and renewals thereof); (xvi) judgment and attachment Liens not giving
rise to an Event of Default; (xvii) Liens arising out of consignment or similar
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arrangements for the sale of goods; (xviii) any interest or title of a lessor in
property subject to any capital lease obligation or operating lease; (xix) Liens
arising from filing Uniform Commercial Code financing statements regarding
leases; (xx) Liens encumbering deposits made to secure obligations arising from
statutory or regulatory requirements of Anvil or any of its Restricted
Subsidiaries, including rights of offset and set-off, arising in the ordinary
course of business; (xxi) Liens on assets transferred to a Securitization Entity
or on assets of a Securitization Entity, in either case incurred in connection
with a Qualified Securitization Transaction; and (xxii) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
custom duties in connection with the importation of goods.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of Anvil or any
of its Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of Anvil or any of its Restricted Subsidiaries; provided that: (i)
the principal amount of such Permitted Refinancing Indebtedness does not exceed
the principal amount of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date at least as late as the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Senior Notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the Senior Notes on terms at least as favorable to the
Holders of Senior Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Indebtedness is incurred either by Anvil or by the
Restricted Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company, or other business entity or government or agency or political
subdivision thereof (including any subdivision or ongoing business of any such
entity or substantially all of the assets of any such entity, subdivision or
business).
"PUBLIC EQUITY OFFERING" means an underwritten public offering pursuant to a
registration statement filed with the Commission in accordance with the
Securities Act of (i) Equity Interests other than Disqualified Stock of Anvil or
any successor by merger to Anvil or (ii) of Equity Interests other than
Disqualified Stock of Anvil's parent or indirect parent corporation to the
extent that the cash proceeds therefrom are contributed to the equity capital of
Anvil or are used to purchase Equity Interests (other than Disqualified Stock)
of Anvil.
"PURCHASE MONEY LIEN" means a Lien granted on an asset or property to secure
a Purchase Money Obligation permitted to be incurred under the Senior Indenture
and incurred solely to finance the purchase, or the cost of construction or
improvement, of such asset or property; provided however, that such Lien
encumbers only such asset or property and is granted within 180 days of such
acquisition.
"PURCHASE MONEY NOTE" means a promissory note of a Securitization Entity
evidencing a line of credit, which may be irrevocable, from Anvil or any
Subsidiary of Anvil in connection with a Qualified Securitization Transaction to
a Securitization Entity, which note shall be repaid from cash available to the
Securitization Entity, other than amounts required to be established as reserves
pursuant to agreements, amounts paid to investors in respect of interest,
principal and other amounts owing to such investors and amounts owing to such
investors and amounts paid in connection with the purchase of newly generated
receivables.
"PURCHASE MONEY OBLIGATIONS" of any Person means any obligations of such
Person to any seller or any other Person incurred or assumed to finance the
purchase, or the cost of construction or improvement, of
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real or personal property to be used in the business of such person or any of
its Restricted Subsidiaries in an amount that is not more than 100% of the cost,
or fair market value, as appropriate, of such property, and incurred within 180
days after the date of such acquisition (excluding accounts payable to trade
creditors incurred in the ordinary course of business).
"QUALIFIED SECURITIZATION TRANSACTION" means any transaction or series of
transactions that may be entered into by Anvil or any of its Subsidiaries
pursuant to which Anvil or any or its Subsidiaries may sell, convey or otherwise
transfer to (a) a Securitization Entity (in the case of a transfer by Anvil or
any of its Subsidiaries) and (b) any other Person (in the case of a transfer by
a Securitization Entity), or may grant a security interest in, any accounts
receivable or equipment (whether now existing or arising or acquired in the
future) of Anvil or any of its Subsidiaries, and any assets related thereto
including, without limitation, all collateral securing such accounts receivable
and equipment, all contracts and contract rights and all guarantees or other
obligations in respect of such accounts receivable and equipment, proceeds of
such accounts receivable and equipment and other assets (including contract
rights) which are customarily transferred or in respect of which security
interests are customarily granted in connection with asset securitization
transactions involving accounts receivable and equipment; PROVIDED that such
transaction or transactions are otherwise permitted by the terms of the Senior
Indenture including the provisions set forth under "Repurchase at the Option of
Holders--Asset Sales".
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of the date of the Senior Indenture, by and among Anvil and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"REPRESENTATIVE" means the indenture trustee or other trustee, client or
representative for any senior Indebtedness.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIZATION ENTITY" means a Wholly Owned Subsidiary of Anvil (or another
Person in which Anvil or any Subsidiary of Anvil makes an Investment and to
which Anvil or any Subsidiary of Anvil transfers accounts receivable or
equipment and related assets) which engages in no activities other than in
connection with the financing of accounts receivable or equipment and which is
designated by the Board of Directors of Anvil (as provided below) as a
Securitization Entity (a) no portion of the Indebtedness or any other
obligations (contingent or otherwise) of which (i) is guaranteed by Anvil or any
Subsidiary of Anvil (excluding guarantees of obligations (other than the
principal of, and interest on, Indebtedness) pursuant to Standard Securitization
Undertakings), (ii) is recourse to or obligates Anvil or any Subsidiary of Anvil
in any way other than pursuant to Standard Securitization Undertakings, or (iii)
subjects any property or asset of Anvil or any Subsidiary of Anvil, directly or
indirectly, contingently or otherwise, to the satisfaction thereof other than
pursuant to Standard Securitization Undertakings, (b) with which neither Anvil
nor any Subsidiary of Anvil has any material contract, agreement, arrangement or
understanding other than on terms no less favorable to Anvil or such Subsidiary
than those that might be obtained at the time from Persons that are not
Affiliates of Anvil, other than fees payable in the ordinary course of business
in connection with servicing receivables of such entity, and (c) to which
neither Anvil nor any Subsidiary of Anvil has any obligation to maintain or
preserve such entity's financial condition or cause such entity to
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achieve certain levels of operating results. Any such designation by the Board
of Directors of Anvil shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the resolution of the Board of Directors of Anvil
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing conditions.
"SENIOR NOTE OFFERING" means the offering of the Senior Notes by Anvil.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Exchange Act, as such Regulation is in effect on the date
hereof.
"STANDARD SECURITIZATION UNDERTAKINGS" means representations, warranties,
covenants and indemnities entered into by Anvil or any Subsidiary of Anvil which
are reasonably customary in an accounts receivable or equipment transaction.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"SUBSIDIARY GUARANTORS" means any Restricted Subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of the Senior Indenture,
and their respective successors and assigns.
"399 VENTURE" means 399 Venture Partners, Inc.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 (15 U.S.C.
SectionSection 77aaa-77bbbb) as in effect on the date on which the Senior
Indenture is qualified under the Trust Indenture Act.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with Anvil or any Restricted Subsidiary of Anvil unless the terms
of any such agreement, contract, arrangement or understanding are no less
favorable to Anvil or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of Anvil; (c) is a
Person with respect to which neither Anvil nor any of its Restricted
Subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Equity Interests or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of Anvil or any of its
Restricted Subsidiaries. Any such designation by the Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described under the caption "--Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Senior Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of Anvil as of such date (and, if such Indebtedness is not permitted
to be incurred as of such date under the covenant described under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock," Anvil shall be
in default of such covenant). The Board of Directors of Anvil may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of Anvil of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted under the covenant described under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock," and (ii) no
Default or Event of Default would be in existence following such designation.
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"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Restricted Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person.
Unrestricted Subsidiaries shall not be included in the definition of Wholly
Owned Subsidiary for any purposes of the Senior Indenture.
UNITS
Concurrent with the Initial Offering, Holdings offered Units in the Initial
Units Offering. Each Unit consisted of $1,000 aggregate liquidation preference
of Old Senior Preferred Stock and 13 shares of Class B Common. The Old Senior
Preferred Stock and the Class B Common comprising each Unit were not separately
tradable until the earliest to occur of (i) such date which was 90 days from the
date of issuance of the Old Senior Preferred Stock, (ii) such earlier date as
may be determined by the Initial Purchaser, (iii) in the event of a Change of
Control (as defined in the Certificate of Designation), the date on which
Holdings mails notice thereof to holders of the Senior Preferred Stock, (iv) in
the event that Holdings elects to exchange the Senior Preferred Stock for the
Exchange Debentures, the date on which Holdings mails notice thereof to holders
of the Senior Preferred Stock, (v) in the event that Holdings elects to redeem
the Senior Preferred Stock with the proceeds of a public equity offering of
Holdings' capital stock, the date on which Holdings mails notice thereof to
holders of the Senior Preferred Stock, and (vi) the date upon which a
registration statement under the Securities Act, with respect to a registered
exchange offer for the Senior Preferred Stock is declared effective under the
Securities Act (such earliest date being the "Separation Date"). The Separation
Date occurred on June 12, 1997 (i.e., 90 days from the date of issuance of
Senior Preferred Stock). Prior to such time, the certificates for the shares of
Old Senior Preferred Stock and Class B Common comprising the Units bore legends
restricting the separate transfer thereof. After such time, the shares of Old
Senior Preferred Stock and Class B Common comprising the Units were transferable
separately, subject to such restrictions on transfer as apply. See "--Senior
Preferred Stock," and "--Description of Capital Stock--Common Stock" for further
information regarding the Senior Preferred Stock and the Class B Common.
SENIOR PREFERRED STOCK
The Senior Preferred Stock were issued by Holdings pursuant to a Certificate
of Designation. The terms of the New Senior Preferred Stock include those stated
in the Certificate of Designation. The form and terms of the New Senior
Preferred Stock are the same as the form and terms of the Old Senior Preferred
Stock (which they replace) except that (i) the New Senior Preferred Stock bear a
Series B designation, (ii) the New Senior Preferred Stock have been registered
under the Securities Act and, and therefore, will not bear legends restricting
the transfer thereof, and (iii) the holders of New Senior Preferred Stock will
not be entitled to certain rights under the Preferred Stock Registration Rights
Agreement, including the provisions providing for liquidated damages in certain
circumstances relating to the timing of the Preferred Exchange Offer, which
rights will terminate when the Preferred Exchange Offer is consumated. The New
Senior Preferred Stock are subject to all such terms, and holders of the New
Senior Preferred Stock are referred to the Certificate of Designation for
statement of them. The following is a summary of the material termas and
provisions of the New Senior Preferred Stock. This summary does not purpose to
be a complete description of the New Senior Preferred Stock and is subject to
the detailed provisions of, and qualified in its entirely by reference to, the
New Senior Preferred Stock and the
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Certificate of Designation (including the definitions contained therein). A copy
of the Certificate of Designation may be obtained from Holdings by any holder or
prospective investor upon request. Definitions relating to certain capitalized
terms are set forth under "--Exchange Debentures--Certain Definitions" and
throughout this description. Capitalized terms that are used but not otherwise
defined herein have the meanings assigned to them in the Certificate of
Designation adn such definitions are incorporated herein by reference. The Old
Senior Preferred Stock and the New Senior Preferred Stock are sometimes referred
to herein collectively as the "Senior Preferred Stock." Any descriptions of the
Senior Preferred Stock presented in the future tense shall refer to the New
Senior Preferred Stock, where appropriate.
GENERAL
The Board of Directors of Holdings adopted resolutions creating a maximum of
2,300,000 shares of Senior Preferred Stock outstanding at any one time, which
consist of the 1,200,000 shares of Old Senior Preferred Stock issued in the
Initial Units Offering plus 1,100,000 additional shares of Senior Preferred
Stock which, among other things, may be used to pay certain dividends on the Old
Senior Preferred Stock issued in the Initial Units Offering at the election of
Holdings, and filed a Certificate of Designation with respect thereto with the
Secretary of State of the State of Delaware as required by Delaware law. Subject
to certain conditions, the Senior Preferred Stock will be exchangeable for
Exchange Debentures at the option of Holdings on any dividend payment date. The
New Senior Preferred Stock will be fully paid and non-assessable, and the
holders thereof will not have any subscription or preemptive rights related
thereto. United States Trust Company of New York will be the transfer agent and
registrar for the Senior Preferred Stock.
RANK
The Senior Preferred Stock will, with respect to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of Holdings, rank
(i) senior to all classes of Common Stock of Holdings and each other class of
capital stock or series of Preferred Stock established after the date of the
Prospectus by the Board of Directors of Holdings the terms of which do not
expressly provide that it ranks on a parity with the Senior Preferred Stock as
to dividend distributions and distributions upon the liquidation, winding-up and
dissolution of Holdings (collectively referred to with the Common Stock of
Holdings as "Junior Securities"); and (ii) subject to certain conditions, on a
parity with each series of Preferred Stock existing on the date of the
Prospectus the terms of which do not expressly provide that it ranks junior to
any Senior Preferred Stock as to dividend distributions and distributions upon
the liquidation, winding-up and dissolution of Holdings and any class of capital
stock or series of Preferred Stock established after the date of this Prospectus
by the Board of Directors of Holdings, the terms of which expressly provide that
such class or series will rank on a parity with the Senior Preferred Stock as to
dividend distributions and distributions upon the liquidation, winding-up and
dissolution of Holdings (collectively referred to as "Parity Securities").
Creditors of Holdings will have priority over the Senior Preferred Stock with
respect to claims on the assets of Holdings. In addition, creditors and
stockholders of Holdings' Subsidiaries will have priority over the Senior
Preferred Stock with respect to claims on the assets of such Subsidiaries. The
Senior Preferred Stock will be subject to the issuance of series of Junior
Securities and Parity Securities, PROVIDED that Holdings may not issue any new
class of Parity Securities without the approval of the holders of at least 50%
of the shares of Senior Preferred Stock then outstanding, voting or consenting,
as the case may be, together as one class, except that without the approval of
the holders of Senior Preferred Stock, Holdings may issue and have outstanding
shares of Parity Securities issued from time to time in exchange for, or the
proceeds of which are used to redeem or repurchase, any or all of the shares of
Senior Preferred Stock or other Parity Securities.
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DIVIDENDS
Holders of Senior Preferred Stock will be entitled to receive, when, as and
if declared by the Board of Directors of Holdings, out of funds legally
available therefor, dividends on the Senior Preferred Stock at a rate per annum
equal to 13% of the liquidation preference per share of Senior Preferred Stock.
All dividends will be cumulative whether or not earned or declared on a daily
basis from the date of issuance of the Senior Preferred Stock and will be
payable quarterly in arrears on March 15, June 15, September 15 and December 15
of each year, commencing on June 15, 1997. On or before March 15, 2002 Holdings
may, at its option, pay dividends in cash or in additional fully paid and
non-assessable shares of Senior Preferred Stock having an aggregate liquidation
preference equal to the amount of such dividends. After March 15, 2002,
dividends may be paid only in cash. It is not expected that Holdings will pay
any dividends in cash for any period ending on or prior to March 15, 2002. The
terms of certain debt instruments of Holdings and Anvil, including the Senior
Indenture and the New Credit Agreement, will restrict the payment of cash
dividends by Holdings and the payment to Holdings of cash dividends by Anvil,
and future agreements may provide the same. See "Risk Factors--Restrictions
Imposed by Certain Covenants," "Risk Factors--Risks Associated with Holding
Company Structure," "Description of Securities--Senior Notes--Certain Covenants"
and "Description of Certain Indebtedness." If any dividend (or portion thereof)
payable on any dividend payment date after March 15, 2002 is not declared or
paid in full in cash on such dividend payment date, the amount of such dividend
that is payable and that is not paid in cash on such date will increase at the
rate of 13% per annum from such dividend payment date until declared and paid in
full.
No full dividends may be declared or paid or funds set apart for the payment
of dividends on any Parity Securities for any period unless full cumulative
dividends shall have been or contemporaneously are declared and paid in full or
declared and, if payable in cash, a sum in cash set apart for such payment on
the Senior Preferred Stock. If full dividends are not so paid, the Senior
Preferred Stock will share dividends pro rata with the Parity Securities. No
dividends may be paid or set apart for such payment on Junior Securities (except
dividends on Junior Securities in additional shares of Junior Securities) and no
Junior Securities or Parity Securities may be repurchased, redeemed or otherwise
retired nor may funds be set apart for payment with respect thereto, if full
cumulative dividends have not been paid on the Senior Preferred Stock.
OPTIONAL REDEMPTION
The Senior Preferred Stock may be redeemed for cash (subject to contractual
and other restrictions with respect thereto and to the legal availability of
funds therefor) at any time on or after March 15, 2002, in whole or in part, at
the option of Holdings, at the following redemption prices (expressed as
percentages of the liquidation preference thereof) if redeemed during the
12-month period beginning March 15, of each of the years set forth below, in
each case together with an amount in cash equal to all accumulated and unpaid
dividends (including an amount in cash equal to a prorated dividend for the
period from the dividend payment date immediately prior to the redemption date
to the redemption date):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2002.............................................................................. 106.500%
2003.............................................................................. 104.333%
2004.............................................................................. 102.167%
2005 and thereafter............................................................... 100.000%
</TABLE>
In addition, Holdings may redeem the Senior Preferred Stock, in whole or in
part, at the option of Holdings, at a redemption price equal to 113% of the
liquidation preference thereof, plus an amount in cash equal to all accumulated
and unpaid dividends (including an amount in cash equal to a prorated dividend
for the period from the dividend payment date immediately prior to the
redemption date to the
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redemption date), with the proceeds of a Public Equity Offering, PROVIDED that
such redemption shall occur within 60 days of the date of the closing of such
Public Equity Offering.
No optional redemption may be authorized or made (i) unless prior thereto
full unpaid cumulative dividends shall have been paid or a sum set apart for
such payment on the Senior Preferred Stock or (ii) at less than 101% of the
liquidation preference of the Senior Preferred Stock at any time when Holdings
is making or purchasing shares of Senior Preferred Stock under a Change of
Control Offer (as defined) in accordance with the provisions of "--Repurchase at
the Option of Holders--Change of Control."
In the event of partial redemptions of Senior Preferred Stock, the shares to
be redeemed will be determined PRO RATA or by lot, as determined by Holdings,
except that Holdings may redeem such shares held by any holders of fewer than
100 shares (or shares held by holders who would hold less than 100 shares as a
result of such redemption), without regard to any PRO RATA redemption
requirement. The terms of certain debt instruments of Holdings, including the
Senior Indenture and the New Credit Agreement, will restrict, directly or
indirectly, the ability of Holdings to redeem the Senior Preferred Stock, and
future agreements to which Holdings or its subsidiaries are parties may contain
similar restrictions. See "Description of Securities-Senior Notes--Certain
Covenants" and "Description of Certain Indebtedness."
MANDATORY REDEMPTION
On March 15, 2009, Holdings will be required to redeem (subject to the legal
availability of funds therefor) all outstanding shares of Senior Preferred Stock
at a price equal to the then effective liquidation preference thereof, plus an
amount in cash equal to all accumulated and unpaid dividends (including an
amount in cash equal to a prorated dividend for the period from the dividend
payment date immediately prior to the redemption date to the redemption date).
PROCEDURES FOR REDEMPTIONS
On and after a redemption date, unless Holdings defaults in the payment of
the applicable redemption price, dividends will cease to accrue on shares of
Senior Preferred Stock called for redemption and all rights of holders of such
shares will terminate except for the right to receive the redemption price,
without interest. Holdings will send a written notice of redemption by first
class mail to each holder of record of shares of Senior Preferred Stock, not
fewer than 30 days nor more than 60 days prior to the date fixed for such
redemption. Shares of Senior Preferred Stock issued and reacquired will, upon
compliance with the applicable requirements of Delaware law, have the status of
authorized but unissued shares of preferred stock of Holdings undesignated as to
series and may with any and all other authorized but unissued shares of
preferred stock of Holdings be designated or redesignated and issued or
reissued, as the case may be, as part of any series of preferred stock of
Holdings, except that any issuance or reissuance of shares of Senior Preferred
Stock must be in compliance with the Certificate of Designation.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
The Certificate of Designation provides that upon the occurrence of a Change
of Control, each Holder of Senior Preferred Stock will have the right to require
Holdings to repurchase all or any part of such Holder's Senior Preferred Stock
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate liquidation preference
thereof, plus an amount in cash equal to all accumulated and unpaid dividends
per share (including an amount in cash equal to a prorated dividend for the
period from the dividend payment date immediately prior to the repurchase date
to the repurchase date) to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, Holdings will mail a
notice to each Holder describing the transaction or transactions that constitute
the Change of Control and offering to repurchase Senior Preferred Stock pursuant
to the procedures required by the Certificate of Designation and described in
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such notice. Holdings will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Senior Preferred Stock as a result of a Change of Control.
The Change of Control Offer will remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Change of Control Offer
Period"). No later than five Business Days after the termination of the Offer
Period (the "Change of Control Purchase Date"), Holdings will purchase all
shares of Senior Preferred Stock validly tendered and not properly withdrawn
pursuant to the Change of Control Offer. Payment for any shares of Senior
Preferred Stock so purchased will be made in the same manner as dividend
payments on the Senior Preferred Stock.
If the Change of Control Purchase Date is on or after a dividend record date
and on or before the related dividend payment date, any accumulated and unpaid
dividends will be paid to the Person in whose name a share of Senior Preferred
Stock is registered at the close of business on such record date, and no
additional dividend will be payable to Holders who tender shares of Senior
Preferred Stock pursuant to the Change of Control Offer.
On the Change of Control Purchase Date, Holdings will, to the extent lawful,
(1) accept for payment all shares of Senior Preferred Stock properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Transfer Agent an
amount equal to the Change of Control Payment in respect of all shares of Senior
Preferred Stock so tendered and (3) deliver or cause to be delivered to the
Transfer Agent the Senior Preferred Stock so accepted together with an Officers'
Certificate stating the total number of shares of Senior Preferred Stock being
purchased by Holdings. The Transfer Agent will promptly mail to each Holder of
shares of Senior Preferred Stock so tendered the Change of Control Payment for
such shares, and the Transfer Agent will promptly authenticate and mail (or
cause to be transferred by book entry) to each Holder a new share certificate
representing any unpurchased shares of the Senior Preferred Stock represented by
the certificate tendered pursuant to the Change of Control Offer, if any.
Holdings will publicly announce the results of the Change of Control Offer on
the Change of Control Purchase Date.
Except as described above, the Certificate of Designation does not contain
provisions that permit the Holders of Senior Preferred Stock to require Holdings
to redeem the Senior Preferred Stock in the event of a takeover,
recapitalization or similar restructuring, including an issuer recapitalization
or similar transaction with management. Consequently, the Change of Control
provisions will not afford any protection in a highly leveraged transaction,
including such a transaction initiated by Holdings, management of Holdings or an
Affiliate of Holdings, if such transaction does not result in a Change of
Control. In addition, the existence of the Holder's right to require Holdings to
repurchase such Holder's Senior Preferred Stock upon the occurrence of a Change
of Control may or may not deter a third party from seeking to acquire Holdings
in a transaction that would constitute a Change of Control.
Holdings' ability to repurchase shares of Senior Preferred Stock pursuant to
a Change of Control Offer may be limited by a number of factors. The New Credit
Agreement will provide that certain change of control events with respect to
Holdings and/or Anvil would constitute a default thereunder permitting the
lending parties thereto to accelerate the Indebtedness thereunder. In addition,
certain events that may obligate Holdings or Anvil to offer to repay all
outstanding obligations under the New Credit Agreement may not constitute a
Change of Control under the Certificate of Designation. However, neither
Holdings nor Anvil may have sufficient resources to repay Indebtedness under the
New Credit Agreement and Holdings may not have sufficient resources to
repurchase tendered shares of Senior Preferred Stock. Furthermore, any future
credit agreements or other agreements relating to senior Indebtedness to which
Holdings or Anvil become a party may contain similar restrictions and
provisions. In the event a Change of Control occurs at a time when Holdings
and/or Anvil is directly or indirectly prohibited from purchasing Senior
Preferred Stock, Holdings and/or Anvil could seek the consent of its lenders to
the purchase of
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Senior Preferred Stock or could attempt to refinance the borrowings that contain
such prohibition. If Holdings and/or Anvil do not obtain such a consent or repay
such borrowings, the purchase of Senior Preferred Stock will remain prohibited.
Holdings' failure to purchase tendered Senior Preferred Stock would constitute a
breach of the Certificate of Designation which would, in turn, constitute a
default under the New Credit Agreement and could lead to the acceleration of the
indebtedness thereunder. In any such event, the structural and legal
subordination of the Senior Preferred Stock and the security granted in respect
of the New Credit Agreement would likely result in the Holders of the Senior
Preferred Stock receiving less ratably than creditors of Holdings.
In addition, the terms of the Senior Notes of Anvil include provisions
similar to those contained in the Senior Preferred Stock enabling holders
thereof to require Anvil to repurchase all or any part of such securities under
circumstances constituting a Change of Control. However, Holdings and Anvil may
not have sufficient resources to repurchase tendered shares of Senior Preferred
Stock and/or Senior Notes and any such failure may constitute a default under
the terms of the New Credit Agreement, the Senior Notes, the Senior Indenture
and the Certificate of Designation. Again, in any such event, the structural and
legal subordination of the Senior Preferred Stock and the security granted in
respect of the New Credit Agreement would likely result in the Holders of the
Senior Preferred Stock receiving less ratably than creditors of Holdings.
The definition of Change of Control includes a phrase relating to the sale,
lease or transfer of "all or substantially all" of the assets of Holdings and
its Restricted Subsidiaries, taken as a whole. Although there is a developing
body of case law interpreting the phrase "substantially all," there is no
precise definition of the phrase under applicable law. Accordingly, the ability
of a Holder of Senior Preferred Stock to require Holdings to repurchase such
shares as a result of a sale, lease or transfer of less than all of the assets
of Holdings and its Restricted Subsidiaries taken as a whole to another Person
or group may be uncertain.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
Holdings, holders of Senior Preferred Stock will be entitled to be paid, out of
the assets of Holdings available for distribution, the liquidation preference
per share, plus an amount in cash equal to all accumulated and unpaid dividends
thereon to the date fixed for liquidation, dissolution or winding-up (including
an amount equal to a prorated dividend for the period from the last dividend
payment date to the date fixed for liquidation, dissolution or winding-up),
before any distribution is made on any Junior Securities, including, without
limitation, Common Stock of Holdings. If, upon any voluntary or involuntary
liquidation, dissolution or winding-up of Holdings, the amounts payable with
respect to the Senior Preferred Stock and all other Parity Securities are not
paid in full, the holders of the Senior Preferred Stock and the Parity
Securities will share equally and ratably in any distribution of assets of
Holdings in proportion to the full liquidation preference and accumulated and
unpaid dividends to which each is entitled. After payment of the full amount of
the liquidation preferences and accumulated and unpaid dividends to which they
are entitled, the holders of shares of Senior Preferred Stock will not be
entitled to any further participation in any distribution of assets of Holdings.
However, neither the sale, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property or assets of Holdings nor the consolidation or merger of Holdings with
or into one or more corporations will be deemed to be a liquidation, dissolution
or winding-up of Holdings.
The Certificate of Designation for the Senior Preferred Stock does not
contain any provision requiring funds to be set aside to protect the liquidation
preference of the Senior Preferred Stock, although such liquidation preference
will be substantially in excess of the par value of such shares of Senior
Preferred Stock. In addition, Holdings is not aware of any provision of Delaware
law or any controlling decision of the courts of the State of Delaware (the
state of incorporation of Holdings) that requires a restriction upon any surplus
of Holdings solely because the liquidation preference of the Senior Preferred
Stock will exceed its par value. Consequently, there will be no restriction upon
any surplus of Holdings
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solely because the liquidation preference of the Senior Preferred Stock will
exceed the par value and there will be no remedies available to holders of the
Senior Preferred Stock before or after the payment of any dividend, other than
in connection with the liquidation of Holdings, solely by reason of the fact
that such dividend would reduce the surplus of Holdings to an amount less than
the difference between the liquidation preference of the Senior Preferred Stock
and its par value.
VOTING RIGHTS
Holders of the Senior Preferred Stock have no voting rights with respect to
general corporate matters except as provided by law or as set forth in the
Certificate of Designation. The Certificate of Designation provides that (a) if
(i) dividends on the Senior Preferred Stock are in arrears and unpaid (and, in
the case of dividends payable after March 15, 2002, are not paid in cash) for
four consecutive quarterly periods, (ii) Holdings fails to discharge any
redemption obligation with respect to the Senior Preferred Stock (whether or not
Holdings is permitted to do so by the terms of the Senior Indenture, the New
Credit Agreement or any other obligation of Holdings), (iii) Holdings fails to
make an offer to purchase all of the outstanding shares of Senior Preferred
Stock following a Change of Control (whether or not Holdings is permitted to do
so by the terms of the Senior Indenture, the New Credit Agreement or any other
obligation of Holdings) or fails to purchase shares of Senior Preferred Stock
from holders who elect to have such shares purchased pursuant to the Change of
Control Offer, (iv) a breach or violation of the provisions described under the
caption "--Certain Covenants" occurs and the breach or violation continues for a
period of 30 days or more, or (v) a default occurs on the obligation to pay
principal of, interest on or any other payment obligation when due (a "Payment
Default") at final maturity on one or more classes of Indebtedness of Holdings
or any Subsidiary of Holdings, whether such Indebtedness exists on the Senior
Preferred Stock Issue Date or is incurred thereafter, having individually or in
the aggregate an outstanding principal amount of $25,000,000 or more, or any
other Payment Default occurs on one or more such classes of Indebtedness and
such class or classes of Indebtedness are declared due and payable prior to
their respective maturities, then the number of directors constituting the Board
of Directors of Holdings will be adjusted to permit the holders of the majority
of the then outstanding Senior Preferred Stock, voting separately as a class, to
elect two directors, and (b) the approval of holders of a majority of the
outstanding shares of Senior Preferred Stock, voting as a separate class, will
be required for (i) any merger, consolidation or sale of assets of Holdings
except as permitted pursuant to the covenant below entitled "Merger or
Consolidation" and (ii) for any modification of the Exchange Debenture
Indenture. Each such event described in clause (a) above is referred to herein
as a "Voting Rights Triggering Event." Voting rights arising as a result of a
Voting Rights Triggering Event will continue until such time as all dividends in
arrears on the Senior Preferred Stock are paid in full (and after March 15,
2002, paid in cash) and any failure, breach or default referred to in clause (a)
is remedied.
In addition, the Certificate of Designation provides that, except as stated
above under "--Ranking," Holdings will not authorize any class of Parity
Securities without the affirmative vote or consent of holders of at least 50% of
the shares of Senior Preferred Stock then outstanding, voting or consenting, as
the case may be, as one class. The Certificate of Designation also provides that
Holdings may not amend the Certificate of Designation so as to affect adversely
the specified rights, preferences, privileges or voting rights of holders of
shares of the Senior Preferred Stock, or authorize the issuance of any
additional shares of Senior Preferred Stock, without the affirmative vote or
consent of the holders of at least 50% of the then outstanding shares of Senior
Preferred Stock, voting or consenting, as the case may be, as one class. The
Certificate of Designation also provides that, except as set forth above, (a)
the creation, authorization or issuance of any shares of Junior Securities or
Parity Securities, (b) the decrease in the amount of authorized capital stock of
any class, including any Preferred Stock or (c) the increase in the amount of
authorized capital stock of any class of Junior Securities shall not require the
consent of the holders of Senior Preferred Stock and shall not be deemed to
affect adversely the rights, preferences, privileges or voting rights of holders
of shares of Senior Preferred Stock.
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Under Delaware law, holders of Senior Preferred Stock will be entitled to
vote as a class upon a proposed amendment to the Certificate of Incorporation,
whether or not entitled to vote thereon by the Certificate of Incorporation, if
the amendment would increase or decrease the par value of the shares of such
class, or alter or change the powers, preferences or special rights of the
shares or such class so as to affect them adversely.
CERTAIN COVENANTS
MERGER OR CONSOLIDATION. The Certificate of Designation provides that,
without the consent of holders of a majority of the outstanding shares of Senior
Preferred Stock, voting as a separate class, Holdings shall not, in a single
transaction or series of related transactions, consolidate or merge with or into
(whether or not Holdings is the surviving corporation), or directly and/or
indirectly through its Restricted Subsidiaries sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets determined on a consolidated basis for Holdings and its Restricted
Subsidiaries taken as a whole in one or more related transactions, to another
corporation, Person or entity unless (i) Holdings is the surviving corporation
or the entity or the Person formed by or surviving any such consolidation or
merger (if other than Holdings) or to which such sale, assignment, transfer,
lease, conveyance or other disposition will have been made is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; (ii) the Senior Preferred Stock shall be converted
into or exchanged for and shall become shares of the entity or Person formed by
or surviving any such consolidation or merger (if other than Holdings) or the
entity or Person to which such sale, assignment, transfer, lease, conveyance or
other disposition such successor, transferee or resulting corporation, having in
respect of such successor, transferee or resulting corporation substantially the
same powers, preferences and relative participating, optional or other special
rights, and the qualifications, limitations or restrictions thereon, that the
Senior Preferred Stock had immediately prior to such consolidation, merger,
sale, assignment, transfer, lease, conveyance or other disposition; (iii)
immediately after such transaction, no Voting Rights Triggering Event, and no
event that after the giving of notice or lapse of time or both would become a
Voting Rights Triggering Event, shall have occurred and be continuing; (iv) the
entity or Person formed by or surviving any such consolidation or merger or to
which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of Holdings
immediately preceding the transaction; and (v) prior to the consummation of any
such proposed transaction, Holdings shall have delivered to the Transfer Agent
an Officers' Certificate and an opinion of counsel to the effect that such
transaction complies with the terms of the Certificate of Designation and that
all conditions precedent to such transaction have been satisfied.
JUNIOR PAYMENTS. The Certificate of Designation provides that Holdings will
not, directly or indirectly, (i) declare or pay any dividend or make any
distribution on account of any Junior Securities (other than dividends or
distributions payable in Junior Securities (other than Disqualified Stock)),
(ii) purchase, redeem or otherwise acquire or retire for value any Junior
Securities or (iii) make any Restricted Investment (all such dividends,
distributions, purchases, redemptions, acquisitions, retirements and Restricted
Investments being collectively referred to as "Junior Payments"), if, at the
time of such Junior Payment:
(i) a Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof; or
(ii) all dividends on the Senior Preferred Stock payable on dividend
payment dates after March 15, 2002, have not been declared and paid in cash.
Notwithstanding the foregoing, the Certificate of Designation shall not
prohibit as Junior Payments:
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(a) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration, such payment would
comply with all of the provisions of the Certificate of Designation
(including, but not limited to, the "Junior Payments" covenant);
(b) the making of any Restricted Investment in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of Holdings) of, or from substantially concurrent additional
capital contributions in respect of, Equity Interests of Holdings (other
than Disqualified Stock);
(c) (X) the redemption, repurchase, retirement or other acquisition of
any Parity Securities of Holdings in exchange for, or out of the proceeds
of, the substantially concurrent sale (other than to a Subsidiary of
Holdings) of, or from substantially concurrent additional capital
contributions in respect of, other Parity or Junior Securities of Holdings
(other than any Disqualified Stock) and (Y) the redemption, repurchase,
retirement or other acquisition of any Junior Securities of Holdings in
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of Holdings) of, or from substantially
concurrent additional capital contributions in respect of, other Junior
Securities of Holdings (other than any Disqualified Stock);
(d) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of Holdings or any of its Restricted
Subsidiaries held by any member of Holdings' (or any of its Restricted
Subsidiaries') management pursuant to any management agreement, stock option
agreement or plan or stockholders agreement; PROVIDED that (X) the aggregate
price paid for all such repurchased, redeemed, acquired or retired Equity
Interests will not exceed $2.0 million in any fiscal year (plus any amount
available for such payments hereunder since the date of the Certificate of
Designation which have not been used for such purpose) or (Y) $8.0 million
in the aggregate (in each case, net of the cash proceeds received by
Holdings from subsequent reissuances of such Equity Interests to new members
of management);
(e) loans to members of management of Holdings or any Restricted
Subsidiary the proceeds of which are used for a concurrent purchase of
Equity Interests of Holdings;
(f) the payment of director's fees and reasonable expenses of its
directors in an aggregate amount not to exceed $125,000 per year (including
indemnification obligations and professional fees and expenses) and to pay
salaries and other compensation of employees who perform services for both
Anvil and Holdings;
(g) an amount not to exceed $200,000 in aggregate to enable Holdings to
make payments to holders of Capital Stock in lieu of issuing fractional
shares thereof;
(h) repurchases of Capital Stock deemed to occur upon exercise of stock
options or warrants if such Capital Stock represents a portion of the
exercise price thereof; and
(i) payments in connection with the application of the net proceeds of
the Recapitalization as set forth under "Use of Proceeds".
TRANSACTIONS WITH AFFILIATES. The Certificate of Designation provides that
Holdings will not, and will not permit any of its Restricted Subsidiaries to,
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to
Holdings or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by Holdings or such Restricted Subsidiary
with an unrelated Person and (ii) Holdings delivers to the Transfer Agent (a)
with respect to any Affiliate Transaction entered into after the
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date of the Certificate of Designation involving aggregate consideration in
excess of $2.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors and (b) with
respect to any Affiliate Transaction involving aggregate consideration in excess
of $7.5 million, an opinion as to the fairness to Holdings or such Restricted
Subsidiary of such Affiliate Transaction from a financial point of view issued
by an investment banking firm of national standing; PROVIDED that the following
will not be deemed to be Affiliate Transactions: (o) reasonable fees and
compensation paid to, and indemnity provided on behalf of, officers and
directors of Holdings, Anvil or any Restricted Subsidiary as determined in good
faith by the appropriate Board of Directors or senior management; (p) the
provision of administrative or management services by Holdings or any of its
officers to Holdings or any of its Restricted Subsidiaries in the ordinary
course of business consistent with past practice, (q) transactions between
Holdings or one or more of its Restricted Subsidiaries and the relevant
Securitization Entity effected as part of a Qualified Securitization
Transaction; (r) any agreement as in effect as of the Senior Preferred Stock
Issue Date (including, without limitation, the New Credit Agreement) or any
amendment thereto or any transactions contemplated thereby (including pursuant
to any amendment thereto) and any replacement agreement so long as any such
amendment or replacement agreement is not more disadvantageous to the Holders of
Senior Preferred Stock or Exchange Debentures in any material respect than the
original agreement as in effect on the Senior Preferred Stock Issue Date; (s)
payments or loans to employees or consultants which are approved by the Board of
Directors of Holdings in good faith; (t) the existence of, or the performance by
Holdings or any of its Restricted Subsidiaries of its obligations under the
terms of, any stockholders agreement (including any registration rights
agreement or purchase agreement related thereto) to which it is a party as of
the Senior Preferred Stock Issue Date and any similar agreement which it may
enter into thereafter; provided however, that the existence of, or the
performance by Holdings or any of its Restricted Subsidiaries of obligations
under any similar agreement entered into after the Senior Preferred Stock Issue
Date shall only be permitted by this clause (t) to the extent that the terms of
any such new agreement are not otherwise disadvantageous to the Holders of the
Senior Preferred Stock or Exchange Debentures in any material respect; (u)
transactions with customers, clients, suppliers, joint venture partners or
purchasers or sellers of goods or services, in each case in the ordinary course
of business (including, without limitation, pursuant to joint venture
agreements) and otherwise in compliance with the terms of the Exchange Debenture
Indenture which are at least as favorable as might reasonably have been obtained
at such time from an unaffiliated party; (v) any employment agreement entered
into by Holdings or any of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of Holdings or such Restricted
Subsidiary (including, without limitation, any such employment agreements
existing prior to the Senior Preferred Issue Date); (w) the granting of stock
options to employees and directors of Holdings and its Restricted Subsidiaries
in accordance with the New Stock Option Plan at exercise prices equal to the
fair market value of the Common Stock and the issuance of Common Stock upon the
exercise of such options; (x) transactions between or among Holdings and/or its
Wholly Owned Subsidiaries, (y) (i) the payment of customary management,
consulting and advisory fees and related expenses to BRS and 399 Venture and
their Affiliates not to exceed $750,000 per year in aggregate and (ii) payments
by Anvil or any of its Restricted Subsidiaries to BRS and 399 Venture and their
Affiliates made pursuant to any financial advisory, financing, underwriting or
placement agreement or in respect of other investment banking activities,
including, without limitation, in connection with acquisitions or divestitures
which are approved by the Board of Directors of Anvil, Holdings or such
Restricted Subsidiary in good faith not to exceed $750,000 per year in
aggregate; and (z) transactions permitted by the covenant described in "--Junior
Payments."
REPORTS. The Certificate of Designation provides that, whether or not
required by the rules and regulations of the Commission, so long as any shares
of Senior Preferred Stock are outstanding, Holdings will furnish to the Holders
of Senior Preferred Stock, within 15 days after it is or would have been
required to file such with the Commission, (i) all quarterly and annual
financial information that would be required
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to be contained in a filing with the Commission on Forms 10-Q and 10-K if
Holdings were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by Holdings' certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if Holdings was required to file such
reports. In addition, whether or not required by the rules and regulations of
the Commission, Holdings will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities analysts
and prospective investors upon request. In addition, Holdings has agreed that,
for so long as any shares of Senior Preferred Stock remain outstanding, it will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
EXCHANGE
Holdings may at its option exchange all, but not less than all, of the then
outstanding shares of Senior Preferred Stock into Exchange Debentures on any
dividend payment date, PROVIDED that on the date of such exchange: (a) there are
no contractual impediments to such exchange; (b) there are legally available
funds sufficient therefor; (c) a registration statement relating to the Exchange
Debentures shall have been declared effective under the Securities Act prior to
such exchange and shall continue to be in effect on the date of such exchange or
Holdings shall have obtained a written opinion of counsel that an exemption from
the registration requirements of the Securities Act is available for such
exchange, and that upon receipt of such Exchange Debentures pursuant to such
exchange made in accordance with such exemption, the holders (assuming such
holder is not an Affiliate of Holdings) thereof will not be subject to any
restrictions imposed by the Securities Act upon the resale thereof and such
exemption is relied upon by Holdings for such exchange; (d) the Exchange
Debenture Indenture and the trustee thereunder shall have been qualified under
the Trust Indenture Act; (e) immediately after giving effect to such exchange,
no Default or Event of Default (each as defined in the Exchange Debenture
Indenture) would exist under the Exchange Debenture Indenture; and (f) Holdings
shall have delivered a written opinion of counsel, dated the date of exchange,
regarding the satisfaction of the conditions set forth in clauses (a), (b), (c),
(d) and (e) and certain other matters. Holdings shall send a written notice of
exchange by mail to each holder of record of shares of Senior Preferred Stock,
which notice shall state, among other things, (i) that Holdings is exercising
its option to exchange the Senior Preferred Stock for Exchange Debentures
pursuant to the Certificate of Designation and (ii) the date of exchange (the
"Exchange Date"), which date shall not be less than 30 days nor more than 60
days following the date on which such notice is mailed. On the Exchange Date,
holders of outstanding shares of Senior Preferred Stock will be entitled to
receive a principal amount of Exchange Debentures equal to the liquidation
preference per share, plus an amount in cash equal to all accrued and unpaid
dividends (including an amount in cash equal to a prorated dividend for the
period from the dividend payment date immediately prior to the Exchange Date to
the Exchange Date), as provided below.
The Exchange Debentures will be issued in registered form, without coupons.
Exchange Debentures issued in exchange for Senior Preferred Stock will be issued
in principal amounts of $1,000 and integral multiples thereof to the extent
possible, and will also be issued in principal amounts less than $1,000 so that
each holder of Senior Preferred Stock will receive certificates representing the
entire amount of Exchange Debentures to which his shares of Senior Preferred
Stock entitle him, PROVIDED that Holdings may, at its option, pay cash in lieu
of issuing an Exchange Debenture in a principal amount less than $1,000. On and
after the Exchange Date, dividends will cease to accrue on the outstanding
shares of Senior Preferred Stock, and all rights of the holders of Senior
Preferred Stock (except the right to receive the Exchange Debentures, an amount
in cash equal to the accrued and unpaid dividends to the Exchange Date and if
Holdings so elects, cash in lieu of any Exchange Debenture which is in an amount
that is not an integral multiple of $1,000) will terminate. The person entitled
to receive the Exchange Debentures issuable upon such exchange will be treated
for an purposes as the registered holder of such Exchange Debentures.
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The New Credit Agreement contains limitations with respect to Holdings'
ability to issue the Exchange Debentures, and any future credit agreements or
other agreements relating to indebtedness to which Holdings or any of its
Subsidiaries become a party may contain similar limitations. See "Description of
Securities-Senior Notes--Certain Covenants" and "Description of Certain
Indebtedness."
Holdings intends to comply with the provisions of Rule 13e-4 promulgated
pursuant to the Exchange Act in connection with any exchange, to the extent
applicable.
TRANSFER AGENT AND REGISTRAR. United States Trust Company of New York is
the transfer agent and registrar for the Senior Preferred Stock.
BOOK-ENTRY, DELIVERY AND FORM
GLOBAL SENIOR PREFERRED STOCK CERTIFICATE
Except as set forth in the next paragraph, the New Senior Preferred Stock
will initially be issued in the form of one global certificate (the "Global
Certificate"). The Global Certificate will be deposited upon issuance of the New
Senior Preferred Stock offered hereby (the "Closing Date") with, or on behalf
of, the Depositary and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Certificate
Holder").
Senior Preferred Stock that were issued as described below under
"--Certificated Securities" will be issued in the form of registered definitive
certificates (the "Certificated Securities"). Such Certificated Securities may,
unless the Global Certificate has previously been exchanged for Certificated
Securities, be exchanged by a QIB for an interest in the Global Certificate.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers, banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, the "Indirect Participants" or the
"Depositary's Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by or on behalf of the
Depositary only through the Depositary's Participants or the Depositary's
Indirect Participants.
Holdings expects that pursuant to procedures established by the Depositary
(i) upon deposit of the Global Certificate, the Depositary will credit the
accounts of Participants designated by the Exchange Agent with the respective
liquidation preference of the individual beneficial interests represented by
such Global Certificate and (ii) ownership of the Senior Preferred Stock
evidenced by the Global Certificate will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by the
Depositary (with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective investors are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Senior Preferred Stock evidenced
by the Global Certificate will be limited to such extent.
So long as the Global Certificate Holder is the registered owner of any
Senior Preferred Stock, the Global Certificate Holder will be considered the
sole Holder under the Certificate of Designation of any Senior Preferred Stock
evidenced by the Global Certificate. Beneficial owners of Senior Preferred Stock
evidenced by the Global Certificate will not be considered the owners or Holders
thereof under the Certificate of Designation for any purpose. Neither Holdings
nor the transfer agent and registrar will have any responsibility or liability
for any aspect of the records of the Depositary or for maintaining, supervising
or reviewing any records of the Depositary relating to the Senior Preferred
Stock.
Payments in respect of the liquidation preference, redemption price,
dividends and Liquidated Damages, if any, on any Senior Preferred Stock
registered in the name of the Global Certificate Holder on
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the applicable record date will be payable to or at the direction of the Global
Certificate Holder in its capacity as the registered Holder under the
Certificate of Designation. Under the terms of the Certificate of Designation,
Holdings and the transfer agent and registrar may treat the persons in whose
names Senior Preferred Stock, including the Global Certificate, are registered
as the owners thereof for the purpose of receiving such payments. Consequently,
neither Holdings nor the transfer agent and registrar has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Senior Preferred Stock. Holdings believes, however, that it is currently the
policy of the Depositary to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Senior Preferred
Stock will be governed by standing instructions and customary practice and will
be the responsibility of the Depositary's Participants or the Depositary's
Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, investors may receive Certificated
Securities. In addition, if (i) Holdings notifies the transfer agent and
registrar in writing that the Depositary is no longer willing or able to act as
a depositary and Holdings is unable to locate a qualified successor within 90
days or (ii) Holdings, at its option, notifies the transfer agent and registrar
in writing that it elects to cause the issuance of Certificated Securities,
then, upon surrender by the Global Certificate Holder of its Global Certificate,
Certificated Securities will be issued to each person that the Global
Certificate Holder and the Depositary identify as being the beneficial owner of
the related Senior Preferred Stock.
Neither Holdings nor the transfer agent and registrar will be liable for any
delay by the Global Certificate Holder or the Depositary in identifying the
beneficial owners of Senior Preferred Stock and Holdings and the transfer agent
and registrar may conclusively rely on, and will be protected in relying on,
instructions from the Global Certificate Holder or the Depositary for all
purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Certificate of Designation requires that payments in respect of the
Senior Preferred Stock represented by the Global Certificate (including
liquidation preference, redemption price, dividends and Liquidated Damages, if
any) be made by wire transfer of immediately available funds to the accounts
specified by the Global Certificate Holder. With respect to Certificated
Securities, Holdings will make all payments of liquidation preference,
redemption price, dividends and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. Secondary trading in preferred stock of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the New
Senior Preferred Stock represented by the Global Certificate are expected to
trade in the Depositary's Same-Day Funds Settlement System, and any permitted
secondary market trading activity in such Senior Preferred Stock will,
therefore, be required by the Depositary to be settled in immediately available
funds. Holdings expects that secondary trading in the Certificated Securities
will also be settled in immediately available funds.
EXCHANGE DEBENTURES
GENERAL
The Exchange Debentures, if issued, will be issued under an Indenture (the
"Exchange Debenture Indenture") between Holdings and United States Trust Company
of New York, as trustee (the "Trustee"). The terms of the Exchange Debentures
include those stated in the Exchange Debenture Indenture and those made part of
the Exchange Debenture Indenture by reference to the Trust Indenture Act of
1939. The Exchange Debentures will be subject to all such terms, and prospective
holders of the Exchange Debentures are referred to the Exchange Debenture
Indenture and the Trust Indenture Act for a statement of such terms. The
following summary of certain provisions of the Exchange Debenture
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Indenture does not purport to be complete and is qualified in its entirety by
reference to the Exchange Debenture Indenture, including the definitions therein
of certain terms. Definitions of certain capitalized terms used in the Exchange
Debenture Indenture and in the following summary are set forth below under
"--Certain Definitions."
The Exchange Debentures, if issued, will be general unsecured obligations of
Holdings, subordinated to all existing and future Senior Indebtedness, including
Holdings' Guarantee of the Senior Notes and the guarantee by Holdings of
borrowings under the New Credit Agreement. The Exchange Debentures will be
issued in fully registered form only in denominations of $1,000 and integral
multiples thereof (other than as described in "--Senior Preferred
Stock--Exchange" or with respect to additional Exchange Debentures issued in
lieu of cash interest as described herein).
Restrictions in the Exchange Debenture Indenture on the ability of Holdings
and its Restricted Subsidiaries to incur additional Indebtedness, to make Asset
Sales, to enter into transactions with Affiliates and to enter into mergers,
consolidations or sales of all or substantially all of its assets, may make more
difficult or discourage a takeover of Anvil or Holdings, whether favored or
opposed by the management of Anvil and Holdings. While such restrictions cover a
variety of arrangements which have traditionally been used to effect highly
leveraged transactions, the Exchange Debenture Indenture may not afford holders
of Exchange Debentures protection in all circumstances from the adverse aspects
of a highly leveraged transaction, reorganization, restructuring, merger or
similar transaction.
As of the date hereof, Holdings has five Subsidiaries, all of which
constitute Restricted Subsidiaries for the purposes of the Exchange Debenture
Indenture. Under certain circumstances, Holdings will be able to designate
future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will
not be subject to many of the restrictive covenants set forth in the Exchange
Debenture Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Exchange Debentures will be limited in aggregate principal amount to
$57,500,000 and will mature on March 15, 2009. Interest on the Exchange
Debentures will accrue at a rate of 13% per annum from the Exchange Date or from
the most recent interest payment date to which interest has been paid or
provided for. Interest will be payable semi-annually in cash (or, on or prior to
March 15, 2002, in additional Exchange Debentures, at the option of Holdings) in
arrears on March 15 and September 15 of each year, commencing with the first
such date after the Exchange Date, to Holders of record on the immediately
preceding March 1 and September 1. Interest on the Exchange Debentures will be
computed on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed. Principal, premium, if any, and interest on the Exchange
Debentures will be payable at the office or agency of Holdings maintained for
such purpose within the City and State of New York or, at the option of
Holdings, payment of interest may be made by check mailed to the Holders of the
Exchange Debentures at their respective addresses set forth in the register of
Holders of Exchange Debentures; PROVIDED that all payments with respect to
Global Exchange Debentures and Certificated Securities the Holders of whom have
given wire transfer instructions to Holdings will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof. Until otherwise designated by Holdings, Holdings' office or agency will
be the office of the Trustee maintained for such purpose. Holdings may change
such office without prior notice to holders of the Exchange Debentures, and
Holdings or any of its Subsidiaries may act as Paying Agent or Registrar.
SUBORDINATION AND RANKING
All obligations in respect of the Exchange Debentures will be subordinated
to the prior payment of all existing and future Senior Indebtedness of Holdings
(including Holdings' Guarantee of the Senior Notes), and will rank PARI PASSU or
senior in right of payment to all other Subordinated Indebtedness of Holdings.
The Exchange Debentures will also effectively rank junior to all indebtedness of
Holdings' Subsidiaries, including the indebtedness evidenced by the Senior
Notes. As of February 1, 1997, on a pro forma basis after giving effect to the
Recapitalization, the aggregate principal amount of Senior Indebtedness of
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Holdings (including indebtedness of Holdings' Subsidiaries) would have been
approximately $162.0 million. The Exchange Debenture Indenture permits Holdings
and its Subsidiaries to incur additional Indebtedness, including additional
Senior Indebtedness, subject to certain limitations. In addition, under the
terms of the Exchange Debenture Indenture, Holdings' Subsidiaries may incur
certain Indebtedness pursuant to agreements that may restrict the ability of
such Subsidiaries to make dividends or other intercompany transfers to Holdings
necessary to service Holdings' obligations, including its obligations under the
Exchange Debentures. Any failure by Holdings to satisfy its obligations with
respect to the Exchange Debentures at maturity (with respect to payments of
principal) or prior thereto (with respect to payments of interest or required
repurchases) would constitute a default under the Exchange Debenture Indenture
and the New Credit Agreement and could cause a default under agreements
governing other indebtedness of Holdings and its Subsidiaries. See "Risk
Factors--Risks Associated with Holding Company Structure," "--Restrictions
Imposed by Certain Covenants" and "Description of Certain Indebtedness."
Upon (a) any distribution to creditors of Holdings in a liquidation or
dissolution of Holdings or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to Holdings or its property or (b)
an assignment for the benefit of creditors or any marshalling of Holdings'
assets and liabilities, the holders of Senior Indebtedness will be entitled to
receive payment in full of all Obligations due in respect of such Senior
Indebtedness (including interest after the commencement of any such proceeding
at the rate specified in the applicable Senior Indebtedness) before holders of
the Exchange Debentures will be entitled to receive any payment with respect to
the Exchange Debentures. Until all Obligations with respect to Senior
Indebtedness are paid in full, any distribution to which holders of the Exchange
Debentures would be entitled shall be made to holders of Senior Indebtedness.
However, holders of the Exchange Debentures may receive securities that are
subordinated at least to the same extent as the Exchange Debentures to Senior
Indebtedness and any securities issued in exchange for Senior Indebtedness.
In addition, Holdings may not make any payment upon or in respect of the
Exchange Debentures (except in such subordinated securities) if (a) a default in
the payment of any principal, premium, if any, interest or other Obligations
with respect to any Designated Senior Debt occurs and is continuing beyond any
applicable grace period (whether upon maturity, as a result of acceleration or
otherwise) or (b) any other default occurs and is continuing with respect to any
Designated Senior Debt that permits holders of such Designated Senior Debt to
accelerate its maturity, and Holdings and the Trustee receive a notice of such
default (a "Payment Blockage Notice") from the holders, or from the trustee,
agent or other representative of the holders, of any such Designated Senior
Debt. Payments on the Exchange Debentures may and shall be resumed upon the
earlier of (i) the date upon which the default is cured or waived (or the date
on which the Designated Senior Debt as to which the default relates shall have
ceased to exist by having been discharged or paid in full in cash) or (ii) in
the case of a default referred to in clause (b) above, 179 days after the date
on which the applicable Payment Blockage Notice is received, unless the maturity
of any Designated Senior Debt has been accelerated. No new period of payment
blockage may be commenced within 360 days after the receipt by the Trustee of
any prior Payment Blockage Notice. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the Trustee
shall be, or be made, the basis for a subsequent Payment Blockage Notice unless
such default shall have been cured or waived for a period of not less than 180
days.
If Holdings fails to make any payment on the Exchange Debentures when due or
within any applicable grace period, whether or not on account of the payment
blockage provision referred to above, such failure would constitute an Event of
Default under the Exchange Debenture Indenture and would enable the holders of
the Exchange Debentures to accelerate the maturity thereof.
The Exchange Debenture Indenture further requires that Holdings promptly
notify holders of Senior Indebtedness if payment on the Exchange Debentures is
accelerated because of an Event of Default. In addition, the subordination
provisions of the Exchange Debenture Indenture may not be amended without the
consent of all holders of Designated Senior Debt.
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As a result of the subordination provisions described above, the structural
subordination of the Exchange Debentures and the security pledged to the
creditors under the New Credit Agreement, in the event of a liquidation or
insolvency, holders of the Exchange Debentures may recover less ratably that
other creditors of Holdings.
"DESIGNATED SENIOR DEBT" means (a) Holdings' Guarantee of the Senior Notes
and the Senior Indenture, (b) Holdings' guarantee of Indebtedness under the New
Credit Agreement and (c) any other Senior Indebtedness permitted to be incurred
pursuant to the Exchange Debenture Indenture in a principal amount of not less
than $20.0 million designated by Holdings as Designated Senior Debt.
OPTIONAL REDEMPTION
Except as set forth below, the Exchange Debentures may not be redeemed at
the option of Holdings prior to March 15, 2002. Thereafter, the Exchange
Debentures will be subject to redemption for cash at the option of Holdings, in
whole or in part, upon not less than 30 nor more than 60 days' notice to each
holder of Exchange Debentures to be redeemed, at the following redemption prices
(expressed as percentages of principal amount) if redeemed during the
twelve-month period beginning on March 15 of each of the years indicated below,
in each case together with any accrued and unpaid interest thereon to the
applicable redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2002.............................................................................. 106.500%
2003.............................................................................. 104.333%
2004.............................................................................. 102.167%
2005 and thereafter............................................................... 100.000%
</TABLE>
In addition, Holdings may redeem the Exchange Debentures in whole or in
part, at a redemption price equal to 113% of the principal amount thereof, plus
an amount in cash equal to all accrued and unpaid interest thereon to the
redemption date, with the proceeds of a Public Equity Offering, PROVIDED that
such redemption shall occur within 60 days of the date of the closing of such
Public Equity Offering.
No optional redemption of Exchange Debentures may be authorized or made at
less than 101% of the principal amount thereof at any time when Holdings is
making or purchasing Exchange Debentures under a Change of Control Offer in
accordance with the provisions of "--Repurchase at the Option of Holders--
Change of Control."
If less than all of the Exchange Debentures are to be redeemed at any time,
selection of Exchange Debentures for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Exchange Debentures are listed, or, if the Exchange
Debentures are not so listed, on a PRO RATA basis, by lot or by such method as
the Trustee will deem fair and appropriate; provided that no Exchange Debentures
of $1,000 or less will be redeemed in part. Notices of redemption will be mailed
by first class mail at least 30 but not more than 60 days before the redemption
date to each Holder of Exchange Debentures to be redeemed at its registered
address. If any Exchange Debenture is to be redeemed in part only, the notice of
redemption that relates to such Exchange Debenture will state the portion of the
principal amount thereof to be redeemed. A new Exchange Debenture in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Exchange Debenture. On and
after the redemption date, interest will cease to accrue on Exchange Debentures
or portions of them called for redemption unless Holdings defaults in the
payment thereof.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders",
Holdings is not required to make any mandatory redemption, purchase or sinking
fund payments with respect to the Exchange Debentures prior to the maturity
date.
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REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
The Exchange Debenture Indenture provides that upon the occurrence of a
Change of Control, each Holder of Exchange Debentures will have the right to
require Holdings to repurchase all or any part of such Holder's Exchange
Debentures pursuant to the offer described below (the "Change of Control Offer")
at an offer price in cash equal to 101% of the aggregate principal amount
thereof, plus an amount in cash equal to all accrued and unpaid interest thereon
to the date of purchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, Holdings will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase Exchange Debentures pursuant to the procedures
required by the Exchange Debenture Indenture and described in such notice.
Holdings will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Exchange
Debentures as a result of a Change of Control.
The Change of Control Offer will remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Change of Control Offer
Period"). No later than five Business Days after the termination of the Offer
Period (the "Change of Control Purchase Date"), Holdings will purchase all
Exchange Debentures validly tendered and not properly withdrawn pursuant to the
Change of Control Offer. Payment for any Exchange Debentures so purchased will
be made in the same manner as interest payments are made on the Exchange
Debentures.
If the Change of Control Purchase Date is on or after an interest record
date and on or before the related interest payment date, any accrued and unpaid
interest will be paid to the Person in whose name an Exchange Debenture is
registered at the close of business on such record date, and no additional
interest will be payable to Holders who tender Exchange Debentures pursuant to
the Change of Control Offer.
On the Change of Control Purchase Date, Holdings will, to the extent lawful,
(1) accept for payment all Exchange Debentures or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all
Exchange Debentures or portions thereof so tendered and (3) deliver or cause to
be delivered to the Trustee the Exchange Debentures so accepted together with an
Officers' Certificate stating the aggregate principal amount of Exchange
Debentures or portions thereof being purchased by Holdings. The Paying Agent
will promptly mail to each Holder of Exchange Debentures so tendered the Change
of Control Payment for such Exchange Debentures, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Exchange Debenture equal in principal amount to any unpurchased portion of
the Exchange Debentures surrendered, if any; provided that each such new
Exchange Debenture will be in a principal amount of $1,000 or an integral
multiple thereof. Holdings will publicly announce the results of the Change of
Control Offer on the Change of Control Purchase Date.
Except as described above, the Exchange Debenture Indenture does not contain
provisions that permit the Holders of Exchange Debentures to require Holdings to
redeem the Exchange Debentures in the event of a takeover, recapitalization or
similar restructuring, including an issuer recapitalization or similar
transaction with management. Consequently, the Change of Control provisions will
not afford any protection in a highly leveraged transaction, including such a
transaction initiated by Holdings, management of Holdings or an Affiliate of
Holdings, if such transaction does not result in a Change of Control. In
addition, the existence of the Holder's right to require Holdings to repurchase
such Holder's Exchange Debentures upon the occurrence of a Change of Control may
or may not deter a third party from seeking to acquire Holdings in a transaction
that would constitute a Change of Control.
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Holdings' ability to repurchase Exchange Debentures pursuant to a Change of
Control Offer may be limited by a number of factors. The New Credit Agreement
provides that certain change of control events with respect to Holdings and/or
Anvil would constitute a default thereunder permitting the lending parties
thereto to accelerate the Indebtedness thereunder. In addition, certain events
that may obligate Holdings or Anvil to offer to repay all outstanding
obligations under the New Credit Agreement may not constitute a Change of
Control under the Exchange Debenture Indenture. However, neither Holdings nor
Anvil may have sufficient resources to repay Indebtedness under the New Credit
Agreement and Holdings may not have sufficient resources to repurchase tendered
Exchange Debentures. Furthermore, any future credit agreements or other
agreements relating to senior Indebtedness to which Holdings or Anvil become a
party may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when Holdings and/or Anvil is directly or indirectly
prohibited from purchasing Exchange Debentures, Holdings and/or Anvil could seek
the consent of its lenders to the purchase of Exchange Debentures or could
attempt to refinance the borrowings that contain such prohibition. If Holdings
and/or Anvil do not obtain such a consent or repay such borrowings, the purchase
of Exchange Debentures will remain prohibited. Holdings' failure to purchase
tendered Exchange Debentures would constitute a breach of the Exchange Debenture
Indenture which would, in turn, constitute a default under the New Credit
Agreement and could lead to the acceleration of the indebtedness thereunder. In
any such event, the structural and contractual subordination of the Exchange
Debentures and the security granted in respect of the New Credit Agreement would
likely result in the Holders of the Exchange Debentures receiving less ratably
than other creditors of Holdings.
In addition, the terms of the Senior Notes of Anvil include provisions
similar to those contained in the Exchange Debentures enabling holders thereof
to require Anvil to repurchase all or any part of such securities under
circumstances constituting a Change of Control. However, Holdings and Anvil may
not have sufficient resources to repurchase tendered Exchange Debentures and/or
Senior Notes and any such failure may constitute a default under the terms of
the New Credit Agreement, the Senior Notes, the Senior Indenture, the Exchange
Debentures and the Exchange Debenture Indenture. Again, in any such event, the
structural and contractual subordination of the Exchange Debentures and the
security granted in respect of the New Credit Agreement would likely result in
the Holders of the Exchange Debentures receiving less ratably than other
creditors of Holdings.
The definition of Change of Control includes a phrase relating to the sale,
lease or transfer of "all or substantially all" of the assets of Holdings and
its Restricted Subsidiaries, taken as a whole. Although there is a developing
body of case law interpreting the phrase "substantially all," there is no
precise definition of the phrase under applicable law. Accordingly, the ability
of a Holder of Exchange Debentures to require Holdings to repurchase such shares
as a result of a sale, lease or transfer of less than all of the assets of
Holdings and its Restricted Subsidiaries taken as a whole to another Person or
group may be uncertain.
ASSET SALES
The Exchange Debenture Indenture provides that Holdings will not, and will
not permit any of its Restricted Subsidiaries to, engage in an Asset Sale in
excess of $2.0 million unless (i) Holdings (or the Restricted Subsidiary, as the
case may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value, and in the case of a lease of assets, a lease
providing for rent and other conditions which are no less favorable to Holdings
(or the Restricted Subsidiary, as the case may be) in any material respect than
the then prevailing market conditions (evidenced in each case by a resolution of
the Board of Directors of such entity set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests sold or otherwise
disposed of, and (ii) at least 75% (100% in the case of lease payments) of the
consideration therefor received by Holdings or such Restricted Subsidiary is in
the form of cash or Cash Equivalents; PROVIDED that the amount of (x) any
liabilities (as shown on Holdings' or such Restricted Subsidiary's most recent
balance sheet or in the notes thereto, excluding contingent liabilities and
trade payables), of Holdings or any Restricted Subsidiary (other than
liabilities that are by their terms
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subordinated to the Exchange Debentures, or any guarantee thereof) that are
assumed by the transferee of any such assets and (y) any notes or other
obligations received by Holdings or any such Restricted Subsidiary from such
transferee that are promptly, but in no event more than 30 days after receipt,
converted by Holdings or such Subsidiary into cash (to the extent of the cash
received), will be deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
Holdings may apply such Net Proceeds (a) to reduce permanently long-term
Indebtedness of a Restricted Subsidiary, (b) to reduce permanently Indebtedness
(and, in the case of revolving Indebtedness, to reduce permanently the
commitments) under the New Credit Agreement, or (c) to an investment in another
business, the making of a capital expenditure or the acquisition of other
tangible assets, in each case, in the same or a similar line of business as
Holdings was engaged in on the date of the Exchange Debenture Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
preceding sentence of this paragraph will be deemed to constitute "Excess
Proceeds." On the earlier of (i) the 366th day after an Asset Sale or (ii) such
date as the Board of Anvil or the Restricted Subsidiary determines not to apply
the Net Proceeds relating to such Asset Sale in the manner set forth in (a), (b)
or (c), if the aggregate amount of Excess Proceeds exceeds $7.5 million,
Holdings will be required to make an offer to all Holders of Exchange Debentures
(an "Asset Sale Offer") to purchase the maximum principal amount of Exchange
Debentures that may be purchased out of the Excess Proceeds, at an offer price
in cash in an amount equal to 100% of the principal amount thereof plus accrued
and unpaid interest thereon to the date of purchase, in accordance with the
procedures set forth in the Exchange Debenture Indenture. To the extent that the
aggregate amount of Exchange Debentures tendered pursuant to an Asset Sale Offer
is less than the Excess Proceeds, Holdings may use any remaining Excess Proceeds
for general corporate purposes. If the aggregate principal amount of Exchange
Debentures surrendered by Holders thereof exceeds the amount of Excess Proceeds,
the Trustee shall select the Exchange Debentures to be purchased on a PRO RATA
basis. Upon completion of such Asset Sale Offer, the amount of Excess Proceeds
shall be reset at zero.
The Asset Sale Offer will remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Asset Sale Offer Period"). No later
than five Business Days after the termination of the Asset Sale Offer Period
(the "Asset Sale Purchase Date"), Holdings will purchase the principal amount of
Exchange Debentures required to be purchased pursuant to this covenant (the
"Asset Sale Offer Amount") or, if less than the Asset Sale Offer Amount has been
tendered, all Exchange Debentures tendered in response to the Asset Sale Offer.
Payment for any Exchange Debentures so purchased will be made in the same manner
as interest payments are made on the Exchange Debentures.
If the Asset Sale Purchase Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid interest
will be paid to the Person in whose name an Exchange Debenture is registered at
the close of business on such record date, and no additional interest will be
payable to Holders who tender Exchange Debentures pursuant to the Asset Sale
Offer.
On or before the Asset Sale Purchase Date, Holdings will, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Asset Sale Offer Amount of Exchange Debentures or portions thereof tendered
pursuant to the Asset Sale Offer, or if less than the Asset Sale Offer Amount
has been tendered, all Exchange Debentures tendered, and will deliver to the
Trustee an Officers' Certificate stating that such Exchange Debentures or
portions thereof were accepted for payment by Holdings in accordance with the
terms of this covenant. Holdings, the Depositary or the Paying Agent, as the
case may be, will promptly (but in any case not later than five days after the
Asset Sale Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Exchange Debentures tendered by such Holder
and accepted by Holdings for purchase, and Holdings will promptly issue a new
Exchange Debenture, and the Trustee, upon delivery of an Officers' Certificate
from Holdings will authenticate and mail or deliver such new Exchange Debenture
to such Holder, in a principal amount equal to any unpurchased portion of the
Exchange Debenture surrendered. Any Exchange Debenture not so accepted
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will be promptly mailed or delivered by Holdings to the Holder thereof. Holdings
will publicly announce the results of the Asset Sale Offer on the Asset Sale
Purchase Date.
Holdings will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of the
Exchange Debentures pursuant to any Asset Sale Offer.
If Holdings is required to make an Asset Sale Offer, the Senior Indenture
under which the Senior Notes will be issued may require Anvil to make a similar
offer to purchase Senior Notes. If either Anvil or Holdings was unable to
purchase all of the Senior Notes or Exchange Debentures it would then be
required to repurchase, an Event of Default may result under the Senior
Indenture and/or the Exchange Debenture Indenture and any such Event of Default
may also constitute an Event of Default under the New Credit Agreement. In any
such event, the subordination provisions of the Exchange Debenture Indenture
would likely result in the Holders of the Exchange Debentures receiving less
ratably than other creditors of Holdings.
The New Credit Agreement permits certain dividends from Holdings'
Subsidiaries to Holdings which may be used to pay interest on the Exchange
Debentures, dividends for purposes such as repurchases of Exchange Debentures by
Holdings upon an Asset Sale may be restricted under the terms of the New Credit
Agreement. In such event, Holdings would need to seek the consent of its lenders
under the New Credit Agreement in order to repurchase Exchange Debentures with
the Net Proceeds of an Asset Sale. See "Risk Factors--Risks Associated with
Holding Company Structure."
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Exchange Debenture Indenture provides that Holdings will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly: (i)
declare or pay any dividend or make any distribution on account of Holdings' or
any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
Holdings) (other than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of Holdings or dividends or distributions
payable to Holdings or any Wholly Owned Subsidiary of Holdings); (ii) purchase,
redeem or otherwise acquire or retire for value any Equity Interests of Holdings
or any direct or indirect parent of Holdings or other Affiliate or Restricted
Subsidiary of Holdings; (iii) make any principal payment on, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness of
Holdings that is subordinated to the Exchange Debentures, except in accordance
with the scheduled mandatory redemption or repayment provisions set forth in the
original documentation governing such Indebtedness (but not pursuant to any
mandatory offer to repurchase upon the occurrence of any event); or (iv) make
any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default will have occurred and be continuing
or would occur as a consequence thereof;
(b) Holdings would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described under
"--Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by Holdings and its Restricted Subsidiaries after
the date of the Exchange Debenture Indenture, is
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less than the sum of, without duplication, (i) 50% of the Consolidated Net
Income of Holdings for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after the date of the
Exchange Debenture Indenture to the end of Holdings' most recently ended
fiscal quarter for which internal financial statements are available at the
time of such Restricted Payment (or, if such Consolidated Net Income for
such period is a deficit, less 100% of such deficit), plus (ii) to the
extent not included in the amount described in clause (i) above, 100% of the
aggregate net cash proceeds received after the date of the Exchange
Debenture Indenture by Holdings from the issue or sale of, or from
additional capital contributions in respect of, Equity Interests of Holdings
or of debt securities of Holdings that have been converted into, or
cancelled in exchange for, Equity Interests of Holdings (other than Equity
Interests (or convertible debt securities) sold to a Restricted Subsidiary
or an Unrestricted Subsidiary of Holdings and other than Disqualified Stock
or debt securities that have been converted into Disqualified Stock and less
the amount of any loans made pursuant to clause (vi) of the next succeeding
paragraph), plus (iii) 100% of the cash proceeds realized upon the sale of
any Unrestricted Subsidiary (less the amount of any reserve established for
purchase price adjustments and less the maximum amount of any
indemnification or similar contingent obligation for the benefit of the
purchaser, any of its Affiliates or any other third party in such sale, in
each case as adjusted for any permanent reduction in any such amount on or
after the date of such sale, other than by virtue of a payment made to such
Person) following the date of the Exchange Debenture Indenture, plus (iv) to
the extent that any Restricted Investment that was made after the date of
the Exchange Debenture Indenture is sold to an unaffiliated purchaser for
cash or otherwise liquidated or repaid for cash, the cash proceeds realized
with respect to such Restricted Investment (less the cost of disposition, if
any).
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the Exchange
Debenture Indenture; (ii) the making of any Restricted Investment in exchange
for, or out of the proceeds of, the substantially concurrent sale (other than to
a Subsidiary of Holdings) of, or from substantially concurrent additional
capital contributions in respect of, Equity Interests of Holdings (other than
Disqualified Stock); (iii) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of Holdings in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Subsidiary of
Holdings) of, or from substantially concurrent additional capital contributions
in respect of, other Equity Interests of Holdings (other than any Disqualified
Stock); (iv) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from (X) an incurrence of Permitted
Refinancing Indebtedness or (Y) the substantially concurrent sale (other than to
a Subsidiary of Holdings) of, or from substantially concurrent additional
capital contributions in respect of, Equity Interests of Holdings (other than
Disqualified Stock); (v) the declaration or payment of any dividend to Holdings
for, or the direct repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of Holdings or any Restricted Subsidiary of
Holdings or Holdings held by any member of Holdings' (or any of its Restricted
Subsidiaries') management pursuant to any management agreement, stock option
agreement or plan or stockholders agreement; PROVIDED that (X) the aggregate
price paid for all such repurchased, redeemed, acquired or retired Equity
Interests will not exceed $2.0 million in any fiscal year (plus any amount
available for such payments hereunder since the date of the Exchange Debenture
Indenture which have not been used for such purpose) or (Y) $8.0 million in the
aggregate (in each case, net of the cash proceeds received by Holdings from
subsequent reissuances of such Equity Interests to new members of management);
(vi) loans to members of management of Holdings or any Restricted Subsidiary the
proceeds of which are used for a concurrent purchase of Equity Interests of
Holdings and a capital contribution in an amount equal to such proceeds to
Holdings; (vii) payments in connection with the application of the net proceeds
of the Recapitalization as set forth under "Use of Proceeds"; (viii) payments to
Holdings in respect of accounting, legal or other administrative expenses
incurred by Holdings relating to the operations of Holdings in the ordinary
course of business and in respect of fees and related expenses associated with
registration statements filed with the Commission and
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subsequent ongoing public reporting requirements arising from the issuance of
Holdings' Guarantee, the Senior Preferred Stock and the Exchange Debentures;
PROVIDED that the aggregate amount of such payments does not exceed $500,000 in
any fiscal year; (ix) so long as Holdings files consolidated income tax returns
which include Anvil, payments to Holdings in an amount equal to the amount of
income tax that Anvil would have paid if it had filed consolidated tax returns
on a separate-company basis; (x) payments of director's fees and the reasonable
expenses of its directors in an aggregate amount not to exceed $125,000 per year
in aggregate (including indemnification obligations and professional fees and
expenses) by Holdings and payments to Holdings in respect thereof; (xi) payments
to holders of its Capital Stock in lieu of issuing fractional shares thereof in
an amount not to exceed $200,000; (xii) any payments on the Senior Preferred
Stock in connection with the exchange thereof into Exchange Debentures; (xiii)
the acquisition and issuance of Senior Preferred Stock by Holdings in connection
with the exchange offer contemplated by the Preferred Stock Registration Rights
Agreement; (xiv) the making of any principal payment on, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Exchange Debentures out of Excess Proceeds available for
general corporate purposes after consummation of purchases of Exchange
Debentures pursuant to an Asset Sale Offer; (xv) the declaration and payment of
any dividend or the making of any other distribution for the purpose of funding
any payment in respect of or repurchase or redemption of Senior Preferred Stock
or Exchange Debentures; and (xvi) the repurchase of the Senior Preferred Stock
or the Exchange Debentures in connection with an offer required to be made
therefor in connection with a Change of Control provided that Anvil has
previously paid all amounts required to be paid in connection with any Change of
Control Offer for the Senior Notes; PROVIDED, HOWEVER, that in the case of any
transaction described in clauses (i), (ii), (iii), (iv) and (v) no Default or
Event of Default will have occurred and be continuing immediately after such
transaction. In determining the aggregate amount of Restricted Payments made
after the date of the Exchange Debenture Indenture, 100% of the amounts expended
pursuant to the foregoing clauses (ii), (iii), (iv)(Y), (v) and (vi) shall be
included in such calculation and none of the amounts expended pursuant to the
foregoing clauses (i), (iv)(X), (vii), (viii), (ix), (x), (xi), (xii), (xiii),
(xiv), (xv) and (xvi) shall be included in such calculation.
As of the date hereof and as of the issue date of the Exchange Debentures,
all of Holdings' Subsidiaries were Restricted Subsidiaries. The Board of
Directors may designate any Subsidiary to be an Unrestricted Subsidiary if such
designation would not cause a Default. For purposes of making such
determination, all outstanding Investments by Holdings and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. Such designation will only be permitted if
such Restricted Payment would be permitted at such time and if such Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) will be the greater
of (i) book value or (ii) fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) on the date of the Restricted Payment of the asset(s) proposed to be
transferred by Holdings or such Restricted Subsidiary, as the case may be,
pursuant to the Restricted Payment. Not later than the date of making any
Restricted Payment, Holdings will deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculation required by this covenant were computed,
which calculations may be based upon Holdings's latest available financial
statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Exchange Debenture Indenture provides that Holdings will not, and will
not permit any of its Restricted Subsidiaries and Unrestricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guaranty or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Indebtedness) and
that Holdings will not issue any Disqualified Stock and will not permit any of
its Restricted Subsidiaries to issue any shares of
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preferred stock; PROVIDED, HOWEVER, that Holdings and its Restricted
Subsidiaries may incur Indebtedness (including Acquired Indebtedness) or issue
shares of Disqualified Stock if: (i) the Fixed Charge Coverage Ratio for
Holdings' most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least (A) at any time prior to March 15, 1999, 2.00 to 1, and (B)
thereafter at least 2.25 to 1, in each case determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter period; and
(ii) no Default or Event of Default will have occurred and be continuing or
would occur as a consequence thereof; PROVIDED, that no Guarantee may be
incurred pursuant to this paragraph unless the guaranteed Indebtedness is
incurred by Holdings or a Restricted Subsidiary pursuant to this paragraph.
The foregoing provisions will not apply to:
(i) the incurrence by Holdings and its Restricted Subsidiaries of
Indebtedness and letters of credit pursuant to the New Credit Agreement
(with letters of credit being deemed to have a principal amount equal to the
maximum potential liability of Holdings or the relevant Restricted
Subsidiary thereunder) in a maximum principal amount outstanding at any one
time not to exceed $55.0 million (or in the event of a refinancing of the
Indebtedness under the New Credit Agreement, the greater of $55.0 million or
the Borrowing Base) (1) less the amount of all mandatory principal payments
actually made by Anvil in respect of term loans thereunder (excluding any
such payments to the extent refinanced at the time of payment under a
replaced credit agreement) and (2) in the case of the revolving credit
facility, reduced by any required permanent repayments (which are
accompanied by a corresponding permanent commitment reduction) thereunder;
(ii) the incurrence by Holdings and its Restricted Subsidiaries of the
Existing Indebtedness;
(iii) the incurrence by Anvil and Holdings of Indebtedness represented by
the Senior Notes and Holdings' Guarantee thereof and the incurrence by
Holdings of the Indebtedness represented by the Exchange Debentures;
(iv) the incurrence by Holdings or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or Purchase Money Obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property used in the business of Holdings or such Restricted
Subsidiary, in an aggregate principal amount not to exceed $7.5 million at
any time outstanding;
(v) the incurrence by Holdings or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by the Exchange Debenture Indenture to be
incurred;
(vi) the incurrence by Holdings or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among Holdings and any of its Wholly
Owned Subsidiaries or between or among any Wholly Owned Subsidiaries;
PROVIDED, HOWEVER, that (i) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person other
than a Wholly Owned Subsidiary and (ii) any sale or other transfer of any
such Indebtedness to a Person that is not either Holdings or a Wholly Owned
Subsidiary will be deemed, in each case, to constitute an incurrence of such
Indebtedness by Holdings or such Subsidiary, as the case may be;
(vii) the incurrence by Holdings or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the Exchange Debenture Indenture to be incurred;
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(viii) the incurrence by Holdings and its Restricted Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of
this paragraph) in an aggregate principal amount at any time outstanding not
to exceed $20.0 million; PROVIDED that such Indebtedness incurred by foreign
subsidiaries that are Restricted Subsidiaries shall not exceed an aggregate
principal amount at any time outstanding of $7.5 million;
(ix) the incurrence by Holdings' Unrestricted Subsidiaries of
Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event will be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of Holdings;
(x) Indebtedness incurred by Holdings or any of its Restricted
Subsidiaries arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from guarantees or
letters of credit, surety bonds or performance bonds securing the
performance of Holdings or any of its Restricted Subsidiaries pursuant to
such agreements, in connection with the disposition of any business, assets
or Restricted Subsidiary of Holdings (other than guarantees or similar
credit support by Holdings or any of its Restricted Subsidiaries of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing such
acquisition), in a principal amount not to exceed 25.0% of the gross
proceeds (with proceeds other than cash or Cash Equivalents being valued at
the fair market value thereof as determined by the Board of Directors of
Holdings in good faith) actually received by Holdings or any of its
Restricted Subsidiaries in connection with such disposition; and
(xi) the incurrence by a Securitization Entity of Indebtedness in a
Qualified Securitization Transaction that is non-recourse to Holdings or any
Subsidiary of Holdings (except Standard Securitization Undertakings);
PROVIDED, HOWEVER, that the amount of Indebtedness outstanding under clause
(i) above and this clause (xi) shall not in the aggregate exceed $55.0
million at any time outstanding (or in the event of a refinancing of the
Indebtedness under the New Credit Agreement, the greater of $55.0 million or
the Borrowing Base).
Notwithstanding any other provision of this covenant, a guarantee of
Indebtedness permitted by the terms of the Exchange Debenture Indenture at the
time such Indebtedness was incurred will not constitute a separate incurrence of
Indebtedness.
SALE AND LEASEBACK TRANSACTIONS
The Exchange Debenture Indenture provides that Holdings will not, and will
not permit any of its Restricted Subsidiaries to, enter into any sale and
leaseback transaction; PROVIDED that Holdings or any Restricted Subsidiary may
enter into a sale and leaseback transaction if (i) Holdings or such Restricted
Subsidiary could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant "--Incurrence of Additional Indebtedness and Issuance of Preferred
Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the
covenant "Liens," (ii) the net cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as determined in good
faith by the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee) of the property that is the subject of such sale and
leaseback transaction and (iii) the transfer of assets in such sale and
leaseback transaction is permitted by, and the proceeds of such transaction are
applied in compliance with, the covenant "--Repurchase at Option of
Holders--Asset Sales."
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LIENS
The Exchange Debenture Indenture provides that Holdings will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly,
create, incur, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom, except Permitted Liens. The Exchange
Debenture Indenture further provides that Holdings will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien that secures obligations under any
Subordinated Indebtedness, unless the Exchange Debentures are equally and
ratably secured with the obligations so secured until such time as such
obligations are no longer secured by a Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Exchange Debenture Indenture provides that Holdings will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i) (a) pay dividends
or make any other distributions to Holdings or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, or (b) pay any Indebtedness
owed to Holdings or any of its Restricted Subsidiaries, (ii) make loans or
advances to Holdings or any of its Restricted Subsidiaries or (iii) transfer any
of its properties or assets to Holdings or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (a)
Existing Indebtedness as in effect on the date of the Exchange Debenture
Indenture, (b) the New Credit Agreement as in effect as of the date of the
Exchange Debenture Indenture, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, PROVIDED THAT such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are no more
restrictive with respect to such dividend and other payment restrictions than
those contained in the New Credit Agreement as in effect on the date of the
Exchange Debenture Indenture, (c) the Senior Indenture, the Senior Notes, the
Certificate of Designation, the Senior Preferred Stock, the Exchange Debenture
Indenture and the Exchange Debentures, (d) applicable law, (e) any instrument
governing Acquired Indebtedness or Capital Stock of a Person acquired by
Holdings or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Acquired Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, PROVIDED that the Consolidated EBITDA of such Person is not taken into
account in determining whether such acquisition was permitted by the terms of
the Exchange Debenture Indenture, (f) by reason of customary non-assignment
provisions in leases and licenses entered into in the ordinary course of
business and consistent with past practices, (g) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so acquired, (h)
agreements relating to the financing of the acquisition of real or tangible
personal property acquired after the date of the Exchange Debenture Indenture,
provided, that such encumbrance or restriction relates only to the property
which is acquired and in the case of any encumbrance or restriction that
constitutes a Lien, such Lien constitutes a Purchase Money Lien, (i) any
restriction or encumbrance contained in contracts for sale of assets permitted
by the Exchange Debenture Indenture in respect of the assets being sold pursuant
to such contractor or (j) Indebtedness or other contractual requirements of a
Securitization Entity in connection with a Qualified Securitization Transaction;
PROVIDED that such restrictions apply only to such Securitization Entity.
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TRANSACTIONS WITH AFFILIATES
The Exchange Debenture Indenture provides that Holdings will not, and will
not permit any of its Restricted Subsidiaries to, sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to Holdings or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by Holdings or such Restricted Subsidiary with an
unrelated Person and (ii) Holdings delivers to the Trustee (a) with respect to
any Affiliate Transaction entered into after the date of the Exchange Debenture
Indenture involving aggregate consideration in excess of $2.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction involving aggregate consideration in excess of $7.5
million, an opinion as to the fairness to Holdings or such Restricted Subsidiary
of such Affiliate Transaction from a financial point of view issued by an
investment banking firm of national standing; PROVIDED that the following will
not be deemed to be Affiliate Transactions: (o) reasonable fees and compensation
paid to, and indemnity provided on behalf of, officers and directors of
Holdings, Anvil or any Restricted Subsidiary as determined in good faith by the
appropriate Board of Directors or senior management; (p) the provision of
administrative or management services by Holdings or any of its officers to
Holdings or any of its Restricted Subsidiaries in the ordinary course of
business consistent with past practice, (q) transactions between Holdings or one
or more of its Restricted Subsidiaries and the relevant Securitization Entity
effected as part of a Qualified Securitization Transaction; (r) any agreement as
in effect as of the date of the Exchange Debenture Indenture (including, without
limitation, the New Credit Agreement) or any amendment thereto or any
transactions contemplated thereby (including pursuant to any amendment thereto)
and any replacement agreement thereto so long as any such amendment or
replacement agreement is not more disadvantageous to the Holders of Exchange
Debentures in any material respect than the original agreement as in effect on
the date of the Exchange Debenture Indenture; (s) payments or loans to employees
or consultants which are approved by the Board of Directors of Holdings in good
faith; (t) the existence of, or the performance by Holdings or any of its
Restricted Subsidiaries of its obligations under the terms of, any stockholders
agreement (including any registration rights agreement or purchase agreement
related thereto) to which it is a party as of the date of the Exchange Debenture
Indenture and any similar agreement which it may enter into thereafter;
PROVIDED, HOWEVER, that the existence of, or the performance by Holdings or any
of its Restricted Subsidiaries of obligations under any similar agreement
entered into after the date of the Exchange Debenture Indenture shall only be
permitted by this clause (t) to the extent that the terms of any such new
agreement are not otherwise disadvantageous to the Holders of the Exchange
Debentures in any material respect; (u) transactions with customers, clients,
suppliers, joint venture partners or purchasers or sellers of goods or services,
in each case in the ordinary course of business (including, without limitation,
pursuant to joint venture agreements) and otherwise in compliance with the terms
of the Exchange Debenture Indenture which are at least as favorable as might
reasonably have been obtained at such time from an unaffiliated party; (v) any
employment agreement entered into by Holdings or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of Holdings or such Restricted Subsidiary (including, without
limitation, any such employment agreements existing prior to the date of the
Exchange Debenture Indenture); (w) the granting of stock options to employees
and directors of Holdings and its Restricted Subsidiaries in accordance with the
New Stock Option Plan at exercise prices equal to the fair market value of the
Common Stock and the issuance of Common Stock upon the exercise of such options;
(x) transactions between or among Holdings and/or its Wholly Owned Subsidiaries,
(y) (i) the payment of customary management, consulting and advisory fees and
related expenses to BRS and 399 Venture and their Affiliates not to exceed
$750,000 per year in aggregate and (ii) payments by Anvil or any of its
Restricted Subsidiaries to BRS and 399 Venture and their Affiliates made
pursuant to any financial
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advisory, financing, underwriting or placement agreement or in respect of other
investment banking activities, including, without limitation, in connection with
acquisitions or divestitures which are approved by the Board of Directors of
Anvil, Holdings or such Restricted Subsidiary in good faith not to exceed
$750,000 per year in aggregate; and (z) transactions permitted by the covenant
described in "-- Restricted Payments."
LINE OF BUSINESS
Holdings will not, and will not permit any Restricted Subsidiary to, engage
in any line of business which is not the same, similar, ancillary, complementary
or related to the businesses in which Holdings is engaged on the date of the
Exchange Debenture Indenture.
REPORTS
The Exchange Debenture Indenture provides that, whether or not required by
the rules and regulations of the Commission, so long as any Exchange Debentures
are outstanding, Holdings will furnish to the Holders of Exchange Debentures,
within 15 days after it is or would have been required to file such with the
Commission, (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if Holdings was required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, reports thereon by the certified
independent accountants of Holdings and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if Holdings was required to
file such reports. In addition, whether or not required by the rules and
regulations of the Commission, Holdings will file copies of all such information
and reports with the Commission for public availability (unless the Commission
will not accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, Holdings has
agreed that, for so long as any Exchange Debentures remain outstanding, they
will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Exchange Debenture Indenture will provide that Holdings shall not, in a
single transaction or series of related transactions, consolidate or merge with
or into (whether or not Holdings is the surviving corporation), or directly
and/or indirectly through its Restricted Subsidiaries sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets determined on a consolidated basis for Holdings and its Restricted
Subsidiaries taken as a whole in one or more related transactions, to another
corporation, Person or entity unless (i) Holdings is the surviving corporation
or the entity or the Person formed by or surviving any such consolidation or
merger (if other than Holdings) or to which such sale, assignment, transfer,
lease, conveyance or other disposition will have been made is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; (ii) the entity or Person formed by or surviving any
such consolidation or merger (if other than Holdings) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made assumes all the obligations of Holdings, under the Exchange
Debentures and the Exchange Debenture Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; (iii) immediately
after such transaction no Default or Event of Default exists; (iv) Holdings or
the entity or Person formed by or surviving any such consolidation or merger (if
other than Holdings), or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made (A) will have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of Holdings immediately preceding the transaction and (B)
will, at the time of such transaction and after giving pro forma effect thereto
as if such transaction had occurred at the
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beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock"; and (v)
Holdings delivers to the Trustee an Officers' Certificate and an Opinion of
Counsel addressed to the Trustee with respect to the foregoing matters;
PROVIDED, HOWEVER, that the requirement set forth in clause (iv) above shall not
apply to a merger between Holdings and any Wholly Owned Subsidiary or to any
merger between Wholly Owned Subsidiaries.
EVENTS OF DEFAULT AND REMEDIES
The Exchange Debenture Indenture provides that each of the following
constitutes an Event of Default: (i) default for 30 days in the payment when due
of interest on the Exchange Debentures; (ii) default in payment when due of the
principal of or premium, if any, on the Exchange Debentures; (iii) failure by
Holdings to comply with the provisions described under the captions "--Change of
Control," "--Asset Sales," "--Restricted Payments," "--Incurrence of
Indebtedness and Issuance of Preferred Stock," "--Sale and Leaseback
Transactions" or "--Merger, Consolidation or Sale of Assets"; (iv) failure by
Holdings for 60 days after notice to comply with any of its other agreements in
the Exchange Debenture Indenture or the Exchange Debentures; (v) default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed by
Holdings or any of its Restricted Subsidiaries or Holdings (or the payment of
which is guaranteed by Holdings or any of its Restricted Subsidiaries or
Holdings) whether such Indebtedness or Guarantee now exists, or is created after
the date of the Exchange Debenture Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $7.5 million or more; (vi) failure
by Holdings or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $4.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days; and (vii) certain events of bankruptcy or
insolvency with respect to Holdings, Anvil or any of Holdings' other Significant
Subsidiaries or group of Restricted Subsidiaries that, together, would
constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Exchange Debentures
may declare all the Exchange Debentures to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to Holdings, Anvil, any
other Significant Subsidiary or any group of Subsidiaries that, taken together,
would constitute a Significant Subsidiary, all outstanding Exchange Debentures
will become due and payable without further action or notice. Holders of
Exchange Debentures may not enforce the Exchange Debenture Indenture or the
Exchange Debentures except as provided in the Exchange Debenture Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Exchange Debentures may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Exchange
Debentures notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest) if
it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Exchange
Debentures then outstanding by notice to the Trustee may on behalf of the
Holders of all of the Exchange Debentures waive any existing Default or Event of
Default and its consequences under the Exchange Debenture Indenture
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except a continuing Default or Event of Default in the payment of interest on,
or the principal of, premium, if any, on the Exchange Debentures.
Holdings is required to deliver to the Trustee annually a statement
regarding compliance with the Exchange Debenture Indenture, and Holdings is
required upon becoming aware of any Default or Event of Default, to deliver to
the Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Holdings, as
such, will have any liability for any obligations of Holdings under the Exchange
Debentures, the Exchange Debenture Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
Exchange Debentures by accepting an Exchange Debenture waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Exchange Debentures. Such waiver may not be effective to waive
liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Holdings may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Exchange Debentures
("Legal Defeasance") except for (i) the rights of Holders of outstanding
Exchange Debentures to receive payments in respect of the principal of, premium,
if any, and interest on such Exchange Debentures when such payments are due from
the trust referred to below, (ii) Holdings' obligations with respect to the
Exchange Debentures concerning issuing temporary Exchange Debentures,
registration of Exchange Debentures, mutilated, destroyed, lost or stolen
Exchange Debentures and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and Holdings' obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Exchange Debenture
Indenture. In addition, Holdings may, at its option and at any time, elect to
have the obligations of Holdings released with respect to certain covenants that
are described in the Exchange Debenture Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations will not constitute a
Default or Event of Default with respect to the Exchange Debentures. In the
event Covenant Defeasance occurs, certain events (not including nonpayment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Exchange Debentures.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
Holdings must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Exchange Debentures, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
outstanding Exchange Debentures on the stated maturity or on the applicable
redemption date, as the case may be, and Holdings must specify whether the
Exchange Debentures are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, Holdings will have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that (A) Holdings has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of the
Exchange Debenture Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel will confirm that, the Holders of the outstanding Exchange
Debentures will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner
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and at the same times as would have been the case if such Legal Defeasance had
not occurred; (iii) in the case of Covenant Defeasance, Holdings will have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding
Exchange Debentures will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Covenant Defeasance had not occurred; (iv)
no Default or Event of Default will have occurred and be continuing on the date
of such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance will not result in a breach or violation of,
or constitute a default under any material agreement or instrument (other than
the Exchange Debenture Indenture) to which Holdings or any of its Subsidiaries
is a party or by which Holdings or any of its Subsidiaries is bound (including,
without limitation, the New Credit Agreement); (vi) Holdings must have delivered
to the Trustee an opinion of counsel to the effect that on the 91st day
following the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (vii) Holdings must deliver to the Trustee an
Officers' Certificate stating that the deposit was not made by Holdings with the
intent of preferring the Holders of Exchange Debentures over the other creditors
of Holdings with the intent of defeating, hindering, delaying or defrauding
creditors of Holdings or others; and (viii) Holdings must deliver to the Trustee
an Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Exchange Debentures in accordance with the
Exchange Debenture Indenture. The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and Holdings may require a Holder to pay any taxes and fees required
by law or permitted by the Exchange Debenture Indenture. Holdings is not
required to transfer or exchange any Exchange Debenture selected for redemption.
Also, Holdings is not required to transfer or exchange any Exchange Debenture
for a period of 15 days before a selection of Exchange Debentures to be
redeemed.
The registered Holder of an Exchange Debenture will be treated as the owner
of it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Exchange
Debenture Indenture or the Exchange Debentures may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the Exchange Debentures then outstanding (including consents obtained in
connection with a tender offer or exchange offer for Exchange Debentures), and
any existing default or compliance with any provision of the Exchange Debenture
Indenture or the Exchange Debentures may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Exchange
Debentures (including consents obtained in connection with a tender offer or
exchange offer for Exchange Debentures).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Exchange Debentures held by a non-consenting Holder): (i)
reduce the principal amount of Exchange Debentures whose Holders must consent to
an amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Exchange Debenture or alter the provisions with respect to
the redemption of the Exchange Debentures (other than provisions relating to the
covenants described above under the caption "--Repurchase at the Option of
Holders"), (iii) reduce the rate of or change the time for payment of interest
on any Exchange Debenture, (iv) waive a Default or Event of Default in the
payment of principal of or premium, if any, or interest on the Exchange
Debentures (except a rescission of acceleration of the Exchange Debentures by
the Holders of at least a majority in aggregate principal
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amount of the Exchange Debentures and a waiver of the payment default that
resulted from such acceleration), (v) make any Exchange Debenture payable in
money other than that stated in the Exchange Debentures, (vi) make any change in
the provisions of the Exchange Debenture Indenture relating to waivers of past
Defaults or the rights of Holders of Exchange Debentures to receive payments of
principal of or premium, if any, or interest on the Exchange Debentures, (vii)
waive a redemption payment with respect to any Exchange Debenture or (viii) make
any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Exchange
Debentures, Holdings and the Trustee may amend or supplement the Exchange
Debenture Indenture or the Exchange Debentures to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Exchange Debentures in addition to
or in place of certificated Exchange Debentures, to provide for the assumption
of Holdings' obligations to Holders of Exchange Debentures in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Exchange Debentures or that does not
adversely affect the legal rights under the Exchange Debenture Indenture of any
such Holder, or to comply with requirements of the Commission in order to effect
or maintain the qualification of the Exchange Debenture Indenture under the
Trust Indenture Act.
Notwithstanding anything to the contrary, the subordination provisions of
the Exchange Debentures may not be amended or modified without the prior
consent, authorization or approval by all holders of Designated Senior Debt.
CONCERNING THE TRUSTEE
The Exchange Debenture Indenture contains certain limitations on the rights
of the Trustee, should it become a creditor of Holdings, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Exchange Debentures will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Exchange Debenture Indenture provides that in
case an Event of Default will occur (which will not be cured), the Trustee will
be required, in the exercise of its power, to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Exchange Debenture Indenture at the request of any Holder of Exchange
Debentures, unless such Holder will have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
BOOK-ENTRY, DELIVERY AND FORM
The Exchange Debentures will initially be issued in global form except that
institutional "accredited investors" (within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) will receive securities in the form of
registered definitive certificates. It is expected that the Exchange Debentures
will be subject to arrangements regarding book-entry, delivery and form which
are substantially the same as those with respect to the Senior Preferred Stock
set forth under "--Senior Preferred Stock--Book-Entry, Delivery and Form".
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Exchange Debenture
Indenture and the foregoing summary of the terms of the Exchange Debentures.
Reference is made to the Exchange Debenture Indenture for a full disclosure of
all such terms, as well as any other capitalized terms used herein for which no
definition is provided.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary or is
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designated a Restricted Subsidiary of such specified Person, including, without
limitation, Indebtedness incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Subsidiary or Restricted
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, which correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback,
including any disposition by means of a merger, consolidation or similar
transaction and including the issuance, sale or other transfer of any of the
capital stock of any Restricted Subsidiary of such person) other than to
Holdings or to any of its Wholly Owned Subsidiaries (including the receipt of
proceeds of insurance paid on account of the loss of or damage to any asset and
awards of compensation for any asset taken by condemnation, eminent domain or
similar proceeding, and including the receipt of proceeds of business
interruption insurance); and (ii) the issuance of Equity Interests in any
Restricted Subsidiaries or the sale of any Equity Interests in any Restricted
Subsidiaries, in each case, in one or a series of related transactions,
PROVIDED, that notwithstanding the foregoing, the term "Asset Sale" shall not
include: (a) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of Holdings, as permitted pursuant to the
covenant described under "Merger, Consolidation or Sale of Assets," (b) the sale
or lease of equipment, inventory, accounts receivable or other assets in the
ordinary course of business consistent with past practice, (c) a transfer of
assets by Holdings to a Wholly Owned Subsidiary or by a Wholly Owned Subsidiary
to Holdings or to another Wholly Owned Subsidiary, (d) an issuance of Equity
Interests by a Wholly Owned Subsidiary to Holdings or to another Wholly Owned
Subsidiary, (e) the surrender or waiver of contract rights or the settlement,
release or surrender of contract, tort or other claims of any kind, (f) the
grant in the ordinary course of business of any non-exclusive license of
patents, trademarks, registrations therefor and other similar intellectual
property, (g) Permitted Investments or (h) any cash dividend, distribution,
Investment or payment made pursuant to the first or second paragraph of the
"Restricted Payments" covenant.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of interest
implicit in such transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended).
"BOARD OF DIRECTORS" means the Board of Directors of Holdings, or any
authorized committee of the Board of Directors.
"BORROWING BASE" means, as of any date, an amount equal to the sum of (i)
85% of all Eligible Receivables, (ii) 60% of all Eligible Raw Materials
Inventory, (iii) 50% of Eligible Finished Goods Inventory and (iv) 50% of the
fair market value or, if acquired after the date of the Senior Indenture, the
acquisition cost, of appraised equipment and real property owned by Holdings and
its Restricted Subsidiaries, or such lesser amount as may then constitute the
"Borrowing Base" under the New Credit Agreement.
"BRS" means Bruckmann, Rosser, Sherrill & Co., L.P.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
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"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities no more than twelve
months from the date of acquisition, (b) U.S. dollar denominated (or foreign
currency fully hedged) time deposits, certificates of deposit, Eurodollar time
deposits or Eurodollar certificates of deposit of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of $100.0
million or (ii) any bank whose short-term commercial paper rating from S&P is at
least A-1 or the equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank being an "Approved Lender"), in each case with
maturities of not more than twelve months from the date of acquisition, (c)
commercial paper and variable or fixed rate notes issued by any Approved Lender
(or by the parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation rated A-2 (or the equivalent thereof) or
better by S&P or P-2 (or the equivalent thereof) or better by Moody's and
maturing within twelve months of the date of acquisition, (d) repurchase
agreements with a bank or trust company or recognized securities dealer having
capital and surplus in excess of $100.0 million for direct obligations issued by
or fully guaranteed by the United States of America in which Holdings shall have
a perfected first priority security interest (subject to no other Liens) and
having, on the date of purchase thereof, a fair market value of at least 100% of
the amount of repurchase obligations, and (e) interests in money market mutual
funds which invest solely in assets or securities of the type described in
subparagraphs (a), (b), (c) or (d) hereof.
"CHANGE OF CONTROL" means such time as (i) prior to the initial public
offering by Holdings or any direct or indirect parent of Holdings of its common
stock (other than a public offering pursuant to a registration statement on Form
S-8), Permitted Holders cease to have, directly or indirectly, in the aggregate
at least 51% of the voting power of the voting stock of Anvil or Holdings or any
other direct or indirect parent of Holdings ceases to own, directly or
indirectly, 100% of the voting power of the voting stock of Anvil (other than by
reason of a merger of Holdings and Anvil) or (ii) after the initial public
offering by Holdings or any direct or indirect parent of Anvil of its common
stock (other than a public offering pursuant to a registration statement on Form
S-8), (A) any Schedule 13D, Form 13F or Schedule 13G under the Exchange Act, or
any amendment to such Schedule or Form, is received by Anvil or Holdings which
indicates that, or Anvil or Holdings otherwise becomes aware that, a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
has become, directly or indirectly, the "beneficial owner," by way of merger,
consolidation or otherwise, of 40% or more of the voting power of the voting
stock of Anvil or Holdings on a fully-diluted basis after giving effect to the
conversion and exercise of all outstanding warrants, options and other
securities of Anvil or Holdings, as the case may be (whether or not such
securities are then currently convertible or exercisable) and (B) such person or
group has become, directly or indirectly, the beneficial owner of a greater
percentage of the voting capital stock of Anvil, calculated on such
fully-diluted basis, than beneficially owned by the Permitted Holders, or (iii)
the sale, lease or transfer of all or substantially all of the assets of
Holdings to any person or group (other than the Permitted Holders), or (iv)
during any period of two consecutive calendar years individuals who at the
beginning of such period constituted the Board of Directors of Anvil or Holdings
(together with any new directors whose election by the Board of Directors of
Anvil or Holdings or whose nomination for election by the shareholders of Anvil
or Holdings, as the case may be, was approved by a vote of a majority of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved or was approved by the Permitted Holders) cease for any reason to
constitute a majority of the directors of Anvil or Holdings, as the case may be,
then in office.
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"COMMISSION" means the Securities and Exchange Commission.
"CONSOLIDATED EBITDA" means, with respect to Holdings and its Restricted
Subsidiaries for any period, the sum of, without duplication, (i) the
Consolidated Net Income for such period, plus (ii) to the extent deducted from
Consolidated Net Income for such period, (x) the Fixed Charges for such period,
plus (y) non-cash dividends on Holdings' preferred stock, plus (iii) provision
for taxes based on income or profits for such period (to the extent such income
or profits were included in computing Consolidated Net Income for such period),
plus (iv) consolidated depreciation, amortization and other non-cash charges of
Holdings and its Restricted Subsidiaries required to be reflected as expenses on
the books and records of Holdings, minus (v) cash payments with respect to any
nonrecurring, non-cash charges previously added back pursuant to clause (iv),
and (vi) excluding the impact of foreign currency translations. Notwithstanding
the foregoing, the provision for taxes based on the income or profits of, and
the depreciation and amortization and other non-cash charges of, a Restricted
Subsidiary of a Person shall be added to Consolidated Net Income to compute
Consolidated EBITDA only to the extent that the Net Income of such Restricted
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to Holdings by such Restricted Subsidiary without
prior approval (that has not been obtained), pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to that Restricted Subsidiary or
its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Subsidiary
thereof, (ii) the Net Income of, or any dividends or other distributions from,
any Unrestricted Subsidiary, to the extent otherwise included, shall be
excluded, whether or not distributed to Holdings or one of its Restricted
Subsidiaries, (iii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (which
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iv) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (v) the cumulative effect of a change in accounting principles
shall be excluded, (vi) income or loss attributable to discontinued operations
shall be excluded; (vii) any increase in cost of sales or other write-offs
resulting from the purchase accounting treatment of any acquisitions shall be
excluded; and (viii) all other extraordinary, unusual or nonrecurring gains or
losses shall be excluded.
"CONSOLIDATED NET WORTH" of a Person at any date means the amount by which
the assets of such Person and its consolidated Restricted Subsidiaries (less any
revaluation or other write-up subsequent to the date of the Exchange Debenture
Indenture in any such assets (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within twelve months after the acquisition of such business))
exceed the sum of (a) the total liabilities of such Person and its consolidated
Restricted Subsidiaries, plus (b) any Disqualified Stock of such Person or any
consolidated Restricted Subsidiaries of such Person issued to any Person other
than such Person or a Wholly Owned Subsidiary of such Person, in each case
determined in accordance with GAAP.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DEPOSITARY" means, with respect to the Exchange Debentures issuable or
issued in whole or in part in global form, the Person specified in the Exchange
Debenture Indenture as the Depositary with respect to the Exchange Debentures,
until a successor shall have been appointed and become such Depositary
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pursuant to the applicable provision of the Exchange Debenture Indenture, and,
thereafter, "Depositary" shall mean or include such successor.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
on which is 91 days after the date that the Exchange Debentures mature.
"ELIGIBLE FINISHED GOODS INVENTORY" means, as of any date of determination,
the gross dollar value (valued at the lower of cost or fair market value (on a
first-in, first-out basis)) of all finished goods inventory (including for
purposes hereof, finished goods inventory which is in transit back to Holdings
or any Restricted Subsidiary) of Holdings or any Restricted Subsidiary less
appropriate reserves determined in accordance with GAAP applied on a consistent
basis but excluding in any event and without duplication, to the extent not
treated accordingly by GAAP, (i) inventory subject to any Lien (other than a
Permitted Lien), (ii) inventory which fails to meet standards for sale or use
imposed by governmental agencies, departments or divisions having regulatory
authority over such goods, (iii) inventory which is not useable or saleable at
prices approximating their cost (after taking into account, without duplication,
the amount of any reserves for obsolescence, unsaleability or decline in value),
(iv) inventory located outside of the United States (unless in transit back to
Holdings or any Restricted Subsidiary), (v) inventory in the possession of
domestic contractors (other than Holdings or any Restricted Subsidiary) or other
third parties, and (vi) all work in process.
"ELIGIBLE RAW MATERIALS INVENTORY" means, as of any date of determination,
the gross dollar value (valued at the lower of cost or fair market value (on a
first-in, first-out basis)) of all raw materials (including for purposes hereof,
uncut dyed or greige cloth) of Holdings or any Restricted Subsidiary less
appropriate reserves determined in accordance with GAAP applied on a consistent
basis but excluding in any event, to the extent not treated accordingly by GAAP
and without duplication, (i) inventory subject to any Lien (other than a
Permitted Lien), (ii) inventory which fails to meet standards for sale or use
imposed by governmental agencies, departments or divisions having regulatory
authority over such goods, (iii) inventory which is not useable or saleable at
prices approximating their cost (after taking into account, without duplication,
the amount of any reserves for obsolescence, unsaleability or decline in value),
(iv) inventory located outside of the United States (unless in transit back to
Holdings or any Restricted Subsidiary), (v) inventory in the possession of
domestic contractors (other than Holdings or any Restricted Subsidiary) or other
third parties, and (vi) all work in process (except uncut dyed or greige cloth).
"ELIGIBLE RECEIVABLES" means, as of any date of determination, the aggregate
gross amount of all accounts receivable, receivables and obligations for payment
created or arising from the sale of inventory or the rendering of services in
the ordinary course of business, owned by or owing to Holdings or any Restricted
Subsidiary, net of allowances and reserves for doubtful or uncollectible
accounts and sales adjustments consistent with Holdings' internal policies and
in any event in accordance with GAAP applied on a consistent basis, (hereinafter
sometimes referred to collectively as "Receivables"), but excluding, without
duplications in any event (i) Receivables subject to a Lien (other than a
Permitted Lien), (ii) Receivables which are outstanding more than 90 days from
the due date of the original invoice or more than 180 days from the date of
shipment, (iii) Receivables evidenced by notes, chattel paper or other
instruments, unless such notes, chattel paper or instruments have been delivered
to and are in the possession of such parties as may be specified in the New
Credit Agreement, (iv) Receivables with respect to which the account debtor is
not solvent or is the subject of any bankruptcy or insolvency proceedings of any
kind, (v) Receivables owing by an account debtor located outside of the United
States (unless payment for the goods shipped is secured by an irrevocable letter
of credit in a form and from an institution acceptable to such parties as may be
specified in the New Credit Agreement), (vi) Receivables which are contingent or
subject to offset, deduction, counterclaim, dispute or other defense to payment,
in each case to the extent of such offset, deduction, counterclaim dispute or
other defense, and (vii) Receivables arising out of transactions with
Subsidiaries or Affiliates of Holdings.
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"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING INDEBTEDNESS" means the Indebtedness of Holdings and its
Restricted Subsidiaries (other than Indebtedness under the New Credit Agreement)
in existence on the date of the Exchange Debenture Indenture, until such amounts
are repaid.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), and (ii) the consolidated interest expense of such
Person and its Restricted Subsidiaries that was capitalized during such period,
and (iii) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such guarantee or Lien is called upon), and (iv) the product of (a) all cash
dividend payments (and non-cash dividend payments in the case of a Person that
is a Restricted Subsidiary) on any series of preferred stock of such Person
payable to a party other than Holdings or a Wholly Owned Subsidiary, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, on a consolidated basis and in accordance
with GAAP, but excluding from the calculation of fixed charges amortization of
financing costs (except to the extent referred to in the parenthetical in clause
(i) of this definition).
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person and its Restricted
Subsidiaries for such period to the Fixed Charges of such Person and its
Restricted Subsidiaries for such period. In the event that Holdings or any of
its Restricted Subsidiaries incurs, assumes, guarantees or repays any
Indebtedness (other than the incurrence or repayment of revolving credit
borrowings used for working capital, except to the extent that a repayment is
accompanied by a permanent reduction in revolving credit commitments) or issues
preferred stock subsequent to the commencement of the four-quarter reference
period for which the Fixed Charge Coverage Ratio is being calculated but prior
to the date on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. For purposes of making the
computation referred to above, (i) acquisitions that have been made by Holdings
or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four quarter reference period and shall give pro forma effect to the
Consolidated EBITDA and Indebtedness of the Person which is the subject of any
such acquisition, and (ii) the Consolidated EBITDA attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Exchange Debenture Indenture.
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"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"HOLDER" means a Person in whose name a share of Senior Preferred Stock or
Exchange Debenture is registered on the Registrar's books.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person), the maximum fixed repurchase price of Disqualified
Stock issued by such Person in each case, if held by any Person other than
Holdings or a Wholly Owned Subsidiary of Holdings, and, to the extent not
otherwise included, the guarantee by such Person of any indebtedness of any
other Person.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the books of such Person) or capital
contributions (excluding commission, travel, relocation and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP; PROVIDED that an acquisition
of assets, Equity Interests or other securities by Holdings for consideration
consisting of common equity securities of Holdings or of any direct or indirect
parent of Holdings shall not be deemed to be an Investment.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which federal offices
or banking institutions in the City of New York, in the city of the Corporate
Trust Office of the Trustee, or at a place of payment are authorized by law,
regulation or executive order to remain closed. If a payment date is a Legal
Holiday, payment may be made on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"LIQUIDATED DAMAGES" means all liquidated damages owing pursuant to the
Registration Rights Agreement.
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"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, and before reduction for
non-cash preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries, (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by Holdings or any
of its Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP and net of any Purchase
Money Obligations relating to the assets comprising such Asset Sale.
"NEW CREDIT AGREEMENT" means, collectively, (i) that certain Amended and
Restated Credit Agreement, as in effect on the date of the Exchange Debenture
Indenture, by and among Anvil, Holdings, the lenders that may be from time to
time parties thereto and NationsBank, N.A., as administrative agent, as the
foregoing may from time to time be amended, renewed, supplemented or otherwise
modified at the option of the parties thereto, including increases in the
principal amount thereof (subject to such increases otherwise being in
conformity with the terms of the Exchange Debenture Indenture); and (ii) after
NationsBank, N.A., as administrative agent, has acknowledged in writing that the
Credit Agreement described in clause (i) above has been terminated and all then
outstanding Indebtedness thereunder or with respect thereto have been repaid in
full in cash and discharged, any successors to or replacements of (as designated
by the Board of Directors of Holdings in its sole judgment, and evidenced by a
resolution) such Credit Agreement, as such successors or replacements may from
time to time be amended, renewed, supplemented, modified or replaced, including
increases in the principal amount thereof (subject to such increases otherwise
being in conformity with the terms of the Exchange Debenture Indenture).
"NEW STOCK OPTION PLAN" means Holdings' 1997 Stock Option Plan to be
approved by the Board of Directors of Holdings providing for the issuance of
options to purchase Common Stock to directors and employees of Holdings, Anvil
or its Restricted Subsidiaries or any successor plan thereto.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither Holdings nor
any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of Holdings
or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of Holdings
or any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERINGS" means the Unit Offering and the Senior Note Offering.
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"OFFICER" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice President of such Person.
"PERMITTED HOLDERS" means, collectively, (i) BRS and its Affiliates, and
their respective employees and directors, (ii) 399 Venture and its Affiliates,
and their respective employees and directors, (iii) all full-time executive
officers of Holdings and its Subsidiaries who acquire Capital Stock of Holdings
and (iv) (A) any spouse, lineal descendant (including by adoption and
stepchildren), or sibling of such natural persons and (B) any trust,
corporation, limited liability company or partnership, the beneficiaries,
members, stockholders or partners of which consist entirely of such natural
persons or the individuals described in clause (A) above.
"PERMITTED INVESTMENTS" means (a) any Investments in Holdings or in a Wholly
Owned Subsidiary of Holdings that is engaged in the same or a similar line of
business as Holdings and its Restricted Subsidiaries were engaged in on the date
of the Exchange Debenture Indenture and reasonable extensions or expansions
thereof; (b) any Investments in Cash Equivalents; (c) Investments by Holdings or
any Restricted Subsidiary of Holdings in a Person if as a result of such
Investment (i) such Person becomes a Wholly Owned Subsidiary of Holdings that is
engaged in the same or a similar line of business as Holdings and its Restricted
Subsidiaries were engaged in on the date of the Exchange Debenture Indenture and
reasonable extensions or expansions thereof or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, Holdings or a Wholly Owned
Subsidiary of Holdings that is engaged in the same or a similar line of business
as Holdings and its Restricted Subsidiaries were engaged in on the date of the
Exchange Debenture Indenture and reasonable extensions or expansions thereof;
(d) Investments made as a result of the receipt of non-cash consideration from
an Asset Sale that was made pursuant to and in compliance with the covenant
described under "--Asset Sales"; (e) Investments by Holdings or any Restricted
Subsidiary in cash in an amount not to exceed $10.0 million in the aggregate at
any one time; (f) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to Anvil or any
Subsidiary or in satisfaction of judgments or pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of
Anvil's trade creditors or customers; (g) the contribution of shares of stock or
other equity securities of an Unrestricted Subsidiary to another Subsidiary; (h)
loans and advances to employees and officers of Anvil and its Restricted
Subsidiaries in the ordinary course of business not to exceed an aggregate of
$750,000; (i) accounts receivable created or acquired in the ordinary course of
business; (j) currency agreements and interest swap obligations entered into in
the ordinary course of Anvil's or its Restricted Subsidiaries' businesses and
otherwise in compliance with the Exchange Debenture Indenture; and (k) any
Investment by Anvil or a Wholly Owned Subsidiary of Anvil in a Securitization
Entity or any Investment by a Securitization Entity in any other Person in
connection with a Qualified Securitization Transaction; PROVIDED that any
Investment in a Securitization Entity is in the form of a Purchase Money Note or
an Equity Interest.
"PERMITTED LIENS" means (i) Liens securing (a) Indebtedness permitted by the
first paragraph of the covenant entitled "--Incurrence of Indebtedness and
Issuance of Preferred Stock," and Indebtedness permitted by clauses (i) , (ii),
(iv) or (viii) under the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock" and (b) related Hedging Obligations; (ii) Liens in
favor of Holdings or any Wholly Owned Subsidiary; (iii) Liens on property of a
Person existing at the time such Person is merged into or consolidated with
Holdings or any Restricted Subsidiary of Holdings; PROVIDED that such Liens were
in existence prior to the contemplation of such merger or consolidation and do
not extend to any assets other than those of the Person merged into or
consolidated with Holdings; (iv) Liens on property of a Person existing at the
time such Person becomes a Restricted Subsidiary of Holdings; (v) Liens on
property existing at the time of acquisition thereof by Holdings or any
Restricted Subsidiary of Holdings, PROVIDED that such Liens were in existence
prior to the contemplation of such acquisition; (vi) Liens to secure the
performance of statutory obligations, surety or appeal bonds, performance bonds
or other obligations of a
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like nature incurred in the ordinary course of business; (vii) Liens existing on
the date of the Exchange Debenture Indenture; (viii) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (ix) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, or other similar Liens arising in the ordinary course of business
which are not overdue for a period of more than 60 days or which are being
contested in good faith by appropriate proceedings diligently conducted; (x)
statutory Liens of landlords or of mortgagees of landlords arising by operation
of law, provided that the rental payments secured thereby are not yet due and
payable; (xi) Liens incurred in the ordinary course of business of Holdings or
any Restricted Subsidiary of Holdings with respect to obligations that do not
exceed $2.5 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by Holdings or such
Restricted Subsidiary; (xii) nonconsensual Liens incurred in the ordinary course
of business of any foreign subsidiary that is a Restricted Subsidiary that (a)
are not incurred in connection with the borrowing of money or the obtaining of
advances of credit (other than trade credit in the ordinary course of business)
and (b) do not in the aggregate materially detract from the value of the
property or materially impair the use thereof in the operation of business by
such Restricted Subsidiary; (xiii) Liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (xiv) easements,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances not interfering in any material respect with the
business of Holdings or any of its Restricted Subsidiaries; (xv) Purchase Money
Liens (including extensions and renewals thereof); (xvi) judgment and attachment
Liens not giving rise to an Event of Default; (xvii) Liens arising out of
consignment or similar arrangements for the sale of goods; (xviii) any interest
or title of a lessor in property subject to any capital lease obligation or
operating lease; (xix) Liens arising from filing Uniform Commercial Code
financing statements regarding leases; (xx) Liens encumbering deposits made to
secure obligations arising from statutory or regulatory requirements of Anvil or
any of its Restricted Subsidiaries, including rights of offset and set-off,
arising in the ordinary course of business; (xxi) Liens on assets transferred to
a Securitization Entity or on assets of a Securitization Entity, in either case
incurred in connection with a Qualified Securitization Transaction; and (xxii)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of custom duties in connection with the importation of goods.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of Holdings or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of Holdings or any of its Restricted Subsidiaries; PROVIDED that:
(i) the principal amount of such Permitted Refinancing Indebtedness does not
exceed the principal amount of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness
has a final maturity date at least as late as the final maturity date of, and
has a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (iii) if the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Exchange Debentures, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Exchange Debentures on terms at
least as favorable to the Holders of Exchange Debentures as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred
either by Holdings or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
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"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company, or other business entity or government or agency or political
subdivision thereof (including any subdivision or ongoing business of any such
entity or substantially all of the assets of any such entity, subdivision or
business).
"PUBLIC EQUITY OFFERING" means an underwritten public offering pursuant to a
registration statement filed with the Commission in accordance with the
Securities Act of (i) Equity Interests other than Disqualified Stock of Holdings
or (ii) of Equity Interests other than Disqualified Stock of Holdings' parent or
indirect parent corporation to the extent that the cash proceeds therefrom are
contributed to the equity capital of Holdings or are used to purchase Equity
Interests (other than Disqualified Stock) of Holdings.
"PURCHASE MONEY LIEN" means a Lien granted on an asset or property to secure
a Purchase Money Obligation permitted to be incurred under the Exchange
Debenture Indenture and incurred solely to finance the purchase, or the cost of
construction or improvement, of such asset or property; PROVIDED HOWEVER, that
such Lien encumbers only such asset or property and is granted within 180 days
of such acquisition.
"PURCHASE MONEY NOTE" means a promissory note of a Securitization Entity
evidencing a line of credit, which may be irrevocable, from Holdings or any
Subsidiary of Holdings in connection with a Qualified Securitization Transaction
to a Securitization Entity, which note shall be repaid from cash available to
the Securitization Entity, other than amounts required to be established as
reserves pursuant to agreements, amounts paid to investors in respect of
interest, principal and other amounts owing to such investors and amounts owing
to such investors and amounts paid in connection with the purchase of newly
generated receivables.
"PURCHASE MONEY OBLIGATIONS" of any Person means any obligations of such
Person to any seller or any other Person incurred or assumed to finance the
purchase, or the cost of construction or improvement, of real or personal
property to be used in the business of such person or any of its Restricted
Subsidiaries in an amount that is not more than 100% of the cost, or fair market
value, as appropriate, of such property, and incurred within 180 days after the
date of such acquisition (excluding accounts payable to trade creditors incurred
in the ordinary course of business).
"QUALIFIED SECURITIZATION TRANSACTION" means any transaction or series of
transactions that may be entered into by Holdings or any of its Subsidiaries
pursuant to which Holdings or any or its Subsidiaries may sell, convey or
otherwise transfer to (a) a Securitization Entity (in the case of a transfer by
Holdings or any of its Subsidiaries) and (b) any other Person (in the case of a
transfer by a Securitization Entity), or may grant a security interest in, any
accounts receivable or equipment (whether now existing or arising or acquired in
the future) of Holdings or any of its Subsidiaries, and any assets related
thereto including, without limitation, all collateral securing such accounts
receivable and equipment, all contracts and contract rights and all guarantees
or other obligations in respect of such accounts receivable and equipment,
proceeds of such accounts receivable and equipment and other assets (including
contract rights) which are customarily transferred or in respect of which
security interests are customarily granted in connection with asset
securitization transactions involving accounts receivable and equipment;
PROVIDED that such transaction or transactions are otherwise permitted by the
terms of the Exchange Debenture Indenture including the provisions set forth
under "Repurchase at the Option of Holders--Asset Sales".
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of the date of the Exchange Debenture Indenture, by and among Holdings
and the other parties named on the signature pages thereof, as such agreement
may be amended, modified or supplemented from time to time.
"REPRESENTATIVE" means the indenture trustee or other trustee, client or
representative for any senior Indebtedness.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the
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Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIZATION ENTITY" means a Wholly Owned Subsidiary of Holdings (or
another Person in which Holdings or any Subsidiary of Holdings makes an
Investment and to which Holdings or any Subsidiary of Holdings transfers
accounts receivable or equipment and related assets) which engages in no
activities other than in connection with the financing of accounts receivable or
equipment and which is designated by the Board of Directors of Holdings (as
provided below) as a Securitization Entity (a) no portion of the Indebtedness or
any other obligations (contingent or otherwise) of which (i) is guaranteed by
Holdings or any Subsidiary of Holdings (excluding guarantees of obligations
(other than the principal of, and interest on, Indebtedness)) pursuant to
Standard Securitization Undertakings, (ii) is recourse to or obligates Holdings
or any Subsidiary of Holdings in any way other than pursuant to Standard
Securitization Undertakings, or (iii) subjects any property or asset of or any
Subsidiary of Holdings, directly or indirectly, contingently or otherwise, to
the satisfaction thereof other than pursuant to Standard Securitization
Undertakings, (b) with which neither Holdings nor any Subsidiary of Holdings has
any material contract, agreement, arrangement or understanding other than on
terms no less favorable to Holdings or such Subsidiary than those that might be
obtained at the time from Persons that are not Affiliates of Holdings, other
than fees payable in the ordinary course of business in connection with
servicing receivables of such entity, and (c) to which neither Holdings nor any
Subsidiary of Holdings has any obligation to maintain or preserve such entity's
financial condition or cause such entity to achieve certain levels of operating
results. Any such designation by the Board of Directors of Holdings shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
resolution of the Board of Directors of Holdings giving effect to such
designation and an officers' certificate certifying that such designation
complied with the foregoing conditions.
"SENIOR INDEBTEDNESS" means: (i) all Obligations (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on any Indebtedness of
Holdings, whether outstanding on the date of issuance of the Exchange Debentures
or thereafter created, incurred or assumed, of the following types: (A) all
Indebtedness of Holdings (including without limitation the Senior Notes and
borrowings under the New Credit Agreement) for money borrowed, and (B) all
Indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which Holdings is responsible or liable; (ii) all capitalized
lease obligations of Holdings; (iii) all Obligations of Holdings: (A) for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, including, without limitation, any such transaction
made pursuant to the New Credit Agreement, (B) constituting Hedging Obligations,
or (C) issued as the deferred purchase price of property and all conditional
sale Obligations of Holdings and all Obligations of Holdings under any title
retention agreement; (iv) all guarantees of Holdings with respect to Obligations
of other persons of the type referred to in clauses (ii) and (iii) and with
respect to the payment of dividends of other persons; and (v) all Obligations of
Holdings consisting of modifications, renewals, extensions, replacements and
refundings of any Obligations described in clauses (i), (ii), (iii) or (iv)
unless, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is expressly provided that such Obligations are
subordinated or junior in right of payment to the Exchange Debentures; PROVIDED,
HOWEVER, that Senior Indebtedness shall not be deemed to include: (1) any
Obligation of Holdings to any Subsidiary, (2) any liability for federal, state,
local or other taxes owed or owing by Holdings, (3) any accounts payable or
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other liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities), (4)
any Indebtedness, guarantee or Obligation of Holdings that is contractually
subordinated or junior in any respect to any other Indebtedness, guarantee or
Obligation of Holdings, or (5) any Indebtedness to the extent the same is
incurred in violation of the Indenture. Senior Indebtedness shall include all
Obligations in respect of Holdings Guarantee of the Senior Notes and the Senior
Indenture of Anvil.
"SENIOR NOTE OFFERING" means the offering by Anvil of the Senior Notes of
Anvil.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Exchange Act, as such Regulation is in effect on the date
hereof.
"STANDARD SECURITIZATION UNDERTAKINGS" means representations, warranties,
covenants and indemnities entered into by Anvil or any Subsidiary of Anvil which
are reasonably customary in an accounts receivable or equipment transaction.
"SUBORDINATED INDEBTEDNESS" means all Obligations of the type referred to in
clauses (i) through (v) of the definition of Senior Indebtedness, if the
instrument creating or evidencing the same, or pursuant to which the same is
outstanding, designates such Obligations as subordinated or junior in right of
payment to Senior Indebtedness.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"399 VENTURE" means 399 Venture Partners, Inc.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 (15 U.S.C.
SectionSection 77aaa-77bbbb) as in effect on the date on which the Exchange
Debenture Indenture is qualified under the Trust Indenture Act.
"UNITS OFFERING" means the offering by Holdings of units consisting of $30.0
million aggregate liquidation preference of Senior Preferred Stock and 390,000
shares of Class B Common.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with Holdings or any Restricted Subsidiary of Holdings unless the
terms of any such agreement, contract, arrangement or understanding are no less
favorable to Holdings or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of Holdings; (c) is a
Person with respect to which neither Holdings nor any of its Restricted
Subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Equity Interests or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of Holdings or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the covenant described under the caption "--
Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to
meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for
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purposes of the Exchange Debenture Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of Holdings
as of such date (and, if such Indebtedness is not permitted to be incurred as of
such date under the covenant described under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock," Holdings shall be in default of
such covenant). The Board of Directors of Holdings may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of Holdings of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the covenant described under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock," and (ii) no Default or Event of
Default would be in existence following such designation.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Restricted Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person.
Unrestricted Subsidiaries shall not be included in the definition of Wholly
Owned Subsidiary for any purposes of the Exchange Debenture Indenture.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summarizes certain provisions of Holdings' Second Amended and
Restated Certificate of Incorporation (the "Restated Certificate") and Bylaws,
which became effective pursuant to the Recapitalization. Such summaries do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Restated Certificate and the
Bylaws, including the definitions therein of certain terms, copies of which may
be obtained from Holdings upon request.
GENERAL
The Restated Certificate provides for, among other things, the authorization
of 500,000 shares of Class A Common, 7,500,000 shares of Class B Common,
1,300,000 shares of Class C Common Stock, $.01 per share par value (the "Class C
Common"), 5,100,000 shares of Senior Preferred Stock and 500,000 shares of
undesignated, serial preferred stock (the "Serial Preferred Stock"). Class A
Common, Class B Common and Class C Common sometimes are referred to in this
section collectively as the "Common Stock."
Holdings has outstanding 290,000 shares of Class A Common, 3,590,000 shares
of Class B Common, no shares of Class C Common, 1,200,000 shares of Senior
Preferred Stock and no shares of Serial Preferred Stock.
COMMON STOCK
All of the issued and outstanding shares of Common Stock are fully paid and
non-assessable. The Class B Common and Class C Common are substantially
identical except with respect to voting and conversion rights. Holders of Class
B Common are entitled to one vote per share on all matters to be voted on by
stockholders while holders of Class A Common and Class C Common have no right to
vote on any matters except in special circumstances including a merger or
consolidation of Holdings or a recapitalization or reorganization as specified
in the Restated Certificate. Subject to the rights of the holders of preferred
stock and the restrictions, if any, imposed by indebtedness outstanding from
time to time, the holders of Common Stock are entitled to dividends and other
distributions, as and when declared or paid, whether in cash, property or
securities of Holdings by the Board of Directors of Holdings out of assets
legally available therefore. Holders of Common Stock are entitled to share in
such dividends or distributions on a pro rata basis, except that the holders of
Class A Common are entitled to a priority on all such dividends in an amount
equal to the then outstanding Class A Preference. The holders of Common Stock
have no preemptive, subscription, redemption or sinking fund rights under the
terms of the Restated Certificate.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of Class A Common are entitled to be paid out of the assets of
Holdings then available for distribution, the Class A Preference of $100 per
share before any distribution is paid on any other shares of Common Stock. The
Class A Preference accretes at a rate of 12.5% per annum. After satisfaction of
all its liabilities, the payment of the liquidation preference of any
outstanding shares of preferred stock and the payment of the Class A Preference,
the holders of shares of Common Stock are entitled to share ratably in the
distribution of all of Holdings' assets remaining available for distribution. If
Holdings in any manner subdivides or combines the outstanding shares of any
class of Common Stock, the outstanding shares of all other classes of Common
Stock will be proportionately subdivided.
Shares of Class A Common and Class B Common are not convertible. Shares of
Class C Common are convertible at the option of the holders representing a
majority of the outstanding Class C Common, into an equal number of shares of
Class B Common.
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PREFERRED STOCK
For a description of the Senior Preferred Stock, see "Description of
Securities--Senior Preferred Stock."
The Restated Certificate authorizes the Board of Directors to create and
issue one or more series of Serial Preferred Stock and determine the rights and
preferences of each series, to the extent permitted by the Restated Certificate
and applicable law. Among other rights, the Board of Directors may determine,
without the further vote or action by the Company's stockholders, subject to
certain limitations set forth in the Certificate of Designation: (i) the number
of shares constituting the series and the distinctive designation of the series;
(ii) the dividend rate on the shares of the series, whether dividends will be
cumulative and, if so, from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of the series; (iii) whether
the series shall have voting rights, in addition to the voting rights provided
by law and, if so, the terms of such voting rights; (iv) whether the series
shall have conversion privileges, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the conversion rate in such
events as the Board of Directors shall determine; (v) whether or not the shares
of that series shall be redeemable or exchangeable and, if so, the terms and
conditions of such redemption or exchange, as the case may be, and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates; (vi) whether the series shall have
a sinking fund for the redemption or purchase of shares of that series and, if
so, the terms and amount of such sinking fund; and (vii) the rights of the
shares of the series in the event of voluntary or involuntary liquidation,
dissolution or winding up of Holdings and the relative rights or priority, if
any, of payment of shares of the series. Except for any difference so provided
by the Board of Directors, the shares of all series of Serial Preferred Stock
rank on a parity with respect to the payment of dividends and the distribution
of assets upon liquidation.
ANTI-TAKEOVER PROVISIONS OF RESTATED CERTIFICATE AND BYLAWS
The rights of Holdings' stockholders are governed by the Delaware General
Corporation Law, the Restated Certificate and the Bylaws. Certain provisions of
the Restated Certificate and Bylaws, which are summarized below, may discourage
or make more difficult a takeover attempt that a stockholder might consider in
its best interest. Such provisions may also adversely affect the prevailing
market price for the Common Stock.
SERIAL PREFERRED STOCK. Subject to certain limitations set forth in the
Certificate of Designation, the Board of Directors has the authority, without
action by Holdings' stockholders, to fix the rights, privileges and preferences
of, and to issue up to 500,000 shares of Serial Preferred Stock. The issuance of
such Serial Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of Holdings without further action by the
stockholders and may adversely affect the voting and other rights of the holders
of the Common Stock, including the loss of voting control to others. Holdings
currently has no plans to issue any additional shares of Serial Preferred Stock.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS. The Bylaws establish
advance notice procedures with regard to stockholder proposals. These procedures
provide that the notice of stockholder proposals must be received by Holdings no
later than (i) with respect to an annual meeting of stockholders, 60 days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders and (ii) with respect to a special meeting of stockholders, no
later than the close of business on the tenth day following the date on which
notice of such meeting is first sent or given to stockholders. Each stockholder
proposal must set forth certain information as specified in the Bylaws.
SECURITYHOLDERS AGREEMENT
In connection with the Initial Units Offering, Holdings, 399 Venture, BRS
and the Initial Purchaser entered into a Registration Rights and Securityholders
Agreement (the "Securityholders Agreement")
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relating to the Class B Common. Each holder of shares of Holdings' Class B
Common included in the Initial Units Offering (including all transferees of such
holders) (collectively, the "Class B Holders") are entitled to the benefits and
subject to the obligations arising under such Securityholders Agreement.
Pursuant to the Securityholders Agreement, each Class B Holder has certain
piggyback registration rights, as well as certain participation rights with
respect to certain third-party sales of Class B Common by 399 Venture or BRS.
With respect to the piggyback registration rights, each Class B Holder has the
right to include its Class B Common in any registration of Class B Common (other
than pursuant to a registration statement on Form S-8 or S-4 or any similar form
or in connection with a registration the primary purpose of which is to register
debt securities (i.e., in connection with a so-called "equity kicker"));
PROVIDED, HOWEVER, that the amount of shares of Class B Common which may be
registered pursuant to an exercise of piggyback rights may be reduced (including
a reduction to zero) if the managing underwriters advise Holdings that in their
opinion the aggregate number of shares of Class B Common which may be included
in such offering exceeds the number which can be sold in such offering without
adversely affecting the marketability of such offering. See "Security Ownership
of Certain Beneficial Owner and Management-- Registration Rights Agreement."
The Securityholders Agreement grants each Class B Holder participation
rights, which provide that prior to any sale, transfer, assignment, pledge or
other disposal (a "Transfer") by Bruckmann, Rosser, Sherrill & Co., L.P., 399
Venture Partners, Inc. or CCT II Partners, L.P. (collectively, the "Fund
Investors") of Class B Common by a Fund Investor, the Fund Investor making such
a Transfer shall deliver a written notice to Holdings and registered Class B
Holders specifying in reasonable detail the identity of the prospective
transferee(s) and the terms and conditions of the Transfer. Each Class B Holder
may elect to participate in the contemplated Transfer by delivering written
notice to the transferring securityholder within 10 days after delivery of the
sale notice. If any Class B Holder has elected to participate in such Transfer,
each such Class B Holder shall be entitled to sell in the contemplated Transfer,
at the same price and on the same terms, a number of shares equal to the product
of (i) the quotient determined by dividing the number of shares owned by such
Class B Holder by the aggregate number of shares of Common Stock (other than
Class A Common) outstanding on a fully diluted basis prior to giving effect to
such Transfer and (ii) the aggregate number of shares to be sold in the
contemplated Transfer. Each Class B Holder transferring shares in a Transfer
shall pay its pro rata share (based on the number of shares to be sold) of the
expenses incurred by the securityholders in connection with such transfer.
Notwithstanding the foregoing, the following Transfers shall not be subject
to participation rights: any Transfer of shares by any Fund Investor (i) among
its Affiliates, employees and consultants, (ii) to any employee, prospective
employee, director or prospective director of Holdings or any Affiliate of
Holdings, (iii) to any former or prospective employee, director or prospective
director of an Investor or any Affiliate of such Affiliate or (iv) to any person
in order to resolve a certain regulatory issues. In addition, these restrictions
and obligations shall not apply to a Transfer or Transfers by Fund Investors of
shares representing an aggregate of up to 5% of Holdings' outstanding shares of
Common Stock (other than Class A Common) or in connection with registered public
sales or Rule 144 sales by the Fund Investors.
In addition, the Securityholders Agreement confers upon each Class B Holder
drag-along rights, which provide that in the event of a sale of Holdings to an
Independent Third Party or group of Independent Third Parties (as defined in the
Securityholders Agreement) pursuant to which such party or parties acquire (i)
capital stock of Holdings possessing the voting power under normal circumstances
to elect a majority of Holdings' Board of Directors (whether by merger,
consolidation, sale, transfer or exchange of Holdings' capital stock) or (ii)
all or substantially all of Holdings' assets determined on a consolidated basis
approved by the Board of Directors of Holdings and with respect to which all
holders of Common Stock (other than the Class A Common) receive or are generally
offered the same form and amount of per share consideration each Class B Holder
shall sell all of the shares of Class B Common held by it. In the event of a
sale subject to these drag-along rights, each Class B Holder will be obligated
to (i) consent to and raise no objections against the sale and (ii) waive any
dissenter's rights and other similar
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rights, and (iii) take all reasonably necessary and desirable actions as
directed by the Board in connection with the consummation of such sale,
provided, that each Class B Holder shall only be required to make customary and
reasonable representations, warranties and indemnities regarding its title to
and ownership of its shares. The obligations of the Class B Holders with respect
to sale are subject to the receipt by Holdings from a nationally recognized
investment bank of a written fairness opinion that the consideration received by
the securityholders is fair and adequate. Class B Holders are liable for their
pro rata share of expenses incurred in connection with a drag-along sale.
The drag-along and participation rights set forth in the Securityholders
Agreement terminate upon the completion of (i) a sale subject to the drag-along
rights or (ii) an underwritten registered public offering of shares of Common
Stock resulting in gross proceeds of at least $30.0 million.
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<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
OLD CREDIT AGREEMENT
On January 30, 1995, Anvil, Holdings and their subsidiaries, as guarantors,
entered into the Old Credit Agreement with NationsBank, N.A. (Carolinas), as
Agent, and The Chase Manhattan Bank, N.A., as Documentation Agent, for various
lending institutions thereto. The Old Credit Agreement provided for Term Loans
of $52.5 million in the form of a dual-tranche facility and a revolving credit
facility, as amended, of up to $47.5 million, which included a $5.0 million
sublimit for issuance of letters of credit. The Company used the proceeds of the
Old Credit Agreement to finance a portion of the Acquisition, to pay fees
incurred in connection with the Acquisition and to provide for working capital
and general corporate purposes.
The maturity and interest rates of the Term Loans varied by tranche. The
Tranche A Term Loan was a six-year term loan in the principal amount of $37.5
million due quarterly in variable amounts from April 29, 1995 through February
3, 2001. The Tranche B Term Loan was a seven-year term loan in the principal
amount of $15.0 million due quarterly in variable amounts from April 29, 1995
through February 2, 2002. The Company's borrowing availability under the
revolving credit facility was based on a formula incorporating 85% of eligible
receivables, 60% of eligible raw materials inventory and 50% of eligible
finished goods inventory (each as defined in the Old Credit Agreement).
NEW CREDIT AGREEMENT
Anvil, along with Holdings and its subsidiaries (excluding Anvil), as
guarantors, entered into the New Credit Agreement with NationsBank, N.A., as
Agent for various lending institutions thereto (the "Agent") and Bank of America
Illinois, Banque Nationale de Paris and Heller Financial Inc., as co-agents. The
New Credit Agreement provides for a revolving credit facility of up to $55.0
million, which includes a $5.0 million sublimit for issuance of standby and
commercial letters of credit. The Company used $33.3 million of the borrowings
under the New Credit Agreement to finance a portion of the Recapitalization. The
New Credit Agreement is available for working capital and general corporate
purposes, including acquisitions in an aggregate amount not to exceed $20.0
million. Indebtedness under the New Credit Agreement is guaranteed by Holdings
and all existing and after-acquired domestic subsidiaries of the Company. The
Agent has a first priority perfected security interest in all assets and
properties of Anvil and its domestic subsidiaries. In addition, the Agent
received a pledge of all of the capital stock of Anvil and its domestic
subsidiaries. The revolving credit facility terminates and all amounts
outstanding will be due and payable in five years from the closing.
As of May 3, 1997, Anvil had borrowings of $26.5 million under the New
Credit Agreement and had $28.5 million of additional borrowing availability.
Anvil's borrowing availability under the revolving credit facility is based on a
formula incorporating: (i) 85% of eligible receivables; (ii) 60% of eligible raw
materials inventory; (iii) 50% of eligible finished goods inventory; and (iv)
50% of appraised equipment and real property (each as defined in the New Credit
Agreement). Interest on borrowings under the revolving credit facility is
payable at a rate equal to LIBOR or the Alternate Base Rate (defined as the
higher of (i) the lender's prime rate and (ii) the Federal Funds rate plus
0.50%), each plus an applicable margin. Anvil may select various interest
periods for LIBOR loans, subject to availability. The applicable margins for
borrowing under the revolving credit facility range from 1.25% to 2.50% for
LIBOR loans, range from 0.25% to 1.50% for Alternate Base Rate loans and is
determined based upon the results of a financial ratio calculation. There is a
per annum commitment fee calculated on the unused portion of the revolving
credit facility and payable quarterly. The commitment fee varies based upon the
results of a financial ratio calculation and ranges from 0.31% to 0.50%. Letter
of credit fees are due quarterly and are equal to the interest rate spread on
LIBOR loans on a per annum basis plus a fronting fee of 0.25% per annum.
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The New Credit Agreement requires prepayment of the revolving credit
facility by an amount equal to 100% of the cash proceeds from all assets sales
by Holdings or any subsidiary, subject to certain exceptions.
The New Credit Agreement requires the Company to meet certain financial
tests (as defined therein), including minimum net worth, minimum fixed charge
coverage ratio, interest coverage and maximum leverage ratio. The New Credit
Agreement also contains covenants which, among other things, limit: (i) the
incurrence of additional indebtedness; (ii) payment of dividends; (iii)
transactions with affiliates; (iv) asset sales, acquisitions and mergers; (v)
prepayments of other indebtedness; (vi) creation of liens and encumbrances; and
(vii) other matters customarily restricted in such agreements. The New Credit
Agreement will contain customary events of default, including: (i) payment
defaults; (ii) breach of representations and warranties; (iii) covenant
defaults; (iv) cross-defaults to certain other indebtedness; (v) certain events
of bankruptcy and insolvency; (vi) ERISA; (vii) judgment defaults; (viii)
failure of any guaranty or security agreement supporting the New Credit
Agreement to be in full force; and (ix) Change in Control (as defined therein).
152
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "Service") will not take a contrary view,
and no ruling from the Service has been or will be sought. Legislative, judicial
or administrative changes or interpretations may be forthcoming that could alter
or modify the statements and conditions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United States)
may be subject to special rules not discussed below. Holdings recommends that
each holder consult such holder's own tax advisor as to the particular tax
consequences of exchanging such holder's Old Senior Preferred Stock for New
Senior Preferred Stock, including the applicability and effect of any state,
local or foreign tax laws.
In the opinion of Kirkland and Ellis, counsel to Holdings, the exchange of
Old Senior Preferred Stock for New Senior Preferred Stock pursuant to the
Preferred Exchange Offer will not be treated as an "exchange" for federal income
tax purposes because of the New Senior Preferred Stock will not be considered to
differ materially in kind or extent from the Old Senior Preferred Stock. Rather,
the New Senior Preferred Stock received by a holder will be treated as a
continuation of the Old Senior Preferred Stock in the hands of such holder. As a
result, there will be no federal income tax consequences to the holder
exchanging Old Senior Preferred Stock for New Senior Preferred Stock pursuant to
the Preferred Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives New Senior Preferred Stock
for its own account pursuant to the Preferred Exchange Offer must aknowledge
taht it will deliver a prospectus in connection with any resale of such New
Senior Preferred Stock. This Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating Broker-Dealer in connection
with resales of New Senior Preferred Stock received in exchange for Old Senior
Preferred Stock where such Old Senior Preferred Stock were acquired as a result
of market-making activities or other trading activities. Holdings has agreed
that for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or suplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
, 1997 (90 days after the commencement of the Preferred Exchange
Offer), all dealers effecting transactions in the New Senior Preferred Stock,
whether or not participating in this distribution, may be required to deliver a
Prospectus.
Holdings will not receive any proceeds from any sales of the New Senior
Preferred Stock by Participating Broker-Dealers. New Senior Preferred Stock
received by Participating Broker-Dealers for their own accounts pursuant ot the
Preferred Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Senior Preferred Stock or a combination of
such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions form any
such Participating Broker-Dealer and/ or the purchasers of any such New Senior
Preferred Stock. Any Participating Broker-Dealer that resells the New Senior
Preferred Stock that were received by it for its own account pursuant to the
Preferred Exchange Offer and any broker or dealer that participates in a
distribution of such New Senior Preferred Stock may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Senior Preferred Stock and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a Participating
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<PAGE>
Broker-Dealer will not be deemeed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, Holdings will promptly,
upon request and in no event more than five business days after such request,
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Participating Broker-Dealer that requests such documents
in the Letter of Transmittal.
LEGAL MATTERS
The validity of the issuance of the New Senior Preferred Stock will be
passed upon for Holdings by Kirkland & Ellis, Chicago, Illinois (a partnership
which includes professional corporations).
EXPERTS
The combined statements of operations and cash flows of the Predecessor, for
the year ended January 28, 1995, included in this prospectus and the related
financial statement schedule included elsewhere in the registration statement
have been audited by KPMG Peat Marwick LLP, independent auditors, as stated in
their report appearing herein and elsewhere in the registration statement, and
are included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The consolidated financial statements of the Company as of January 27, 1996
and February 1, 1997 and for the years then ended, included in this prospectus
and the related financial statement schedule included elsewhere in the
registration statement have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein and elsewhere in the
registration statement, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
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UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The financial statements presented herein reflect the consolidated financial
statements of the Company. Holdings' sole asset is the capital stock of Anvil.
The following unaudited pro forma statements of operations (the "Pro Forma
Financial Statements") have been derived by the application of pro forma
adjustments to the Company's historical consolidated statements of operations
included elsewhere in this Prospectus. The unaudited pro forma statements of
operations for the year ended February 1, 1997 and the three months ended May 3,
1997 give effect to the Recapitalization, including the Initial Offerings and
the application of the net proceeds therefrom as described in Note a. of the
Notes to the Unaudited Pro Forma Financial Statements as if such transactions
had been consummated on January 28, 1996. The Pro Forma Financial Statements
should not be considered indicative of actual results that would have been
achieved had the Recapitalization been consummated on the date or for the
periods indicated and do not purport to indicate results of operations as of any
future date or for any future period. The Pro Forma Financial Statements should
be read in conjunction with the Company's historical financial statements and
the notes thereto included elsewhere in the Prospectus.
The Old Senior Notes surrendered in exchange for the New Senior Notes will
be retired and canceled and cannot be reissued. Likewise, the Old Senior
Preferred Stock surrendered in exchange for the New Senior Preferred Stock will
be retired and canceled and cannot be reissued. Accordingly, neither the
issuance of the New Senior Notes nor the New Senior Preferred Stock will result
in any increase or decrease in the indebtedness of the Company. As such, no
effect has been given to the Exchange Offers in the Unaudited Pro Forma
Financial Data.
P-1
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 1, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- --------------- --------------
<S> <C> <C> <C>
Net sales............................................... $ 204,154 $ -- $ 204,154
Cost of good sold....................................... 156,813 -- 156,813
---------- ------- --------------
Gross profit............................................ 47,341 -- 47,341
Selling, general and administrative expenses............ 21,678 -- 21,678
Amortization of intangible assets....................... 958 -- 958
---------- ------- --------------
Operating income........................................ 24,705 -- 24,705
Other income (expense):
Interest expense...................................... (7,912) (9,847)(b) (17,759)
Interest income and other--net........................ 415 -- 415
---------- ------- --------------
Income before provision for income taxes................ 17,208 9,847 7,361
Provision for income taxes.............................. 6,883 (3,938)(c) 2,945
---------- ------- --------------
Net income.............................................. $ 10,325 $ (5,909) $ 4,416(d)
---------- ------- --------------
---------- ------- --------------
Pro forma net income (loss) per share (f):
Class A Common Stock.................................. $ 12.20
--------------
--------------
Class B Common Stock.................................. $ (.90)
--------------
--------------
Weighted average shares outstanding:
Class A Common Stock.................................. 290
--------------
--------------
Class B Common Stock.................................. 3,590
--------------
--------------
OTHER DATA:
Cash interest expense................................. $ 6,036 $ 16,752(g)
EBITDA (h)............................................ $ 33,550 $ 33,550
Capital expenditures.................................. $ 4,815 $ 4,815
Depreciation and amortization......................... $ 8,245 $ 8,245
</TABLE>
See notes to unaudited pro forma financial statements.
P-2
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MAY 3, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- --------------- ------------
<S> <C> <C> <C>
Net sales................................................... $ 60,288 $ -- $ 60,288
Cost of good sold........................................... 45,859 -- 45,859
---------- --------------- ------------
Gross profit................................................ 14,429 -- 14,429
Selling, general and administrative expenses................ 6,128 -- 6,128
Special compensation........................................ 10,915 (10,915)(e) --
Amortization of intangible assets........................... 250 -- 250
---------- --------------- ------------
Operating (loss) income..................................... (2,864 ) (10,915) 8,051
Other income (expense):
Interest expense.......................................... (3,142 ) (1,171)(b) (4,313)
Interest income and other--net............................ (178 ) -- 178
---------- --------------- ------------
Income before provision for income taxes and extraordinary
item...................................................... (6,184 ) (9,744) 3,560
(Benefit) provision for income taxes........................ (2,474 ) 3,898(c) 1,424
---------- --------------- ------------
Loss before extraordinary item.............................. (3,710 ) 2,136
Extraordinary item--loss on extinguishment of debt (net of a
tax benefit of $1,838).................................... (2,757 ) 2,757(e) --
---------- --------------- ------------
Net (loss) income........................................... $ (6,467 ) $ (5,846) $ 2,136(e)
---------- --------------- ------------
---------- --------------- ------------
Pro forma net income (loss) per share (f):
Class A Common Stock:
Net income.............................................. $ 3.53
------------
------------
Class B Common Stock:
Net loss................................................ $ .00
------------
------------
Weighted average shares outstanding:
Class A Common Stock...................................... 290
------------
------------
Class B Common Stock...................................... 3,590
------------
------------
OTHER DATA:
Cash interest expense..................................... $ 2,996 $ 4,071(g)
EBITDA (h)................................................ $ 9,979 $ 9,979
Capital expenditures...................................... $ 1,231 $ 1,231
Depreciation and amortization............................. $ 1,928 $ 1,928
</TABLE>
See notes to unaudited pro forma financial statements.
P-3
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
a. Presentation and Transactions:
The unaudited pro forma statements of operations assume the following
transactions occurred on January 28, 1996.
The Company used approximately $203.7 million to complete the
Recapitalization, including the payment of related fees and expenses. In order
to finance the Recapitalization: (i) Anvil issued $130.0 million in aggregate
principal amount of Senior Notes in the Offering; (ii) Holdings issued 30,000
Units, consisting of an aggregate of 1,200,000 shares of Senior Preferred Stock
and 390,000 shares of Class B Common, in the Units Offering for gross proceeds
of $26.7 million; (iii) Anvil borrowed approximately $32.0 million under the New
Credit Agreement; and (iv) BRS, 399 Venture and the Management Investors made a
cash Equity Contribution of $13.1 million to Holdings.
The following summarizes the sources and uses of funds relating to the
Recapitalization (in millions):
<TABLE>
<CAPTION>
SOURCES:
<S> <C>
Borrowings under the New Credit Agreement................................. $ 33.3
Senior Notes due 2007..................................................... 130.0
Units..................................................................... 26.7
Equity Contribution....................................................... 13.1
Other..................................................................... .6
---------
Total sources....................................................... $ 203.7
---------
---------
USES:
Repay borrowings under the Old Credit Agreement........................... $ 61.1
Repay the Subordinated Note............................................... 9.5
Redeem or exchange the Old Preferred Stock................................ 22.7
Repurchase shares of Old Common Stock..................................... 92.3
Payment under the Phantom Equity Plan..................................... 5.3
Payment of Management Bonus............................................... 0.5
Fees and expenses......................................................... 12.3
---------
Total uses.......................................................... $ 203.7
---------
---------
</TABLE>
P-4
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
b. The pro forma adjustments to interest expense (in thousands):
<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS
FEBRUARY 1, ENDED
1997 MAY 3, 1997
--------------- -----------
<S> <C> <C>
Elimination of interest expense relating to Holdings' existing
debt agreements:
Old Credit Agreement......................................... $ (5,693) $ (1,224)
Subordinated Note............................................ (1,187) (121)
Amortization of deferred financing costs..................... (728) (91)
Accretion of discount on Subordinated Note................... (200) (25)
Additional interest expense related to:
Senior Notes (assuming 10.875% interest rate)................ 14,138 1,767
Amortization of deferred issuance costs related to the Senior
Notes...................................................... 678 98
Borrowings under New Credit Agreement (assuming 8.0% interest
rate)...................................................... 2,614 598
Amortization of deferred issuance cost related to New Credit
Agreement.................................................. 225 169
--------------- -----------
Pro forma adjustment......................................... $ 9,847 $ 1,171
--------------- -----------
--------------- -----------
</TABLE>
c. The pro forma adjustment to provide income taxes at an effective rate of
approximately 40%.
d. Pro forma net income for the year ended February 1, 1997 does not include
total charges of $10.0 million, net of a tax benefit of $6.6 million
consisting of the following items: (i) $1.1 million, net of a tax benefit of
$0.7 million of a loss on extinguishment of the Subordinated Note; (ii) $2.3
million, net of a tax benefit of $1.5 million for the write-off of deferred
financing costs; (iii) $3.5 million, net of a tax benefit of $2.3 million of
compensation to management (of the $5.8 million pretax amount, $5.3 million
is payable pursuant to the Phantom Equity Plan and the balance of $0.5
million represents transaction bonuses); and (iv) $3.1 million, net of a tax
benefit of $2.1 million for compensation expense recorded in connection with
the exercise of stock options by management. If the above charges were
included in net income, the net loss on a pro forma basis would be $5.6
million.
e. Pro forma net income for the three months ended May 3, 1997 does not include
total charges of $9.3 million, net of a tax benefit of $6.3 million
consisting of the following items: (i) $0.9 million, net of a tax benefit of
$0.7 million of a loss on extinguishment of the Subordinated Note; (ii) $1.8
million, net of a tax benefit of $1.2 million for the write-off of deferred
financing costs; (iii) $3.5 million, net of a tax benefit of $2.3 million of
compensation to management (of the $5.8 million pretax amount, $5.3 million
is payable pursuant to the Phantom Equity Plan and the balance of $0.5
million represents transaction bonuses); and (iv) $3.1 million, net of a tax
benefit of $2.1 million for compensation expense recorded in connection with
the exercise of stock options by management.
P-5
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
f. Pro forma net income (loss) per share is computed by dividing net income
(loss) applicable to each class of Common Stock by the average number of
shares of such stock outstanding, as follows (in thousands):
<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS
FEBRUARY 1, ENDED
1997 MAY 3, 1997
--------------- -----------
<S> <C> <C>
Pro forma net income........................................... $ 4,416 $ 2,136
Less: Preferred dividends...................................... (4,094) (1,108)
Class A common preference................................. (3,798) (1,025)
------- -----------
Net (loss) income applicable to common stockholders............ $ (3,476) $ 3
------- -----------
------- -----------
Preference per Class A common share............................ $ 13.10 $ 3.53
Net loss per common share...................................... (.90) .00
------- -----------
Net income per Class A common share............................ $ 12.20 $ 3.53
------- -----------
------- -----------
Net loss per Class B common share.............................. $ (0.90) $ .00
------- -----------
------- -----------
</TABLE>
g. Pro forma cash interest expense calculated as follows (in thousands)
<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS
FEBRUARY 1, ENDED
1997 MAY 3, 1997
--------------- -----------
<S> <C> <C>
Senior Notes (assuming 10.875% interest rate).................. $ 14,138 $ 3,473
New Credit Agreement (assuming 8% interest rate)............... 2,614 598
------- -----------
Pro forma adjustments.......................................... $ 16,752 $ 4,071
------- -----------
------- -----------
</TABLE>
h. EBITDA is defined as operating income plus depreciation and amortization.
For the year ended February 1, 1997 EBITDA excludes a non-cash charge of
$0.6 million for the disposal of certain fixed assets and in the three month
period ended May 3, 1997 excludes non-recurring items of $10.9 million of
charges for special compensation. EBITDA is not a measure of performance
under GAAP. EBITDA should not be considered in isolation or as a substitute
for net income, cash flows from operating activities and other income or
cash flow statement data prepared in accordance with GAAP, or as a measure
of profitability or liquidity. Management believes, however, that EBITDA
represents a useful measure of assessing the performance of the Company's
ongoing operating activities as it reflects earnings trends of the Company
without the impact of purchase accounting applied in connection with the
Acquisition. In addition, management believes EBITDA is a widely accepted
financial indicator of company's ability to service and/or incur
indebtedness. EBITDA should not be construed as an indication of the
Company's operating performance or as a measure of liquidity. EBITDA does
not take into account the Company's debt service requirements and other
commitments and, accordingly, is not necessarily indicative of amounts that
may be available for discretionary uses. The EBITDA measure presented in
this Prospectus may not be comparable to other similarly titled measures of
other companies.
P-6
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
Report of Independent Accountants--Holdings............................................................ F-2
Report of Independent Accountants--Predecessor......................................................... F-3
Consolidated Balance Sheets of the Company at January 27, 1996, February 1, 1997 and May 3, 1997
(unaudited)........................................................................................... F-4
Combined Statements of Operations of the Predecessor for the year ended January 28, 1995 and
Consolidated Statements of Operations of the Company for the years ended January 27, 1996 and February
1, 1997 and the quarters ended April 27, 1996 (unaudited) and May 3, 1997 (unaudited)................. F-5
Consolidated Statements of Changes in Stockholders' Equity of the Company for the years ended January
27, 1996, February 1, 1997 and the quarter ended May 3, 1997 (unaudited).............................. F-6
Combined Statements of Cash Flows of the Predecessor for the year ended January 28, 1995 and
Consolidated Statements of Cash Flows of the Company for the years ended January 27, 1996 and February
1, 1997 and the quarters ended April 27, 1996 (unaudited) and May 3, 1997 (unaudited)................. F-7
Notes to Combined and Consolidated Financial Statements................................................ F-8
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Anvil Holdings, Inc.
We have audited the accompanying consolidated balance sheet of Anvil
Holdings, Inc. and subsidiaries as of January 27, 1996 and February 1, 1997 and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Anvil Holdings,
Inc. and subsidiaries as of January 27, 1996 and February 1, 1997 and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
March 28, 1997
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Anvil Knitwear
We have audited the accompanying combined statement of operations and cash
flows of Anvil Knitwear (a division of McGregor Corporation, which is a
subsidiary of Astrum International Corp.) for the year ended January 28, 1995.
These combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the combined
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Anvil Knitwear for the year ended January 28, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the financial statements, Anvil Knitwear was sold
by McGregor Corporation upon the close of business on January 28, 1995.
KPMG PEAT MARWICK LLP
New York, New York
March 24, 1995
F-3
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JANUARY 27, FEBRUARY 1,
1996 1997 MAY 3, 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................. $ 1,568 $ 1,863 $ 1,405
Accounts receivable, less allowances for doubtful accounts of $451,
$874 and $616....................................................... 21,920 28,517 32,862
Inventories........................................................... 33,927 32,471 30,325
Prepaid and refundable income taxes................................... 4,782 3,305 5,792
Deferred income taxes................................................. 1,062 1,629 1,629
Prepaid expenses and other current assets............................. 644 423 1,262
----------- ----------- -----------
Total current assets.............................................. 63,903 68,208 73,275
PROPERTY, PLANT AND EQUIPMENT--Net...................................... 40,539 38,830 38,370
INTANGIBLE ASSETS--Net.................................................. 27,403 26,568 26,195
OTHER ASSETS............................................................ 4,682 3,226 4,748
----------- ----------- -----------
$ 136,527 $ 136,832 $ 142,588
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Revolving credit facility borrowings.................................. $ 27,600 $ 14,400 $ 26,500
Accounts payable...................................................... 7,522 9,360 10,097
Accrued expenses and other current liabilities........................ 8,771 10,130 12,656
Current portion of long-term bank borrowings.......................... 3,850 4,850 --
----------- ----------- -----------
Total current liabilities......................................... 47,743 38,740 49,253
LONG-TERM BANK BORROWINGS............................................... 46,325 41,475 --
SUBORDINATED PROMISSORY NOTE............................................ 6,682 7,869 --
10 7/8% SENIOR NOTES.................................................... -- -- 126,153
DEFERRED INCOME TAXES................................................... 1,046 3,535 1,697
OTHER LONG-TERM OBLIGATIONS............................................. 1,723 1,827 1,934
REDEEMABLE PREFERRED STOCK (Liquidation value $30,488).................. -- -- 28,164
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock - old............................................... 2 2 --
Common stock - old.................................................. 101 101 --
Common stock - new:.................................................
Class A, $.01 par value, 12.5% cumulative; authorized 500,000
shares, issued and outstanding at May 3, 1997: 290,000
(aggregate liquidation value, $29,450).......................... 3
Class B, $.01 par value, authorized 7,500,000 shares; issued and
outstanding at May 3, 1997: 3,590,000 shares.................... 36
Class C, $.01 par value; authorized 1,400,000 shares; none
issued.......................................................... --
Additional paid-in capital.......................................... 23,001 23,054 12,801
Retained earnings (deficit)......................................... 10,154 20,479 (77,453)
Loans receivable-stockholders....................................... (250) (250) --
----------- ----------- -----------
Total stockholders' equity (deficiency)........................... 33,008 43,386 (64,613)
----------- ----------- -----------
$ 136,527 $ 136,832 $ 142,588
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to combined and consolidated financial statements.
F-4
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSOR
(COMBINED) THE COMPANY (CONSOLIDATED)
----------- --------------------------------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED
JANUARY 28, JANUARY 27, FEBRUARY 1, THREE THREE
1995 1996 1997 MONTHS MONTHS
----------- ----------- ----------- ENDED APRIL ENDED MAY
27, 1996 3, 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES...................................... $ 169,923 $ 193,389 $ 204,154 $ 58,552 $ 60,288
COST OF GOODS SOLD............................. 131,906 149,723 156,813 46,836 45,859
----------- ----------- ----------- ----------- -----------
Gross profit............................. 38,017 43,666 47,341 11,716 14,429
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES... 14,704 17,778 21,678 5,276 6,128
SPECIAL COMPENSATION........................... -- -- -- -- 10,915
AMORTIZATION OF INTANGIBLE ASSETS.............. 13,435 736 958 203 250
----------- ----------- ----------- ----------- -----------
Operating income......................... 9,878 25,152 24,705 6,237 (2,864)
OTHER INCOME (EXPENSE):
Interest expense............................. (227) (8,844) (7,912) (1,710) (3,142)
Interest income and other expense--net....... 2,451 616 415 (447) (178)
----------- ----------- ----------- ----------- -----------
Income (loss) before provision (benefit)
for income taxes....................... 12,102 16,924 17,208 4,080 (6,184)
PROVISION (BENEFIT) FOR INCOME TAXES........... 11,045 6,770 6,883 1,632 (2,474)
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM.... $ 1,057 $ 10,154 $ 10,325 $ 2,448 $ (3,710)
EXTRAORDINARY ITEM - Loss on extinguishment of
debt (net of tax benefit of $1,888)........... -- -- -- -- (2,757)
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS).............................. $ 1,057 $ 10,154 $ 10,325 $ 2,448 $ (6,467)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
PRO FORMA INCOME (LOSS) PER COMMON SHARE:
Class A Common Stock:
Net income................................... $ 12.20 $ 3.53
----------- -----------
----------- -----------
Class B Common Stock:
Net loss..................................... $ (.90) $ .00
----------- -----------
----------- -----------
Weighted average shares used in computation of
pro forma income (loss) per share:
Class A Common............................... 290 290
----------- -----------
----------- -----------
Class B Common............................... 3,590 3,590
----------- -----------
----------- -----------
</TABLE>
See notes to combined and consolidated financial statements.
F-5
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY
(CONSOLIDATED)
-----------------------------------------------------------------------------------------
COMMON STOCK (OLD) COMMON
PREFERRED STOCK STOCK (NEW)
------------------ ------------------ -----------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B C A B C A
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 29, 1995........... $ 1 $ 1 $ -- $ 58 $ 26 $ 17 $ --
Net income............................
----- ----- ----- --- --- --- -----
Balance at January 27, 1996........... 1 1 -- 58 26 17 --
Exercise of stock options............. --
Net income............................
----- ----- ----- --- --- --- -----
Balance at February 1, 1997........... 1 1 -- 58 26 17 --
Exercise of stock options
(unaudited)......................... 5
Repurchase and exchange of Old Common
Stock (unaudited)................... (58) (31) (17) 2
Redemption and exchange of Old
Preferred Stock (unaudited)......... (1) (1)
Common shares issued in Units Offering
(unaudited).........................
Repayment of stockholder loans
(unaudited).........................
Issuance of new common stock
(unaudited)......................... 1
Offering expenses attributable to the
sale of common stock (unaudited)....
Net loss (unaudited)..................
----- ----- ----- --- --- --- -----
Balance at May 3, 1997 (unaudited).... $ -- $ -- $ -- $ -- $ -- $ -- $ 3
----- ----- ----- --- --- --- -----
----- ----- ----- --- --- --- -----
<CAPTION>
ADDITIONAL LOANS
CLASS CLASS PAID-IN RETAINED RECEIVABLE--
B C CAPITAL EARNINGS STOCKHOLDERS TOTAL
----- ----- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 29, 1995........... $ -- $ -- $ 23,001 $ -- $ (250) $ 22,854
Net income............................ 10,154 10,154
----- ----- ----------- ----------- ------------- ---------
Balance at January 27, 1996........... -- -- 23,001 10,154 (250) 33,008
Exercise of stock options............. 53 53
Net income............................ 10,325 10,325
----- ----- ----------- ----------- ------------- ---------
Balance at February 1, 1997........... -- -- 23,054 20,479 (250) 43,386
Exercise of stock options
(unaudited)......................... 5,507 5,512
Repurchase and exchange of Old Common
Stock (unaudited)................... 19 (8,563) (85,440) (94,088)
Redemption and exchange of Old
Preferred Stock (unaudited)......... (19,998) (6,025) (26,025)
Common shares issued in Units Offering
(unaudited)......................... 4 386 390
Repayment of stockholder loans
(unaudited)......................... 250 250
Issuance of new common stock
(unaudited)......................... 13 13,049 13,063
Offering expenses attributable to the
sale of common stock (unaudited).... (634) (634)
Net loss (unaudited).................. (6,467) (6,467)
----- ----- ----------- ----------- ------------- ---------
Balance at May 3, 1997 (unaudited).... $ 36 $ -- $ 12,801 $ (77,453) $ -- $ (64,613)
----- ----- ----------- ----------- ------------- ---------
----- ----- ----------- ----------- ------------- ---------
</TABLE>
See notes to combined and consolidated financial statements.
F-6
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
(COMBINED) (CONSOLIDATED)
----------- --------------------------------------------------
YEAR YEAR YEAR THREE THREE
ENDED ENDED ENDED MONTHS MONTHS
JANUARY 28, JANUARY 27, FEBRUARY 1, ENDED APRIL ENDED MAY
1995 1996 1997 27, 1996 3, 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................... $ 1,057 $ 10,154 $ 10,325 $ 2,448 $ (6,467)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization................................. 18,761 6,463 7,287 1,577 1,678
Amortization of other assets.................................. -- 728 728 385 461
Write-off of inventory step-up................................ -- 1,746 -- -- --
Provision for accounts receivable allowances.................. 993 451 440 -- --
Write down of property and equipment.......................... -- -- 600 -- --
Noncash interest expense...................................... -- 1,182 1,187 310 1,827
Write-off of deferred financing fees.......................... -- -- -- -- 3,010
Noncash compensation.......................................... -- -- -- -- 5,176
Deferred income taxes......................................... 831 1,656 1,922 -- --
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable........................................... (3,181) 683 (5,878) (14,866) (4,411)
Inventories................................................... (6,589) (8,267) 2,917 6,480 2,146
Prepaid and refundable income taxes........................... -- (4,782) 1,477 3,062 (2,487)
Accounts payable.............................................. 3,208 913 707 664 737
Accrued expenses.............................................. (54) (893) 1,169 2,116 2,526
Other--net.................................................... (1,372) (2,871) 930 (209) (2,464)
----------- ----------- ----------- ----------- -----------
Net cash provided by operating activities................... 13,654 7,163 23,811 1,967 1,732
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition, net of cash acquired............................... -- -- (1,728) -- --
Purchases of property and equipment, net........................ (7,888) (7,703) (4,791) (564) (1,231)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities....................... (7,888) (7,703) (6,519) (564) (1,231)
----------- ----------- ----------- ----------- -----------
</TABLE>
F-7
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR YEAR YEAR THREE THREE
ENDED ENDED ENDED MONTHS MONTHS
JANUARY 28, JANUARY 27, FEBRUARY 1, ENDED APRIL ENDED MAY
1995 1996 1997 27, 1996 3, 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from new credit agreement, net......................... -- -- -- -- 26,500
Proceeds from (repayments) of old revolving credit facility,
net........................................................... -- 3,100 (13,200) 500 (14,400)
Repayments of long-term debt.................................... -- (2,325) (3,850) (775) (46,325)
Proceeds from exercise of stock options......................... -- -- 53 48 336
Repayment of Subordinated Promissory Note....................... -- -- -- -- (9,575)
Proceeds of Senior Notes........................................ -- -- -- -- 130,000
Redemption of Old Preferred Stock............................... -- -- -- -- (22,736)
Repurchase of Old Common Stock.................................. -- -- -- -- (94,088)
Proceeds from sale of Units..................................... -- -- -- -- 26,667
Issuance of New Common Stock.................................... -- -- -- -- 13,063
Repayment of stockholder loans.................................. -- -- -- -- 250
Expenses related to the Recapitalization........................ -- -- -- -- (10,651)
Advances to McGregor Corporation................................ (5,313) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net cash (used in) provided by financing activities......... (5,313) 775 (16,997) (227) (959)
----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................. 453 235 295 1,176 (458)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...................... 546 1,333 1,568 1,568 1,863
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR............................ $ 999 $ 1,568 $ 1,863 $ 2,744 $ 1,405
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest.......................................... $ 227 $ 5,946 $ 6,036 $ 1,610 $ 1,776
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Cash paid for income taxes...................................... -- $ 9,834 $ 3,484 $ (1,430) $ 13
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Fair value of assets acquired, excluding cash................... $ 3,049
Liabilities assumed............................................. (1,194)
Expenses incurred............................................... (127)
-----------
Cash paid....................................................... $ 1,728
-----------
-----------
Promissory note issued $ 250
-----------
-----------
Exchange of Old Preferred Stock into Units...................... $ 3,333
-----------
-----------
</TABLE>
See notes to combined and consolidated financial statements.
F-8
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
1. ACQUISITIONS
On January 28, 1995, Anvil Holdings, Inc. (the "Company") and its
wholly-owned subsidiary, Anvil Knitwear, Inc. ("Anvil"), acquired the assets and
assumed certain liabilities of the Anvil Knitwear division from McGregor
Corporation ("McGregor") (the "Acquisition") for an aggregate purchase price of
approximately $105,000, plus acquisition costs. The Acquisition was funded with
the proceeds of $20,000 of preferred stock, $6,400 of common stock, $52,500 of
long-term bank debt, $7,500 in subordinated notes and the balance with a
revolving line of credit.
The Acquisition was a leveraged buyout transaction in which Culligan
International Company ("Culligan"), an affiliate of McGregor, retained an
ownership interest of approximately 30.6% in the common stock of the Company.
Accordingly, in allocating the purchase price to the net assets acquired, the
net assets were valued at the sum of (i) their carryover cost basis to the
extent of 30.6% plus (ii) their estimated fair market values, to the extent of
the new ownership interest 69.4%. The excess of the purchase price over the
estimated fair value of the net assets acquired, related to the new ownership
interest, which amounted to approximately $23,000, was recognized as goodwill
and is being amortized over a period of 35 years. The fair market value
attributable to the interest in the net assets retained by the predecessor owner
has been recorded as a reduction to stockholders' equity.
In connection with the Acquisition, the Company also acquired the entire
ownership interest in Anvil s.r.o., an entity located in the Czech Republic.
Concurrent with the Acquisition, the Company determined to close down the
operations of Anvil s.r.o. and accordingly, provided for the estimated closedown
costs in recording the assets acquired and liabilities assumed from the
Acquisition.
On January 31, 1997, the Company completed the acquisition of certain assets
and assumption of certain liabilities of Cottontops, a marketer and distributor
of activewear products which, prior to the acquisition, sold finished activewear
products to the Company as well as directly into the retail market. The
aggregate amount of consideration payable in connection with this acquisition
(including the Company's assumption of certain liabilities) totaled $3.5
million, subject to adjustments in certain circumstances. The acquisition has
been accounted for using the purchase method of accounting. The Company will
consolidate the results of operations of Cottontops commencing February 2, 1997.
The fair value of assets acquired and liabilities assumed, as included in the
consolidated balance sheet at February 1, 1997, is based upon management's
estimates using currently available information. Management's final estimates as
to such fair value may differ from these preliminary estimates after completion
of asset appraisals and adjustments to the closing balance sheet, if any.
Consequently, the allocation of purchase price as reflected in the accompanying
balance sheet is preliminary and subject to adjustment based upon a final
determination of net assets acquired and liabilities assumed. Adjustments, if
any to either the allocation of the purchase price to assets acquired and
liabilities assumed, or to the purchase price itself, will be recorded in the
consolidated financial statements when finalized.
2. RECAPITALIZATION AND NOTES AND UNITS OFFERINGS (UNAUDITED)
Effective March 14, 1997, the Company Anvil VT, Inc., Vestar Equity
Partners, L.P. ("Vestar"), 399 Venture Partners, Inc. and certain of its
employees and affiliates (collectively, "399 Venture"), the Management Investors
(as defined) and other existing shareholders of the Company (collectively, the
"Existing Shareholders") and Bruckmann, Rosser, Sherill & Co., L.P. and certain
of its employees and affiliates (collectively, "BRS") completed a reorganization
(the "Reorganization") pursuant to which: (i) the Company redeemed or
repurchased all of its outstanding shares of capital stock; (ii) BRS contributed
F-9
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
2. RECAPITALIZATION AND NOTES AND UNITS OFFERINGS (UNAUDITED) (CONTINUED)
$13,063 for the purchase of 1,415,797 shares new common stock; (iii) 399 Venture
and the Management Investors reinvested 1,770,673 of their existing shares of
common stock of the Company, which were converted into 167,515 shares of newly
issued common stock; and (iv) 399 Venture exchanged 33,330 shares of its
existing preferred stock for 3,333 Units consisting of Senior Exchangeable
Preferred Stock and new common stock.
Concurrently with the Recapitalization, the Company sold 30,000 Units
consisting of $30,000, 13% Senior Exchangeable Preferred Stock due 2009, and
390,000 shares of Class B common stock (the "Units Offering"). The Senior
Exchangeable Preferred Stock was recorded at $27,656 representing the proceeds
of $30,000, less $390 allocated to the Class B common stock and $1,954 of
expenses attributable to the Units offering. Additionally, on March 14, 1997,
Anvil sold $130,000 of 10 7/8% Senior Notes due 2007 ("Senior Notes") in
connection with the Recapitalization.
The net proceeds from the Units and Notes offerings and borrowings under the
New Credit Agreement (see Note 8) were used by the Company to: (i) redeem the
outstanding common stock and preferred stock; (ii) repay the balance outstanding
under the Credit Agreement; (iii) repay the subordinated debt; (iv) pay fees and
expenses; (v) pay a management bonus; and (vi) pay amounts due in accordance
with the Phantom Equity Plan (see Note 17). During the three months ended May 3,
1997, the Company recorded a special compensation charge of $10,915, which
consists of the compensation recorded upon exercise of options by members of
management, payment of a special transaction bonus to management and payments
under a then existing equity buy-out plan to members of management.
The following summarizes the sources and uses of funds relating to the
Recapitalization (in millions):
<TABLE>
<CAPTION>
SOURCES:
<S> <C>
Borrowings under the New Credit Agreement................................. $ 33.3
Senior Notes due 2007..................................................... 130.0
Units..................................................................... 26.7
Equity Contribution....................................................... 13.1
Other..................................................................... .6
---------
Total sources....................................................... $ 203.7
---------
---------
USES:
Repay borrowings under the Old Credit Agreement........................... $ 61.1
Repay the Subordinated Note............................................... 9.5
Redeem or exchange the Old Preferred Stock................................ 22.7
Repurchase shares of Old Common Stock..................................... 92.3
Payment under the Phantom Equity Plan..................................... 5.3
Payment of Management Bonus............................................... 0.5
Fees and expenses......................................................... 12.3
---------
Total uses.......................................................... $ 203.7
---------
---------
</TABLE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS--The Company is engaged in the business of designing, manufacturing
and marketing quality casual knitwear and athletic wear for men, women and
children. The Company markets and distributes its
F-10
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
products, under private label and brand names, primarily to wholesalers and
screen printers, principally in the United States. Anvil's operations are on a
"52/53-week" fiscal year ending on the Saturday closest to January 31.
BASIS OF PRESENTATION--THE COMPANY--The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries, after elimination of significant intercompany accounts and
transactions.
The accompanying unaudited consolidated financial statements as of May 3,
1997 and for the three months ended May 3, 1997 and April 27, 1996 have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended May 3, 1997 are not
necessarily indicative of the results that may be expected for the year ending
January 31, 1998 or any other period.
BASIS OF PRESENTATION--PREDECESSOR--The combined statement of operations and
cash flows of Anvil Knitwear, a division of McGregor Corporation ("McGregor"), a
wholly-owned subsidiary of Astrum International Corp. ("Astrum") include the
divisional accounts of McGregor that relate to Anvil Knitwear, the accounts of
Winston Mills, Inc., a subsidiary of McGregor ("Winston Mills"), whose operation
solely serviced Anvil Knitwear, and the accounts of Anvil Knitwear's
wholly-owned foreign subsidiary, Anvil s.r.o. All intercompany accounts and
transactions between Anvil Knitwear, Winston Mills and Anvil s.r.o. have been
eliminated.
ASTRUM REORGANIZATION--On May 25, 1993, the United States Bankruptcy Court
confirmed Astrum's amended plan of reorganization (the "Plan"). Pursuant to the
terms of the Plan, which became effective June 8, 1993, Astrum completed a
comprehensive financial reorganization which reduced its debt and interest
expense (the "reorganization").
The reorganization has been accounted for pursuant to the American Institute
of Certified Public Accountants Statement of Position 90-7, entitled FINANCIAL
REPORTING BY ENTITIES IN REORGANIZATION UNDER THE BANKRUPTCY CODE" ("SOP 90-7").
SOP 90-7 requires that Astrum's assets be adjusted to their fair market value
("fresh-start" values), and that a new reporting entity be created. In adopting
"fresh-start" reporting, Astrum determined its reorganization value, which
approximated the fair value of Astrum before considering liabilities. In
allocating the reorganization value, Anvil's assets were recorded at their fair
value with the excess value reported as the intangible asset "reorganization
value in excess of amounts allocable to identifiable assets." The Plan and SOP
90-7 were adopted for accounting purposes on June 30, 1993.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents include all highly
liquid investments with an original maturity of 90 days or less.
F-11
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are depreciated
for financial reporting purposes principally using the straight-line method over
the estimated useful lives of the assets, ranging from 4 to 25 years. Leasehold
improvements are amortized over the lesser of the estimated useful life or the
term of the lease.
INVENTORIES--Inventories, are stated at the lower of cost or market, with
cost being determined by the first-in, first-out (FIFO) method. Cost of goods
sold for the year ended January 27, 1996 includes approximately $1,746 of
charges related to the initial allocation of purchase price to inventory in
connection with the Acquisition.
INTANGIBLE ASSETS--Intangible assets of the Company consist of trademarks
and goodwill. Trademarks are being amortized over their estimated useful life of
17 years. Goodwill is being amortized over the period of expected benefit of 35
years. Intangible assets of the Predecessor consisted of the reorganization
value of the Predecessor in excess of amounts allocable to identifiable assets
and was being amortized on the straight-line method over three years.
EVALUATION OF LONG-LIVED ASSETS--Long-lived assets are assessed for
recoverability whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In evaluating an asset for
recoverability, the Company estimates the future cash flows expected to result
from the use of the asset and eventual disposition. If the sum of the expected
future cash flows (undiscounted and without interest charges) is less than the
carrying amount of the asset an impairment loss, equal to the excess of the
carrying amount over the fair value of the asset, is recognized. There were no
adjustments to the carrying amount of long-lived assets for the years ended
January 27, 1996 or February 1, 1997 resulting from the Company's evaluation.
DEFERRED FINANCING FEES--Included in other assets are deferred financing
fees (approximately $3,800 and $3,100 at January 27, 1996 and February 1, 1997,
respectively), which are being amortized over approximately six years to
coincide with the term of the underlying credit agreement.
INTEREST RATE SWAPS--Gains and losses related to interest rate swaps that
qualify as hedges of existing liabilities are included in the carrying amount of
those liabilities and are ultimately recognized in income as adjustments to the
recorded interest expense. The Company does not hold or issue financial
instruments for trading or speculative purposes.
REVENUE RECOGNITION--Revenue is recognized at the time merchandise is
shipped. Allowances for sales returns and discounts are provided when sales are
recorded.
INCOME TAXES--Income taxes have been accounted for in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, ACCOUNTING FOR
INCOME TAXES, which requires the use of an asset and liability approach for
financial accounting and reporting of income taxes.
EARNINGS PER SHARE--Proforma income (loss) per share is computed based upon
the average outstanding shares attributable to the Class A and Class B Common
shares after the Recapitalization, and assuming the Recapitalization took place
at the beginning of the earliest period presented.
RECLASSIFICATIONS--Certain reclassifications have been made to prior years
financial statements to conform to current presentation.
F-12
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING FOR STOCK-BASED COMPENSATION--Effective January 28, 1996, the
Company adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION. The
statement requires expanded disclosures of stock-based compensation arrangements
and encourages, but does not require, compensation cost to be measured based on
the fair value of the equity instrument awarded. The Company adopted only the
disclosure provision of SFAS No. 123 and continues to account for stock-based
compensation under APB No. 25 which recognizes compensation cost based on the
intrinsic value of the equity instrument awarded.
NEW ACCOUNTING STANDARDS--Statement of Financial Accounting Standards
("SFAS") No. 128, EARNINGS PER SHARE, effective for interim and annual periods
ending after December 15, 1997, establishes standards for computing and
presenting earnings per share ("EPS") and simplifies the standards for computing
EPS currently found in Accounting Principles Board Opinion No. 15, EARNINGS PER
SHARE. Common stock equivalents under APB No. 15, with the exception of
contingently issuable shares (shares issuable for little or no cash
consideration), are no longer included in the calculation of primary, or basic
EPS. Under SFAS No. 128, contingently issuable shares are included in the
calculation of basic EPS. The Company will report EPS calculated in accordance
with SFAS No. 128 commencing with the fourth quarter of fiscal year ending
January 31, 1998. This change in reporting EPS is not expected to have a
material effect on reported EPS.
SFAS No. 129, DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE, effective
for periods ending after December 15, 1997, establishes standards for disclosing
information about an entity's capital structure. This statement requires
disclosure of the pertinent rights and privileges of various securities
outstanding (stock, options, warrants, preferred stock, debt and participation
rights) including dividend and liquidation preferences, participant rights, call
prices and dates, conversion or exercise prices and redemption requirements.
Adoption of this statement will have no effect on the Company as it currently
discloses the information required.
4. INVENTORIES
<TABLE>
<CAPTION>
JANUARY 27, FEBRUARY 1, MAY 3,
1996 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
(UNAUDITED)
Finished goods..................................................... $ 25,414 $ 21,545 $ 14,961
Work-in-process.................................................... 2,890 4,326 6,592
Raw materials and supplies......................................... 5,623 6,600 8,772
----------- ----------- -----------
$ 33,927 $ 32,471 $ 30,325
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-13
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
5. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
JANUARY 27, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
Land............................................................................ $ 882 $ 882
Buildings and improvements...................................................... 14,538 15,034
Machinery, equipment, furniture and fixtures.................................... 30,846 34,895
----------- -----------
46,266 50,811
Less accumulated depreciation and amortization.................................. (5,727) (11,981)
----------- -----------
$ 40,539 $ 38,830
----------- -----------
----------- -----------
</TABLE>
The Company recorded a charge of $600 in the year ended February 1, 1997,
(equal to the amount by which the carrying value exceeded the fair value) for
the disposal of certain fixed assets.
6. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
JANUARY 27, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
Trademarks--net of accumulated amortization of $286 and $572.................... $ 4,572 $ 4,286
Goodwill--net of accumulated amortization of $450 and $1,122.................... 22,831 22,282
----------- -----------
$ $27,403 $ 26,568
----------- -----------
----------- -----------
</TABLE>
7. ACCRUED EXPENSES
<TABLE>
<CAPTION>
JANUARY 27, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
Accrued wages and bonuses....................................................... $ 2,766 $ 3,044
Other........................................................................... 6,005 7,086
----------- -----------
$ 8,771 $ 10,130
----------- -----------
----------- -----------
</TABLE>
F-14
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
8. CREDIT AGREEMENT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
JANUARY 27, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
Bank Debt:
Tranche A......................................................... $ 35,250 $ 31,500
Tranche B......................................................... 14,925 14,825
----------- -----------
50,175 46,325
Less current portion................................................ 3,850 4,850
----------- -----------
$ 46,325 $ 41,475
----------- -----------
----------- -----------
</TABLE>
On January 30, 1995, Anvil entered into a Credit Agreement, amended on
various dates through March 30, 1996 (the "Credit Agreement"), providing a
$47,500 credit facility for revolving loans (with a sublimit for letters of
credit of $5,000) and $52,500 of term loans, expiring January 30, 2001, subject
to certain maximum levels of borrowing based upon asset levels. The amount of
financing available under the revolving credit facility is based upon a formula
incorporating 85% of eligible receivables (80% prior to March 1996), 60% of
eligible raw materials inventory and 50% of eligible finished goods inventory,
all as defined in the Credit Agreement. As of January 27, 1996 and February 1,
1997 approximately $4,810 and $22,375, respectively, was available for borrowing
under the revolving credit facility.
Interest on direct borrowings is payable, at least quarterly, at either the
Base Rate (8.5% and 8.25% at January 27, 1996 and February 1, 1997) or at the
Eurodollar Rate (5.5% and 5.6% at January 27, 1996 and February 1, 1997,
respectively), each plus an applicable margin, at the election of Anvil. The
applicable margins for borrowings under the revolving credit facility range from
.75% to 1.25% for Base Rate loans and 2% to 2.5% for Eurodollar loans and are
determined quarterly based upon the results of a financial ratio calculation.
There is a commitment fee of .5% per annum on the unused portion of the
revolving credit facility, payable quarterly. Letter of credit fees are equal to
.5% of the amount drawn under letters of credit and 2.25% to 2.75% per annum,
determined quarterly based upon the results of a financial ratio calculation, on
the amount available for borrowings. At least once during each calendar year,
for a period of 30 consecutive days, the loans under the revolving credit
facility must be repaid so that the aggregate outstanding amount does not exceed
$25,000 during such 30-day period. Borrowings outstanding at January 27, 1996
and February 1, 1997 amounted to $27,600 and $14,600, respectively, and the
weighted average interest rate thereon was 7.73% and 8.0% at January 27, 1996
and February 1, 1997, respectively. The Company manages its exposure to interest
rate risk through interest rate swaps (see Note 13).
The term loans are comprised of two tranches. Tranche A is a six-year term
loan in the principal amount of $37,500 due quarterly in varying amounts from
April 29, 1995 through February 3, 2001. Amounts outstanding under the Tranche A
loan bear interest, payable at least quarterly, at either the Base Rate, plus an
applicable margin, or at the Eurodollar Rate, plus an applicable margin, at the
election of Anvil. The applicable margins for borrowings outstanding under
Tranche A range from 1% to 1.5% for Base Rate loans and 2.25% to 2.75% for
Eurodollar loans and are determined quarterly based upon the results of a
financial ratio calculation.
F-15
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
8. CREDIT AGREEMENT (CONTINUED)
Tranche B is a seven-year term loan in the principal amount of $15,000 due
quarterly in variable amounts commencing April 29, 1995 through February 2,
2002. Amounts outstanding under the Tranche B loans bear interest, payable at
least quarterly, at either the Base Rate, plus 2%, or at the Adjusted Eurodollar
Rate, plus 3.25%, at the election of Anvil. Borrowings outstanding at January
27, 1996 and February 1, 1997 under Tranche A and Tranche B were $50,175 and
$46,325, respectively and the prevailing interest rate was 8.24% and 8.25% at
January 27, 1996 and February 1, 1997, respectively.
Anvil is required to comply with various covenants, including maintaining
certain financial ratios and interest rate protection agreements (see Note 13),
restrictions on additional indebtedness, capital expenditures, declaration of
dividends, and acquisition of the Company's common stock. Additionally, the net
proceeds from certain asset sales must, in certain circumstances, be used to
prepay the term loans and Anvil may be obligated to make mandatory prepayments
of the term loans in the event of excess cash flow, as defined. All borrowings
under the credit facility are secured by substantially all of the assets of
Anvil, including accounts receivable, inventory and property and equipment.
Further, the Company has guaranteed repayment of these loans. All amounts under
the Credit Agreement were repaid on March 14, 1997 in connection with the
Recapitalization. In connection with the repayment of the Credit Agreement, the
Company will record a charge of $3,010 before a tax benefit of $1,204, to write
off the balance of the deferred financing fees.
NEW CREDIT AGREEMENT--In March 1997, Anvil entered into an Amended and
Restated Credit Agreement (the "New Credit Agreement") providing a $55,000
revolving credit facility, with a sublimit of $5,000 for letters of credit
expiring March 14, 2002, subject to certain maximum levels of borrowings based
upon asset levels. Anvil used $33,250 of the borrowings under the New Credit
Agreement to finance a portion of the Recapitalization.
Anvil's borrowing availability under the revolving credit facility is based
on a formula incorporating: (i) 85% of eligible receivables; (ii) 60% of
eligible raw materials inventory; (iii) 50% of eligible finished goods
inventory; and (iv) 50% of appraised equipment and real property (each as
defined in the New Credit Agreement). Interest on borrowings under the revolving
credit facility is payable at a rate equal to LIBOR or the Alternate Base Rate
(defined as the higher of (i) the lender's prime rate and (ii) the Federal Funds
rate plus 0.5%), each plus an applicable margin ranging from 1.25% to 2.50% for
LIBOR loans and 0.25% to 1.50% for Alternate Base Rate loans, determined based
upon attainment of certain financial ratios. An annual commitment fee ranging
from 0.31% to 0.50% is payable on the unused portion of the revolving credit
facility.
The New Credit Agreement requires Anvil to comply with various covenants,
including maintaining certain financial ratios, additional indebtedness, the
payment of dividends, asset sales, acquisitions and mergers. Additionally, the
net proceeds from certain asset sales must, in circumstances, be used to prepay
borrowings under the credit facility. All borrowings under the credit facility
are secured by substantially all the assets of Anvil including accounts
receivable, inventories and property and equipment.
9. SENIOR NOTES
On March 14, 1997, Anvil issued $130,000 of 10 7/8% Senior Notes (the
"Senior Notes") due March 15, 2007, at a discount of $3,900. Interest on the
notes is payable semiannually on March 15 and September 15. Prior to March 15,
2000, the Company may redeem up to 40% of the aggregate principal amount of the
F-16
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
9. SENIOR NOTES (CONTINUED)
Senior Notes outstanding at a redemption price of 110%. The Company may redeem
the Senior Notes at a redemption price of 105.438%, 103.625%, and 101.813% at
any time during the 12-month period beginning on March 15, 2002, 2003 and 2004,
respectively and at 100% thereafter.
The Senior Notes are senior unsecured obligations of the Company and will
rank senior in right of payment to all subordinated indebtedness of the Company
and PARI PASSU in right of payment with all existing and future senior
indebtedness, including borrowings under the New Credit agreement. The indenture
contains certain covenants, including restrictions on additional indebtedness,
certain asset sales, and the payment of dividends.
The Senior Notes are guaranteed by the Company and Cottontops, Inc.
10. SUBORDINATED PROMISSORY NOTE
In connection with the Acquisition (see Note 1), the Company issued a
subordinated promissory note (the "Note") to Culligan in the principal amount of
$7,500, due January 30, 2005, or earlier upon a change in ownership, as defined.
The Note was recorded at the fair value of the property received and the
discount ($1,800 and $1,600 at January 27, 1996 and February 1, 1997,
respectively) was being amortized on a straight-line basis over the term of the
Note. The recorded balance of the Note includes interest accrued at 12%,
compounded semi-annually. The Note was prepaid on March 14, 1997 at an amount
equal to the principal value and accrued interest thereon. In connection with
such payment, the Company will record a charge of approximately $1,580, before a
tax benefit of $630 representing the balance of the unamortized debt discount.
11. RELATED PARTY TRANSACTIONS
THE COMPANY--The Company entered into a management agreement with Vestar
Equity Partners L.P. ("Vestar"), Citicorp Venture Capital, Ltd. ("CVC") and
Culligan through January 2005, whereby Vestar provided advisory and consulting
services to the Company and its subsidiaries, and CVC and Culligan, in turn,
provided consulting services to Vestar, when requested in connection with the
fulfillment by Vestar, of Vestar's obligation to the Company. In exchange for
these services, the Company paid, semi-annually in advance, a management fee
aggregating $200, $120 and $180, per annum to Vestar, CVC and Culligan,
respectively. Pursuant to the terms and conditions of the Recapitalization and
the Units and Notes Offerings, the management agreement was terminated.
In connection with the Acquisition, the Company paid transaction costs of
approximately $1,563 to Vestar and $938 to CVC.
PREDECESSOR--Prior to the acquisition, McGregor and certain affiliates
provided various administrative services to the Predecessor, including
purchasing and administration related to taxes, insurance, employee benefit
plans, management and other matters. The Predecessor was charged for these
costs. There were no such charges for administrative services provided by
McGregor for the year ended January 28, 1995, the value of which were not
material.
F-17
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
12. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
(COMBINED) (CONSOLIDATED)
----------- --------------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED
JANUARY 28, JANUARY 27, FEBRUARY 1,
1995 1996 1997
----------- --------------- ---------------
<S> <C> <C> <C>
Current:
Federal........................................ $ 8,445 $ 4,475 $ 4,337
State and local................................ 1,769 639 624
Deferred......................................... 831 1,656 1,922
----------- ------ ------
$ 11,045 $ 6,770 $ 6,883
----------- ------ ------
----------- ------ ------
</TABLE>
Prior to the Acquisition, the operations of the Predecessor were included in
the consolidated U.S. Federal and certain unitary state and local income tax
returns of Astrum and McGregor. The provisions shown in the accompanying
combined statements of earnings represent an amount equivalent to income taxes
which would have been payable if the Predecessor was filing its own returns.
Deferred income taxes (benefit), resulting from differences between
accounting for financial statement purposes and accounting for tax purposes were
as follows:
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
JANUARY 27, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
Depreciation.................................................................... $ 331 $ 2,268
Expenses capitalized to inventory............................................... (326) 57
Amortization of goodwill........................................................ 2,087 300
Accretion of Subordinated Promissory Note....................................... (80) (80)
Insurance reserves.............................................................. -- (240)
Accrued expenses not deductible until paid...................................... (356) (383)
----------- -----------
$ 1,656 $ 1,922
----------- -----------
----------- -----------
</TABLE>
F-18
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
12. INCOME TAXES (CONTINUED)
A reconciliation of the statutory Federal tax rate and the effective rate
follows:
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
(COMBINED) (CONSOLIDATED)
------------- ----------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED
JANUARY 28, JANUARY 27, FEBRUARY 1,
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Federal statutory tax rate.................................. 35% 35% 35%
State and local taxes--net of Federal income tax benefit.... 9 5 5
Losses of Anvil s.r.o., not currently deductible............ 6 -- --
Amortization................................................ 39 -- --
Other....................................................... 2 -- --
--- --- ---
91% 40% 40%
--- --- ---
--- --- ---
</TABLE>
The tax effects of temporary differences that give rise to a significant
portion of the deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
JANUARY 27, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Inventories....................................................... 640 583
Property, plant and equipment..................................... 1,000 --
Trademarks........................................................ 785 712
Reserves not currently deductible................................. -- 240
Accounts receivable reserves and other............................ 423 806
----------- -----------
Total deferred tax assets..................................... 2,848 2,341
----------- -----------
Deferred tax liabilities:
Property, plant and equipment..................................... -- (1,268)
Goodwill.......................................................... (2,112) (2,339)
Subordinated Promissory Note...................................... (720) (640)
----------- -----------
Total deferred tax liabilities................................ (2,832) (4,247)
----------- -----------
Net deferred tax asset (liability).................................. $ 16 $ (1,906)
----------- -----------
----------- -----------
</TABLE>
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
In March 1995, Anvil entered into interest rate swap agreements for an
aggregate notional amount of $25,000 to manage its interest rate risk. Under
these interest rate swaps, Anvil receives interest at LIBOR, reset quarterly,
and pays interest at the weighted average fixed rate of 7.3%. Interest payments
and receipts commenced September 1995 and occur quarterly. The swap agreements
have terms of three and five years. The Company does not hold or issue financial
instruments for trading purposes.
F-19
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
13. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to swap agreements, but it does not expect any
counterparties to fail to meet their obligations given their high credit
ratings. The fair value of interest rate swaps at January 27, 1996, and February
1, 1997 is approximately $1,527 and $705, respectively and reflects the
estimated amount that the Company would pay to terminate the contracts at the
reporting date. The fair value information has been obtained from dealer
quotations.
The carrying amounts of all other financial instruments reported on the
balance sheet at January 27, 1996 and February 1, 1997 approximate their fair
value. Considerable judgment is required in interpreting certain market data to
develop estimated fair values for certain financial instruments. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange.
14. PROFIT-SHARING RETIREMENT PLAN
The Company has a savings plan (the "Plan") under which eligible employees
may contribute up to 16%, subject to certain limitations, of their compensation.
The Company will match 100% of the contributions up to the first 3% and 50% on
the next 3%. During the year ended January 27, 1996 and February 1, 1997, the
Company made contributions to the Plan aggregating approximately $918 and
$1,059, respectively.
Prior to the Acquisition, employees of the Predecessor were eligible to
participate in a savings and investment plan sponsored by McGregor. Expense
attributable to the Predecessor's portion of the plan for the year ended January
28, 1995, was approximately $800.
F-20
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
15. OLD CAPITAL STRUCTURE
The components of preferred and common stock are as follows:
<TABLE>
<CAPTION>
JANUARY 27, FEBRUARY 1,
1996 1997
------------- -------------
<S> <C> <C>
Preferred Stock:
12.5% Class A, $.01 par value, authorized 205,010 shares;
cumulative, 129,854 shares issued and outstanding at January 27,
1996 and February 1, 1997, respectively; aggregate liquidation
value of $14,656 and $16,575, respectively...................... $ 1 $ 1
12.5% Class B, $.01 par value, authorized 70,420 shares;
cumulative, convertible; 70,416 shares issued and outstanding at
January 27, 1996 and February 1, 1997, respectively; aggregate
liquidation value of $7,964 and $9,007, respectively............ 1 1
12.5% Class C, $.01 par value, authorized 5,000 shares;
cumulative, convertible; none issued............................ -- --
----- -----
$ 2 $ 2
----- -----
----- -----
Common Stock:
Class A, par value $.01 per share, authorized 10,600,000 shares,
5,750,000 and 5,755,000 shares issued and outstanding at January
27, 1996 and February 1, 1997, respectively..................... $ 58 $ 58
Class B, par value $.01 per share, authorized 3,200,000 shares;
convertible; 2,600,000 and 2,675,000 shares issued and
outstanding at January 27, 1996 and February 1, 1997,
respectively.................................................... 26 26
Class C, par value $.01 per share, authorized 1,650,000 shares;
convertible; 1,650,000 shares issued and outstanding at January
27, 1996 and February 1, 1997, respectively..................... 17 17
----- -----
$ 101 $ 101
----- -----
----- -----
</TABLE>
PREFERRED STOCK--The Company has three classes of preferred stock: Class A,
Class B and Class C (collectively the "Preferred Stock"). Dividends accrue at
12.5% on the sum of the liquidation value ($100 per share) plus accumulated and
unpaid dividends thereon, compounded quarterly. The Preferred Stock is
redeemable, in whole or in part, at the option of the Company at the liquidation
value, plus the accumulated unpaid dividends thereon. The Preferred Stock ranks
senior to the Company's common stock as to dividends and liquidation rights.
Holders of Class A preferred stock are entitled to one vote per share on all
matters to be voted on by the Company's stockholders. Holders of Class B and
Class C preferred stock have no voting rights with respect to matters to be
voted on by the Company's stockholders; however, under certain circumstances,
such holders may be entitled to vote as a separate class on any proposed merger,
consolidation, recapitalization or reorganization. At January 27, 1996 and
February 1, 1997
F-21
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
15. OLD CAPITAL STRUCTURE (CONTINUED)
dividends in arrears on the Preferred Stock amounted to approximately $2,620 and
$5,582, respectively. The Preferred Stock was redeemed in connection with the
Recapitalization.
COMMON STOCK--The Company has three classes of common stock: Class A, Class
B and Class C. Holders of Class A common stock are entitled to one vote per
share on all matters to be voted on by the Company's stockholders. Holders of
Class B and Class C common stock have no voting rights with respect to matters
to be voted on by the Company's stockholders; however, under certain
circumstances, such holders were entitled to vote as a separate class on any
proposed merger, consolidation, recapitalization or reorganization.
Certain members of management obtained loans from the Company to partially
finance the purchase of common and preferred stock. Such loans bore interest at
7.19%, were due January 30, 2002 and are classified as a reduction to
stockholders' equity. Management repaid the above loans including accrued
interest, as part of the Recapitalization.
16. NEW CAPITAL STRUCTURE
REDEEMABLE PREFERRED STOCK--In connection with the Units Offering, in March
1997, the Company issued 1,200,000 shares of 13% Senior Exchangeable Preferred
Stock ("Redeemable Preferred Stock") due 2009. Total shares authorized are
2,300,000. Dividends accrue quarterly at 13% on the sum of the liquidation value
($25 per share) plus accumulated and unpaid dividends thereon. On or before
March 15, 2002 the Company may, at its option, pay dividends in cash or in
additional fully paid and non-assessable shares of Redeemable Preferred Stock
having an aggregate liquidation preference equal to the amount of such
dividends. On any scheduled dividend payment date, the Company may, at its
option, but subject to certain conditions, exchange all but not less than all of
the shares of Redeemable Preferred Stock then outstanding for the Company's 13%
Subordinated Exchange Debentures due 2009. The Redeemable Preferred Stock or the
Exchange Debentures, if issued will be redeemable at the option of the Company,
in whole or in part, at any time on or after March 15, 2002, at the redemption
price of 101% of the liquidation preference or aggregate principal amount (as
the case may be) thereof, plus, in the case of the Redeemable Preferred Stock,
an amount equal to all accumulated and unpaid dividends per share to the date of
purchase, or in the case of the Exchange Debentures, an amount equal to all
accumulated and unpaid interest thereon to the date of purchase. On March 15,
2009, the Company is required to redeem all outstanding shares of the Redeemable
Preferred Stock at an amount equal to the liquidation preference and all
accumulated and unpaid dividends. The Redeemable Preferred Stock was recorded at
an amount equal to the proceeds (net of discounts) less an amount attributable
to the Class B Common Stock issued in Connection with the Units Offering.
COMMON STOCK--Following the Recapitalization in which the old common shares
were redeemed or exchanged, the Company has the following issues of common
stock:
12.5% Class A, $.01 par value, authorized 500,000 shares; cumulative;
290,000 shares; issued and outstanding at March 14, 1997; aggregate
liquidation value of $29,000 at March 14, 1997.
Class B, $.01 par value, authorized 7,500,000 shares; 3,590,000 shares
issued and outstanding at March 14, 1997.
Class C, $.01 par value, authorized 1,400,000 shares, convertible; none
issued at March 14, 1997.
F-22
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
16. NEW CAPITAL STRUCTURE (CONTINUED)
The Class A common stock will accrete at a rate of 12.5% per annum,
compounded quarterly, payable in shares of Class A Common Stock.
Holders of Class B Stock will be entitled to one vote per share on all
matters to be voted on by stockholders while holders of Class A Common Stock and
Class C Common Stock will have no right to vote on any matters except in special
circumstances including a merger or consolidation of the Company or a
recapitalization or reorganization.
17. STOCK OPTION PLANS AND AGREEMENTS
STOCK OPTION PLAN--The Company had a stock option plan (the "Stock Option
Plan") pursuant to which options to purchase 600,000 shares of common stock at
an exercise price of $.64 may be awarded to certain senior executives
("Management Investors"). At January 27, 1996, options to purchase 75,000 shares
at $.64 were outstanding, all of which were exercised during the year ended
February 1, 1997. At February 1, 1997 an additional 75,000 options were granted
at $.64. In March 1997, in connection with the Recapitalization, the remaining
additional 450,000 management options vested and were immediately exercised, at
which time all Class A and B shareholders, including optionees, received $10.50
per share of common stock. The 525,000 options had a value of $5,200 at the date
of exercise, which will be charged to compensation expense with a corresponding
credit to shareholders' equity in the year ending January 31, 1998.
PHANTOM EQUITY PLAN--Upon sale of the Company, or under certain
circumstances as provided for in the agreement, the Management Investors will be
paid 5% of the excess of the aggregate sale price over $100,000. In connection
with the Recapitalization, the Management Investors were paid $5,300 in
accordance with the Phantom Equity Plan at which time the Phantom Equity Plan
was terminated. The $5,300 will be charged to expense in the year ending January
31, 1998.
18. COMMITMENTS AND CONTINGENCIES
LEASES--The Company is obligated under various leases for equipment, office
space and distribution facilities which expire at various dates through 2002.
Future minimum rental commitments under noncancelable operating leases, with
terms in excess of one year are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDING AMOUNT
----------- ---------
<S> <C>
1998................................................................................. 648
1999................................................................................. 611
2000................................................................................. 408
2001................................................................................. 364
2002................................................................................. 364
Thereafter........................................................................... 152
---------
Total............................................................................ $ 2,547
---------
---------
</TABLE>
Rental expense for the years ended January 28, 1995, January 27, 1996 and
February 1, 1997, was approximately $755, and $620, respectively.
F-23
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
18. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LITIGATION--The Company is a party to various litigation matters incidental
to the conduct of its business. The Company does not believe that the outcome of
any of the matters in which it is currently involved will have a material
adverse effect on the financial condition or results of operations of the
Company.
Prior to the Acquisition, groundwater contamination was discovered at the
Asheville, North Carolina facility. In 1990, Winston Mills, Inc., a subsidiary
of McGregor, entered into an Administrative Order on Consent ("AOC") with the
North Carolina Department of Environment, Health and Natural Resources ("DEHNR")
concerning such contamination. Since that time, McGregor has been conducting
investigation and corrective action under DEHNR oversight and has remained
responsible to the DEHNR with respect to the contamination that is subject to
the AOC. While the total cost of the cleanup at the facility will depend upon
the extent of contamination and the corrective action approved by the DEHNR,
preliminary cleanup cost estimates range from $1.0 to $4.0 million. McGregor
continues to be a party to the Asheville, North Carolina facility's hazardous
waste permit and Culligan, an affiliate of McGregor, has guaranteed McGregor's
obligations under the AOC. McGregor also contractually agreed to fully indemnify
the Company with respect to the contamination as part of the terms of the
Acquisition. This indemnity is guaranteed by Culligan and by Astrum (now known
as Samsonite Corporation) in the event Culligan is unable to perform its
guarantor obligations. The Company could be held responsible for the cleanup of
this contamination if McGregor and Culligan were to become unable to fulfill
their obligations to DEHNR and the Company was not successful in obtaining
indemnification for the clean-up from either McGregor, Culligan or Astrum.
McGregor also agreed to fully indemnify the Company for any costs associated
with certain other environmental matters identified at the time of the
Acquisition. The Company believes that, even if McGregor were unable to fulfill
its indemnification obligations, these other matters would not have a material
adverse effect on the Company. McGregor also agreed to indemnify the Company,
subject to certain limitation, with respect to environmental liabilities that
arise from events that occurred or conditions in existence prior to the
Acquisition. Culligan and Astrum have also guaranteed McGregor's obligations
under these indemnities.
EMPLOYMENT AGREEMENTS--The Company has entered into employment agreements
expiring January 31, 1999, with annual renewals thereafter, with certain senior
executives providing for minimal annual compensation, plus bonuses equal to 4%
of the Company's annual profits, as defined. At February 1, 1997, the aggregate
minimum obligation under the remaining terms of these employment agreements is
approximately $1,930. If an executive is terminated without cause, or if the
executive terminates his employment under certain circumstances, as provided,
the Company is liable for termination payments through the end of the agreement.
Additionally, under certain circumstances, the Company may be liable for
additional termination benefits up to a period not exceeding two years.
F-24
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
19. FOREIGN OPERATIONS
In addition to the United States, the Predecessor, through its wholly-owned
subsidiary, Anvil s.r.o., had operations in the Czech Republic. Income (loss)
before income taxes consisted of the following:
<TABLE>
<CAPTION>
YEAR
ENDED
JANUARY 28,
1995
-----------
<S> <C>
United States.................................................................... $ 14,169
Foreign.......................................................................... (2,067)
-----------
$ 12,102
-----------
-----------
</TABLE>
20. SUMMARIZED FINANCIAL DATA OF ANVIL KNITWEAR, INC.
Summarized financial data of Anvil Knitwear, Inc. is as follows:
<TABLE>
<CAPTION>
JANUARY 27, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
Current assets..................................................... $ 63,903 $ 68,208
----------- -----------
----------- -----------
Total assets....................................................... 136,527 $ 136,832
----------- -----------
----------- -----------
Current liabilities................................................ $ 47,743 $ 38,740
----------- -----------
----------- -----------
Long-term liabilities.............................................. $ 49,094 $ 46,837
----------- -----------
----------- -----------
Total liabilities.................................................. $ 96,837 $ 85,577
----------- -----------
----------- -----------
Stockholder's equity............................................... $ 39,690 $ 51,255
----------- -----------
----------- -----------
<CAPTION>
YEAR ENDED YEAR ENDED
JANUARY 27, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
Net sales.......................................................... $ 193,389 $ 204,154
----------- -----------
----------- -----------
Operating income................................................... $ 25,152 $ 24,705
----------- -----------
----------- -----------
Interest expense................................................... $ 7,662 $ 6,725
----------- -----------
----------- -----------
Net income......................................................... $ 10,864 $ 11,037
----------- -----------
----------- -----------
</TABLE>
Anvil Knitwear, Inc. is a wholly-owned subsidiary of Anvil Holdings, Inc.
Anvil Holdings, Inc. has fully and unconditionally, jointly and severally (along
with Cottontops, Inc.) guaranteed the Old Senior Notes and the New Senior Notes.
Complete financial statements and other disclosures concerning Anvil Knitwear,
Inc. are not presented because management has determined they are not meaningful
to investors.
F-25
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
20. SUMMARIZED FINANCIAL DATA OF ANVIL KNITWEAR, INC. (CONTINUED)
Summarized balance sheet data of Cottontops, Inc., as of February 1, 1997 is
as follows:
<TABLE>
<CAPTION>
FEBRUARY 1,
1997
-----------
<S> <C>
Current assets................................................................... $ 2,671
-----------
-----------
Total assets..................................................................... $ 3,100
-----------
-----------
Current liabilities.............................................................. $ 1,403
-----------
-----------
Long-term liabilities............................................................ $ 1,202
-----------
-----------
Total liabilities................................................................ $ 2,605
-----------
-----------
Stockholder's equity............................................................. $ 495
-----------
-----------
</TABLE>
Cottontops, Inc. is a wholly-owned subsidiary of Anvil Knitwear, Inc. and
has fully and unconditionally, jointly and severally (along with Holdings)
guaranteed the Old Senior Notes and the New Senior Notes. The summarized balance
sheet data presented above is subject to final adjustment of the allocation of
purchase price to the net assets acquired (see Note 1). Complete financial
statements and other disclosures concerning Cottontops Inc. are not presented
because management has determined they are not meaningful to investors.
F-26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HOLDINGS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information............................ iv
Summary.......................................... 1
Risk Factors..................................... 17
The Recapitalization............................. 26
Use of Proceeds.................................. 27
Capitalization................................... 29
Dividend Policy.................................. 29
Selected Historical Financial Data............... 30
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 33
Business......................................... 40
Management....................................... 51
Security Ownership of Certain Beneficial Owners
and Management................................. 57
Certain Relationships and Related Transactions... 60
The Preferred Exchange Offer..................... 62
Description of Securities........................ 72
Description of Capital Stock..................... 147
Description of Certain Indebtedness.............. 151
Certain Federal Income Tax Consequences.......... 153
Plan of Distribution............................. 153
Legal Matters.................................... 154
Experts.......................................... 154
Unaudited Pro Forma Financial Statements......... P-1
Index to Financial Statements.................... F-1
</TABLE>
UNTIL , 1997 (90 DAYS AFTER THE COMMENCEMENT OF THE PREFERRED
EXCHANGE OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------------
PROSPECTUS
---------------------
$30,000,000
ANVIL HOLDINGS, INC.
OFFER TO EXCHANGE ITS 13% SERIES B SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2009
FOR ANY AND ALL OF ITS OUTSTANDING 13% SENIOR EXCHANGEABLE PREFERRED STOCK DUE
2009
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
GENERAL CORPORATION LAW
Holdings is incorporated under the laws of the State of Delaware. Section
145 ("Section 145") of the General Corporation Law of the State of Delaware, as
the same exists or may hereafter be amended (the "General Corporation Law"),
INTER ALIA, provides that a Delaware corporation may indemnify any persons who
were, are or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
were or are threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by reasons of the
fact that such person was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit, provided such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the corporation's best
interests, provided that no indemnification is permitted without judicial
approval if the officer, director, employee or agent is adjudged to be liable to
the corporation. Where an officer, director, employee or agent is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
CERTIFICATE OF INCORPORATION
Holdings' Certificate of Incorporation ("Certificate") provides that, to the
fullest extent permitted by the General Corporation Law, a director of Holdings
shall not be liable to Holdings or its stockholders for monetary damages for a
breach of fiduciary duty as a director. In addition, Holdings' Certificate
provides that, to the fullest extent permitted by the General Corporation Law,
Holdings shall indemnify any director from and against any and all expenses,
liabilities or other losses of any nature.
BY-LAWS
Holdings' By-Laws do not contain specific indemnification provisions.
II-1
<PAGE>
INSURANCE
Holdings' directors and officers will be covered by insurance policies
intended to be obtained by Holdings against certain liabilities for actions
taken in such capacities, including liabilities under the Securities Act of
1933.
ITEM 21.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<C> <S>
2.1 Recapitalization Agreement, dated as of February 12, 1997, by and among Citicorp
Venture Capital, Ltd., Bruckmann, Rosser, Sherrill & Co., Inc. ("BRS &Co."),
Holdings, Anvil VT, Inc. and the stockholders and voting trust certificate holders
named on the signature pages thereto, as amended by the certain Amendment and
Consent to Assignment dated as of February 21, 1997 and that Waiver and Second
Amendment to the Recapitalization Agreement dated as of March 13, 1997.+**
3.1 Restated Certificate of Incorporation of Holdings.**
3.2 By-Laws of Holdings.**
4.1 Units Purchase Agreement, dated as of March 14, 1997, by and between Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") and Holdings.**
4.2 Unit Agreement, dated as of March 14, 1997, by and between Holdings and United
States Trust Company of New York, as trustee.**
4.3 Exchange Debenture Indenture, dated as of March 14, 1997, by and between Holdings
and United States Trust Company of New York, as trustee.**
4.4 Registration Rights Agreement, dated as of March 14, 1997, by and between Holdings
and DLJ, as the Initial Purchaser.**
4.5 Certificate of Designation of Holdings.
4.6 Form of Certificate of Designations of Holdings relating to Series B 13% Senior
Exchangeable Preferred Stock.
4.7 Form of Unit.
5.1 Opinion of Kirkland & Ellis.*
8.1 Opinion of Kirkland & Ellis.*
10.1 Purchase Agreement, dated as of March 14, 1997, by and among DLJ, Wasserstein
Perella Securities, Inc. ("Wasserstein"), NationsBanc Capital Markets, Inc.
("NationsBanc"), Anvil and Holdings.**
10.2 Senior Indenture, dated as of March 14, 1997, by and among the Anvil, Holdings,
Cottontops and the other Subsidiary Guarantors and United States Trust Company of
New York, as trustee.**
10.3 Form of 10 7/8% Senior Notes and Guarantees.
10.4 Form of Series B 10 7/8% Senior Notes and Guarantees.
10.5 Amended and Restated Credit Agreement, dated as of March 14, 1997, among Anvil, as
Borrower, Holdings, Cottontops and certain subsidiaries, as Guarantors, the Banks
Identified therein as lending institutions, NationsBank, N.A. ("NationsBank"), as
Agent, and Bank of America Illinois, Banque Nationale de Paris and Heller Financial,
Inc., as co-agents.+**
10.6 Amended and Restated Pledge and Security Agreement, dated as of March 14, 1997, by
and among Anvil, Holdings and NationsBank.+**
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.7 Registration Rights Agreement, dated as of March 14, 1997, by and among Anvil,
Holdings, Cottontops and DLJ, Wasserstein and NationsBanc, as Initial Purchasers.**
10.8 Employment Agreement, dated as of January 31, 1995, by and between Anvil and Bernard
Geller.**
10.9 Employment Agreement, dated as of January 31, 1995, by and between Anvil and Jacob
Hollander.**
10.10 Employment Agreement, dated as of January 31, 1995, by and between Anvil and William
H. Turner.**
10.11 Employment Agreement, dated as of January 31, 1995, by and between Anvil and Anthony
Corsano.**
10.12 Asset Purchase Agreement, dated as of December 29, 1994, by and among McGregor
Corporation, Winston Mills, Inc., Anvil and Holdings.+
10.13 Guaranty Agreement, dated as of January 28, 1995, by and among Culligan
International Company, Astrum International Company and Anvil.**
10.14 Registration Rights and Securityholders Agreement, dated as of March 14, 1997, by
and among Holdings, BRS & Co., 399 Venture Partners, Inc. ("399 Venture Partners"),
CCT II Partners, L.P. ("CCT") and DLJ.**
10.15 Registration Rights Agreement, dated as of March 14, 1997, by and among Holdings,
BRS & Co., 399 Venture Partners, CCT, Bernard Geller, Anthony Corsano, William
Turner, Jacob Hollander and each other executive of Holdings or its subsidiaries who
acquires common stock from Holdings after the date thereof and executes a joinder
thereto, the persons set forth on the signature pages thereto and DLJ.**
10.16 Stockholders Agreement, dated as of March 14, 1997, by and among Holdings, BRS &
Co., 399 Venture Partners, CCT and Bernard Geller, Anthony Corsano, William Turner,
Jacob Hollander and each other executive of Holdings or its subsidiaries who
acquires common stock from Holdings after the date thereof and executes a joinder
thereto.**
10.17 Stock Option Plan.
10.18 Management Agreement by and between Holdings and BRS & Co.*
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges.
12.2. Statement Regarding Computation of Ratios of Earnings to Fixed Charges and Preferred
Stock Dividends.
12.3 Statement Regarding Computation of Ratios of EBITDA to Cash Interest Expense.
12.4 Statement Regarding Computation of Ratios of Net Debt to EBITDA.
21.1 Subsidiaries of Holdings.**
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1).*
24.1 Powers of Attorney (included in Part I to the Registration Statement).**
25.1 Statement of Eligibility of Trustee on Form T-1.**
27.2 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
+ Holdings agrees to furnish supplementally to the Commission a copy of any
omitted schedule or exhibit to such agreement upon request by the
Commission.
II-3
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES.
Schedule II--Anvil Holdings, Inc.--Valuation and Qualifying Accounts.
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions, are inapplicable or not material, or the information
called for thereby is otherwise included in the financial statements and
therefore has been omitted.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertake:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial BONA FIDE offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering; and
(4) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(5) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described under
Item 20 or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrants of expenses incurred or paid by a director, officer
or controlling person
II-4
<PAGE>
of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(6) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
(8) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(9) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Anvil Holdings,
Inc. has duly caused this Amendment No. 1 to the Registration Statement on Form
S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of New York, State of New York on June 27, 1997.
ANVIL HOLDINGS, INC.
BY: /S/ JACOB HOLLANDER
-----------------------------------------
Jacob Hollander
VICE PRESIDENT, SECRETARY AND GENERAL
COUNSEL
****
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement and power of attorney have been signed by
the following persons in the capacities and on the dates indicated:
SIGNATURE CAPACITY DATES
- ------------------------------ --------------------------- -------------------
President, Chairman of the
** Board and Director
- ------------------------------ (Principal Executive and June 27, 1997
Bernard Geller Financial Officer)
** Vice President, Secretary,
- ------------------------------ General Counsel and June 27, 1997
Jacob Hollander Director
** Vice President of Finance
- ------------------------------ (Principal Accounting June 27, 1997
Pasquale Branchizio Officer)
** Director
- ------------------------------ June 27, 1997
Bruce C. Bruckmann
** Director
- ------------------------------ June 27, 1997
Stephen F. Edwards
** Director
- ------------------------------ June 27, 1997
David F. Thomas
** Director
- ------------------------------ June 27, 1997
John D. Weber
- ------------------------
** The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to the Registration Statement on behalf of the above named
officers and directors of the Company pursuant to the Power of Attorney
executed by such officers and directors and previously filed with the
Securities and Exchange Commission.
/s/ JACOB HOLLANDER
- ------------------------------
Jacob Hollander
ATTORNEY-IN-FACT
II-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Anvil Knitwear
In connection with our audit of the combined statements of operations and
cash flows of Anvil Knitwear, a division of McGregor Corporation, which is a
subsidiary of Astrum International Corp., for the year ended January 28, 1995,
which financial statements are included in the Prospectus, we have also audited
the financial statement schedule of Valuation and Qualifying Accounts.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
KPMG Peat Marwick LLP
New York, New York
March 24, 1995
S-1
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS YEAR
- ------------------------------------------------------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Predecessor (Combined)
Year ended January 28, 1995
Allowance for doubtful accounts...................... $ 1,232 $ 501 $ (629)(b) $ 371(a) $ 733
----------- ----- ----- ----------- -----------
----------- ----- ----- ----------- -----------
The Company (Consolidated)
Year ended January 27, 1996
Allowance for doubtful accounts...................... $ 733 $ 435 $ -- $ 717(a) $ 451
----------- ----- ----- ----------- -----------
----------- ----- ----- ----------- -----------
The Company (Consolidated)
Year ended February 1, 1997
Allowance for doubtful accounts...................... $ 451 $ 440 $ -- $ 17(a) $ 874
----------- ----- ----- ----------- -----------
----------- ----- ----- ----------- -----------
</TABLE>
- ------------------------
(a) Accounts written-off as uncollectible.
(b) Recoveries of previously written-off accounts.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------
<C> <S> <C>
2.1 Recapitalization Agreement, dated as of February 12, 1997, by and among Citicorp Venture Capital,
Ltd., Bruckmann, Rosser, Sherrill & Co., Inc. ("BRS &Co."), Holdings, Anvil VT, Inc. and the
stockholders and voting trust certificate holders named on the signature pages thereto, as
amended by the certain Amendment and Consent to Assignment dated as of February 21, 1997 and that
Waiver and Second Amendment to the Recapitalization Agreement dated as of March 13, 1997.+**
3.1 Restated Certificate of Incorporation of Holdings.**
3.2 By-Laws of Holdings.**
4.1 Units Purchase Agreement, dated as of March 14, 1997, by and between Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") and Holdings.**
4.2 Unit Agreement, dated as of March 14, 1997, by and between Holdings and United States Trust
Company of New York, as trustee.**
4.3 Exchange Debenture Indenture, dated as of March 14, 1997, by and between Holdings and United
States Trust Company of New York, as trustee.**
4.4 Registration Rights Agreement, dated as of March 14, 1997, by and between Holdings and DLJ, as
the Initial Purchaser.**
4.5 Certificate of Designation of Holdings.
4.6 Form of Certificate of Designation of Holdings relating to Series B 13% Senior Exchangeable
Preferred Stock.
4.7 Form of Unit.
5.1 Opinion of Kirkland & Ellis.*
8.1 Opinion of Kirkland & Ellis.*
10.1 Purchase Agreement, dated as of March 14, 1997, by and among DLJ, Wasserstein Perella Securities,
Inc. ("Wasserstein"), NationsBanc Capital Markets, Inc. ("NationsBanc"), Anvil and Holdings.**
10.2 Senior Indenture, dated as of March 14, 1997, by and among the Anvil, Holdings, Cottontops and
the other Subsidiary Guarantors and United States Trust Company of New York, as trustee.**
10.3 Form of 10 7/8% Senior Notes and Guarantees.
10.4 Form of Series B 10 7/8% Senior Notes and Guarantees.
10.5 Amended and Restated Credit Agreement, dated as of March 14, 1997, among Anvil, as Borrower,
Holdings, Cottontops and certain subsidiaries, as Guarantors, the Banks Identified therein as
lending institutions, NationsBank, N.A. ("NationsBank"), as Agent, and Bank of America Illinois,
Banque Nationale de Paris and Heller Financial, Inc., as co-agents.+**
10.6 Amended and Restated Pledge and Security Agreement, dated as of March 14, 1997, by and among
Anvil, Holdings and NationsBank.+**
10.7 Registration Rights Agreement, dated as of March 14, 1997, by and among Anvil, Holdings,
Cottontops and DLJ, Wasserstein and NationsBanc, as Initial Purchasers.**
10.8 Employment Agreement, dated as of January 31, 1995, by and between Anvil and Bernard Geller.**
10.9 Employment Agreement, dated as of January 31, 1995, by and between Anvil and Jacob Hollander.**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------
<C> <S> <C>
10.10 Employment Agreement, dated as of January 31, 1995, by and between Anvil and William H. Turner.**
10.11 Employment Agreement, dated as of January 31, 1995, by and between Anvil and Anthony Corsano.**
10.12 Asset Purchase Agreement, dated as of December 29, 1994, by and among McGregor Corporation,
Winston Mills, Inc., Anvil and Holdings.+
10.13 Guaranty Agreement, dated as of January 28, 1995, by and among Culligan International Company,
Astrum International Company and Anvil.**
10.14 Registration Rights and Securityholders Agreement, dated as of March 14, 1997, by and among
Holdings, BRS & Co., 399 Venture Partners, Inc. ("399 Venture Partners"), CCT II Partners, L.P.
("CCT") and DLJ.**
10.15 Registration Rights Agreement, dated as of March 14, 1997, by and among Holdings, BRS & Co., 399
Venture Partners, CCT, Bernard Geller, Anthony Corsano, William Turner, Jacob Hollander and each
other executive of Holdings or its subsidiaries who acquires common stock from Holdings after the
date thereof and executes a joinder thereto, the persons set forth on the signature pages thereto
and DLJ.**
10.16 Stockholders Agreement, dated as of March 14, 1997, by and among Holdings, BRS & Co., 399 Venture
Partners, CCT and Bernard Geller, Anthony Corsano, William Turner, Jacob Hollander and each other
executive of Holdings or its subsidiaries who acquires common stock from Holdings after the date
thereof and executes a joinder thereto.**
10.17 Stock Option Plan.
10.18 Management Agreement by and between Holdings and BRS & Co.*
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges.
12.2. Statement Regarding Computation of Ratios of Earnings to Fixed Charges and Preferred Stock
Dividends.
12.3 Statement Regarding Computation of Ratios of EBITDA to Cash Interest Expense.
12.4 Statement Regarding Computation of Ratios of Net Debt to EBITDA.
21.1 Subsidiaries of Holdings.**
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1).*
24.1 Powers of Attorney (included in Part I to the Registration Statement).**
25.1 Statement of Eligibility of Trustee on Form T-1.**
27.2 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
+ Holdings agrees to furnish supplementally to the Commission a copy of any
omitted schedule or exhibit to such agreement upon request by the
Commission.
<PAGE>
ANVIL HOLDINGS, INC.
March 13, 1997
CERTIFICATE OF DESIGNATIONS OF THE POWERS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER
SPECIAL RIGHTS OF 13% SENIOR EXCHANGEABLE
PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
Anvil Holdings, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the board of directors of the
Company (the "Board of Directors") by its Restated Certificate of Incorporation
(hereinafter referred to as the "Certificate of Incorporation"), and pursuant to
the provisions of Section 151 of the General Corporation Law of the State of
Delaware, said Board of Directors, by unanimous written consent dated March 11,
1997, duly approved and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors does
hereby create, authorize and provide for the issue of 13% Series A Senior
Exchangeable Preferred Stock, par value $0.01 per share, with a liquidation
preference of $25.00 per share, consisting of up to 2,300,000 shares,
having the designations, preferences, relative, participating, optional and
other special rights and the qualifications, limitations and restrictions
thereof that are set forth in the Certificate of Incorporation and in this
Resolution as follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of preferred stock of the Company a series of preferred stock
designated as the "13% Series A Senior Exchangeable Preferred Stock" (the
"Senior Preferred Stock"). The number of shares constituting such series shall
be 2,300,000 shares of Senior Preferred Stock, consisting of an initial issuance
of 1,200,000 shares of Senior Preferred Stock plus up to 1,100,000 additional
shares of Senior Preferred Stock which may be issued to pay dividends on the
Senior Preferred Stock if the Company elects to pay dividends in additional
shares of Senior Preferred Stock. The liquidation preference of the Senior
Preferred Stock shall be $25.00 per share.
(b) Rank. The Senior Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding-up and dissolution
of the Company, rank senior to all classes of common stock of the Company and
each other class of capital stock or series of Preferred Stock of the Company
hereafter created by the Board of Directors the
<PAGE>
2
terms of which do not expressly provide that it ranks on a parity with the
Senior Preferred Stock as to dividend distributions and distributions upon
the liquidation, winding-up and dissolution of the Company (collectively
referred to with the Common Stock of the Company as "Junior Securities").
The Senior Preferred Stock shall, with respect to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the
Company, rank on a parity with each series of Preferred Stock existing on the
date hereof the terms of which do not expressly provide that it ranks junior
to any Senior Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding-up and dissolution of the Company and any class
of capital stock or series of Preferred Stock hereafter created by the Board
of Directors, the terms of which expressly provide that such class or series
shall rank on a parity with the Senior Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up and
dissolution of the Company (collectively referred to as "Parity Securities");
provided that any such Parity Securities that were not approved by the
Holders in accordance with paragraph (f)(ii)(A) hereof shall be deemed to be
Junior Securities and not Parity Securities.
(c) Dividends.
(i) Beginning on the Senior Preferred Stock Issue Date, the Holders
of the outstanding shares of Senior Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, dividends on each share of Senior Preferred
Stock, at a rate per annum equal to 13% of the liquidation preference per
share of the Senior Preferred Stock. Notwithstanding the foregoing, during
the pendency of a Registration Default, then as liquidated damages, the
dividend rate borne by the Senior Preferred Stock, with respect to the
first 90-day period immediately following the occurrence of such
Registration Default will increase by an amount equal to $.05 per week per
$1,000 liquidation preference of Senior Preferred Stock held by such Holder
and the dividend rate borne by the Senior Preferred Stock will increase by
an additional $.05 per week per $1,000 liquidation preference of Senior
Preferred Stock with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum increase in the
dividend rate of $.30 per week per $1,000 liquidation preference of Senior
Preferred Stock and following the cure of all Registration Defaults, the
accrual of dividends at the increased rates specified by this sentence will
cease. All dividends shall be cumulative, whether or not earned or
declared, on a daily basis from the Senior Preferred Stock Issue Date and
shall be payable quarterly in arrears on each Dividend Payment Date,
commencing on the first Dividend Payment Date after the Senior Preferred
Stock Issue Date, provided that if any dividend payable on any Dividend
Payment Date on or before March 15, 2002 is not declared and paid in full
in cash on such Dividend Payment Date, the amount payable as dividends on
such Dividend Payment Date that is not paid in cash (including partial
payments in cash) on such Dividend Payment Date shall be paid by the
Company in additional fully paid and non-assessable shares (including
fractional shares, if applicable) of Senior Preferred Stock having an
aggregate liquidation preference equal to the amount of such dividends
(rounded to the nearest whole cent). After March 15, 2002, dividends shall
be paid only in cash. If any dividend (or portion thereof) payable on any
Dividend Payment Date after March 15, 2002 is not declared or paid in full
in cash on such Dividend Payment Date, the amount of such dividend that is
payable and that is not paid
<PAGE>
3
in cash on such date shall increase at the rate of 13% per annum,
compounded quarterly, from such Dividend Payment Date until declared and
paid in full. Each distribution in the form of a dividend (whether in
cash or in additional shares of Senior Preferred Stock) shall be payable
to Holders of record as they appear on the stock register of the Company
on such record dates, not less than 10 nor more than 60 days preceding
the related Dividend Payment Date, as shall be fixed by the Board of
Directors. Dividends shall cease to accumulate in respect of shares of
the Senior Preferred Stock on the Exchange Date or on the date of their
earlier redemption unless the Company shall have failed to issue the
appropriate aggregate principal amount of Exchange Debentures (as
defined in paragraph (g)(i)(A) hereof) in respect of the Senior
Preferred Stock on the Exchange Date or shall have failed to pay the
relevant redemption price on the date filed for redemption.
(ii) All dividends paid with respect to shares of the Senior
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the
Holders entitled thereto.
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Company to pay or set apart for payment, any dividends on
shares of the Senior Preferred Stock at any time.
(iv) Dividends on account of arrears for any past Dividend Period
and dividends in connection with any optional redemption pursuant to
paragraph (e)(i) may be declared and paid at any time, without reference to
any regular Dividend Payment Date, to Holders of record on such date, not
more than 45 days prior to the payment thereof, as may be fixed by the
Board of Directors.
(v) No full dividends shall be declared by the Board of Directors
or paid or funds set apart for payment of dividends by the Company on any
Parity Securities for any period unless full cumulative dividends shall
have been or contemporaneously are declared and paid in full, or declared
and (in the case of dividends payable in cash) a sum in cash set apart
sufficient for such payment, on the Senior Preferred Stock for all Dividend
Periods terminating on or prior to the date of payment of such full
dividends on such Parity Securities. If any dividends are not paid in
full, as aforesaid, upon the shares of the Senior Preferred Stock and any
other Parity Securities, all dividends declared upon shares of the Senior
Preferred Stock and any other Parity Securities shall be declared pro rata
so that the amount of dividends declared per share on the Senior Preferred
Stock and such Parity Securities shall in all cases bear to each other the
same ratio that accrued dividends per share on the Senior Preferred Stock
and such Parity Securities bear to each other.
(vi) (A) Holders of shares of the Senior Preferred Stock shall be
entitled to receive the dividends provided for in paragraph (c)(i) hereof
in preference to and in priority over any dividends upon any of the Junior
Securities.
<PAGE>
4
(B) So long as any shares of Senior Preferred Stock are
outstanding, the Company shall not declare, pay or set apart for payment
any dividend on any of the Junior Securities or make any payment on account
of, or set apart for payment money for a sinking or other similar fund for,
the purchase, redemption or other retirement of, any of the Junior
Securities or any warrants, rights, calls or options exercisable for or
convertible into any of the Junior Securities, or make any distribution in
respect thereof, either directly or indirectly, and whether in cash,
obligations or shares of the Company or other property (other than
dividends on Junior Securities paid in additional shares of Junior
Securities), and shall not permit any corporation or other entity directly
or indirectly controlled by the Company to purchase or redeem any of the
Junior Securities or any such warrants, rights, calls or options unless
full cumulative dividends determined in accordance herewith have been paid
in full on the Senior Preferred Stock.
(C) So long as any shares of Senior Preferred Stock are
outstanding, the Company shall not make any payment on account of, or set
apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Parity Securities
or any warrants, rights, calls or options exercisable for or convertible
into any of the Parity Securities, and shall not permit any corporation or
other entity directly or indirectly controlled by the Company to purchase
or redeem any of the Parity Securities or any such warrants, rights calls
or options unless the dividends determined in accordance herewith on the
Senior Preferred Stock have been paid in full.
(vii) Dividends payable on shares of the Senior Preferred Stock for
any period less than a year shall be computed on the basis of a 360-day
year of twelve 30-day months and the actual number of days elapsed in the
period for which payable. If any Dividend Payment Date occurs on a day
that is not a Business Day, any accrued dividends otherwise payable on such
Dividend Payment Date shall be paid on the next succeeding Business Day.
(d) Liquidation Preference.
(i) Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the Company, the Holders of shares of Senior
Preferred Stock then outstanding shall be entitled to be paid, out of the
assets of the Company available for distribution to its stockholders,
$25.00 per share of Senior Preferred Stock, plus an amount in cash equal to
all accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding-up (including an amount equal to a
prorated dividend for the period from the last Dividend Payment Date to the
date fixed for liquidation, dissolution or winding-up), before any payment
shall be made or any assets distributed to the holders of any of the Junior
Securities, including, without limitation, Common Stock of the Company.
Except as provided in the preceding sentence, Holders of shares of Senior
Preferred Stock shall not be entitled to any distribution in the event of
liquidation, dissolution or winding-up of the affairs of the Company. If
the assets of the Company are not sufficient to pay in full the liquidation
preference payable to the Holders of outstanding shares of the Senior
Preferred Stock and all Parity Securities, then the holders of all such
shares shall share equally and ratably in such distribution of assets
<PAGE>
5
of the Company in accordance with the amounts which would be payable on such
distribution if the amount to which the Holders of outstanding shares of
Senior Preferred Stock and the holders of outstanding shares of all Parity
Securities are entitled were paid in full.
(ii) After payment of the full amount of the liquidation preferences
and all accumulated and unpaid dividends to which they are entitled, the
holders of shares of the Senior Preferred Stock shall not be entitled to
any further participation in any distribution of assets of the Company.
(iii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets
of the Company nor the consolidation or merger of the Company with or into
one or more corporations shall be deemed to be a liquidation, dissolution
or winding-up of the affairs of the Company (unless such sale, conveyance,
exchange or transfer is in connection with a dissolution or winding-up of
the business of the Company).
(e) Redemption.
(i) Optional Redemption. (A) The Company may (subject to
contractual and other restrictions with respect thereto and the legal
availability of funds therefor), at the option of the Board of Directors,
redeem at any time on or after March 15, 2002, from any source of funds
legally available therefor, in whole or in part, in the manner provided in
paragraph (e)(iii) hereof, any or all of the shares of the Senior Preferred
Stock, at the redemption prices (expressed as a percentage of the
liquidation preference thereof) set forth below plus, without duplication,
an amount in cash equal to all accumulated and unpaid dividends per share
(including an amount in cash equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the Redemption Date to
the Redemption Date) (the "Optional Redemption Price"), if redeemed during
the 12-month period beginning on March 15 of each of the calendar years
indicated below:
YEAR PERCENTAGE
---- ----------
2002. . . . . . . . . . . . . . . . . 106.500%
2003. . . . . . . . . . . . . . . . . 104.333%
2004. . . . . . . . . . . . . . . . . 102.167%
2005 and thereafter . . . . . . . . . 100.000%
provided that no optional redemption pursuant to this paragraph (e)(i)(A)
shall be authorized or made (1) unless prior thereto full unpaid cumulative
dividends for all Dividend Periods terminating on or prior to the
Redemption Date and for an amount equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the Redemption
Date to the Redemption Date shall have been or immediately prior to the
Redemption Notice (as defined in paragraph (e)(iii)(A) hereof) are declared
<PAGE>
6
and paid in cash or declared and a sum set apart sufficient for such cash
payment on the Redemption Date, on the outstanding shares of the Senior
Preferred Stock or (2) at less than 101% of the liquidation preference of
the Senior Preferred Stock at any time when the Company is making or
purchasing shares of Senior Preferred Stock under an Offer (as defined in
paragraph (h)(ii) hereof) in accordance with the provisions of paragraph
(h) hereof.
(B) In addition, at any time, the Company any redeem, in the manner
provided in paragraph (e)(iii) hereof, shares of the Senior Preferred
Stock, in whole or in part, at the option of the Company, at a redemption
price equal to 113% of the liquidation preference thereof, plus an amount
in cash equal to all accumulated and unpaid dividends per share (including
an amount in cash equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Redemption Date to the
Redemption Date) (the "Contingent Redemption Price"), with the proceeds of
a Public Equity Offering, provided that such redemption occurs within 60
days after consummation of such Public Equity Offering; and provided,
further, that no optional redemption pursuant to this paragraph (e)(i)(B)
shall be authorized or made unless prior thereto full unpaid cumulative
dividends for all Dividend Periods terminating on or prior to the
Redemption Date and for an amount equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the Redemption
Date to the Redemption Date shall have been or immediately prior to the
Redemption Notice are declared and paid in cash or declared and a sum set
apart sufficient for such cash payment on the Redemption Date, on the
outstanding shares of the Senior Preferred Stock.
(C) In the event of a redemption of only a portion of the then
outstanding shares of the Senior Preferred Stock, the Company shall effect
such redemption as it determines, pro rata according to the number of
shares held by each Holder of the Senior Preferred Stock or by lot, as may
be determined by the Company in its sole discretion, except that the
Company may redeem such shares held by any Holders of fewer than 100 shares
(or shares held by Holders who would hold less than 100 shares as a result
of such redemption), without regard to any pro rata redemption requirement.
(ii) Mandatory Redemption. On March 15, 2009, the Company shall
redeem (subject to the legal availability of funds therefor) from any
source of funds legally available therefor, in the manner provided in
paragraph (e)(iii) hereof, all of the shares of the Senior Preferred Stock
then outstanding at a redemption price equal to 100% of the liquidation
preference per share, plus an amount in cash equal to all accumulated and
unpaid dividends per share (including an amount equal to a prorated
dividend for the period from the Redemption Date immediately prior to the
Redemption Date to the Redemption Date) (the "Mandatory Redemption Price").
(iii) Procedures for Redemption. (A) At least 30 days and not more
than 60 days prior to the date fixed for any redemption of the Senior
Preferred Stock, written notice (the "Redemption Notice") shall be given by
first-class mail, postage prepaid, to each Holder of record on the record
date fixed for such redemption of the Senior Preferred Stock at such
Holder's address as the same appears on the stock register of the
<PAGE>
7
Company, provided that no failure to give such notice nor any deficiency
therein shall affect the validity of the procedure for the redemption of
any shares of Senior Preferred Stock to be redeemed except as to the
Holder or Holders to whom the Company has failed to give said notice or
except as to the Holder or Holders whose notice was defective. The
Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i)(A), (e)(i)(B)
or (e)(ii) hereof;
(2) the Optional Redemption Price, the Contingent Redemption Price or the
Mandatory Redemption Price, as the case may be;
(3) whether all or less than all the outstanding shares of the Senior
Preferred Stock are to be redeemed and the total number of shares of
the Senior Preferred Stock being redeemed;
(4) the number of shares of Senior Preferred Stock held, as of the
appropriate record date, by the Holder that the Company intends to
redeem;
(5) the date fixed for redemption;
(6) that the Holder is to surrender to the Company, at the place or places
where certificates for shares of Senior Preferred Stock are to be
surrendered for redemption, in the manner and at the price designated,
the certificate or certificates representing the shares of Senior
Preferred Stock to be redeemed; and
(7) that dividends on the shares of the Senior Preferred Stock to be
redeemed shall cease to accrue on such Redemption Date unless the
Company defaults in the payment of the Optional Redemption Price, the
Contingent Redemption Price or the Mandatory Redemption Price, as the
case may be.
(B) Each Holder of Senior Preferred Stock shall surrender the
certificate or certificates representing such shares of Senior Preferred
Stock to the Company, duly endorsed, in the manner and at the place
designated in the Redemption Notice, and on the Redemption Date the full
Optional Redemption Price, Contingent Redemption Price or Mandatory
Redemption Price, as the case may be, for such shares shall be payable in
cash to the Person whose name appears on such certificate or certificates
as the owner thereof, and each surrendered certificate shall be canceled
and retired. In the event that less than all of the shares represented by
any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(C) Unless the Company defaults in the payment in full of the
applicable redemption price, dividends on the Senior Preferred Stock called
for redemption shall cease to accumulate on the Redemption Date, and the
Holders of such redemption shares shall cease to have any further rights
with respect thereto on the Redemption Date, other
<PAGE>
8
than the right to receive the Optional Redemption Price, the Contingent
Redemption Price or the Mandatory Redemption Price, as the case may be,
without interest.
(f) Voting Rights.
(i) The Holders of shares of the Senior Preferred Stock, except as
otherwise required under the laws of the State of Delaware or as set forth
in paragraphs (ii) and (iii) below and in paragraph (m) hereof, shall not
be entitled or permitted to vote on any matter required or permitted to be
voted upon by the stockholders of the Company.
(ii) (A) So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not authorize any class of Parity Securities
without the affirmative vote or consent of Holders of at least 50% of the
outstanding shares of Senior Preferred Stock, voting or consenting, as the
case may be, separately as one class, given in person or by proxy, either
in writing or by resolution adopted at an annual or special meeting, except
that without the approval of Holders of the Senior Preferred Stock, the
Company may authorize or issue shares of Parity Securities in exchange for,
or the proceeds of which are used to redeem or repurchase, any or all
shares of Senior Preferred Stock then outstanding, provided that (1) in the
case of Parity Securities issued in exchange for, or the proceeds of which
are used to redeem or repurchase, less than all shares of Senior Preferred
Stock then outstanding, the aggregate liquidation preference of such Parity
Securities shall not exceed the aggregate liquidation preference of,
premium and accrued and unpaid dividends on, and expenses in connection
with the refinancing of, the Senior Preferred Stock so exchanged, redeemed
or repurchased and (2) such Parity Securities shall not be mandatorily
redeemable prior to March 15, 2009.
(B) So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not amend this Certificate of Designations
so as to affect adversely the specified rights, preferences, privileges or
voting rights of Holders of shares of Senior Preferred Stock or to
authorize the issuance of any additional shares of Senior Preferred Stock
without the affirmative vote or consent of Holders of a least 50% of the
outstanding shares of Senior Preferred Stock, voting or consenting, as the
case may be, separately as one class, given in person or by proxy, either
in writing or by resolution adopted at an annual or special meeting.
(C) Prior to the exchange of Senior Preferred Stock for Exchange
Debentures, the Company shall not amend or modify the indenture for the
Exchange Debentures in the form as executed on the Senior Preferred Stock
Issue Date (the "Exchange Debenture Indenture") (except as expressly
provided therein) without the affirmative vote or consent of Holders of at
least a majority of the shares of Senior Preferred Stock then outstanding,
voting or consenting, as the case may be, separately as one class, given in
person or by proxy, either in writing or by resolution adopted at an annual
or special meeting.
(D) Except as set forth in paragraphs (f)(ii)(A) above, (1) the
creation, authorization or issuance of any shares of any Junior Securities
or Parity Securities, (2)
<PAGE>
9
the decrease in the amount of authorized capital stock of any class,
including any preferred stock, or (3) the increase in the amount of
authorized capital stock of any class of Junior Securities shall not
require the consent of Holders of Senior Preferred Stock and shall not,
unless not complying with paragraph (f)(ii)(A), be deemed to affect
adversely the rights, preferences, privileges or voting rights of Holders
of shares of Senior Preferred Stock.
(iii) (A) If (1) dividends on the Senior Preferred Stock are in
arrears and unpaid (and, in the case of dividends payable after March 15,
2002, are not paid in cash) for four consecutive quarterly periods (a
"Dividend Default"); (2) the Company fails to discharge any redemption
obligation of the Senior Preferred Stock when required (a "Redemption
Default"), whether or not the Company is permitted to do so by the terms of
any indenture, the credit agreement or any other obligations of the
Company; (3) the Company fails to make an offer to purchase all outstanding
shares of Senior Preferred Stock following a Change of Control if such
offer to purchase is required to be made pursuant to paragraph (h) hereof
or fails to purchase shares of Senior Preferred Stock from holders who
elect to have such shares purchased pursuant to such Change of Control
offer (a "Change of Control Default"), whether or not the Company is
permitted to do so by the terms of any indenture, the credit agreement or
any other obligation of the Company; (4) the Company breaches or violates
one of the provisions set forth in paragraph (m) hereof and the breach or
violation continues for a period of 30 days or more (a "Restriction
Default"); or (5) a default occurs on the obligations to pay principal of,
interest on or any other payment obligation when due (a "Payment Default")
at final maturity on one or more classes of Indebtedness of the Company or
any Subsidiary of the Company, whether such Indebtedness exists on the
Senior Preferred Stock Issue Date or is incurred thereafter, having
individually or in the aggregate, an outstanding principal amount of
$25,000,000 or more, or any other Payment Default occurs on one or more
such classes of Indebtedness and such class or classes of Indebtedness are
declared due and payable prior to their respective maturities, then, in any
such case, the number of directors constituting the Board of Directors
shall be adjusted as set forth in the Certificate of Incorporation to
permit the Holders of the majority of the then outstanding Senior Preferred
Stock, voting separately as one class, to elect two directors. Subject to
Section (f)(iii)(B) below, Holders of a majority of the issued and
outstanding shares of the Senior Preferred Stock, voting separately as one
class, shall have the exclusive right to elect two directors at a meeting
therefor called upon occurrence of such Dividend Default, Redemption
Default, Change of Control Default, Restriction Default or Payment Default,
as the case may be, and at every subsequent meeting at which the terms of
office of the directors so elected by the Holders of the Senior Preferred
Stock expire (other than as described in (f)(iii)(B) below). Each such
event described in clauses (1), (2), (3), (4) and (5) is a "Voting Rights
Triggering Event."
(B) The right of the Holders of Senior Preferred Stock voting
separately as one class to elect members of the Board of Directors as set
forth in paragraph (f)(iii)(A) above shall continue until such time as (1)
in the event such right arises due to a Dividend Default, all accumulated
dividends that are in arrears on the Senior Preferred Stock are paid in
full (and, in the case of Dividends payable after March 15,
<PAGE>
10
2002, are paid in cash); and (2) in the event such right arises due to a
Redemption Default, a Change of Control Default, a Restriction Default or
a Payment Default, the Company remedies any such failure, breach or
default, at which time the term of any directors elected pursuant to
paragraph (f)(iii)(A) shall terminate, subject always to the same
provisions for the renewal and divestment of such special voting rights
in the case of any future Voting Rights Triggering Event. At any time
after voting power to elect directors shall have become vested and be
continuing in the Holders of shares of the Senior Preferred Stock
pursuant to this paragraph (f)(iii), or if vacancies shall exist in the
offices of directors elected by the Holders of shares of the Senior
Preferred Stock, a proper officer of the Company may, and upon the
written request of the Holders of record of at least 10% of the shares of
Senior Preferred Stock then outstanding addressed to the Secretary of the
Company shall, call a special meeting of the Holders of Senior Preferred
Stock, for the purpose of electing the directors which such Holders are
entitled to elect. If such meeting shall not be called by the proper
officer of the Company within 20 days after personal service of said
written request upon the Secretary of the Company, or within 20 days
after mailing the same within the United States by certified mail,
addressed to the Secretary of the Company at its principal executive
offices, then the Holders of record of at least 20% of the outstanding
shares of the Senior Preferred Stock may designate in writing one of
their numbers to call such meeting at the expense of the Company, and
such meeting may be called by the Person so designated upon the notice
required for the annual meeting of stockholders of the Company and shall
be held at the place for holding the annual meetings of stockholders or
such other place in the United States as shall be designated in such
notice. Notwithstanding the provisions of this paragraph (f)(iii)(B), no
such special meeting shall be called if any such request is received less
than 30 days before the date fixed for the next ensuing annual or special
meeting of stockholders of the Company. Any Holder of shares of the
Senior Preferred Stock so designated shall have, and the Company shall
provide, access to the lists of Holders of shares of the Senior Preferred
Stock for purposes of calling a meeting pursuant to the provisions of
this paragraph (f)(iii)(B).
(C) At any meeting held for the purpose of electing directors at
which the Holders of Senior Preferred Stock shall have the right, voting
separately as one class, to elect directors as aforesaid, the presence in
person or by proxy of the Holders of at least a majority of the outstanding
Senior Preferred Stock shall be required to constitute a quorum of such
Senior Preferred Stock.
(D) Any vacancy occurring in the office of a director elected by
the Holders of shares of the Senior Preferred Stock may be filled by the
remaining director elected by the Holders of shares of the Senior Preferred
Stock unless and until such vacancy shall be filled by the Holders of
shares of the Senior Preferred Stock.
(iv) In any case in which the Holders of shares of the Senior
Preferred Stock shall be entitled to vote pursuant to this paragraph (f) or
pursuant to the laws of the State of Delaware, each Holder of shares of the
Senior Preferred Stock shall be entitled to one vote for each share of
Senior Preferred Stock held.
<PAGE>
11
(g) Exchange.
(i) Requirements. (A) The Company may at its option exchange all,
but not less than all, of the then outstanding shares of Senior Preferred
Stock into the Company's 13% Subordinated Exchange Debentures due 2009 (the
"Exchange Debentures") on any Dividend Payment Date, provided that on the
date of such exchange: (1) there shall be no contractual impediments to
such exchange; (2) there shall be legally available funds sufficient
therefor (including, without limitation, legally available funds sufficient
therefor under Sections 160 and 170 (or any successor provisions) of the
Delaware General Corporation Law); (3) either (a) a registration statement
relating to the Exchange Debentures shall have been declared effective
under the Securities Act of 1933, as amended (the "Securities Act"), prior
to such exchange and shall continue to be in effect on the date of such
exchange or (b)(i) the Company shall have obtained a written opinion of
counsel that an exemption from the registration requirements of the
Securities Act is available for such exchange and that upon receipt of such
Exchange Debentures pursuant to such exchange made in accordance with such
exemption, the holders (assuming such holder is not an Affiliate of the
Company) thereof shall not be subject to any restrictions imposed by the
Securities Act upon the resale thereof and (ii) such exemption is relied
upon by the Company for such exchange; (4) the Exchange Debenture Indenture
and the Trustee shall have been qualified under the Trust Indenture Act of
1939, as amended; (5) immediately after giving effect to such exchange, no
Default or Event of Default (each as defined in the Exchange Debenture
Indenture) would exist under the Exchange Debenture Indenture; and (6) the
Company shall have delivered to the Trustee a written opinion of counsel,
dated the date of exchange, regarding the satisfaction of the conditions
set forth in clauses (1), (2), (3), (4) and (5). In the event that the
issuance of the Exchange Debentures is not permitted on the date of
exchange or any of the conditions set forth in clauses (1) through (6) of
the preceding sentence are not satisfied on the date of exchange, the
Company shall use its best efforts to satisfy such conditions and effect
such exchange as soon as practicable.
The Company shall send a written notice (the "Exchange Notice") of
exchange by mail to each Holder, which notice shall state: (v) that the
Company is exercising its option to exchange the Senior Preferred Stock for
Exchange Debentures pursuant to this Certificate of Designations; (w) the
date fixed for exchange (the "Exchange Date"), which date shall not be less
than 30 days nor more than 60 days following the date on which the Exchange
Notice is mailed (except as provided in the last sentence of this
paragraph); (x) that the Holder is to surrender to the Company, at the
place or places where certificates for shares of Senior Preferred Stock are
to be surrendered for exchange, in the manner designated in the Exchange
Notice, the certificate or certificates representing the shares of Senior
Preferred Stock to be exchanged; (y) that dividends on the shares of Senior
Preferred Stock to be exchanged shall cease to accrue on the Exchange Date
whether or not certificates for shares of Senior Preferred Stock are
surrendered for exchange on the Exchange Date unless the Company shall
default in the delivery of Exchange Debentures; and (z) that interest on
the Exchange Debentures shall accrue from the Exchange Date whether or not
certificates for shares of Senior Preferred Stock are surrendered for
exchange on the Exchange Date. On the Exchange Date, if
<PAGE>
12
the conditions set forth in clauses (1) through (6) above are satisfied,
the Company shall issue Exchange Debentures in exchange for the Senior
Preferred Stock as provided in the next paragraph.
(B) Upon any exchange pursuant to paragraph (g)(i)(A), Exchange
Debentures shall be issued in exchange for Senior Preferred Stock, in
registered form without coupons, in a principal amount equal to the
liquidation preference thereof, plus an amount in cash equal to all
accumulated and unpaid dividends (including a prorated dividend for the
period from the immediately preceding Dividend Payment Date to the Exchange
Date). Exchange Debentures will be issued in principal amounts of $1,000
and integral multiples thereof to the extent possible, and will also be
issued in principal amounts less than $1,000 so that each Holder of Senior
Preferred Stock will receive certificates representing the entire amount of
Exchange Debentures to which his shares of Senior Preferred Stock entitle
him, provided that the Company may, at its option, pay cash in lieu of
issuing an Exchange Debenture in a principal amount of less than $1,000.
(ii) Procedure for Exchange. (A) On or before the date fixed for
exchange, each Holder of Senior Preferred Stock shall surrender the
certificate or certificates representing such shares of Senior Preferred
Stock, in the manner and at the place designated in the Exchange Notice.
The Company shall cause the Exchange Debentures to be executed on the
Exchange Date and, upon surrender in accordance with the Exchange Notice of
the certificates for any shares of Senior Preferred Stock so exchanged
(properly endorsed or assigned for transfer, if the notice shall so state),
such shares shall be exchanged by the Company into Exchange Debentures.
The Company shall pay interest on the Exchange Debentures at the rate and
on the dates specified therein from the Exchange Date.
(B) If notice has been mailed as aforesaid, and if before the
Exchange Date (1) the Exchange Debenture Indenture shall have been duly
executed and delivered by the Company and the Trustee and (2) all Exchange
Debentures necessary for such exchange shall have been duly executed by the
Company and delivered to the Trustee with irrevocable instructions to
authenticate the Exchange Debentures necessary for such exchange, then on
the Exchange Date, dividends shall cease to accrue on the outstanding
shares of Senior Preferred Stock and all of the rights of the Holders of
shares of the Senior Preferred Stock as stockholders of the Company shall
cease (except the right to receive Exchange Debentures), and the Person or
Persons entitled to receive the Exchange Debentures issuable upon exchange
shall be treated for all purposes as the registered holder or holders of
such Exchange Debentures as of the date of exchange.
(h) Change of Control.
(i) Upon the occurrence of a Change of Control, each Holder of Senior
Preferred Stock shall have the right to require the Company to purchase all
or any part of such Holder's Senior Preferred Stock pursuant to an Offer at
a purchase price in cash equal to 101% of the aggregate liquidation
preference thereof plus, without duplication, an amount in cash equal to
all accumulated and unpaid dividends per share (including an
<PAGE>
13
amount in cash equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Change of Control Purchase
Date (as defined in paragraph (h)(ii)(B) hereof) to the Change of Control
Purchase Date) (the "Change of Control Payment").
(ii) Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder stating: (A) that an offer ("Offer") is being
made pursuant to this Certificate of Designations and that, to the extent
lawful, all shares of Senior Preferred Stock validly tendered and not
properly withdrawn shall be accepted for payment; (B) a description of the
transaction or transactions that constitute the Change of Control; (C) the
purchase price and the expiration date of the Offer, which shall be the
date 20 Business Days following the commencement of the Offer; (D) that any
shares of Senior Preferred Stock not validly tendered and any shares of
Senior Preferred Stock properly withdrawn shall continue to accrue
dividends in accordance with the terms of this Certificate of Designations;
(E) that, unless the Company defaults in the payment of the Change of
Control Payment, all shares of Senior Preferred Stock accepted for payment
pursuant to the Offer shall cease to accrue dividends after the date on
which payment is made in respect of the shares purchased, which shall be
not later than five Business Days after the termination of the Offer (the
"Change of Control Purchase Date"); and (F) a description of the procedures
to be followed by such Holder in order to have its shares of Senior
Preferred Stock validly tendered and a description of the procedures to be
followed by such Holder in order to withdraw tendered shares.
(iii) On the Change of Control Purchase Date, (A) the Company
shall, to the extent lawful, (1) accept for payment shares of Senior
Preferred Stock tendered pursuant to the Offer, (2) deposit with the
transfer agent an amount equal to the Change of Control Payment in respect
of all shares of Senior Preferred Stock so tendered, (3) deliver or cause to
be delivered to the transfer agent the Senior Preferred Stock so accepted
together with an officers' certificate stating the total number of shares of
Senior Preferred Stock being purchased by the Company, (4) promptly mail to
each Holder of shares of Senior Preferred Stock so accepted payment in an
amount equal to the purchase price for such shares and (5) arrange to have
promptly authenticated and mailed (or cause to be transferred by book
entry) to each Holder a new share certificate representing any unpurchased
shares of the Senior Preferred Stock represented by the certificate
tendered pursuant to the Offer, if any, and (B) unless the Company defaults
in the payment for the shares of Senior Preferred Stock tendered pursuant
to the Offer, dividends shall cease to accrue with respect to the shares of
Senior Preferred Stock tendered and all rights of Holders of such tendered
shares shall terminate, except for the right to receive payment therefor,
on the Change of Control Purchase Date. The Company shall publicly
announce the results of the Offer on the Change of Control Purchase Date.
(iv) The Company shall comply with Rule 14e-1 under the Exchange Act
and any securities laws and regulations, to the extent such laws and
regulations are applicable to the repurchase of shares of the Senior
Preferred Stock in connection with a Change of Control.
<PAGE>
14
(i) Conversion or Exchange. The Holders of shares of Senior
Preferred Stock shall not have any rights hereunder to convert such shares into
or exchange such shares for shares of any other class or classes or of any other
series of any class or classes of Capital Stock of the Company.
(j) Preemptive Rights. No shares of Senior Preferred Stock shall
have any rights of preemption whatsoever as to any securities of the Company, or
any warrants, rights or options issued or granted with respect thereto,
regardless of how such securities or such warrants, rights or options may be
designated, issued or granted.
(k) Reissuance of Senior Preferred Stock. Shares of Senior Preferred
Stock that have been issued and reacquired in any manner, including shares
purchased or redeemed or exchanged, shall (upon compliance with any applicable
provisions of the laws of Delaware) have the status of authorized but unissued
shares of Preferred Stock of the Company undesignated as to series and may be
designated or redesignated and issued or reissued, as the case may be, as part
of any series of Preferred Stock of the Company, provided that any issuance of
such shares as Senior Preferred Stock must be in compliance with the terms
hereof.
(l) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(m) Certain Additional Provisions.
(i) Merger or Consolidation. Without the consent of Holders of a
majority of the outstanding shares of Senior Preferred Stock, voting as a
separate class, the Company shall not, in a single transaction or series of
related transactions, consolidate or merge with or into (whether or not the
Company is the surviving corporation), or directly and/or indirectly
through its Restricted Subsidiaries sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or
assets determined on a consolidated basis for the Company and its
Restricted Subsidiaries taken as a whole in one or more related
transactions, to another corporation, Person or entity unless (A) the
Company is the surviving corporation or the entity or the Person formed by
or surviving any such consolidation or merger (if other than the Company)
or to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (B) the Senior Preferred Stock shall be converted into or
exchanged for and shall become shares of the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease,
conveyance or other disposition such successor, transferee or resulting
corporation, having in respect of such successor, transferee or resulting
corporation substantially the same powers, preferences and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereon, that the Senior Preferred Stock had
immediately prior to such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition; (C) immediately after
such transaction, no Voting Rights Triggering Event,
<PAGE>
15
and no event that after the giving of notice or lapse of time or both
would become a Voting Rights Triggering Event, shall have occurred and be
continuing; (D) the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company),
or to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made will have Consolidated Net Worth
immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the
transaction; and (E) prior to the consummation of any such proposed
transaction, the Company shall have delivered to the transfer agent an
Officers' Certificate and an opinion of counsel to the effect that such
transaction complies with the terms of the Certificate of Designations
and that all conditions precedent to such transaction have been
satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of
all or substantially all of the properties or assets of one or more
Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
(ii) Junior Payments. The Company shall not, directly or indirectly,
(A) declare or pay any dividend or make any distribution on account of any
Junior Securities (other than dividends or distributions payable in Junior
Securities (other than Disqualified Stock)), (B) purchase, redeem or
otherwise acquire or retire for value any Junior Securities or (C) make any
Restricted Investment (all such dividends, distributions, purchases,
redemptions, acquisitions, retirements and Restricted Investments being
collectively referred to as "Junior Payments"), if, at the time of such
Junior Payment:
(x) a Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof; or
(y) all dividends on the Senior Preferred Stock payable on Dividend
Payment Dates after March 15, 2002, have not been declared and paid in
cash.
Notwithstanding the foregoing, this Certificate of Designations shall
not prohibit as Junior Payments:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration, such payment would
comply with all of the provisions hereof (including, but not limited to,
this paragraph (m)(ii));
(2) the making of any Restricted Investment in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of, or from substantially concurrent additional
capital contributions in respect of, Equity Interests of the Company (other
than Disqualified Stock);
<PAGE>
16
(3) (X) the redemption, repurchase, retirement or other acquisition of
any Parity Securities of the Company in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Subsidiary
of the Company) of, or from substantially concurrent additional capital
contributions in respect of, other Parity or Junior Securities of the
Company (other than any Disqualified Stock) and (Y) the redemption,
repurchase, retirement or other acquisition of any Junior Securities of the
Company in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of, or from
substantially concurrent additional capital contributions in respect of,
other Junior Securities of the Company (other than any Disqualified Stock);
(4) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any of its Restricted
Subsidiaries held by any member of the Company's (or any of its Restricted
Subsidiaries') management pursuant to any management agreement, stock
option agreement or plan or stockholders agreement; provided that (X) the
aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests will not exceed $2.0 million in any fiscal year
(plus any amount available for such payments hereunder since the date of
the Certificate of Designations which have not been used for such purpose)
or (Y) $8.0 million in the aggregate (in each case, net of the cash
proceeds received by the Company from subsequent reissuances of such Equity
Interests to new members of management);
(5) loans to members of management of the Company or any Restricted
Subsidiary the proceeds of which are used for a concurrent purchase of
Equity Interests of the Company;
(6) the payment of director's fees and reasonable expenses of its
directors in an aggregate amount not to exceed $125,000 per year (including
indemnification obligations and professional fees and expenses) and to pay
salaries and other compensation of employees who perform services for both
Anvil and the Company;
(7) an amount not to exceed $200,000 in aggregate to enable the
Company to make payments to holders of Capital Stock in lieu of issuing
fractional shares thereof;
(8) repurchases of Capital Stock deemed to occur upon exercise of
stock options or warrants if such Capital Stock represents a portion of the
exercise price thereof; and
(9) payments made in connection with the application of the net
proceeds of the Recapitalization as set forth under "Use of Proceeds" in
the Offering Memorandum relating to the Units Offering.
(iii) Transactions with Affiliates.
(A) Except as otherwise set forth in this paragraph (m)(iii), neither
the Company will not, and will not permit any of its Restricted
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter
into or make any contract, agreement, understanding,
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17
loan, advance or guarantee with, or for the benefit of, any Affiliate
(each of the foregoing, an "Affiliate Transaction"), unless (x) such
Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (y) the Company
delivers to the transfer agent (i) with respect to any Affiliate
Transaction entered into after the date of the Certificate of
Designations involving aggregate consideration in excess of $2.0 million,
a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with
clause (x) above and that such Affiliate Transaction has been approved by
a majority of the disinterested members of the Board of Directors and
(ii) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $7.5 million, an opinion as to the fairness to
the Company or such Restricted Subsidiary of such Affiliate Transaction
from a financial point of view issued by an investment banking firm of
national standing.
(B) Notwithstanding the foregoing, the following transactions will
not be deemed to be Affiliate Transactions: (1) reasonable fees and
compensation paid to, and indemnity provided on behalf of, officers and
directors of the Company, Anvil or any Restricted Subsidiary as determined
in good faith by the appropriate Board of Directors or senior management;
(2) the provision of administrative or management services by the Company
or any of its officers to the Company or any of its Restricted Subsidiaries
in the ordinary course of business consistent with past practice, (3)
transactions between the Company or one or more of its Restricted
Subsidiaries and the relevant Securitization Entity effected as part of a
Qualified Securitization Transaction, (4) any agreement as in effect as of
the Senior Preferred Stock Issue Date (including, without limitation, the
New Credit Agreement) or any amendment thereto or any transactions
contemplated thereby (including pursuant to any amendment thereto) and any
replacement agreement so long as any such amendment or replacement
agreement is not more disadvantageous to the Holders of the Senior
Preferred Stock or the Exchange Debentures in any material respect than the
original agreement as in effect on the Senior Preferred Stock Issue Date,
(5) payments or loans to employees or consultants which are approved by the
Board of Directors of the Company in good faith, (6) the existence of, or
the performance by the Company or any of its Restricted Subsidiaries of its
obligations under the terms of, any stockholders agreement (including any
registration rights agreement or purchase agreement related thereto) to
which it is a party as of the Senior Preferred Stock Issue Date and any
similar agreement which it may enter into thereafter; provided, however,
that the existence of, or the performance by the Company or any of its
Restricted Subsidiaries of obligations under any similar agreement entered
into after the Senior Preferred Stock Issue Date shall only be permitted by
this clause (6) to the extent that the terms of any such new agreement are
not otherwise disadvantageous to the Holders of the Senior Preferred Stock
or Exchange Debentures in any material respect, (7) transactions with
customers, clients, suppliers, joint venture partners or purchasers or
sellers of goods or services, in each case in the ordinary course of
business (including, without limitation, pursuant to joint venture
agreements) and otherwise in compliance with the terms of the Exchange
Debenture Indenture which are at least as favorable as might reasonably
have been obtained at such time from an unaffiliated party, (8) any
<PAGE>
18
employment agreement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the
past practice of the Company or such Restricted Subsidiary (including,
without limitation, any such employment agreements existing prior to the
Senior Preferred Issue Date), (9) the granting of stock options to
employees and directors of the Company and its Restricted Subsidiaries in
accordance with the New Stock Option Plan at exercise prices equal to the
fair market value of the Common Stock and the issuance of Common Stock upon
the exercise of such options, (10) transactions between or among the
Company and/or its Wholly Owned Subsidiaries, (11)(i) the payment of
customary management, consulting and advisory fees and related expenses to
BRS and 399 Venture and their Affiliates not to exceed $750,000 per year in
aggregate and (ii) payments by Anvil or any of its Restricted Subsidiaries
to BRS or 399 Venture and their Affiliates made pursuant to any financial
advisory, financing, underwriting or placement agreement or in respect of
other investment banking activities, including, without limitation, in
connection with acquisitions or divestitures which are approved by the
Board of Directors of Anvil, the Company or such Restricted Subsidiary in
good faith not to exceed $750,000 per year in aggregate and (12)
transactions permitted by the covenant described in paragraph (m)(ii).
(iv) Reports. So long as any shares of Senior Preferred Stock are
outstanding, the Company will furnish to the Holders of Senior Preferred
Stock, within 15 days after it is or would have been required to file such
with the Commission, (A) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on
Forms 10-Q and 10-K if the Company were required to file such Forms,
including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information
only, a report thereon by the Company's certified independent accountants
and (B) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company was required to file such reports. In
addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and
reports with the Commission for public availability (unless the Commission
will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition,
the Company has agreed that, for so long as any shares of Senior Preferred
Stock remain outstanding, it will furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities
Act.
(n) Definitions. As used in this Certificate of Designations, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, which correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause
<PAGE>
19
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Anvil" means Anvil Knitwear, Inc., a Delaware corporation.
"BRS" means Bruckmann, Rosser, Sherrill & Co., L.P.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities no more than twelve
months from the date of acquisition, (b) U.S. dollar denominated (or foreign
currency fully hedged) time deposits, certificates of deposit, Eurodollar time
deposits or Eurodollar certificates of deposit of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of $100.0
million or (ii) any bank whose short-term commercial paper rating from S&P is at
least A-1 or the equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank being an "Approved Lender"), in each case with
maturities of not more than twelve months from the date of acquisition, (c)
commercial paper and variable or fixed rate notes issued by any Approved Lender
(or by the parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation rated A-2 (or the equivalent thereof) or
better by S&P or P-2 (or the equivalent thereof) or better by Moody's and
maturing within twelve months of the date of acquisition, (d) repurchase
agreements with a bank or trust company or recognized securities dealer having
capital and surplus in excess of $100.0 million for direct obligations issued by
or fully guaranteed by the United States of America in which the Company shall
have a perfected first priority security interest (subject to no other Liens)
and having, on the date of purchase thereof, a fair market value of at least
100% of the amount of repurchase obligations, and (e) interests in money market
mutual funds which invest solely in assets or securities of the type described
in subparagraphs (a), (b), (c) or (d) hereof.
"Change of Control" means such time as (i) prior to the initial public
offering by the Company or any direct or indirect parent of the Company of its
common stock (other than a public offering pursuant to a registration statement
on Form S-8), the Permitted Holders cease
<PAGE>
20
to have, directly or indirectly, in the aggregate at least 51% of the voting
power of the voting stock of Anvil or the Company or any other direct or
indirect parent or the Company ceases to own, directly or indirectly, 100% of
the voting power of the voting stock of Anvil (other than by reason of a
merger of the Company and Anvil) or (ii) after the initial public offering by
the Company or any direct or indirect parent of Anvil of its common stock
(other than a public offering pursuant to a registration statement on Form
S-8), (A) any Schedule 13D, Form 13F or Schedule 13G under the Exchange Act,
or any amendment to such Schedule or Form, is received by Anvil or the
Company which indicates that, or Anvil or the Company otherwise becomes aware
that, a "person" or "group" (within the meaning of Sections 13(d) and 14(d)
(2) of the Exchange Act) has become, directly or indirectly, the "beneficial
owner," by way of merger, consolidation or otherwise, of 40% or more of the
voting power of the voting stock of Anvil or the Company on a fully-diluted
basis after giving effect to the conversion and exercise of all outstanding
warrants, options and other securities of Anvil or the Company, as the case
may be (whether or not such securities are then currently convertible or
exercisable) and (B) such person or group has become, directly or indirectly,
the beneficial owner of a greater percentage of the voting capital stock of
Anvil, calculated on such fully-diluted basis, than beneficially owned by the
Permitted Holders, or (iii) the sale, lease or transfer of all or
substantially all of the assets of the Company to any person or group (other
than the Permitted Holders), or (iv) during any period of two consecutive
calendar years individuals who at the beginning of such period constituted
the Board of Directors of Anvil or the Company (together with any new
directors whose election by the Board of Directors of Anvil or the Company or
whose nomination for election by the shareholders of Anvil or the Company, as
the case may be, was approved by a vote of a majority of the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination for election was previously so approved or was
approved by the Permitted Holders) cease for any reason to constitute a
majority of the directors of Anvil or the Company, as the case may be, then
in office.
"Commission" means the Securities and Exchange Commission.
"Consolidated Net Worth" of a Person at any date means the amount by which
the assets of such Person and its consolidated Restricted Subsidiaries (less any
revaluation or other write-up subsequent to the date of the Exchange Debenture
Indenture in any such assets (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within twelve months after the acquisition of such business))
exceed the sum of (a) the total liabilities of such Person and its consolidated
Restricted Subsidiaries, plus (b) any Disqualified Stock of such Person or any
consolidated Restricted Subsidiaries of such Person issued to any Person other
than such Person or a wholly-owned Restricted Subsidiary of such Person, in each
case determined in accordance with GAAP.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
on which is 91 days after the mandatory redemption date of the Senior Preferred
Stock or the maturity date of the Exchange Debentures.
<PAGE>
21
"Dividend Payment Date" means March 15, June 15, September 15 and December
15 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter, each
Quarterly Dividend Period.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Exchange Debenture Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a holder of shares of Senior Preferred Stock.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person), the maximum fixed repurchase price of Disqualified
Stock issued by such Person in each case, if held by any Person other than the
Company or a Wholly Owned Subsidiary of the Company, and, to the extent not
otherwise included, the Guarantee by such Person of any indebtedness of any
other Person.
<PAGE>
22
"Initial Dividend Period" means the dividend period commencing on the
Senior Preferred Stock Issue Date and ending on the day before the first
Dividend Payment Date to occur thereafter.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the books of such Person) or capital
contributions (excluding commission, travel, relocation and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP; provided that an acquisition
of assets, Equity Interests or other securities by the Company for consideration
consisting of common equity securities of the Company or of any direct or
indirect parent of the Company shall not be deemed to be an Investment.
"Legal Holiday" means a Saturday, a Sunday or a day on which federal
offices or banking institutions in the City of New York, in the city of the
Corporate Trust Office of the trustee under the Exchange Debenture Indenture, or
at a place of payment are authorized by law, regulation or executive order to
remain closed. If a payment date is a Legal Holiday, payment may be made on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"New Stock Option Plan" means Holdings' 1997 Stock Option Plan to be
approved by the Board of Directors of Holdings providing for the issuance of
options to purchase Common Stock to directors and employees of Holdings, Anvil
or its Restricted Subsidiaries which may provide for the grant of options in
respect of up to 5% of the fully diluted Common Stock of the Company at exercise
prices equal to the fair market value thereof on the date of grant or any
successor plan thereto.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on
<PAGE>
23
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity; and (iii) as to which the lenders have
been notified in writing that they will not have any recourse to the stock or
assets of the Company or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offerings" means the Units Offering and the Senior Note Offering.
"Offering Memorandum" means the Offering Memorandum, dated March 11, 1997,
relating to the offering and placement of the Units, consisting of $30,000,000
aggregate liquidation preference of the Senior Preferred Stock and 390,000
shares of Class B Common Stock, par value $0.01 per share, of the Company, to
the public.
"Permitted Holders" means, collectively, (i) BRS and its Affiliates, and
their respective employees and directors, (ii) 399 Venture and its Affiliates,
and their respective employees and directors, (iii) all full-time executive
officers of the Company and its Subsidiaries who acquire Capital Stock of the
Company and (iv) (A) any spouse, lineal descendant (including by adoption and
stepchildren), or sibling of such natural persons and (B) any trust,
corporation, limited liability company or partnership, the beneficiaries,
members, stockholders or partners of which consist entirely of such natural
persons or the individuals described in clause (A) above.
"Permitted Investments" means (a) any Investments in the Company or in a
Wholly Owned Subsidiary of the Company that is engaged in the same or a similar
line of business as the Company and its Restricted Subsidiaries were engaged in
on the date of the Exchange Debenture Indenture and reasonable extensions or
expansions thereof; (b) any Investments in Cash Equivalents; (c) Investments by
the Company or any Restricted Subsidiary of the Company in a Person if as a
result of such Investment (i) such Person becomes a Wholly Owned Subsidiary of
the Company that is engaged in the same or a similar line of business as the
Company and its Restricted Subsidiaries were engaged in on the date of the
Exchange Debenture Indenture and reasonable extensions or expansions thereof or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Wholly Owned Subsidiary of the Company that is engaged in the
same or a similar line of business as the Company and its Restricted
Subsidiaries were engaged in on the date of the Exchange Debenture Indenture and
reasonable extensions or expansions thereof; (d) Investments made as a result of
the receipt of non-cash consideration from an Asset Sale (as defined in the
Exchange Debenture Indenture) that was made pursuant to and in compliance with
the covenant described under Section 4.8 of the Exchange Debenture Indenture;
(e) Investments by the Company or any Restricted Subsidiary in cash in an amount
not to exceed $10.0 million in the aggregate at any one time; (f) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to Anvil or any Subsidiary or in
satisfaction of judgments or pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of Anvil's trade creditors or
customers; (g) the contribution of shares of stock or other equity securities of
an Unrestricted Subsidiary to another Subsidiary; (h) loans and advances to
employees and officers of Anvil and its
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24
Restricted Subsidiaries in the ordinary course of business not to exceed an
aggregate of $750,000; (i) accounts receivable created or acquired in the
ordinary course of business; (j) currency agreements and interest swap
obligations entered into in the ordinary course of Anvil's or its Restricted
Subsidiaries' businesses and otherwise in compliance with the Exchange
Debenture Indenture; and (k) any Investment by Anvil or a Wholly Owned
Subsidiary of Anvil in a Securitization Entity or any Investment by a
Securitization Entity in any other Person in connection with a Qualified
Securitization Transaction; provided that any Investment in a Securitization
Entity is in the form of a Purchase Money Note or an Equity Interest.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company, or other business entity or government or agency or political
subdivision thereof (including any subdivision or ongoing business of any such
entity or substantially all of the assets of any such entity, subdivision or
business).
"Public Equity Offering" means an underwritten public offering pursuant to
a registration statement filed with the Commission in accordance with the
Securities Act of (i) Equity Interests other than Disqualified Stock of the
Company or (ii) of Equity Interests other than Disqualified Stock of the
Company's parent or indirect parent corporation to the extent that the cash
proceeds therefrom are contributed to the equity capital of the Company or are
used to purchase Equity Interests (other than Disqualified Stock) of the
Company.
"Purchase Money Note" means a promissory note of a Securitization Entity
evidencing a line of credit, which may be irrevocable, from the Company or any
Subsidiary of the Company in connection with a Qualified Securitization
Transaction to a Securitization Entity, which note shall be repaid from cash
available to the Securitization Entity, other than amounts required to be
established as reserves pursuant to agreements, amounts paid to investors in
respect of interest, principal and other amounts owing to such investors and
amounts owing to such investors and amounts paid in connection with the purchase
of newly generated receivables.
"Qualified Securitization Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any or its Subsidiaries may sell, convey or
otherwise transfer to (a) a Securitization Entity (in the case of a transfer by
the Company or any of its Subsidiaries) and (b) any other Person (in the case of
a transfer by a Securitization Entity), or may grant a security interest in, any
accounts receivable or equipment (whether now existing or arising or acquired in
the future) of the Company or any of its Subsidiaries, and any assets related
thereto including, without limitation, all collateral securing such accounts
receivable and equipment, all contracts and contract rights and all guarantees
or other obligations in respect of such accounts receivable and equipment,
proceeds of such accounts receivable and equipment and other assets (including
contract rights) which are customarily transferred or in respect of which
security interests are customarily granted in connection with asset
securitization transactions involving accounts receivable and equipment;
provided that such transaction or transactions are otherwise permitted by the
terms of the Exchange Debenture Indenture including the provisions of Section
4.8 of the Exchange Debenture Indenture.
<PAGE>
25
"Quarterly Dividend Period" shall mean the quarterly period commencing on
each March 15, June 15, September 15 and December 15 and ending on the day
before the following Dividend Payment Date.
"Redemption Date" with respect to any shares of Senior Preferred Stock,
means the date on which such shares of Senior Preferred Stock are redeemed by
the Company.
"Registration Default" shall have the meaning ascribed thereto in the
Registration Rights Agreement by and between Holdings and Donaldson, Lufkin &
Jenrette Securities Corporation dated March 14, 1997, as such agreement may be
amended, modified or supplemented from time to time.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc. and its successors.
"Securitization Entity" means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Subsidiary of the Company makes an
Investment and to which the Company or any Subsidiary of the Company transfers
accounts receivable or equipment and related assets) which engages in no
activities other than in connection with the financing of accounts receivable or
equipment and which is designated by the Board of Directors of the Company (as
provided below) as a Securitization Entity (a) no portion of the Indebtedness or
any other obligations (contingent or otherwise) of which (i) is guaranteed by
the Company or any Subsidiary of the Company (excluding guarantees of
obligations (other than the principal of, and interest on, Indebtedness))
pursuant to Standard Securitization Undertakings, (ii) is recourse to or
obligates the Company or any Subsidiary of the Company in any way other than
pursuant to Standard Securitization Undertakings, or (iii) subjects any property
or asset of or any Subsidiary of the Company, directly or indirectly,
contingently or otherwise, to the satisfaction thereof other than pursuant to
Standard Securitization Undertakings, (b) with which neither the Company nor any
Subsidiary of the Company has any material contract, agreement, arrangement or
understanding other than on terms no less favorable to the Company or such
Subsidiary than those that might be obtained at the time from Persons that are
not Affiliates of the Company, other than fees payable in the ordinary course of
business in connection with servicing receivables of such entity, and (c) to
which neither the Company nor any Subsidiary of the Company has any obligation
to maintain or preserve such entity's financial condition or cause such entity
to achieve certain levels of operating results. Any such designation by the
Board of Directors of the Company shall be evidenced to the Trustee by filing
with the Trustee a certified copy of the resolution of the Board of Directors of
the Company giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing conditions.
<PAGE>
26
"Senior Preferred Stock Issue Date" means the date on which the Senior
Preferred Stock is originally issued by the Company under this Certificate of
Designations.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by Anvil or any Subsidiary of Anvil which
are reasonably customary in an accounts receivable or equipment transaction.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"399 Venture" means 399 Venture Partners, Inc.
"Trustee" means the party named as such in the Exchange Debenture Indenture
until a successor replaces it in accordance with the applicable provisions of
the Exchange Debenture Indenture and thereafter means the successor serving
thereunder.
"Units Offering" means the offer and sale of Units, consisting of
$30,000,000 liquidation preference of the Senior Preferred Stock and 390,000
shares of Class B Common Stock, par value $0.01 per share, of the Company as
contemplated by the Offering Memorandum.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a duly adopted
Board resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; and (d) has not guaranteed
or otherwise directly or indirectly provided credit support for any Indebtedness
of the Company or any of its Restricted Subsidiaries. Any such designation by
the Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant set
forth in Section 4.9 of the Exchange Debenture Indenture. If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Exchange Debenture Indenture and any Indebtedness
of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
the Company
<PAGE>
27
as of such date (and, if such Indebtedness is not permitted to be incurred as
of such date under the covenant set forth in Section 4.10 of the Exchange
Debenture Indenture, the Company shall be in default of such covenant). The
Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation
shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i)
such Indebtedness is permitted under the covenant set forth in Section 4.10
of the Exchange Debenture Indenture, and (ii) no Default or Event of Default
(each as defined in the Exchange Debenture Indenture) under the Exchange
Debenture Indenture would be in existence following such designation.
"Wholly Owned Subsidiary" of any Person means a Restricted Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person.
Unrestricted Subsidiaries shall not be included in the definition of Wholly
Owned Subsidiary for any purposes of the Exchange Debenture Indenture.
(o) Registration Rights.
Reference is made to the Registration Rights Agreement by and between
Holdings and Donaldson, Lufkin & Jenrette Securities Corporation dated March 14,
1997, as such agreement may be amended, modified or supplemented from time to
time. So long as any shares of Senior Preferred Stock constitute "Transfer
Restricted Securities" as defined in the Registration Rights Agreement, each
Holder shall be entitled to the rights granted by the Company thereunder and
shall be bound by the restrictions therein.
IN WITNESS WHEREOF, Anvil Holdings, Inc. has caused this Certificate
of Designations to be signed by Bernard Geller, in his capacity as President and
attested to by Jacob Hollander, in his capacity as Secretary, on the date and
year first above written.
ANVIL HOLDINGS, INC.
By:____________________________
Name: Bernard Geller
Title: President
Attest:
By:____________________________
Name: Jacob Hollander
Title: Secretary
(corporate seal)
<PAGE>
ANVIL HOLDINGS, INC.
July __, 1997
CERTIFICATE OF DESIGNATIONS OF THE POWERS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER
SPECIAL RIGHTS OF 13% SERIES B SENIOR EXCHANGEABLE
PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
Anvil Holdings, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the board of directors of the
Company (the "Board of Directors") by its Restated Certificate of Incorporation
(hereinafter referred to as the "Certificate of Incorporation"), and pursuant to
the provisions of Section 151 of the General Corporation Law of the State of
Delaware, said Board of Directors, by unanimous written consent dated July __,
1997, duly approved and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors does
hereby create, authorize and provide for the issue of 13% Series B Senior
Exchangeable Preferred Stock, par value $0.01 per share, with a liquidation
preference of $25.00 per share, consisting of up to 2,300,000 shares,
having the designations, preferences, relative, participating, optional and
other special rights and the qualifications, limitations and restrictions
thereof that are set forth in the Certificate of Incorporation and in this
Resolution as follows:
(a) Designation. There is hereby created out of the authorized
and unissued shares of preferred stock of the Company a series of preferred
stock designated as the "13% Series B Senior Exchangeable Preferred Stock"
(the "Senior Preferred Stock"). The number of shares constituting such
series shall be 2,300,000 shares of Senior Preferred Stock, consisting of an
initial issuance of 1,200,000 shares of Senior Preferred Stock plus up to
1,100,000 additional shares of Senior Preferred Stock which may be issued to
pay dividends on the Senior Preferred Stock if the Company elects to pay
dividends in additional shares of Senior Preferred Stock. The liquidation
preference of the Senior Preferred Stock shall be $25.00 per share.
(b) Rank. The Senior Preferred Stock shall, with respect to
dividend distributions and distributions upon the liquidation, winding-up and
dissolution of the Company, rank senior to all classes of common stock of the
Company and each other class of capital stock or series of Preferred Stock of
the Company hereafter created by the Board of Directors the terms of which do
not expressly provide that it ranks on a parity with the Senior Preferred
Stock as to dividend distributions and distributions upon the liquidation,
winding-up and dissolution of the Company (collectively referred to with the
Common Stock of the Company as "Junior Securities"). The Senior
<PAGE>
Preferred Stock shall, with respect to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the
Company, rank on a parity with each series of Preferred Stock existing on the
date hereof the terms of which do not expressly provide that it ranks junior
to any Senior Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding-up and dissolution of the Company and any class
of capital stock or series of Preferred Stock hereafter created by the Board
of Directors, the terms of which expressly provide that such class or series
shall rank on a parity with the Senior Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up and
dissolution of the Company (collectively referred to as "Parity Securities");
provided that any such Parity Securities that were not approved by the
Holders in accordance with paragraph (f)(ii)(A) hereof shall be deemed to be
Junior Securities and not Parity Securities.
(c) Dividends.
(i) Beginning on the Senior Preferred Stock Issue Date, the
Holders of the outstanding shares of Senior Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors,
out of funds legally available therefor, dividends on each share of
Senior Preferred Stock, at a rate per annum equal to 13% of the
liquidation preference per share of the Senior Preferred Stock. All
dividends shall be cumulative, whether or not earned or declared, on a
daily basis from the Senior Preferred Stock Issue Date and shall be
payable quarterly in arrears on each Dividend Payment Date, commencing on
the first Dividend Payment Date after the Senior Preferred Stock Issue
Date, provided that if any dividend payable on any Dividend Payment Date
on or before March 15, 2002 is not declared and paid in full in cash on
such Dividend Payment Date, the amount payable as dividends on such
Dividend Payment Date that is not paid in cash (including partial
payments in cash) on such Dividend Payment Date shall be paid by the
Company in additional fully paid and non-assessable shares (including
fractional shares, if applicable) of Senior Preferred Stock having an
aggregate liquidation preference equal to the amount of such dividends
(rounded to the nearest whole cent). After March 15, 2002, dividends
shall be paid only in cash. If any dividend (or portion thereof) payable
on any Dividend Payment Date after March 15, 2002 is not declared or paid
in full in cash on such Dividend Payment Date, the amount of such
dividend that is payable and that is not paid in cash on such date shall
increase at the rate of 13% per annum, compounded quarterly, from such
Dividend Payment Date until declared and paid in full. Each distribution
in the form of a dividend (whether in cash or in additional shares of
Senior Preferred Stock) shall be payable to Holders of record as they
appear on the stock register of the Company on such record dates, not
less than 10 nor more than 60 days preceding the related Dividend Payment
Date, as shall be fixed by the Board of Directors. Dividends shall cease
to accumulate in respect of shares of the Senior Preferred Stock on the
Exchange Date or on the date of their earlier redemption unless the
Company shall have failed to issue the appropriate aggregate principal
amount of Exchange Debentures (as defined in paragraph (g)(i)(A) hereof)
in respect of the Senior Preferred Stock on the Exchange Date or shall
have failed to pay the relevant redemption price on the date filed for
redemption.
(ii) All dividends paid with respect to shares of the Senior
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to
the Holders entitled thereto.
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<PAGE>
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Company to pay or set apart for payment, any dividends on
shares of the Senior Preferred Stock at any time.
(iv) Dividends on account of arrears for any past Dividend
Period and dividends in connection with any optional redemption pursuant
to paragraph (e)(i) may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to Holders of record on
such date, not more than 45 days prior to the payment thereof, as may be
fixed by the Board of Directors.
(v) No full dividends shall be declared by the Board of
Directors or paid or funds set apart for payment of dividends by the
Company on any Parity Securities for any period unless full cumulative
dividends shall have been or contemporaneously are declared and paid in
full, or declared and (in the case of dividends payable in cash) a sum in
cash set apart sufficient for such payment, on the Senior Preferred Stock
for all Dividend Periods terminating on or prior to the date of payment
of such full dividends on such Parity Securities. If any dividends are
not paid in full, as aforesaid, upon the shares of the Senior Preferred
Stock and any other Parity Securities, all dividends declared upon shares
of the Senior Preferred Stock and any other Parity Securities shall be
declared pro rata so that the amount of dividends declared per share on
the Senior Preferred Stock and such Parity Securities shall in all cases
bear to each other the same ratio that accrued dividends per share on the
Senior Preferred Stock and such Parity Securities bear to each other.
(vi) (A) Holders of shares of the Senior Preferred Stock
shall be entitled to receive the dividends provided for in paragraph
(c)(i) hereof in preference to and in priority over any dividends upon
any of the Junior Securities.
(B) So long as any shares of Senior Preferred Stock are
outstanding, the Company shall not declare, pay or set apart for
payment any dividend on any of the Junior Securities or make any
payment on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other retirement
of, any of the Junior Securities or any warrants, rights, calls or
options exercisable for or convertible into any of the Junior
Securities, or make any distribution in respect thereof, either
directly or indirectly, and whether in cash, obligations or shares of
the Company or other property (other than dividends on Junior
Securities paid in additional shares of Junior Securities), and shall
not permit any corporation or other entity directly or indirectly
controlled by the Company to purchase or redeem any of the Junior
Securities or any such warrants, rights, calls or options unless full
cumulative dividends determined in accordance herewith have been paid
in full on the Senior Preferred Stock.
(C) So long as any shares of Senior Preferred Stock are
outstanding, the Company shall not make any payment on account of, or
set apart for payment money for a sinking or other similar fund for,
the purchase, redemption or other retirement of, any of the Parity
Securities or any warrants, rights, calls or options exercisable for
or convertible into any of the Parity Securities, and shall not permit
any corporation or other entity directly or indirectly controlled by
the
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<PAGE>
Company to purchase or redeem any of the Parity Securities or any
such warrants, rights calls or options unless the dividends determined
in accordance herewith on the Senior Preferred Stock have been paid in
full.
(vii) Dividends payable on shares of the Senior Preferred
Stock for any period less than a year shall be computed on the basis of a
360-day year of twelve 30-day months and the actual number of days
elapsed in the period for which payable. If any Dividend Payment Date
occurs on a day that is not a Business Day, any accrued dividends
otherwise payable on such Dividend Payment Date shall be paid on the next
succeeding Business Day.
(d) Liquidation Preference.
(i) Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Company, the Holders of
shares of Senior Preferred Stock then outstanding shall be entitled to be
paid, out of the assets of the Company available for distribution to its
stockholders, $25.00 per share of Senior Preferred Stock, plus an amount
in cash equal to all accumulated and unpaid dividends thereon to the date
fixed for liquidation, dissolution or winding-up (including an amount
equal to a prorated dividend for the period from the last Dividend
Payment Date to the date fixed for liquidation, dissolution or
winding-up), before any payment shall be made or any assets distributed
to the holders of any of the Junior Securities, including, without
limitation, Common Stock of the Company. Except as provided in the
preceding sentence, Holders of shares of Senior Preferred Stock shall not
be entitled to any distribution in the event of liquidation, dissolution
or winding-up of the affairs of the Company. If the assets of the
Company are not sufficient to pay in full the liquidation preference
payable to the Holders of outstanding shares of the Senior Preferred
Stock and all Parity Securities, then the holders of all such shares
shall share equally and ratably in such distribution of assets of the
Company in accordance with the amounts which would be payable on such
distribution if the amount to which the Holders of outstanding shares of
Senior Preferred Stock and the holders of outstanding shares of all
Parity Securities are entitled were paid in full.
(ii) After payment of the full amount of the liquidation
preferences and all accumulated and unpaid dividends to which they are
entitled, the holders of shares of the Senior Preferred Stock shall not
be entitled to any further participation in any distribution of assets of
the Company.
(iii) For the purposes of this paragraph (d), neither the
sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the
property or assets of the Company nor the consolidation or merger of the
Company with or into one or more corporations shall be deemed to be a
liquidation, dissolution or winding-up of the affairs of the Company
(unless such sale, conveyance, exchange or transfer is in connection with
a dissolution or winding-up of the business of the Company).
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<PAGE>
(e) Redemption.
(i) Optional Redemption.
(A) The Company may (subject to contractual and other
restrictions with respect thereto and the legal availability of funds
therefor), at the option of the Board of Directors, redeem at any time
on or after March 15, 2002, from any source of funds legally available
therefor, in whole or in part, in the manner provided in paragraph
(e)(iii) hereof, any or all of the shares of the Senior Preferred
Stock, at the redemption prices (expressed as a percentage of the
liquidation preference thereof) set forth below plus, without
duplication, an amount in cash equal to all accumulated and unpaid
dividends per share (including an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately
prior to the Redemption Date to the Redemption Date) (the "Optional
Redemption Price"), if redeemed during the 12-month period beginning
on March 15 of each of the calendar years indicated below:
YEAR PERCENTAGE
---- ----------
2002. . . . . . . . . . . . . . . . . . . . . . . . . . . 106.500%
2003. . . . . . . . . . . . . . . . . . . . . . . . . . . 104.333%
2004. . . . . . . . . . . . . . . . . . . . . . . . . . . 102.167%
2005 and thereafter . . . . . . . . . . . . . . . . . . . 100.000%
provided that no optional redemption pursuant to this paragraph (e)(i)(A)
shall be authorized or made (1) unless prior thereto full unpaid cumulative
dividends for all Dividend Periods terminating on or prior to the
Redemption Date and for an amount equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the Redemption
Date to the Redemption Date shall have been or immediately prior to the
Redemption Notice (as defined in paragraph (e)(iii)(A) hereof) are declared
and paid in cash or declared and a sum set apart sufficient for such cash
payment on the Redemption Date, on the outstanding shares of the Senior
Preferred Stock or (2) at less than 101% of the liquidation preference of
the Senior Preferred Stock at any time when the Company is making or
purchasing shares of Senior Preferred Stock under an Offer (as defined in
paragraph (h)(ii) hereof) in accordance with the provisions of paragraph
(h) hereof.
(B) In addition, at any time, the Company any redeem, in
the manner provided in paragraph (e)(iii) hereof, shares of the Senior
Preferred Stock, in whole or in part, at the option of the Company, at
a redemption price equal to 113% of the liquidation preference
thereof, plus an amount in cash equal to all accumulated and unpaid
dividends per share (including an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately
prior to the Redemption Date to the Redemption Date) (the "Contingent
Redemption Price"), with the proceeds of a Public Equity Offering,
provided that such redemption occurs within 60 days after consummation
of such Public Equity Offering; and provided, further, that no
optional redemption pursuant to this paragraph (e)(i)(B) shall be
authorized or made unless prior thereto full unpaid cumulative
dividends for
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<PAGE>
all Dividend Periods terminating on or prior to the Redemption Date
and for an amount equal to a prorated dividend for the period from
the Dividend Payment Date immediately prior to the Redemption Date
to the Redemption Date shall have been or immediately prior to the
Redemption Notice are declared and paid in cash or declared and a
sum set apart sufficient for such cash payment on the Redemption
Date, on the outstanding shares of the Senior Preferred Stock.
(C) In the event of a redemption of only a portion of
the then outstanding shares of the Senior Preferred Stock, the
Company shall effect such redemption as it determines, pro rata
according to the number of shares held by each Holder of the Senior
Preferred Stock or by lot, as may be determined by the Company in
its sole discretion, except that the Company may redeem such shares
held by any Holders of fewer than 100 shares (or shares held by
Holders who would hold less than 100 shares as a result of such
redemption), without regard to any pro rata redemption requirement.
(ii) Mandatory Redemption. On March 15, 2009, the Company
shall redeem (subject to the legal availability of funds therefor) from
any source of funds legally available therefor, in the manner provided in
paragraph (e)(iii) hereof, all of the shares of the Senior Preferred
Stock then outstanding at a redemption price equal to 100% of the
liquidation preference per share, plus an amount in cash equal to all
accumulated and unpaid dividends per share (including an amount equal to
a prorated dividend for the period from the Redemption Date immediately
prior to the Redemption Date to the Redemption Date) (the "Mandatory
Redemption Price").
(iii) Procedures for Redemption.
(A) At least 30 days and not more than 60 days prior
to the date fixed for any redemption of the Senior Preferred Stock,
written notice (the "Redemption Notice") shall be given by
first-class mail, postage prepaid, to each Holder of record on the
record date fixed for such redemption of the Senior Preferred Stock
at such Holder's address as the same appears on the stock register
of the Company, provided that no failure to give such notice nor
any deficiency therein shall affect the validity of the procedure
for the redemption of any shares of Senior Preferred Stock to be
redeemed except as to the Holder or Holders to whom the Company has
failed to give said notice or except as to the Holder or Holders
whose notice was defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i)(A),
(e)(i)(B) or (e)(ii) hereof;
(2) the Optional Redemption Price, the Contingent Redemption Price or
the Mandatory Redemption Price, as the case may be;
(3) whether all or less than all the outstanding shares of the
Senior Preferred Stock are to be redeemed and the total number
of shares of the Senior Preferred Stock being redeemed;
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<PAGE>
(4) the number of shares of Senior Preferred Stock held, as of the
appropriate record date, by the Holder that the Company intends
to redeem;
(5) the date fixed for redemption;
(6) that the Holder is to surrender to the Company, at the place or
places where certificates for shares of Senior Preferred Stock
are to be surrendered for redemption, in the manner and at the
price designated, the certificate or certificates representing
the shares of Senior Preferred Stock to be redeemed; and
(7) that dividends on the shares of the Senior Preferred Stock to be
redeemed shall cease to accrue on such Redemption Date unless
the Company defaults in the payment of the Optional Redemption
Price, the Contingent Redemption Price or the Mandatory
Redemption Price, as the case may be.
(B) Each Holder of Senior Preferred Stock shall surrender the
certificate or certificates representing such shares of Senior
Preferred Stock to the Company, duly endorsed, in the manner and at
the place designated in the Redemption Notice, and on the Redemption
Date the full Optional Redemption Price, Contingent Redemption Price
or Mandatory Redemption Price, as the case may be, for such shares
shall be payable in cash to the Person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event that less
than all of the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the
unredeemed shares.
(C) Unless the Company defaults in the payment in full of the
applicable redemption price, dividends on the Senior Preferred Stock
called for redemption shall cease to accumulate on the Redemption
Date, and the Holders of such redemption shares shall cease to have
any further rights with respect thereto on the Redemption Date, other
than the right to receive the Optional Redemption Price, the
Contingent Redemption Price or the Mandatory Redemption Price, as the
case may be, without interest.
(f) Voting Rights.
(i) The Holders of shares of the Senior Preferred Stock, except
as otherwise required under the laws of the State of Delaware or as set
forth in paragraphs (ii) and (iii) below and in paragraph (m) hereof,
shall not be entitled or permitted to vote on any matter required or
permitted to be voted upon by the stockholders of the Company.
(ii) (A) So long as any shares of the Senior Preferred Stock
are outstanding, the Company shall not authorize any class of Parity
Securities without the affirmative vote or consent of Holders of at least
50% of the outstanding shares of Senior Preferred Stock, voting or
consenting, as the case may be, separately as one class, given in
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<PAGE>
person or by proxy, either in writing or by resolution adopted at an annual
or special meeting, except that without the approval of Holders of the
Senior Preferred Stock, the Company may authorize or issue shares of Parity
Securities in exchange for, or the proceeds of which are used to
redeem or repurchase, any or all shares of Senior Preferred Stock then
outstanding, provided that (1) in the case of Parity Securities issued in
exchange for, or the proceeds of which are used to redeem or repurchase,
less than all shares of Senior Preferred Stock then outstanding, the
aggregate liquidation preference of such Parity Securities shall not
exceed the aggregate liquidation preference of, premium and accrued and
unpaid dividends on, and expenses in connection with the refinancing of,
the Senior Preferred Stock so exchanged, redeemed or repurchased and
(2) such Parity Securities shall not be mandatorily redeemable prior to
March 15, 2009.
(B) So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not amend this Certificate of
Designations so as to affect adversely the specified rights,
preferences, privileges or voting rights of Holders of shares of
Senior Preferred Stock or to authorize the issuance of any additional
shares of Senior Preferred Stock without the affirmative vote or
consent of Holders of a least 50% of the outstanding shares of Senior
Preferred Stock, voting or consenting, as the case may be, separately
as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
(C) Prior to the exchange of Senior Preferred Stock for
Exchange Debentures, the Company shall not amend or modify the
indenture for the Exchange Debentures in the form as executed on the
Senior Preferred Stock Issue Date (the "Exchange Debenture Indenture")
(except as expressly provided therein) without the affirmative vote or
consent of Holders of at least a majority of the shares of Senior
Preferred Stock then outstanding, voting or consenting, as the case
may be, separately as one class, given in person or by proxy, either
in writing or by resolution adopted at an annual or special meeting.
(D) Except as set forth in paragraphs (f)(ii)(A) above, (1)
the creation, authorization or issuance of any shares of any Junior
Securities or Parity Securities, (2) the decrease in the amount of
authorized capital stock of any class, including any preferred stock,
or (3) the increase in the amount of authorized capital stock of any
class of Junior Securities shall not require the consent of Holders of
Senior Preferred Stock and shall not, unless not complying with
paragraph (f)(ii)(A), be deemed to affect adversely the rights,
preferences, privileges or voting rights of Holders of shares of
Senior Preferred Stock.
(iii) (A) If (1) dividends on the Senior Preferred Stock are
in arrears and unpaid (and, in the case of dividends payable after
March 15, 2002, are not paid in cash) for four consecutive quarterly
periods (a "Dividend Default"); (2) the Company fails to discharge any
redemption obligation of the Senior Preferred Stock when required
(a "Redemption Default"), whether or not the Company is permitted to do so
by the terms of any indenture, the credit agreement or any other
obligations of the Company; (3) the Company fails to make an offer to
purchase all outstanding shares of Senior Preferred Stock following a
Change of Control if such offer to purchase is required to be made pursuant
to
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<PAGE>
paragraph (h) hereof or fails to purchase shares of Senior Preferred Stock
from holders who elect to have such shares purchased pursuant to such
Change of Control offer (a "Change of Control Default"), whether or not
the Company is permitted to do so by the terms of any indenture, the credit
agreement or any other obligation of the Company; (4) the Company breaches
or violates one of the provisions set forth in paragraph (m) hereof and
the breach or violation continues for a period of 30 days or more (a
"Restriction Default"); or (5) a default occurs on the obligations to pay
principal of, interest on or any other payment obligation when due (a
"Payment Default") at final maturity on one or more classes of Indebtedness
of the Company or any Subsidiary of the Company, whether such Indebtedness
exists on the Senior Preferred Stock Issue Date or is incurred thereafter,
having individually or in the aggregate, an outstanding principal amount
of $25,000,000 or more, or any other Payment Default occurs on one or
more such classes of Indebtedness and such class or classes of Indebtedness
are declared due and payable prior to their respective maturities, then, in
any such case, the number of directors constituting the Board of Directors
shall be adjusted as set forth in the Certificate of Incorporation to
permit the Holders of the majority of the then outstanding Senior Preferred
Stock, voting separately as one class, to elect two directors. Subject
to Section (f)(iii)(B) below, Holders of a majority of the issued and
outstanding shares of the Senior Preferred Stock, voting separately as one
class, shall have the exclusive right to elect two directors at a meeting
therefor called upon occurrence of such Dividend Default, Redemption
Default, Change of Control Default, Restriction Default or Payment Default,
as the case may be, and at every subsequent meeting at which the terms of
office of the directors so elected by the Holders of the Senior Preferred
Stock expire (other than as described in (f)(iii)(B) below). Each such
event described in clauses (1), (2), (3), (4) and (5) is a "Voting Rights
Triggering Event."
(B) The right of the Holders of Senior Preferred Stock
voting separately as one class to elect members of the Board of
Directors as set forth in paragraph (f)(iii)(A) above shall continue
until such time as (1) in the event such right arises due to a
Dividend Default, all accumulated dividends that are in arrears on the
Senior Preferred Stock are paid in full (and, in the case of Dividends
payable after March 15, 2002, are paid in cash); and (2) in the event
such right arises due to a Redemption Default, a Change of Control
Default, a Restriction Default or a Payment Default, the Company
remedies any such failure, breach or default, at which time the term
of any directors elected pursuant to paragraph (f)(iii)(A) shall
terminate, subject always to the same provisions for the renewal and
divestment of such special voting rights in the case of any future
Voting Rights Triggering Event. At any time after voting power to
elect directors shall have become vested and be continuing in the
Holders of shares of the Senior Preferred Stock pursuant to this
paragraph (f)(iii), or if vacancies shall exist in the offices of
directors elected by the Holders of shares of the Senior Preferred
Stock, a proper officer of the Company may, and upon the written
request of the Holders of record of at least 10% of the shares of
Senior Preferred Stock then outstanding addressed to the Secretary of
the Company shall, call a special meeting of the Holders of Senior
Preferred Stock, for the purpose of electing the directors which such
Holders are entitled to elect. If such meeting shall not be called by
the proper officer of the Company within 20 days after personal
service of said written request upon the Secretary of the Company, or
within 20 days after mailing the same within the United States by
certified mail, addressed
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to the Secretary of the Company at its principal executive offices,
then the Holders of record of at least 20% of the outstanding shares
of the Senior Preferred Stock may designate in writing one of their
numbers to call such meeting at the expense of the Company, and such
meeting may be called by the Person
so designated upon the notice required for the annual meeting of
stockholders of the Company and shall be held at the place for holding
the annual meetings of stockholders or such other place in the United
States as shall be designated in such notice. Notwithstanding the
provisions of this paragraph (f)(iii)(B), no such special meeting
shall be called if any such request is received less than 30 days
before the date fixed for the next ensuing annual or special meeting
of stockholders of the Company. Any Holder of shares of the Senior
Preferred Stock so designated shall have, and the Company shall
provide, access to the lists of Holders of shares of the Senior
Preferred Stock for purposes of calling a meeting pursuant to the
provisions of this paragraph (f)(iii)(B).
(C) At any meeting held for the purpose of electing
directors at which the Holders of Senior Preferred Stock shall have
the right, voting separately as one class, to elect directors as
aforesaid, the presence in person or by proxy of the Holders of at
least a majority of the outstanding Senior Preferred Stock shall be
required to constitute a quorum of such Senior Preferred Stock.
(D) Any vacancy occurring in the office of a director
elected by the Holders of shares of the Senior Preferred Stock may be
filled by the remaining director elected by the Holders of shares of
the Senior Preferred Stock unless and until such vacancy shall be
filled by the Holders of shares of the Senior Preferred Stock.
(iv) In any case in which the Holders of shares of the Senior
Preferred Stock shall be entitled to vote pursuant to this paragraph
(f) or pursuant to the laws of the State of Delaware, each Holder of
shares of the Senior Preferred Stock shall be entitled to one vote
for each share of Senior Preferred Stock held.
(g) Exchange.
(i) Requirements.
(A) The Company may at its option exchange all, but not
less than all, of the then outstanding shares of Senior Preferred
Stock into the Company's 13% Subordinated Exchange Debentures due
2009 (the "Exchange Debentures") on any Dividend Payment Date,
provided that on the date of such exchange: (1) there shall be no
contractual impediments to such exchange; (2) there shall be legally
available funds sufficient therefor (including, without limitation,
legally available funds sufficient therefor under Sections 160 and 170
(or any successor provisions) of the Delaware General Corporation
Law); (3) either (a) a registration statement relating to the Exchange
Debentures shall have been declared effective under the Securities Act
of 1933, as amended (the "Securities Act"), prior to such exchange and
shall continue to be in effect on the date of such exchange or (b)(i)
the Company shall have obtained a written opinion of counsel that an
exemption from the registration
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requirements of the Securities Act is available for such exchange and
that upon receipt of such Exchange Debentures pursuant to such
exchange made in accordance with such exemption, the holders (assuming
such holder is not an Affiliate of the Company) thereof shall not be
subject to any restrictions imposed by the Securities Act upon the
resale thereof and (ii) such exemption is relied upon by the Company
for such exchange; (4) the Exchange Debenture Indenture and the
Trustee shall have been qualified under the Trust Indenture Act of
1939, as amended; (5) immediately after giving effect to such
exchange, no Default or Event of Default (each as defined in the
Exchange Debenture Indenture) would exist under the Exchange Debenture
Indenture; and (6) the Company shall have delivered to the Trustee a
written opinion of counsel, dated the date of exchange, regarding
the satisfaction of the conditions set forth in clauses (1), (2),
(3), (4) and (5). In the event that the issuance of the Exchange
Debentures is not permitted on the date of exchange or any of the
conditions set forth in clauses (1) through (6) of the preceding
sentence are not satisfied on the date of exchange, the Company shall
use its best efforts to satisfy such conditions and effect such
exchange as soon as practicable.
The Company shall send a written notice (the "Exchange Notice")
of exchange by mail to each Holder, which notice shall state: (v) that the
Company is exercising its option to exchange the Senior Preferred Stock for
Exchange Debentures pursuant to this Certificate of Designations; (w) the
date fixed for exchange (the "Exchange Date"), which date shall not be less
than 30 days nor more than 60 days following the date on which the Exchange
Notice is mailed (except as provided in the last sentence of this
paragraph); (x) that the Holder is to surrender to the Company, at the
place or places where certificates for shares of Senior Preferred Stock are
to be surrendered for exchange, in the manner designated in the Exchange
Notice, the certificate or certificates representing the shares of Senior
Preferred Stock to be exchanged; (y) that dividends on the shares of Senior
Preferred Stock to be exchanged shall cease to accrue on the Exchange Date
whether or not certificates for shares of Senior Preferred Stock are
surrendered for exchange on the Exchange Date unless the Company shall
default in the delivery of Exchange Debentures; and (z) that interest on
the Exchange Debentures shall accrue from the Exchange Date whether or not
certificates for shares of Senior Preferred Stock are surrendered for
exchange on the Exchange Date. On the Exchange Date, if the conditions set
forth in clauses (1) through (6) above are satisfied, the Company shall
issue Exchange Debentures in exchange for the Senior Preferred Stock as
provided in the next paragraph.
(B) Upon any exchange pursuant to paragraph (g)(i)(A),
Exchange Debentures shall be issued in exchange for Senior Preferred
Stock, in registered form without coupons, in a principal amount
equal to the liquidation preference thereof, plus an amount in cash
equal to all accumulated and unpaid dividends (including a prorated
dividend for the period from the immediately preceding Dividend
Payment Date to the Exchange Date). Exchange Debentures will be
issued in principal amounts of $1,000 and integral multiples thereof
to the extent possible, and will also be issued in principal amounts
less than $1,000 so that each Holder of Senior Preferred Stock will
receive certificates representing the entire amount of Exchange
Debentures to which his shares of Senior Preferred Stock entitle him,
provided that
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<PAGE>
the Company may, at its option, pay cash in lieu of issuing an
Exchange Debenture in a principal amount of less than $1,000.
(ii) Procedure for Exchange.
(A) On or before the date fixed for exchange, each Holder
of Senior Preferred Stock shall surrender the certificate or
certificates representing such shares of Senior Preferred Stock, in
the manner and at the place designated in the Exchange Notice. The
Company shall cause the Exchange Debentures to be executed on the
Exchange Date and, upon surrender in accordance with the Exchange
Notice of the certificates for any shares of Senior Preferred Stock
so exchanged (properly endorsed or assigned for transfer, if the
notice shall so state), such shares shall be exchanged by the Company
into Exchange Debentures. The Company shall pay interest on the
Exchange Debentures at the rate and on the dates specified therein
from the Exchange Date.
(B) If notice has been mailed as aforesaid, and if before
the Exchange Date (1) the Exchange Debenture Indenture shall have been
duly executed and delivered by the Company and the Trustee and (2) all
Exchange Debentures necessary for such exchange shall have been duly
executed by the Company and delivered to the Trustee with irrevocable
instructions to authenticate the Exchange Debentures necessary for
such exchange, then on the Exchange Date, dividends shall cease to
accrue on the outstanding shares of Senior Preferred Stock and all of
the rights of the Holders of shares of the Senior Preferred Stock as
stockholders of the Company shall cease (except the right to receive
Exchange Debentures), and the Person or Persons entitled to receive
the Exchange Debentures issuable upon exchange shall be treated for
all purposes as the registered holder or holders of such Exchange
Debentures as of the date of exchange.
(h) Change of Control.
(i) Upon the occurrence of a Change of Control, each Holder of
Senior Preferred Stock shall have the right to require the Company to
purchase all or any part of such Holder's Senior Preferred Stock pursuant
to an Offer at a purchase price in cash equal to 101% of the aggregate
liquidation preference thereof plus, without duplication, an amount in
cash equal to all accumulated and unpaid dividends per share (including
an amount in cash equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Change of Control Purchase
Date (as defined in paragraph (h)(ii)(B) hereof) to the Change of Control
Purchase Date) (the "Change of Control Payment").
(ii) Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder stating: (A) that an offer ("Offer")
is being made pursuant to this Certificate of Designations and that, to
the extent lawful, all shares of Senior Preferred Stock validly tendered
and not properly withdrawn shall be accepted for payment; (B) a description
of the transaction or transactions that constitute the Change of Control;
(C) the purchase price and the expiration date of the Offer, which shall
be the date 20 Business Days following the commencement of the Offer;
(D) that any shares of Senior Preferred Stock not
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<PAGE>
validly tendered and any shares of Senior Preferred Stock properly
withdrawn shall continue to accrue dividends in accordance with the terms
of this Certificate of Designations; (E) that, unless the Company defaults
in the payment of the Change of Control Payment, all shares of Senior
Preferred Stock accepted for payment pursuant to the Offer shall cease to
accrue dividends after the date on which payment is made in respect of the
shares purchased, which shall be not later than five Business Days after
the termination of the Offer (the "Change of Control Purchase Date"); and
(F) a description of the procedures to be followed by such Holder in order
to have its shares of Senior Preferred Stock validly tendered and a
description of the procedures to be followed by such Holder in order to
withdraw tendered shares.
(iii) On the Change of Control Purchase Date, (A) the Company
shall, to the extent lawful, (1) accept for payment shares of Senior
Preferred Stock tendered pursuant to the Offer, (2) deposit with the
transfer agent an amount equal to the Change of Control Payment in respect
of all shares of Senior Preferred Stock so tendered, (3) deliver or cause
to be delivered to the transfer agent the Senior Preferred Stock so
accepted together with an officers' certificate stating the total number
of shares of Senior Preferred Stock being purchased by the Company,
(4) promptly mail to each Holder of shares of Senior Preferred Stock so
accepted payment in an amount equal to the purchase price for such shares
and (5) arrange to have promptly authenticated and mailed (or cause to be
transferred by book entry) to each Holder a new share certificate
representing any unpurchased shares of the Senior Preferred Stock
represented by the certificate tendered pursuant to the Offer, if any, and
(B) unless the Company defaults in the payment for the shares of Senior
Preferred Stock tendered pursuant to the Offer, dividends shall cease to
accrue with respect to the shares of Senior Preferred Stock tendered and
all rights of Holders of such tendered shares shall terminate, except for
the right to receive payment therefor, on the Change of Control Purchase
Date. The Company shall publicly announce the results of the Offer on the
Change of Control Purchase Date.
(iv) The Company shall comply with Rule 14e-1 under the
Exchange Act and any securities laws and regulations, to the extent such
laws and regulations are applicable to the repurchase of shares of the
Senior Preferred Stock in connection with a Change of Control.
(i) Conversion or Exchange. The Holders of shares of Senior
Preferred Stock shall not have any rights hereunder to convert such shares into
or exchange such shares for shares of any other class or classes or of any
other series of any class or classes of Capital Stock of the Company.
(j) Preemptive Rights. No shares of Senior Preferred Stock shall
have any rights of preemption whatsoever as to any securities of the Company,
or any warrants, rights or options issued or granted with respect thereto,
regardless of how such securities or such warrants, rights or options may be
designated, issued or granted.
(k) Reissuance of Senior Preferred Stock. Shares of Senior
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall (upon compliance with any
applicable provisions of the laws of Delaware) have
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<PAGE>
the status of authorized but unissued shares of Preferred Stock of the Company
undesignated as to series and may be designated or redesignated and issued or
reissued, as the case may be, as part of any series of Preferred Stock of the
Company, provided that any issuance of such shares as Senior Preferred Stock
must be in compliance with the terms hereof.
(l) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately
succeeding Business Day.
(m) Certain Additional Provisions.
(i) Merger or Consolidation. Without the consent of Holders
of a majority of the outstanding shares of Senior Preferred Stock, voting
as a separate class, the Company shall not, in a single transaction or
series of related transactions, consolidate or merge with or into (whether
or not the Company is the surviving corporation), or directly and/or
indirectly through its Restricted Subsidiaries sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its
properties or assets determined on a consolidated basis for the Company
and its Restricted Subsidiaries taken as a whole in one or more related
transactions, to another corporation, Person or entity unless (A) the
Company is the surviving corporation or the entity or the Person formed by
or surviving any such consolidation or merger (if other than the Company)
or to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (B) the Senior Preferred Stock shall be converted into or
exchanged for and shall become shares of the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease,
conveyance or other disposition such successor, transferee or resulting
corporation, having in respect of such successor, transferee or resulting
corporation substantially the same powers, preferences and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereon, that the Senior Preferred Stock had
immediately prior to such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition; (C) immediately after
such transaction, no Voting Rights Triggering Event, and no event that
after the giving of notice or lapse of time or both would become a
Voting Rights Triggering Event, shall have occurred and be continuing;
(D) the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition will have
been made will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction; and (E) prior to the
consummation of any such proposed transaction, the Company shall have
delivered to the transfer agent an Officers' Certificate and an opinion
of counsel to the effect that such transaction complies with the terms
of the Certificate of Designations and that all conditions precedent to
such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of
one or more Subsidiaries of the Company, the Capital Stock of which
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<PAGE>
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of
the properties and assets of the Company.
(ii) Junior Payments. The Company shall not, directly or
indirectly, (A) declare or pay any dividend or make any distribution on
account of any Junior Securities (other than dividends or distributions
payable in Junior Securities (other than Disqualified Stock)),
(B) purchase, redeem or otherwise acquire or retire for value any Junior
Securities or (C) make any Restricted Investment (all such dividends,
distributions, purchases, redemptions, acquisitions, retirements and
Restricted Investments being collectively referred to as "Junior
Payments"), if, at the time of such Junior Payment:
(x) a Voting Rights Triggering Event shall have occurred
and be continuing or would occur as a consequence thereof; or
(y) all dividends on the Senior Preferred Stock payable on
Dividend Payment Dates after March 15, 2002, have not been declared
and paid in cash.
Notwithstanding the foregoing, this Certificate of Designations shall
not prohibit as Junior Payments:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration, such payment
would comply with all of the provisions hereof (including, but not
limited to, this paragraph (m)(ii));
(2) the making of any Restricted Investment in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of, or from substantially concurrent
additional capital contributions in respect of, Equity Interests of
the Company (other than Disqualified Stock);
(3) (X) the redemption, repurchase, retirement or other acquisition of any
Parity Securities of the Company in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of, or from substantially concurrent
additional capital contributions in respect of, other Parity or
Junior Securities of the Company (other than any Disqualified Stock)
and (Y) the redemption, repurchase, retirement or other acquisition of
any Junior Securities of the Company in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of, or from substantially concurrent
additional capital contributions in respect of, other Junior
Securities of the Company (other than any Disqualified Stock);
(4) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any of its Restricted
Subsidiaries held by any member of the Company's (or any of its
Restricted Subsidiaries') management pursuant to any management
agreement, stock option agreement or plan or stockholders agreement;
provided that (X) the aggregate price paid for all such repurchased,
redeemed,
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<PAGE>
acquired or retired Equity Interests will not exceed $2.0 million in
any fiscal year (plus any amount available for such payments hereunder
since the date of the Certificate of Designations which have not been
used for such purpose) or (Y) $8.0 million in the aggregate (in each
case, net of the cash proceeds received by the Company from subsequent
reissuances of such Equity Interests to new members of management);
(5) loans to members of management of the Company or any Restricted
Subsidiary the proceeds of which are used for a concurrent purchase
of Equity Interests of the Company;
(6) the payment of director's fees and reasonable expenses of its
directors in an aggregate amount not to exceed $125,000 per year
(including indemnification obligations and professional fees and
expenses) and to pay salaries and other compensation of employees who
perform services for both Anvil and the Company;
(7) an amount not to exceed $200,000 in aggregate to enable the Company
to make payments to holders of Capital Stock in lieu of issuing
fractional shares thereof;
(8) repurchases of Capital Stock deemed to occur upon exercise of stock
options or warrants if such Capital Stock represents a portion of the
exercise price thereof; and
(9) payments made in connection with the application of the net proceeds
of the Recapitalization as set forth under "Use of Proceeds" in the
Offering Memorandum relating to the Units Offering.
(iii) Transactions with Affiliates.
(A) Except as otherwise set forth in this paragraph
(m)(iii), neither the Company will not, and will not permit any of its
Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose
of any of its properties or assets to, or purchase any property or
assets from, or enter into or make any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of,
any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (x) such Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by the
Company or such Restricted Subsidiary with an unrelated Person and (y)
the Company delivers to the transfer agent (i) with respect to any
Affiliate Transaction entered into after the date of the Certificate
of Designations involving aggregate consideration in excess of $2.0
million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction
complies with clause (x) above and that such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board
of Directors and (ii) with respect to any Affiliate Transaction
involving aggregate consideration in excess of $7.5 million, an
opinion as to the fairness to the Company or such Restricted
Subsidiary of such Affiliate Transaction from a financial point of
view issued by an investment banking firm of national standing.
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(B) Notwithstanding the foregoing, the following
transactions will not be deemed to be Affiliate Transactions: (1)
reasonable fees and compensation paid to, and indemnity provided on
behalf of, officers and directors of the Company, Anvil or any
Restricted Subsidiary as determined in good faith by the appropriate
Board of Directors or senior management; (2) the provision of
administrative or management services by the Company or any of its
officers to the Company or any of its Restricted Subsidiaries in the
ordinary course of business consistent with past practice, (3)
transactions between the Company or one or more of its Restricted
Subsidiaries and the relevant Securitization Entity effected as part
of a Qualified Securitization Transaction, (4) any agreement as in
effect as of the Senior Preferred Stock Issue Date (including, without
limitation, the New Credit Agreement) or any amendment thereto or any
transactions contemplated thereby (including pursuant to any amendment
thereto) and any replacement agreement so long as any such amendment
or replacement agreement is not more disadvantageous to the Holders
of the Senior Preferred Stock or the Exchange Debentures in any
material respect than the original agreement as in effect on the
Senior Preferred Stock Issue Date, (5) payments or loans to employees
or consultants which are approved by the Board of Directors of the
Company in good faith, (6) the existence of, or the performance by
the Company or any of its Restricted Subsidiaries of its obligations
under the terms of, any stockholders agreement (including any
registration rights agreement or purchase agreement related thereto)
to which it is a party as of the Senior Preferred Stock Issue Date
and any similar agreement which it may enter into thereafter;
provided, however, that the existence of, or the performance by the
Company or any of its Restricted Subsidiaries of obligations under
any similar agreement entered into after the Senior Preferred Stock
Issue Date shall only be permitted by this clause (6) to the extent
that the terms of any such new agreement are not otherwise
disadvantageous to the Holders of the Senior Preferred Stock or
Exchange Debentures in any material respect, (7) transactions with
customers, clients, suppliers, joint venture partners or purchasers
or sellers of goods or services, in each case in the ordinary course
of business (including, without limitation, pursuant to joint venture
agreements) and otherwise in compliance with the terms of the
Exchange Debenture Indenture which are at least as favorable as might
reasonably have been obtained at such time from an unaffiliated party,
(8) any employment agreement entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Restricted
Subsidiary (including, without limitation, any such employment
agreements existing prior to the Senior Preferred Issue Date), (9) the
granting of stock options to employees and directors of the Company
and its Restricted Subsidiaries in accordance with the New Stock
Option Plan at exercise prices equal to the fair market value of the
Common Stock and the issuance of Common Stock upon the exercise of
such options, (10) transactions between or among the Company and/or
its Wholly Owned Subsidiaries, (11)(i) the payment of customary
management, consulting and advisory fees and related expenses to BRS
and 399 Venture and their Affiliates not to exceed $750,000 per year
in aggregate and (ii) payments by Anvil or any of its Restricted
Subsidiaries to BRS or 399 Venture and their Affiliates made pursuant
to any financial advisory, financing, underwriting or
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<PAGE>
placement agreement or in respect of other investment banking
activities, including, without limitation, in connection with
acquisitions or divestitures which are approved by the Board of
Directors of Anvil, the Company or such Restricted Subsidiary in good
faith not to exceed $750,000 per year in aggregate and (12)
transactions permitted by the covenant described in paragraph (m)(ii).
(iv) Reports. So long as any shares of Senior Preferred Stock
are outstanding, the Company will furnish to the Holders of Senior
Preferred Stock, within 15 days after it is or would have been required to
file such with the Commission, (A) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file
such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (B) all current reports that would be required to be
filed with the Commission on Form 8-K if the Company was required to file
such reports. In addition, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability
(unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors
upon request. In addition, the Company has agreed that, for so long as any
shares of Senior Preferred Stock remain outstanding, it will furnish to
the Holders and to securities analysts and prospective investors, upon
their request, the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act.
(n) Definitions. As used in this Certificate of Designations,
the following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, which correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Anvil" means Anvil Knitwear, Inc., a Delaware corporation.
"BRS" means Bruckmann, Rosser, Sherrill & Co., L.P.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
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"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities no more than twelve
months from the date of acquisition, (b) U.S. dollar denominated (or foreign
currency fully hedged) time deposits, certificates of deposit, Eurodollar time
deposits or Eurodollar certificates of deposit of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of $100.0
million or (ii) any bank whose short-term commercial paper rating from S&P is at
least A-1 or the equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank being an "Approved Lender"), in each case with
maturities of not more than twelve months from the date of acquisition, (c)
commercial paper and variable or fixed rate notes issued by any Approved Lender
(or by the parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation rated A-2 (or the equivalent thereof) or
better by S&P or P-2 (or the equivalent thereof) or better by Moody's and
maturing within twelve months of the date of acquisition, (d) repurchase
agreements with a bank or trust company or recognized securities dealer having
capital and surplus in excess of $100.0 million for direct obligations issued by
or fully guaranteed by the United States of America in which the Company shall
have a perfected first priority security interest (subject to no other Liens)
and having, on the date of purchase thereof, a fair market value of at least
100% of the amount of repurchase obligations, and (e) interests in money market
mutual funds which invest solely in assets or securities of the type described
in subparagraphs (a), (b), (c) or (d) hereof.
"Change of Control" means such time as (i) prior to the initial public
offering by the Company or any direct or indirect parent of the Company of its
common stock (other than a public offering pursuant to a registration statement
on Form S-8), the Permitted Holders cease to have, directly or indirectly, in
the aggregate at least 51% of the voting power of the voting stock of Anvil or
the Company or any other direct or indirect parent or the Company ceases to own,
directly or indirectly, 100% of the voting power of the voting stock of Anvil
(other than by reason of a merger of the Company and Anvil) or (ii) after the
initial public offering by the Company or any direct or indirect parent of Anvil
of its common stock (other than a public offering pursuant to a registration
statement on Form S-8), (A) any Schedule 13D, Form 13F or Schedule 13G under the
Exchange Act, or any amendment to such Schedule or Form, is received by Anvil or
the Company which indicates that, or Anvil or the Company otherwise becomes
aware that, a "person" or "group" (within the meaning of Sections 13(d) and
14(d) (2) of the Exchange Act) has become, directly or indirectly, the
"beneficial owner," by way of merger, consolidation or otherwise, of 40% or more
of the voting power of the voting stock of Anvil or the Company on a
fully-diluted basis after giving effect to the conversion and exercise of all
outstanding warrants, options and other securities of Anvil or the Company, as
the case may be (whether or not such securities are then currently convertible
or exercisable) and (B) such person or group has become, directly or indirectly,
the beneficial owner of a greater percentage of the voting capital stock of
Anvil, calculated on such fully-diluted basis, than beneficially owned by the
Permitted Holders, or (iii) the sale, lease or transfer of all or
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<PAGE>
substantially all of the assets of the Company to any person or group (other
than the Permitted Holders), or (iv) during any period of two consecutive
calendar years individuals who at the beginning of such period constituted the
Board of Directors of Anvil or the Company (together with any new directors
whose election by the Board of Directors of Anvil or the Company or whose
nomination for election by the shareholders of Anvil or the Company, as the
case may be, was approved by a vote of a majority of the directors then still
in office who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved or was approved
by the Permitted Holders) cease for any reason to constitute a majority of the
directors of Anvil or the Company, as the case may be, then in office.
"Commission" means the Securities and Exchange Commission.
"Consolidated Net Worth" of a Person at any date means the amount by
which the assets of such Person and its consolidated Restricted Subsidiaries
(less any revaluation or other write-up subsequent to the date of the Exchange
Debenture Indenture in any such assets (other than write-ups resulting from
foreign currency translations and write-ups of tangible assets of a going
concern business made within twelve months after the acquisition of such
business)) exceed the sum of (a) the total liabilities of such Person and its
consolidated Restricted Subsidiaries, plus (b) any Disqualified Stock of such
Person or any consolidated Restricted Subsidiaries of such Person issued to any
Person other than such Person or a wholly-owned Restricted Subsidiary of such
Person, in each case determined in accordance with GAAP.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
on which is 91 days after the mandatory redemption date of the Senior Preferred
Stock or the maturity date of the Exchange Debentures.
"Dividend Payment Date" means March 15, June 15, September 15 and
December 15 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Exchange Debenture Indenture.
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"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a holder of shares of Senior Preferred Stock.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person), the maximum fixed repurchase price of
Disqualified Stock issued by such Person in each case, if held by any Person
other than the Company or a Wholly Owned Subsidiary of the Company, and, to the
extent not otherwise included, the Guarantee by such Person of any indebtedness
of any other Person.
"Initial Dividend Period" means the dividend period commencing on the
Senior Preferred Stock Issue Date and ending on the day before the first
Dividend Payment Date to occur thereafter.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the books of such Person) or capital
contributions (excluding commission, travel, relocation and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP; provided that an acquisition
of assets, Equity Interests or other securities by the Company for consideration
consisting of common equity securities of the Company or of any direct or
indirect parent of the Company shall not be deemed to be an Investment.
"Legal Holiday" means a Saturday, a Sunday or a day on which federal
offices or banking institutions in the City of New York, in the city of the
Corporate Trust Office of the trustee under the Exchange Debenture Indenture, or
at a place of payment are authorized by law, regulation or executive order to
remain closed. If a payment date is a Legal Holiday, payment may be made
21
<PAGE>
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"New Stock Option Plan" means Holdings' 1997 Stock Option Plan to be
approved by the Board of Directors of Holdings providing for the issuance of
options to purchase Common Stock to directors and employees of Holdings, Anvil
or its Restricted Subsidiaries which may provide for the grant of options in
respect of up to 5% of the fully diluted Common Stock of the Company at exercise
prices equal to the fair market value thereof on the date of grant or any
successor plan thereto.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering Memorandum" means the Offering Memorandum, dated March 11,
1997, relating to the offering and placement of the Units, consisting of
$30,000,000 aggregate liquidation preference of the Senior Preferred Stock and
390,000 shares of Class B Common Stock, par value $0.01 per share, of the
Company, to the public.
"Permitted Holders" means, collectively, (i) BRS and its Affiliates,
and their respective employees and directors, (ii) 399 Venture and its
Affiliates, and their respective employees and directors, (iii) all full-time
executive officers of the Company and its Subsidiaries who acquire Capital Stock
of the Company and (iv) (A) any spouse, lineal descendant (including by adoption
and stepchildren), or sibling of such natural persons and (B) any trust,
corporation, limited liability company or partnership, the beneficiaries,
members, stockholders or partners of which consist entirely of such natural
persons or the individuals described in clause (A) above.
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<PAGE>
"Permitted Investments" means (a) any Investments in the Company or in
a Wholly Owned Subsidiary of the Company that is engaged in the same or a
similar line of business as the Company and its Restricted Subsidiaries were
engaged in on the date of the Exchange Debenture Indenture and reasonable
extensions or expansions thereof; (b) any Investments in Cash Equivalents; (c)
Investments by the Company or any Restricted Subsidiary of the Company in a
Person if as a result of such Investment (i) such Person becomes a Wholly Owned
Subsidiary of the Company that is engaged in the same or a similar line of
business as the Company and its Restricted Subsidiaries were engaged in on the
date of the Exchange Debenture Indenture and reasonable extensions or expansions
thereof or (ii) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is liquidated
into, the Company or a Wholly Owned Subsidiary of the Company that is engaged in
the same or a similar line of business as the Company and its Restricted
Subsidiaries were engaged in on the date of the Exchange Debenture Indenture and
reasonable extensions or expansions thereof; (d) Investments made as a result of
the receipt of non-cash consideration from an Asset Sale (as defined in the
Exchange Debenture Indenture) that was made pursuant to and in compliance with
the covenant described under Section 4.8 of the Exchange Debenture Indenture;
(e) Investments by the Company or any Restricted Subsidiary in cash in an amount
not to exceed $10.0 million in the aggregate at any one time; (f) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to Anvil or any Subsidiary or in
satisfaction of judgments or pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of Anvil's trade creditors or
customers; (g) the contribution of shares of stock or other equity securities of
an Unrestricted Subsidiary to another Subsidiary; (h) loans and advances to
employees and officers of Anvil and its Restricted Subsidiaries in the ordinary
course of business not to exceed an aggregate of $750,000; (i) accounts
receivable created or acquired in the ordinary course of business; (j) currency
agreements and interest swap obligations entered into in the ordinary course of
Anvil's or its Restricted Subsidiaries' businesses and otherwise in compliance
with the Exchange Debenture Indenture; and (k) any Investment by Anvil or a
Wholly Owned Subsidiary of Anvil in a Securitization Entity or any Investment by
a Securitization Entity in any other Person in connection with a Qualified
Securitization Transaction; provided that any Investment in a Securitization
Entity is in the form of a Purchase Money Note or an Equity Interest.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
limited liability company, or other business entity or government or agency or
political subdivision thereof (including any subdivision or ongoing business of
any such entity or substantially all of the assets of any such entity,
subdivision or business).
"Public Equity Offering" means an underwritten public offering
pursuant to a registration statement filed with the Commission in accordance
with the Securities Act of (i) Equity Interests other than Disqualified Stock of
the Company or (ii) of Equity Interests other than Disqualified Stock of the
Company's parent or indirect parent corporation to the extent that the cash
proceeds therefrom are contributed to the equity capital of the Company or are
used to purchase Equity Interests (other than Disqualified Stock) of the
Company.
"Purchase Money Note" means a promissory note of a Securitization
Entity evidencing a line of credit, which may be irrevocable, from the Company
or any Subsidiary of the Company in connection with a Qualified Securitization
Transaction to a Securitization Entity, which
23
<PAGE>
note shall be repaid from cash available to the Securitization Entity, other
than amounts required to be established as reserves pursuant to agreements,
amounts paid to investors in respect of interest, principal and other amounts
owing to such investors and amounts owing to such investors and amounts paid
in connection with the purchase of newly generated receivables.
"Qualified Securitization Transaction" means any transaction or series
of transactions that may be entered into by the Company or any of its
Subsidiaries pursuant to which the Company or any or its Subsidiaries may sell,
convey or otherwise transfer to (a) a Securitization Entity (in the case of a
transfer by the Company or any of its Subsidiaries) and (b) any other Person (in
the case of a transfer by a Securitization Entity), or may grant a security
interest in, any accounts receivable or equipment (whether now existing or
arising or acquired in the future) of the Company or any of its Subsidiaries,
and any assets related thereto including, without limitation, all collateral
securing such accounts receivable and equipment, all contracts and contract
rights and all guarantees or other obligations in respect of such accounts
receivable and equipment, proceeds of such accounts receivable and equipment and
other assets (including contract rights) which are customarily transferred or in
respect of which security interests are customarily granted in connection with
asset securitization transactions involving accounts receivable and equipment;
provided that such transaction or transactions are otherwise permitted by the
terms of the Exchange Debenture Indenture including the provisions of Section
4.8 of the Exchange Debenture Indenture.
"Quarterly Dividend Period" shall mean the quarterly period commencing
on each March 15, June 15, September 15 and December 15 and ending on the day
before the following Dividend Payment Date.
"Redemption Date" with respect to any shares of Senior Preferred
Stock, means the date on which such shares of Senior Preferred Stock are
redeemed by the Company.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc. and its successors.
"Securitization Entity" means a Wholly Owned Subsidiary of the Company
(or another Person in which the Company or any Subsidiary of the Company makes
an Investment and to which the Company or any Subsidiary of the Company
transfers accounts receivable or equipment and related assets) which engages in
no activities other than in connection with the financing of accounts receivable
or equipment and which is designated by the Board of Directors of the Company
(as provided below) as a Securitization Entity (a) no portion of the
Indebtedness or any other obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any Subsidiary of the Company (excluding guarantees
of obligations (other than the principal of, and interest on, Indebtedness))
pursuant to Standard Securitization Undertakings, (ii) is recourse to or
obligates the Company or any Subsidiary of the Company in any way other than
pursuant to Standard Securitization Undertakings, or (iii) subjects any property
or asset of or any Subsidiary of the Company, directly or indirectly,
contingently or otherwise, to the satisfaction thereof other than
24
<PAGE>
pursuant to Standard Securitization Undertakings, (b) with which neither the
Company nor any Subsidiary of the Company has any material contract, agreement,
arrangement or understanding other than on terms no less favorable to the
Company or such Subsidiary than those that might be obtained at the time from
Persons that are not Affiliates of the Company, other than fees payable in the
ordinary course of business in connection with servicing receivables of such
entity, and (c) to which neither the Company nor any Subsidiary of the Company
has any obligation to maintain or preserve such entity's financial condition or
cause such entity to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolution of the
Board of Directors of the Company giving effect to such designation and an
officers' certificate certifying that such designation complied with the
foregoing conditions.
"Senior Preferred Stock Issue Date" means the date on which the Senior
Preferred Stock is originally issued by the Company under this Certificate of
Designations.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by Anvil or any Subsidiary of
Anvil which are reasonably customary in an accounts receivable or equipment
transaction.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"399 Venture" means 399 Venture Partners, Inc.
"Trustee" means the party named as such in the Exchange Debenture
Indenture until a successor replaces it in accordance with the applicable
provisions of the Exchange Debenture Indenture and thereafter means the
successor serving thereunder.
"Units Offering" means the offer and sale of Units, consisting of
$30,000,000 liquidation preference of the Senior Preferred Stock and 390,000
shares of Class B Common Stock, par value $0.01 per share, of the Company as
contemplated by the Offering Memorandum.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a duly
adopted Board resolution; but only to the extent that such Subsidiary: (a) has
no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such
25
<PAGE>
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not guaranteed or otherwise directly
or indirectly provided credit support for any Indebtedness of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant set forth in Section
4.9 of the Exchange Debenture Indenture. If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Exchange Debenture Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant set forth in Section 4.10 of the
Exchange Debenture Indenture, the Company shall be in default of such covenant).
The Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant set forth in Section 4.10 of the Exchange Debenture Indenture, and
(ii) no Default or Event of Default (each as defined in the Exchange Debenture
Indenture) under the Exchange Debenture Indenture would be in existence
following such designation.
"Wholly Owned Subsidiary" of any Person means a Restricted Subsidiary
of such Person all of the outstanding Capital Stock or other ownership interests
of which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person.
Unrestricted Subsidiaries shall not be included in the definition of Wholly
Owned Subsidiary for any purposes of the Exchange Debenture Indenture.
* * * * *
<PAGE>
IN WITNESS WHEREOF, Anvil Holdings, Inc. has caused this Certificate
of Designations to be signed by Jacob Hollander, in his capacity as Secretary,
on the date and year first above written.
ANVIL HOLDINGS, INC.
By:____________________________
Name: Jacob Hollander
Title: Secretary
<PAGE>
GLOBAL UNIT
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE UNIT
AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE UNIT AGREEMENT, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY
TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE UNIT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO HOLDINGS OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF HOLDINGS THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR
(d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF HOLDINGS SO
<PAGE>
REQUESTS), (2) TO HOLDINGS OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (1) ABOVE.
26,667 Units
ANVIL HOLDINGS, INC.
Units each Consisting of 40 Shares of
13% Senior Exchangeable Preferred Stock due 2009
and 13 Shares of Class B
Common Stock of Anvil Holdings, Inc.
No. 1 CUSIP No. 037344306
Anvil Holdings, Inc., a Delaware corporation (the "COMPANY" or
"HOLDINGS"), which term includes any successor corporation), hereby certifies
that Cede & Co. is the owner of 26,667 Units as described above, transferable
only on the books of Holdings by the holder thereof in person or by his or her
duly authorized attorney, on surrender of the Certificate properly endorsed.
Each Unit consists of 40 shares of 13% Senior Exchangeable Preferred
Stock due 2009 of Holdings (the "SENIOR PREFERRED STOCK") and 13 shares of
Class B Common Stock, par value $0.01 per share, of Holdings (the "CLASS B
COMMON"). This Unit is issued pursuant to the Unit Agreement (the "UNIT
AGREEMENT") dated as of March 14, 1997 among Holdings, United States Trust
Company of New York, as Unit Agent (the "UNIT AGENT") and as Transfer Agent (the
"TRANSFER AGENT"), and is subject to the terms and provisions contained therein,
all of which terms and provisions the holder of this Unit Certificate consents
to by acceptance hereof. The terms of the Senior Preferred Stock are governed
by a Certificate of Designations (the "CERTIFICATE OF DESIGNATIONS") dated as of
March 13, 1997, and are subject to the terms and provisions contained therein,
to which all of such terms and provisions the holder of this Unit Certificate
consents by acceptance hereof.
Reference is made to the further provisions of this Unit Certificate
contained on the reverse hereof, which will for all purposes have the same
effect as if set forth at this place. Copies of the Unit Agreement and
Certificate of Designations are on file at the office of Anvil Holdings, Inc.
228 E. 45th Street, New York, New York 10017, Attention: Jacob Hollander, and
are available to any holder on written request and without cost.
The Senior Preferred Stock and the Class B Common comprising each Unit
will not be separately tradable until the earliest to occur of (i) such date
which is 90 days from the date of issuance of the Senior Preferred Stock,
(ii) such earlier date as may be determined by Donaldson, Lufkin & Jenrette
Securities Corporation, (iii) in the event of a Change of Control, the date on
which
<PAGE>
Holdings mails notice thereof to holders of the Senior Preferred Stock, (iv)
in the event that Holdings elects to exchange the Senior Preferred Stock for
Exchange Debentures, the date on which Holdings mails notice thereof to
holders of the Senior Preferred Stock, (v) in the event that Holdings elects
to redeem the Senior Preferred Stock with the proceeds of a public equity
offering of Holdings' capital stock, the date on which Holdings mails notice
thereof to holders of the Senior Preferred Stock, and (vi) the date upon
which a registration statement under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), with respect to a registered exchange offer for the
Senior Preferred Stock is declared effective under the Securities Act.
Capitalized terms used but not otherwise defined in this Unit
Certificate shall have the meanings given thereto in the Certificate of
Designations.
Dated: March 14, 1997
ANVIL HOLDINGS, INC.
By:________________________________
Name: Bernard Geller
Title: President
By:_________________________________
Name: Jacob Hollander
Title: Vice President, Secretary and General
Counsel
Certificate of Authentication:
This is one of the Units
referred to in the within
mentioned Unit Agreement.
UNITED STATES TRUST COMPANY OF NEW YORK,
as Unit Agent
By:___________________________
Authorized Signatory
<PAGE>
[REVERSE OF GLOBAL UNIT]
ANVIL HOLDINGS, INC.
Units Each Consisting of 40 Shares
of 13% Senior Exchangeable
Preferred Stock due 2009 and
13 Shares of Class B Common Stock
of Anvil Holdings, Inc.
I. PROVISIONS RELATING TO THE 13%
SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2009
1. DIVIDENDS. Holders of 13% Senior Exchangeable Preferred Stock
(the "Senior Preferred Stock") issued by Holdings pursuant to a Certificate
of Designations dated March 13, 1997 (the "Certificate of Designations") will
be entitled to receive, when, as and if declared by the Board of Directors of
Holdings, out of funds legally available therefor, dividends on the Senior
Preferred Stock at a rate per annum equal to 13% of the liquidation
preference per share of Senior Preferred Stock. All dividends will be
cumulative whether or not earned or declared on a daily basis from the date
of issuance of the Senior Preferred Stock and will be payable quarterly in
arrears on March 15, June 15, September 15 and December 15 of each year. On
or before March 15, 2002 Holdings may, at its option, pay dividends in cash
or in additional fully paid and non-assessable shares of Senior Preferred
Stock having an aggregate liquidation preference equal to the amount of such
dividends. After March 15, 2002, dividends may be paid only in cash. It is
not expected that Holdings will pay any dividends in cash for any period
ending on or prior to March 15, 2002. Notwithstanding the foregoing, during
the pendency of a Registration Default (as defined in the Registration Rights
Agreement), then as liquidated damages, the dividend rate borne by the Senior
Preferred Stock, with respect to the first 90-day period immediately
following the occurrence of such Registration Default will increase by an
amount equal to $.05 per week per $1,000 liquidation preference of Senior
Preferred Stock held by such Holder and the dividend rate borne by the Senior
Preferred Stock will increase by an additional $.05 per week per $1,000
liquidation preference of Senior Preferred Stock with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up
to a maximum increase in the dividend rate of $.30 per week per $1,000
liquidation preference of Senior Preferred Stock and following the cure of
all Registration Defaults, the accrual of dividends at the increased rates
specified by this sentence will cease.
2. METHOD OF PAYMENT. Each distribution in the form of a dividend
(whether in cash or in additional shares of Senior Preferred Stock) shall be
payable to Holders of record as they appear on the stock register of Holdings on
such record dates, not less than 10 nor more than 60 days preceding the related
Dividend Payment Date, as shall be fixed by the Board of Directors. Dividends
shall cease to accumulate in respect of shares of the Senior Preferred Stock on
the Exchange Date (as defined in the Certificate of Designations) or on the date
of their earlier redemption unless Holdings shall have failed to issue the
appropriate aggregate principal amount of Exchange Debentures (as defined below)
in respect of the Senior Preferred Stock on the Exchange Date or shall have
failed to pay the relevant redemption price on the date filed for redemption.
<PAGE>
3. CERTIFICATE OF DESIGNATIONS. The Senior Preferred Stock is issued
by Holdings pursuant to the Certificate of Designations. The number of shares
constituting such series shall be 2,300,000 shares of Senior Preferred Stock,
consisting of an initial issuance of 1,200,000 shares of Senior Preferred Stock
plus additional shares of Senior Preferred Stock which may be issued to pay
dividends on the Senior Preferred Stock if Holdings elects to pay dividends in
additional shares of Senior Preferred Stock. The liquidation preference of the
Senior Preferred Stock shall be $25.00 per share.
4. RANK. The Senior Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding-up and dissolution
of Holdings, (i) rank senior to all classes of common stock of Holdings and each
other class of capital stock or series of Preferred Stock of Holdings hereafter
created by the Board of Directors the terms of which do not expressly provide
that it ranks on a parity with the Senior Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up and dissolution
of Holdings (collectively referred to with the Common Stock of Holdings as
"Junior Securities") and (ii) rank on a parity with each series of Preferred
Stock existing on the date hereof the terms of which do not expressly provide
that it ranks junior to any senior Preferred Stock as to dividend distributions
and distributions upon the liquidation, winding-up and dissolution of Holdings
and any class of capital stock or series of Preferred Stock hereafter created by
the Board of Directors, the terms of which expressly provide that such class or
series shall rank on a parity with the Senior Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up and dissolution
of Holdings (collectively referred to as "Parity Securities").
5. OPTIONAL REDEMPTION. (a) Holdings may (subject to contractual
and other restrictions with respect thereto and the legal availability of funds
therefor), at the option of the Board of Directors, redeem at any time on or
after March 15, 2002, from any source of funds legally available therefor, in
whole or in part, in the manner set forth in the Certificate of Designations,
any or all of the shares of the Senior Preferred Stock, at the redemption prices
(expressed as a percentage of the liquidation preference thereof) set forth
below plus, without duplication, an amount in cash equal to all accumulated and
unpaid dividends per share (including an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior to the
Redemption Date to the Redemption Date), if redeemed during the 12-month period
beginning on March 15 of each of the calendar years indicated below:
Year Percentage
---- ----------
2002. . . . . . . . . . . . . . . . . . .106.500%
2003. . . . . . . . . . . . . . . . . . .104.333%
2004. . . . . . . . . . . . . . . . . . .102.167%
2005 and thereafter . . . . . . . . . . .100.000%
(b) In addition, at any time, Holdings any redeem, subject to certain
restrictions in the Certificate of Designations, shares of the Senior Preferred
Stock, in whole or in part, at the option of Holdings, at a redemption price
equal to 113% of the liquidation preference thereof, plus an amount in cash
equal to all accumulated and unpaid dividends per share (including an amount
<PAGE>
in cash equal to a prorated dividend for the period from the Dividend Payment
Date immediately prior to the Redemption Date to the Redemption Date), with
the proceeds of a Public Equity Offering (as defined in the Certificate of
Designations), provided that such redemption occurs within 60 days after
consummation of such Public Equity Offering.
6. MANDATORY REDEMPTION. On March 15, 2009, Holdings shall redeem
(subject to the legal availability of funds therefor) from any source of funds
legally available therefor, in the manner provided in the Certificate of
Designations, all of the shares of the Senior Preferred Stock then outstanding
at a redemption price equal to 100% of the liquidation preference per share,
plus an amount in cash equal to all accumulated and unpaid dividends per share
(including an amount equal to a prorated dividend for the period from the
Redemption Date immediately prior to the Redemption Date to the Redemption
Date).
7. EXCHANGE. Holdings may at its option exchange all, but not less
than all, of the then outstanding shares of Senior Preferred Stock into
Holdings' 13% Subordinated Exchange Debentures due 2009 (the "Exchange
Debentures") on any Dividend Payment Date, pursuant to and in accordance with
the provisions of the Certificate of Designations and, provided that on the date
of such exchange: (1) there shall be no contractual impediments to such
exchange; (2) there shall be legally available funds sufficient therefor
(including, without limitation, legally available funds sufficient therefor
under Sections 160 and 170 (or any successor provisions) of the Delaware General
Corporation Law); (3) either (a) a registration statement relating to the
Exchange Debentures shall have been declared effective under the Securities Act
of 1933, as amended (the "Securities Act"), prior to such exchange and shall
continue to be in effect on the date of such exchange or (b)(i) Holdings shall
have obtained a written opinion of counsel that an exemption from the
registration requirements of the Securities Act is available for such exchange
and that upon receipt of such Exchange Debentures pursuant to such exchange made
in accordance with such exemption, the holders (assuming such holder is not an
Affiliate of Holdings) thereof shall not be subject to any restrictions imposed
by the Securities Act upon the resale thereof and (ii) such exemption is relied
upon by Holdings for such exchange; (4) the indenture for the Exchange
Debentures (the "Exchange Debenture Indenture") and the Trustee shall have been
qualified under the Trust Indenture Act of 1939, as amended; (5) immediately
after giving effect to such exchange, no Default or Event of Default (each as
defined in the Exchange Debenture Indenture) would exist under the Exchange
Debenture Indenture; and (6) Holdings shall have delivered to the Trustee a
written opinion of counsel, dated the date of exchange, regarding the
satisfaction of the conditions set forth in clauses (1), (2), (3), (4) and (5).
In the event that the issuance of the Exchange Debentures is not permitted on
the date of exchange or any of the conditions set forth in clauses (1) through
(6) of the preceding sentence are not satisfied on the date of exchange,
Holdings shall use its best efforts to satisfy such conditions and effect such
exchange as soon as practicable.
8. VOTING RIGHTS. The Holders of shares of the Senior Preferred
Stock, except as otherwise required under the laws of the State of Delaware or
as set forth below or as set forth in the Certificate of Designations, shall not
be entitled or permitted to vote on any matter required or permitted to be voted
upon by the stockholders of Holdings.
9. DEFAULT. If (1) dividends on the Senior Preferred Stock are in
arrears and unpaid (and, in the case of dividends payable after March 15, 2002,
are not paid in cash) for four consecutive quarterly periods (a "Dividend
Default"); (2) Holdings fails to discharge any redemption obligation of the
Senior Preferred Stock when required (a "Redemption Default"), whether or not
<PAGE>
Holdings is permitted to do so by the terms of any indenture, the credit
agreement or any other obligations of Holdings; (3) Holdings fails to make an
offer to purchase all outstanding shares of Senior Preferred Stock following a
Change of Control (as defined in the Certificate of Designations) if such offer
to purchase is required to be made pursuant to the Certificate of Designations
or fails to purchase shares of Senior Preferred Stock from holders who elect to
have such shares purchased pursuant to such Change of Control offer (a "Change
of Control Default"), whether or not Holdings is permitted to do so by the terms
of any indenture, the credit agreement or any other obligation of Holdings;
(4) Holdings breaches or violates one of the provisions set forth in paragraph
(m) the Certificate of Designations and the breach or violation continues for a
period of 30 days or more (a "Restriction Default"); or (5) a default occurs on
the obligations to pay principal of, interest on or any other payment obligation
when due (a "Payment Default") at final maturity on one or more classes of
Indebtedness of Holdings or any Subsidiary of Holdings, whether such
Indebtedness exists on the Senior Preferred Stock Issue Date or is incurred
thereafter, having individually or in the aggregate, an outstanding principal
amount of $25,000,000 or more, or any other Payment Default occurs on one or
more such classes of Indebtedness and such class or classes of Indebtedness are
declared due and payable prior to their respective maturities, then, in any such
case, the number of directors constituting the Board of Directors shall be
adjusted as set forth in the Certificate of Incorporation to permit the Holders
of the majority of the then outstanding Senior Preferred Stock, voting
separately as one class, to elect two directors. Subject to certain conditions,
Holders of a majority of the issued and outstanding shares of the Senior
Preferred Stock, voting separately as one class, shall have the exclusive right
to elect two directors at a meeting therefor called upon occurrence of such
Dividend Default, Redemption Default, Change of Control Default, Restriction
Default or Payment Default, as the case may be, and at every subsequent meeting
at which the terms of office of the directors so elected by the Holders of the
Senior Preferred Stock expire. Each such event described in clauses (1), (2),
(3), (4) and (5) is a "Voting Rights Triggering Event."
10. REGISTRATION RIGHTS. Pursuant to a Preferred Stock Registration
Rights Agreement (the "Preferred Stock Registration Rights Agreement") between
the Initial Purchaser and Holdings, Holdings agree to: (i) file with the
Commission within 60 days of the consummation of the Unit Offering a
registration statement (the "Preferred Stock Exchange Offer Registration") with
respect to an offer to exchange the Senior Preferred Stock for a new issue of
preferred stock of Holdings (the "New Senior Preferred Stock") registered under
the Securities Act, with terms substantially identical to those of the Senior
Preferred Stock (the "Preferred Stock Exchange Offer"); (ii) use their best
efforts to cause such registration statement to become effective within 120 days
of the consummation of the Units Offering; and (iii) cause the Preferred Stock
Exchange Offer to be consummated within 150 days of the consummation of the
Units Offering. If: (i) the Preferred Stock Exchange Offer is not permitted by
applicable law or (ii) any holder of Transfer Restricted Securities (as defined
in the Offering Memorandum) notifies Holdings (A) that it is prohibited by law
or Commission policy from participating in the Preferred Stock Exchange Offer,
(B) that it may not resell the New Senior Preferred Stock acquired by it in the
Preferred Stock Exchange Offer to the public without delivering a prospectus and
the prospectus contained in the Preferred Stock Exchange Offer Registration
Statement is not appropriate or available for such resales or (C) that it is a
broker-dealer and holds Senior Preferred Stock acquired directly from Holdings
or an affiliate of Holdings, Holdings will be required to provide a shelf
registration statement to cover resales of the Senior Preferred Stock by the
holders thereof. If Holdings fails to satisfy these registration obligations,
it will be required to pay Liquidated Damages to the holders of the Senior
Preferred Stock under certain circumstances.
<PAGE>
11. CHANGE OF CONTROL. Upon the occurrence of a Change of Control,
each Holder of Senior Preferred Stock shall have the right to require Holdings
to purchase all or any part of such Holder's Senior Preferred Stock at a
purchase price in cash equal to 101% of the aggregate liquidation preference
thereof plus, without duplication, an amount in cash equal to all accumulated
and unpaid dividends per share pursuant to and in accordance with the
Certificate of Designations.
12. RESTRICTIVE COVENANTS. The Certificate of Designations contains
certain covenants that limit the ability of Holdings to redeem or repurchase
Junior Securities or Parity Securities and pay dividends thereon, to merge or
consolidate with any other entity, to sell assets and to enter into transactions
with affiliates. The Certificate of Designations also requires Holdings to
deliver certain reports and information to the holders of the Senior Preferred
Stock.
13. AUTHENTICATION. The Units shall not be valid until the Unit
Agent or Authentication Agent manually signs the certificate of authentication
on the Units.
14. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations may be
used in the name of a Holder of shares of Senior Preferred Stock or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
15. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, Holdings has caused
CUSIP numbers to be printed on the Global Unit as a convenience to the Holders
of the Global Unit. No representation is made as to the accuracy of such
numbers as printed on the Global Unit and reliance may be placed only on the
other identification numbers printed hereon.
Holdings will furnish to any Holder of a Senior Preferred Stock
Certificate upon written request and without charge a copy of the Certificate of
Designations, which has the text of this share of Senior Preferred Stock in
larger type. Requests may be made to: Anvil Holdings, Inc., 228 E. 45th
Street, New York, New York, 10017, Attn: Jacob Hollander.
<PAGE>
II. PROVISIONS RELATING TO THE CLASS B COMMON STOCK
ANVIL HOLDINGS, INC.
The Second Amended and Restated Certificate of Incorporation (the
"Restated Certificate") of Anvil Holdings, Inc. ("Holdings") provides for the
authorization of three classes of Common Stock: Class A Common Stock, Class B
Common Stock and Class C Common Stock (collectively, the "Common Stock").
Holders of Class B Common Stock are entitled to one vote per share on
all matters to be voted on by stockholders while holders of Class A Common Stock
and Class C Common Stock have no right to vote on amy matters except in special
circumstances as specified in the Restated Certificate. Subject to the rights
of the holders of preferred stock and the restrictions, if any, imposed by
indebtedness outstanding from time to time, the holders of Class B Common Stock
are entitled to dividends and other distributions, as and when declared or paid,
whether in cash, property or securities of Holdings by the Board of Directors of
holdings out of assets legally available therefore. Holders of Common Stock are
entitled to share in such dividends or distributions on a pro rata basis, except
that the holders of Class A Common Stock are entitled to a priority on all such
dividends in an amount equal to the then outstanding Class A Preference (as
defined below). The holders of Common Stock do not have preemptive,
subscription, redemption or sinking fund rights under the terms of the Restated
Certificate.
Upon any voluntary or involuntary liquidation, dissolution or winding
up of Holdings, holders of Class A Common Stock are entitled to be paid out of
the assets of Holdings then available for distribution, a preference (the "Class
A Preference") of $100 per share before any distribution is paid on any other
shares of Common Stock. The Class A Preference accrue at a rate of 12.5% per
annum. After satisfaction of all its liabilities, the payment of the
liquidation preference of any outstanding shares of preferred stock and the
payment of the Class A Preference, the holders of shares of Common Stock are
entitled to share ratably in the distribution of all of Holdings' assets
remaining available for distribution. If Holdings in any manner subdivides or
combines the outstanding shares of any class of Common Stock, the outstanding
shares of all other classes of Common Stock will be proportionately subdivided.
Shares of Class A Common Stock and Class B Common Stock are not
convertible. Shares of Class C Common Stock are convertible at the option of
the holders representing a majority of the outstanding Class C Common Stock,
into an equal number of shares of Class B Common Stock.
Holdings is party to a Registration Rights and Securityholders
Agreement pursuant to which it has certain registration obligations with respect
to the Class B Common Stock.
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Unit, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Unit to:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ______________________________________, agent to
transfer this Unit on the books of Holdings. The agent may substitute another
to act for him.
Dated: _____________ Signed:________________________________________________
(Sign exactly as your name appears
on the other side of this Unit)
<PAGE>
SCHEDULE OF INCREASES OR DECREASES OF UNITS
The following increases or decreases in this Global Unit have been made:
<TABLE>
<CAPTION>
Number of Units of
Amount of decrease in Amount of increase in this Global Unit
Date of Number of Units of this Number of Units of following such Signature of authorized
Exchange Global Unit this Global Unit decrease or increase signatory of Unit Agent
- -------- ----------------------- --------------------- -------------------- -----------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
Unless and until it is exchanged in whole or in part for Senior Notes
in definitive form, this Senior Note may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede & Co.
or such other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.
THE SENIOR NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SENIOR
NOTE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SENIOR NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.
THE HOLDER OF THE SENIOR NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF ANVIL
THAT (A) SUCH SENIOR NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF ANVIL SO REQUESTS), (2) TO ANVIL OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THE SENIOR NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (1) ABOVE.
<PAGE>
10-7/8% SERIES A SENIOR
NOTES DUE 2007
ANVIL KNITWEAR, INC.
AI GLOBAL SENIOR NOTE
CUSIP No. 03734PAB7
No. $500,000
ANVIL KNITWEAR, INC. promise to pay to Cede & Co. or registered
assigns, the principal sum of Five Hundred Thousand Dollars on March 15, 2007.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Reference is hereby made to the further provisions of this Senior
Note set forth on the reverse hereof, which further provisons shall for all
purposes have the same effect as if set forth at this place.
Dated: March 14, 1997
ANVIL KNITWEAR, INC.
By: __________________________
Name:
Title:
By: __________________________
Name:
Title:
Certificate of Authentication:
This is one of the Senior Notes
referred to in the within-mentioned Indenture:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By: _____________________________________
Authorized Signatory
Dated: March 14, 1997
2
<PAGE>
10-7/8% SERIES A SENIOR
NOTES DUE 2007
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Anvil Knitwear, Inc., a Delaware corporation ("Anvil")
promises to pay interest on the principal amount of this Senior Note at 10-7/8%
per annum from March 14, 1997 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. Anvil will pay interest and Liquidated Damages semi-annually
in arrears on March 15 and September 15 of each year, or if any such day is not
a Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Senior Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; PROVIDED that if there is no existing Default in the payment of
interest, and if this Senior Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; PROVIDED,
FURTHER, that the first Interest Payment Date shall be September 15, 1997.
Anvil shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. Anvil will pay interest on the Senior Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Senior Notes at the close of business on the March 1
or September 1 next preceding the Interest Payment Date, even if such Senior
Notes are cancelled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.12 of the Indenture with respect
to defaulted interest. The Senior Notes will be payable as to principal,
premium, interest and Liquidated Damages at the office or agency of Anvil
maintained for such purpose within the City and State of New York, or, at the
option of Anvil, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
PROVIDED that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium, if any, and
Liquidated Damages on, all Global Senior Notes and all other Senior Notes the
Holders of which shall have provided wire transfer instructions to Anvil or the
Paying Agent. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee under the
Indenture, will act as Paying Agent and Registrar. Anvil may change any Paying
Agent or Registrar without notice to any Holder. Anvil or any of its
Subsidiaries may act in any such capacity.
3
<PAGE>
4. INDENTURE. Anvil issued the Senior Notes under an Indenture dated
as of March 14, 1997 ("Indenture") among Anvil, Anvil Holdings, Inc.,
Cottontops, Inc. and the other Subsidiary Guarantors (as defined therein) and
the Trustee. The terms of the Senior Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The
Senior Notes are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. The Senior Notes are
unsecured obligations of Anvil limited to $130.0 million in aggregate principal
amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in clause 5(b) of this Senior Note, the Senior
Notes will not be redeemable at Anvil's option prior to March 15, 2002.
Thereafter, the Senior Notes will be subject to redemption for cash at the
option of Anvil, in whole or in part, upon not less than 30 nor more than 60
days' notice, to each holder of Senior Notes to be redeemed at the following
redemption prices (expressed as percentages of principal amount thereof), if
redeemed during the twelve-month period beginning on March 15 of each of the
years indicated below, in each case together with any accrued and unpaid
interest and Liquidated Damages thereon to the applicable redemption date:
YEAR PERCENTAGE
2002. . . . . . . . . . . . . . 105.438%
2003. . . . . . . . . . . . . . 103.625%
2004. . . . . . . . . . . . . . 101.813%
2005 and thereafter . . . . . . 100.000%
(b) Notwithstanding the provisions of clause 5(a) of this Senior Note,
at any time on or before March 15, 2000, Anvil may (but will not have the
obligation to) redeem for cash up to 40% of the original aggregate principal
amount of the Senior Notes at a redemption price of 110% of the principal amount
thereof, in each case plus any accrued and unpaid interest and Liquidated
Damages thereon to the redemption date, with the net proceeds of a Public Equity
Offering; PROVIDED that at least 60% of the original aggregate principal amount
of the Senior Notes remains outstanding immediately after the occurrence of such
redemption; and PROVIDED, FURTHER, that such redemption will occur within 60
days of the date of the closing of such Public Equity Offering.
(c) Notices of redemption will be mailed by first class mail at least
30 days but not more than 60 days before the redemption date to each Holder
whose Senior Notes are to be redeemed at its registered address. Senior Notes
in denominations larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000, unless all of the Senior Notes held by a Holder are to be
redeemed. Unless Anvil defaults in making such redemption payment, on and after
the redemption date interest ceases to accrue on Senior Notes or portions
thereof called for redemption.
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6. MANDATORY REDEMPTION.
Anvil shall not be required to make any mandatory redemption, purchase
or sinking fund payments with respect to the Senior Notes prior to the maturity
date.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of Senior
Notes will have the right to require Anvil to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Senior Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon to the date of
purchase (the "Change of Control Payment"). Within 30 days following any Change
of Control, Anvil will mail a notice to each Holder describing the transaction
or transactions that constitute the Change of Control and offering to repurchase
Senior Notes pursuant to the procedures required by the Indenture and described
in such notice. Anvil will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Senior Notes as a result of a Change of Control.
On the Change of Control Purchase Date, Anvil will, to the extent
lawful, (1) accept for payment all Senior Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Senior
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by Anvil. The Paying Agent will promptly mail to each
Holder of Senior Notes so tendered the Change of Control Payment for such Senior
Notes, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Senior Note equal in principal
amount to any unpurchased portion of the Senior Notes surrendered, if any;
PROVIDED that each such new Senior Note will be in a principal amount of $1,000
or an integral multiple thereof. Anvil will publicly announce the results of
the Change of Control Offer on the Change of Control Purchase Date.
(b) Anvil will not, and will not permit any of its Restricted
Subsidiaries to, engage in an Asset Sale in excess of $1.0 million unless (i)
Anvil (or the Restricted Subsidiary, as the case may be) receives consideration
at the time of such Asset Sale at least equal to the fair market value, and in
the case of a lease of assets, a lease providing for rent and other conditions
which are no less favorable to Anvil (or the Restricted Subsidiary, as the case
may be) in any material respect than the then prevailing market conditions
(evidenced in each case by a resolution of the Board of Directors of such entity
set forth in an Officers' Certificate delivered to the Trustee) of the assets or
Equity Interests sold or otherwise disposed of, and (ii) at least 80% (100% in
the case of lease payments) of the consideration therefor received by Anvil or
such Restricted Subsidiary is in the form of cash or Cash Equivalents; PROVIDED
that the amount of (x) any liabilities (as shown on Anvil's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto, excluding
contingent liabilities and trade payables), of Anvil or any Restricted
Subsidiary (other than liabilities that are by
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their terms subordinated to the Senior Notes, or any guarantee thereof) that
are assumed by the transferee of any such assets and (y) any notes or other
obligations received by Anvil or any such Restricted Subsidiary from such
transferee that are promptly, but in no event more than 30 days after
receipt, converted by Anvil or such Subsidiary into cash (to the extent of
the cash received), shall be deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, Anvil may apply such Net Proceeds (a) to reduce permanently long-term
Indebtedness of a Restricted Subsidiary, (b) to reduce permanently Indebtedness
(and, in the case of revolving Indebtedness, to reduce permanently the
commitments) under the New Credit Agreement, or (c) to an investment in another
business, the making of a capital expenditure or the acquisition of other
tangible assets, in each case, in the same or a similar line of business as
Anvil was engaged in on the date of the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the preceding sentence of
this paragraph will be deemed to constitute "Excess Proceeds." On the earlier of
(i) the 366th day after an Asset Sale or (ii) such date as the Board of Anvil or
the Restricted Subsidiary determines not to apply the Net Proceeds relating to
such Asset Sale in the manner set forth in (a), (b) or (c), if the aggregate
amount of Excess Proceeds exceeds $5.0 million, Anvil will be required to make
an offer to all Holders of Senior Notes (an "Asset Sale Offer") to purchase the
maximum principal amount of Senior Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon
to the date of purchase, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Senior Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, Anvil may use
any remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Senior Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Senior Notes to be
purchased on a pro rata basis. Upon completion of such Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and Senior
Notes may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and Anvil may require a Holder to pay any
taxes and fees required by law or permitted by the Indenture. Anvil need not
exchange or register the transfer of any Senior Note or portion of a Senior Note
selected for redemption, except for the unredeemed portion of any Senior Note
being redeemed in part. Also, it need not exchange or register the transfer of
any Senior Notes for a period of 15 days before a selection of Senior Notes to
be redeemed or during the period between a record date and the corresponding
Interest Payment Date.
9. PERSONS DEEMED OWNERS. The registered Holder of a Senior Note may
be treated as its owner for all purposes.
10. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Senior Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Senior
Notes then outstanding
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(including consents obtained in connection with a tender offer or exchange
offer for Senior Notes), and any existing default or compliance with any
provision of the Indenture or the Senior Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding
Senior Notes. Without the consent of any Holder of a Senior Note, the
Indenture or the Senior Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Senior
Notes in addition to or in place of certificated Senior Notes, to provide for
the assumption of Anvil's obligations to Holders of the Senior Notes in case
of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Senior Notes or that does
not adversely affect the legal rights under the Indenture of any such Holder,
or to comply with the requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
11. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Senior Notes; (ii) default in payment when due of the principal
of or premium, if any, on the Senior Notes; (iii) failure by Anvil to comply
with Section 4.7, 4.8, 4.9, 4.10, 4.11 or 5.1 of the Indenture; (iv) failure by
Anvil for 60 days after notice to comply with any of its other agreements in the
Indenture or the Senior Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by Anvil or any of its Restricted
Subsidiaries or Holdings (or the payment of which is guaranteed by Anvil or any
of its Restricted Subsidiaries or Holdings) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more; (vi) failure by Anvil or any of
its Restricted Subsidiaries or Holdings to pay final judgments aggregating in
excess of $3.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; (vii) except as permitted by the Indenture, any Subsidiary
Guarantee will be held in any judicial proceeding to be unenforceable or invalid
or will cease for any reason to be in full force and effect or any Subsidiary
Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, will deny
or disaffirm its obligations under the Subsidiary Guarantee; (viii) the
Guarantee will be held in any judicial proceeding to be unenforceable or invalid
or will cease for any reason to be in full force and effect or Holdings, or any
Person acting on behalf of Holdings, will deny or disaffirm its obligations
under the Guarantee and (ix) certain events of bankruptcy or insolvency with
respect to Holdings, Anvil or any of its Significant Subsidiaries or group of
Restricted Subsidiaries that, together, would constitute a Significant
Subsidiary. If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Senior
Notes may declare all the Senior Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to Holdings, Anvil, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Senior Notes will become
due and payable without
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further action or notice. Holders of the Senior Notes may not enforce the
Indenture or the Senior Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Senior Notes may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of the Senior Notes notice of
any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines
that withholding notice is in their interest. The Holders of a majority in
aggregate principal amount of the Senior Notes then outstanding by notice to
the Trustee may on behalf of the Holders of all of the Senior Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest
on, or the principal of, premium and Liquidated Damages, if any, on the
Senior Notes. Anvil is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and Anvil is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee
a statement specifying such Default or Event of Default.
12. TRUSTEE DEALINGS WITH ANVIL. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for Anvil or its Affiliates, and may otherwise deal with Anvil or its
Affiliates, as if it were not the Trustee.
13. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of Anvil, as such, shall not have any liability for
any obligations of Anvil under the Senior Notes or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Senior Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Senior Notes.
14. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS EXCHANGE DEBENTURE, WITHOUT REGARD TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.
15. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SENIOR NOTES.
In addition to the rights provided to Holders of Senior Notes under the
Indenture, Holders of Transferred Restricted Senior Notes shall have all the
rights set forth in the Registration Rights Agreement dated as of the date of
the Indenture, between Anvil, Holdings, Cottontops, Inc. and the parties named
on the signature pages thereof (the "Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, Anvil has caused CUSIP
numbers
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to be printed on the Senior Notes and the Trustee may use CUSIP numbers in
notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Senior Notes or
as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
Anvil will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Anvil Knitwear, Inc.
228 East 45th Street
New York, New York 10017
Attention: Jacob Hollander
Telephone No.: (212) 476-0352
Telecopier No.: (212) 885-9411
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SCHEDULE OF CHANGES IN PRINCIPAL AMOUNT OF NOTE
The following changes in the principal amount of this Global Senior
Note have been recorded:
<TABLE>
<CAPTION>
Principal Amount of this
Amount of decrease in Amount of increase in Global Senior Note Signature of
Principal Amount of Principal Amount of following such decrease authorized officer of
Date of Transaction this Global Senior Note this Global Senior Note (or increase) Trustee
- ------------------- ----------------------- ----------------------- ------------------------- ----------------------
<S> <C> <C> <C> <C>
</TABLE>
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<PAGE>
ASSIGNMENT FORM
For value received, I or we assign and transfer this Senior Note to
______________________________________________________________
______________________________________________________________
(Print or type name, address and zip code of assignee)
______________________________________________________________
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint ________________________ agent to transfer this Senior
Note on the books of Anvil. The agent may substitute another to act for him.
In connection with any transfer of this Senior Note occurring prior to
March 14, 1999, the undersigned confirms that it has not utilized any general
solicitation or general advertising in connection with the transfer and that:
[CHECK ONE]
[ ] (a) this Senior Note is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933) in
compliance with the exemption from registration under the Securities
Act of 1933 provided by Rule 144A thereunder.
OR
[ ] (b) this Senior Note is being transferred other than in accordance with
(a) above and documents and, if required by the Trustee or Anvil,
legal opinions are being furnished which comply with the conditions
of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.14 of the Indenture shall have been satisfied.
Date: __________________________
Your Signature: ______________________
(Sign exactly as your name appears on the
face of this Senior Note)
Signature Guarantee
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TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Senior Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933 and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding Anvil as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: _______________________ _____________________________
NOTICE: To be executed by
an executive officer
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Option of Holder to Elect Purchase
If you want to elect to have this Senior Note purchased by Anvil
pursuant to Section 4.7 or 4.8 of the Indenture, check the box below:
Section 4.7 Section 4.8
If you want to elect to have only part of the Senior Note purchased by
Anvil pursuant to Section 4.7 or Section 4.8 of the Indenture, state the amount
you elect to have purchased: $__________________
Date:____________________ Your Signature:
(Sign exactly as your name appears on the Senior Note)
Tax Identification No.:
Signature Guarantee.
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Unless and until it is exchanged in whole or in part for Senior Notes
in definitive form, this Senior Note may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede & Co.
or such other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.
THE SENIOR NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SENIOR
NOTE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SENIOR NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.
THE HOLDER OF THE SENIOR NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF ANVIL
THAT (A) SUCH SENIOR NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF ANVIL SO REQUESTS), (2) TO ANVIL OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THE SENIOR NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (1) ABOVE.
<PAGE>
10-7/8% SERIES A SENIOR
NOTES DUE 2007
ANVIL KNITWEAR, INC.
CUSIP No. 03734PAA9
No. $129,500,000
ANVIL KNITWEAR, INC. promise to pay to Cede & Co. or registered
assigns, the principal sum of One Hundred and Twenty-Nine Million Five Hundred
Thousand Dollars on March 15, 2007.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Reference is hereby made to the further provisions of this Senior
Note set forth on the reverse hereof, which further provisons shall for all
purposes have the same effect as if set forth at this place.
Dated: March 14, 1997
ANVIL KNITWEAR, INC.
By: _____________________________
Name:
Title:
By: _____________________________
Name:
Title:
Certificate of Authentication:
This is one of the Senior Notes
referred to in the within-mentioned Indenture:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:_________________________________
Authorized Signatory
Dated: March 14, 1997
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<PAGE>
10-7/8% SERIES A SENIOR
NOTES DUE 2007
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Anvil Knitwear, Inc., a Delaware corporation ("Anvil")
promises to pay interest on the principal amount of this Senior Note at 10-7/8%
per annum from March 14, 1997 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. Anvil will pay interest and Liquidated Damages semi-annually
in arrears on March 15 and September 15 of each year, or if any such day is not
a Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Senior Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; PROVIDED that if there is no existing Default in the payment of
interest, and if this Senior Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; PROVIDED,
FURTHER, that the first Interest Payment Date shall be September 15, 1997.
Anvil shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. Anvil will pay interest on the Senior Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Senior Notes at the close of business on the March 1
or September 1 next preceding the Interest Payment Date, even if such Senior
Notes are cancelled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.12 of the Indenture with respect
to defaulted interest. The Senior Notes will be payable as to principal,
premium, interest and Liquidated Damages at the office or agency of Anvil
maintained for such purpose within the City and State of New York, or, at the
option of Anvil, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
PROVIDED that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium, if any, and
Liquidated Damages on, all Global Senior Notes and all other Senior Notes the
Holders of which shall have provided wire transfer instructions to Anvil or the
Paying Agent. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee under the
Indenture, will act as Paying Agent and Registrar. Anvil may change any Paying
Agent or Registrar without notice to any Holder. Anvil or any of its
Subsidiaries may act in any such capacity.
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<PAGE>
4. INDENTURE. Anvil issued the Senior Notes under an Indenture dated
as of March 14, 1997 ("Indenture") among Anvil, Anvil Holdings, Inc.,
Cottontops, Inc. and the other Subsidiary Guarantors (as defined therein) and
the Trustee. The terms of the Senior Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The
Senior Notes are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. The Senior Notes are
unsecured obligations of Anvil limited to $130.0 million in aggregate principal
amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in clause 5(b) of this Senior Note, the Senior
Notes will not be redeemable at Anvil's option prior to March 15, 2002.
Thereafter, the Senior Notes will be subject to redemption for cash at the
option of Anvil, in whole or in part, upon not less than 30 nor more than 60
days' notice, to each holder of Senior Notes to be redeemed at the following
redemption prices (expressed as percentages of principal amount thereof), if
redeemed during the twelve-month period beginning on March 15 of each of the
years indicated below, in each case together with any accrued and unpaid
interest and Liquidated Damages thereon to the applicable redemption date:
YEAR PERCENTAGE
2002. . . . . . . . . . . . . . 105.438%
2003. . . . . . . . . . . . . . 103.625%
2004. . . . . . . . . . . . . . 101.813%
2005 and thereafter . . . . . . 100.000%
(b) Notwithstanding the provisions of clause 5(a) of this Senior Note,
at any time on or before March 15, 2000, Anvil may (but will not have the
obligation to) redeem for cash up to 40% of the original aggregate principal
amount of the Senior Notes at a redemption price of 110% of the principal amount
thereof, in each case plus any accrued and unpaid interest and Liquidated
Damages thereon to the redemption date, with the net proceeds of a Public Equity
Offering; PROVIDED that at least 60% of the original aggregate principal amount
of the Senior Notes remains outstanding immediately after the occurrence of such
redemption; and PROVIDED, FURTHER, that such redemption will occur within 60
days of the date of the closing of such Public Equity Offering.
(c) Notices of redemption will be mailed by first class mail at least
30 days but not more than 60 days before the redemption date to each Holder
whose Senior Notes are to be redeemed at its registered address. Senior Notes
in denominations larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000, unless all of the Senior Notes held by a Holder are to be
redeemed. Unless Anvil defaults in making such redemption payment, on and after
the redemption date interest ceases to accrue on Senior Notes or portions
thereof called for redemption.
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6. MANDATORY REDEMPTION.
Anvil shall not be required to make any mandatory redemption, purchase
or sinking fund payments with respect to the Senior Notes prior to the maturity
date.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of Senior
Notes will have the right to require Anvil to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Senior Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon to the date of
purchase (the "Change of Control Payment"). Within 30 days following any Change
of Control, Anvil will mail a notice to each Holder describing the transaction
or transactions that constitute the Change of Control and offering to repurchase
Senior Notes pursuant to the procedures required by the Indenture and described
in such notice. Anvil will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Senior Notes as a result of a Change of Control.
On the Change of Control Purchase Date, Anvil will, to the extent
lawful, (1) accept for payment all Senior Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Senior
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by Anvil. The Paying Agent will promptly mail to each
Holder of Senior Notes so tendered the Change of Control Payment for such Senior
Notes, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Senior Note equal in principal
amount to any unpurchased portion of the Senior Notes surrendered, if any;
PROVIDED that each such new Senior Note will be in a principal amount of $1,000
or an integral multiple thereof. Anvil will publicly announce the results of
the Change of Control Offer on the Change of Control Purchase Date.
(b) Anvil will not, and will not permit any of its Restricted
Subsidiaries to, engage in an Asset Sale in excess of $1.0 million unless (i)
Anvil (or the Restricted Subsidiary, as the case may be) receives consideration
at the time of such Asset Sale at least equal to the fair market value, and in
the case of a lease of assets, a lease providing for rent and other conditions
which are no less favorable to Anvil (or the Restricted Subsidiary, as the case
may be) in any material respect than the then prevailing market conditions
(evidenced in each case by a resolution of the Board of Directors of such entity
set forth in an Officers' Certificate delivered to the Trustee) of the assets or
Equity Interests sold or otherwise disposed of, and (ii) at least 80% (100% in
the case of lease payments) of the consideration therefor received by Anvil or
such Restricted Subsidiary is in the form of cash or Cash Equivalents; PROVIDED
that the amount of (x) any liabilities (as shown on Anvil's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto, excluding
contingent liabilities and trade payables), of Anvil or any Restricted
Subsidiary (other than liabilities that are by
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their terms subordinated to the Senior Notes, or any guarantee thereof) that
are assumed by the transferee of any such assets and (y) any notes or other
obligations received by Anvil or any such Restricted Subsidiary from such
transferee that are promptly, but in no event more than 30 days after
receipt, converted by Anvil or such Subsidiary into cash (to the extent of
the cash received), shall be deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, Anvil may apply such Net Proceeds (a) to reduce permanently long-term
Indebtedness of a Restricted Subsidiary, (b) to reduce permanently
Indebtedness (and, in the case of revolving Indebtedness, to reduce
permanently the commitments) under the New Credit Agreement, or (c) to an
investment in another business, the making of a capital expenditure or the
acquisition of other tangible assets, in each case, in the same or a similar
line of business as Anvil was engaged in on the date of the Indenture. Any
Net Proceeds from Asset Sales that are not applied or invested as provided in
the preceding sentence of this paragraph will be deemed to constitute "Excess
Proceeds." On the earlier of (i) the 366th day after an Asset Sale or (ii)
such date as the Board of Anvil or the Restricted Subsidiary determines not
to apply the Net Proceeds relating to such Asset Sale in the manner set forth
in (a), (b) or (c), if the aggregate amount of Excess Proceeds exceeds $5.0
million, Anvil will be required to make an offer to all Holders of Senior
Notes (an "Asset Sale Offer") to purchase the maximum principal amount of
Senior Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon to the date of
purchase, in accordance with the procedures set forth in the Indenture. To
the extent that the aggregate amount of Senior Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, Anvil may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Senior Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Senior Notes to be
purchased on a pro rata basis. Upon completion of such Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and Senior
Notes may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and Anvil may require a Holder to pay any
taxes and fees required by law or permitted by the Indenture. Anvil need not
exchange or register the transfer of any Senior Note or portion of a Senior Note
selected for redemption, except for the unredeemed portion of any Senior Note
being redeemed in part. Also, it need not exchange or register the transfer of
any Senior Notes for a period of 15 days before a selection of Senior Notes to
be redeemed or during the period between a record date and the corresponding
Interest Payment Date.
9. PERSONS DEEMED OWNERS. The registered Holder of a Senior Note may
be treated as its owner for all purposes.
10. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Senior Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Senior
Notes then outstanding
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(including consents obtained in connection with a tender offer or exchange
offer for Senior Notes), and any existing default or compliance with any
provision of the Indenture or the Senior Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding
Senior Notes. Without the consent of any Holder of a Senior Note, the
Indenture or the Senior Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Senior
Notes in addition to or in place of certificated Senior Notes, to provide for
the assumption of Anvil's obligations to Holders of the Senior Notes in case
of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Senior Notes or that does
not adversely affect the legal rights under the Indenture of any such Holder,
or to comply with the requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
11. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Senior Notes; (ii) default in payment when due of the principal
of or premium, if any, on the Senior Notes; (iii) failure by Anvil to comply
with Section 4.7, 4.8, 4.9, 4.10, 4.11 or 5.1 of the Indenture; (iv) failure by
Anvil for 60 days after notice to comply with any of its other agreements in the
Indenture or the Senior Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by Anvil or any of its Restricted
Subsidiaries or Holdings (or the payment of which is guaranteed by Anvil or any
of its Restricted Subsidiaries or Holdings) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more; (vi) failure by Anvil or any of
its Restricted Subsidiaries or Holdings to pay final judgments aggregating in
excess of $3.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; (vii) except as permitted by the Indenture, any Subsidiary
Guarantee will be held in any judicial proceeding to be unenforceable or invalid
or will cease for any reason to be in full force and effect or any Subsidiary
Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, will deny
or disaffirm its obligations under the Subsidiary Guarantee; (viii) the
Guarantee will be held in any judicial proceeding to be unenforceable or invalid
or will cease for any reason to be in full force and effect or Holdings, or any
Person acting on behalf of Holdings, will deny or disaffirm its obligations
under the Guarantee and (ix) certain events of bankruptcy or insolvency with
respect to Holdings, Anvil or any of its Significant Subsidiaries or group of
Restricted Subsidiaries that, together, would constitute a Significant
Subsidiary. If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Senior
Notes may declare all the Senior Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to Holdings, Anvil, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Senior Notes will become
due and payable without
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further action or notice. Holders of the Senior Notes may not enforce the
Indenture or the Senior Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Senior Notes may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of the Senior Notes notice of
any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines
that withholding notice is in their interest. The Holders of a majority in
aggregate principal amount of the Senior Notes then outstanding by notice to
the Trustee may on behalf of the Holders of all of the Senior Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest
on, or the principal of, premium and Liquidated Damages, if any, on the
Senior Notes. Anvil is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and Anvil is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee
a statement specifying such Default or Event of Default.
12. TRUSTEE DEALINGS WITH ANVIL. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for Anvil or its Affiliates, and may otherwise deal with Anvil or its
Affiliates, as if it were not the Trustee.
13. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of Anvil, as such, shall not have any liability for
any obligations of Anvil under the Senior Notes or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Senior Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Senior Notes.
14. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS EXCHANGE DEBENTURE, WITHOUT REGARD TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.
15. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SENIOR NOTES.
In addition to the rights provided to Holders of Senior Notes under the
Indenture, Holders of Transferred Restricted Senior Notes shall have all the
rights set forth in the Registration Rights Agreement dated as of the date of
the Indenture, between Anvil, Holdings, Cottontops, Inc. and the parties named
on the signature pages thereof (the "Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, Anvil has caused CUSIP
numbers
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to be printed on the Senior Notes and the Trustee may use CUSIP numbers in
notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Senior Notes or
as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
Anvil will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Anvil Knitwear, Inc.
228 East 45th Street
New York, New York 10017
Attention: Jacob Hollander
Telephone No.: (212) 476-0352
Telecopier No.: (212) 885-9411
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SCHEDULE OF CHANGES IN PRINCIPAL AMOUNT OF NOTE
The following changes in the principal amount of this Global Senior
Note have been recorded:
<TABLE>
<CAPTION>
Principal Amount of this
Amount of decrease in Amount of increase in Global Senior Note Signature of
Principal Amount of Principal Amount of following such decrease authorized officer of
Date of Transaction this Global Senior Note this Global Senior Note (or increase) Trustee
- ------------------- ----------------------- ----------------------- ------------------------- ----------------------
<S> <C> <C> <C> <C>
</TABLE>
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<PAGE>
ASSIGNMENT FORM
For value received, I or we assign and transfer this Senior Note to
______________________________________________________________
______________________________________________________________
(Print or type name, address and zip code of assignee)
______________________________________________________________
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint ________________________ agent to transfer this Senior
Note on the books of Anvil. The agent may substitute another to act for him.
In connection with any transfer of this Senior Note occurring prior to
March 14, 1999, the undersigned confirms that it has not utilized any general
solicitation or general advertising in connection with the transfer and that:
[CHECK ONE]
[ ] (a) this Senior Note is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933) in
compliance with the exemption from registration under the Securities
Act of 1933 provided by Rule 144A thereunder.
OR
[ ] (b) this Senior Note is being transferred other than in accordance with
(a) above and documents and, if required by the Trustee or Anvil,
legal opinions are being furnished which comply with the conditions
of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.14 of the Indenture shall have been satisfied.
Date: __________________________
Your Signature: ______________________
(Sign exactly as your name appears on the
face of this Senior Note)
Signature Guarantee
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TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Senior Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933 and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding Anvil as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: _______________________ _____________________________
NOTICE: To be executed by
an executive officer
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<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Senior Note purchased by Anvil
pursuant to Section 4.7 or 4.8 of the Indenture, check the box below:
Section 4.7 Section 4.8
If you want to elect to have only part of the Senior Note purchased by
Anvil pursuant to Section 4.7 or Section 4.8 of the Indenture, state the amount
you elect to have purchased: $__________________
Date:____________________ Your Signature:
(Sign exactly as your name appears on the Senior Note)
Tax Identification No.:
Signature Guarantee.
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<PAGE>
GUARANTEE
Anvil Holdings, Inc., a Delaware corporation ("Holdings"), which term
includes any successors or assigns under the Indenture (the "Indenture") hereby
irrevocably and unconditionally guarantees (i) the due and punctual payment of
the principal of, premium, if any, and interest and Liquidated Damages on the
10-7/8% Senior Notes due 2007 (the "Senior Notes") of Anvil Knitwear, Inc., a
Delaware corporation ("Anvil"), whether at stated maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal,
and premium if any, and (to the extent permitted by law) interest on any
interest, if any, on the Senior Notes, and the due and punctual performance of
all other obligations of Anvil, to the Holders or the Trustee all in accordance
with the terms set forth in Article 10 of the Indenture, (ii) in case of any
extension of time of payment or renewal of any Senior Notes or any such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise, and (iii) the payment of any and all
costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee or any Holder in enforcing any rights under this Guarantee.
The obligations of Holdings to the Holders and to the Trustee pursuant
to this Guarantee and the Indenture are expressly set forth in Article 10 of the
Indenture and reference is hereby made to such Indenture for the precise terms
of this Guarantee.
No stockholder, officer, director or incorporator, as such, past,
present or future of Holdings shall have any liability under this Guarantee by
reason of his or its status as such stockholder, officer, director or
incorporator.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon Holdings and its successors and assigns until
full and final payment of all of Anvil's obligations under the Senior Notes and
Indenture and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders, and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof. This is a
Guarantee of payment and not of collectibility.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Senior Note upon which this Guarantee
is noted shall have been executed by the Trustee under the Indenture by the
manual signature of one of its authorized officers.
<PAGE>
THE TERMS OF ARTICLE 10 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS GUARANTEE, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Dated as of March 14, 1997 ANVIL HOLDINGS, INC.
By: ______________________________
Name:
Title:
ATTEST: _____________________
2
<PAGE>
SUBSIDIARY GUARANTEE
The Subsidiary Guarantor(s) listed below (hereinafter referred to as
the "Subsidiary Guarantors," which term includes any successors or assigns under
the Indenture (the "Indenture") and any additional Subsidiary Guarantors),
hereby irrevocably and unconditionally guarantee (i) the due and punctual
payment of the principal of, premium, if any, and interest and Liquidated
Damages on the 10-7/8% Senior Notes due 2007 (the "Senior Notes") of Anvil
Knitwear, Inc., a Delaware corporation, whether at stated maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal, and premium if any, and (to the extent permitted by law)
interest on any interest, if any, on the Senior Notes, and the due and punctual
performance of all other obligations of the Company, to the Holders or the
Trustee all in accordance with the terms set forth in Article 11 of the
Indenture, (ii) in case of any extension of time of payment or renewal of any
Senior Notes or any such other obligations, that the same will be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise, and (iii) the
payment of any and all costs and expenses (including reasonable attorneys' fees)
incurred by the Trustee or any Holder in enforcing any rights under this
Subsidiary Guarantee.
The obligations of each Subsidiary Guarantor to the Holders and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 11 of the Indenture and reference is hereby made to such
Indenture for the precise terms of this Guarantee.
No stockholder, officer, director or incorporator, as such, past,
present or future of each Subsidiary Guarantor shall have any liability under
this Subsidiary Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon each Subsidiary Guarantor and its successors
and assigns until full and final payment of all of the Company's obligations
under the Senior Notes and Indenture and shall inure to the benefit of the
successors and assigns of the Trustee and the Holders, and, in the event of any
transfer or assignment of rights by any Holder or the Trustee, the rights and
privileges herein conferred upon that party shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and conditions
hereof. This is a Guarantee of payment and not of collectibility.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Senior Note upon which
this Subsidiary Guarantee is noted shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized officers.
The Obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee shall be limited to the extent necessary to insure that it does not
constitute a fraudulent conveyance under applicable law.
<PAGE>
THE TERMS OF ARTICLE 11 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS GUARANTEE, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Dated as of March 14, 1997
COTTONTOPS, INC.
By: __________________________
Name:
Title:
ATTEST:_____________________
2
<PAGE>
Unless and until it is exchanged in whole or in part for Senior Notes
in definitive form, this Senior Note may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede & Co.
or such other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.
<PAGE>
10-7/8% SERIES B SENIOR
NOTES DUE 2007
ANVIL KNITWEAR, INC.
AI GLOBAL SENIOR NOTE
CUSIP No. 03734PAC5
No. 1 $500,000
ANVIL KNITWEAR, INC. promise to pay to Cede & Co. or registered assigns,
the principal sum of Five Hundred Thousand Dollars on March 15, 2007.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Reference is hereby made to the further provisions of this Senior Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Dated: July __, 1997
ANVIL KNITWEAR, INC.
By:____________________________________
Name: Bernard Geller
Title: Chief Executive Officer
By:____________________________________
Name: Jacob Hollander
Title: Executive Vice President
Certificate of Authentication:
This is one of the Senior Notes
referred to in the within-mentioned Indenture:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:________________________
Authorized Signatory
Dated: July __, 1997
2
<PAGE>
10-7/8% SERIES B SENIOR
NOTES DUE 2007
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Anvil Knitwear, Inc., a Delaware corporation
("Anvil") promises to pay interest on the principal amount of this Senior
Note at 10-7/8% per annum from July __, 1997 until maturity. Anvil will pay
interest semi-annually in arrears on March 15 and September 15 of each year,
or if any such day is not a Business Day, on the next succeeding Business Day
(each an "Interest Payment Date"). Interest on the Senior Notes will accrue
from the most recent date to which interest has been paid or, if no interest
has been paid, from the date of issuance; PROVIDED that if there is no
existing Default in the payment of interest, and if this Senior Note is
authenticated between a record date referred to on the face hereof and the
next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; PROVIDED, FURTHER, that the first Interest
Payment Date shall be September 15, 1997. Anvil shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is
1% per annum in excess of the rate then in effect; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law)
on overdue installments of interest (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. METHOD OF PAYMENT. Anvil will pay interest on the Senior Notes
(except defaulted interest) to the Persons who are registered Holders of
Senior Notes at the close of business on the March 1 or September 1 next
preceding the Interest Payment Date, even if such Senior Notes are cancelled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Senior Notes will be payable as to principal, premium and interest at
the office or agency of Anvil maintained for such purpose within the City and
State of New York, or, at the option of Anvil, payment of interest may be
made by check mailed to the Holders at their addresses set forth in the
register of Holders, PROVIDED that payment by wire transfer of immediately
available funds will be required with respect to principal, interest and
premium, if any, on all Global Senior Notes and all other Senior Notes the
Holders of which shall have provided wire transfer instructions to Anvil or
the Paying Agent. Such payment shall be in such coin or currency of the
United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee under the
Indenture, will act as Paying Agent and Registrar. Anvil may change any
Paying Agent or Registrar without notice to any Holder. Anvil or any of its
Subsidiaries may act in any such capacity.
4. INDENTURE. Anvil issued the Senior Notes under an Indenture
dated as of March 14, 1997 ("Indenture") among Anvil, Anvil Holdings, Inc.,
Cottontops, Inc. and the other Subsidiary Guarantors (as defined therein) and
the Trustee. The terms of the Senior Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The
Senior Notes are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms.
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The Senior Notes are unsecured obligations of Anvil limited to $130.0 million
in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in clause 5(b) of this Senior Note, the
Senior Notes will not be redeemable at Anvil's option prior to March 15,
2002. Thereafter, the Senior Notes will be subject to redemption for cash at
the option of Anvil, in whole or in part, upon not less than 30 nor more than
60 days' notice, to each holder of Senior Notes to be redeemed at the
following redemption prices (expressed as percentages of principal amount
thereof), if redeemed during the twelve-month period beginning on March 15 of
each of the years indicated below, in each case together with any accrued and
unpaid interest thereon to the applicable redemption date:
YEAR PERCENTAGE
2002. . . . . . . . . . . . .105.438%
2003. . . . . . . . . . . . .103.625%
2004. . . . . . . . . . . . .101.813%
2005 and thereafter . . . . .100.000%
(b) Notwithstanding the provisions of clause 5(a) of this Senior
Note, at any time on or before March 15, 2000, Anvil may (but will not have
the obligation to) redeem for cash up to 40% of the original aggregate
principal amount of the Senior Notes at a redemption price of 110% of the
principal amount thereof, in each case plus any accrued and unpaid interest
thereon to the redemption date, with the net proceeds of a Public Equity
Offering; PROVIDED that at least 60% of the original aggregate principal
amount of the Senior Notes remains outstanding immediately after the
occurrence of such redemption; and PROVIDED, FURTHER, that such redemption
will occur within 60 days of the date of the closing of such Public Equity
Offering.
(c) Notices of redemption will be mailed by first class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Senior Notes are to be redeemed at its registered address.
Senior Notes in denominations larger than $1,000 may be redeemed in part but
only in integral multiples of $1,000, unless all of the Senior Notes held by
a Holder are to be redeemed. Unless Anvil defaults in making such redemption
payment, on and after the redemption date interest ceases to accrue on Senior
Notes or portions thereof called for redemption.
6. MANDATORY REDEMPTION. Anvil shall not be required to make any
mandatory redemption, purchase or sinking fund payments with respect to the
Senior Notes prior to the maturity date.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of
Senior Notes will have the right to require Anvil to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's
Senior Notes pursuant to the offer described below (the "Change of Control
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<PAGE>
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon to the date of
purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, Anvil will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and
offering to repurchase Senior Notes pursuant to the procedures required by
the Indenture and described in such notice. Anvil will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Senior Notes as a result
of a Change of Control.
On the Change of Control Purchase Date, Anvil will, to the extent
lawful, (1) accept for payment all Senior Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Senior
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by Anvil. The Paying Agent will promptly mail to each
Holder of Senior Notes so tendered the Change of Control Payment for such Senior
Notes, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Senior Note equal in principal
amount to any unpurchased portion of the Senior Notes surrendered, if any;
PROVIDED that each such new Senior Note will be in a principal amount of $1,000
or an integral multiple thereof. Anvil will publicly announce the results of
the Change of Control Offer on the Change of Control Purchase Date.
(b) Anvil will not, and will not permit any of its Restricted
Subsidiaries to, engage in an Asset Sale in excess of $1.0 million unless (i)
Anvil (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair
market value, and in the case of a lease of assets, a lease providing for
rent and other conditions which are no less favorable to Anvil (or the
Restricted Subsidiary, as the case may be) in any material respect than the
then prevailing market conditions (evidenced in each case by a resolution of
the Board of Directors of such entity set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests sold or otherwise
disposed of, and (ii) at least 80% (100% in the case of lease payments) of
the consideration therefor received by Anvil or such Restricted Subsidiary is
in the form of cash or Cash Equivalents; PROVIDED that the amount of (x) any
liabilities (as shown on Anvil's or such Restricted Subsidiary's most recent
balance sheet or in the notes thereto, excluding contingent liabilities and
trade payables), of Anvil or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Senior Notes, or any
guarantee thereof) that are assumed by the transferee of any such assets and
(y) any notes or other obligations received by Anvil or any such Restricted
Subsidiary from such transferee that are promptly, but in no event more than
30 days after receipt, converted by Anvil or such Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, Anvil may apply such Net Proceeds (a) to reduce permanently long-term
Indebtedness of a Restricted Subsidiary, (b) to reduce permanently Indebtedness
(and, in the case of revolving Indebtedness, to reduce permanently the
commitments) under the New Credit Agreement, or (c) to an investment in another
business, the making of a capital expenditure or the acquisition of other
tangible assets, in each case, in the same or a similar line of business as
Anvil was engaged in on the date of the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the
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<PAGE>
preceding sentence of this paragraph will be deemed to constitute "Excess
Proceeds." On the earlier of (i) the 366th day after an Asset Sale or (ii)
such date as the Board of Anvil or the Restricted Subsidiary determines not
to apply the Net Proceeds relating to such Asset Sale in the manner set forth
in (a), (b) or (c), if the aggregate amount of Excess Proceeds exceeds $5.0
million, Anvil will be required to make an offer to all Holders of Senior
Notes (an "Asset Sale Offer") to purchase the maximum principal amount of
Senior Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon to the date of purchase, in accordance
with the procedures set forth in the Indenture. To the extent that the
aggregate amount of Senior Notes tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, Anvil may use any remaining Excess Proceeds
for general corporate purposes. If the aggregate principal amount of Senior
Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds,
the Trustee shall select the Senior Notes to be purchased on a pro rata
basis. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and
Senior Notes may be exchanged as provided in the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and Anvil may require a
Holder to pay any taxes and fees required by law or permitted by the
Indenture. Anvil need not exchange or register the transfer of any Senior
Note or portion of a Senior Note selected for redemption, except for the
unredeemed portion of any Senior Note being redeemed in part. Also, it need
not exchange or register the transfer of any Senior Notes for a period of 15
days before a selection of Senior Notes to be redeemed or during the period
between a record date and the corresponding Interest Payment Date.
9. PERSONS DEEMED OWNERS. The registered Holder of a Senior Note
may be treated as its owner for all purposes.
10. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Senior Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the Senior Notes then outstanding (including consents obtained in connection
with a tender offer or exchange offer for Senior Notes), and any existing
default or compliance with any provision of the Indenture or the Senior Notes
may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Senior Notes. Without the consent of any
Holder of a Senior Note, the Indenture or the Senior Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Senior Notes in addition to or in place of certificated Senior
Notes, to provide for the assumption of Anvil's obligations to Holders of the
Senior Notes in case of a merger or consolidation, to make any change that
would provide any additional rights or benefits to the Holders of the Senior
Notes or that does not adversely affect the legal rights under the Indenture
of any such Holder, or to comply with the requirements of the Commission in
order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
11. DEFAULTS AND REMEDIES. Events of Default include: (i) default
for 30 days in the payment when due of interest on the Senior Notes; (ii)
default in payment when due of the principal of or premium, if any, on the
Senior Notes; (iii) failure by Anvil to comply with Section
6
<PAGE>
4.7, 4.8, 4.9, 4.10, 4.11 or 5.1 of the Indenture; (iv) failure by Anvil for
60 days after notice to comply with any of its other agreements in the
Indenture or the Senior Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by Anvil or any of its
Restricted Subsidiaries or Holdings (or the payment of which is guaranteed by
Anvil or any of its Restricted Subsidiaries or Holdings) whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of
the grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $5.0 million or more; (vi) failure
by Anvil or any of its Restricted Subsidiaries or Holdings to pay final
judgments aggregating in excess of $3.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days; (vii) except as permitted
by the Indenture, any Subsidiary Guarantee will be held in any judicial
proceeding to be unenforceable or invalid or will cease for any reason to be
in full force and effect or any Subsidiary Guarantor, or any Person acting on
behalf of any Subsidiary Guarantor, will deny or disaffirm its obligations
under the Subsidiary Guarantee; (viii) the Guarantee will be held in any
judicial proceeding to be unenforceable or invalid or will cease for any
reason to be in full force and effect or Holdings, or any Person acting on
behalf of Holdings, will deny or disaffirm its obligations under the
Guarantee and (ix) certain events of bankruptcy or insolvency with respect to
Holdings, Anvil or any of its Significant Subsidiaries or group of Restricted
Subsidiaries that, together, would constitute a Significant Subsidiary. If
any Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the then outstanding Senior Notes may
declare all the Senior Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising
from certain events of bankruptcy or insolvency with respect to Holdings,
Anvil, any Significant Subsidiary or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Senior
Notes will become due and payable without further action or notice. Holders
of the Senior Notes may not enforce the Indenture or the Senior Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Senior Notes may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders of the Senior Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the
Senior Notes then outstanding by notice to the Trustee may on behalf of the
Holders of all of the Senior Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default
or Event of Default in the payment of interest on, or the principal of,
premium on the Senior Notes. Anvil is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture, and Anvil is
required upon becoming aware of any Default or Event of Default, to deliver
to the Trustee a statement specifying such Default or Event of Default.
12. TRUSTEE DEALINGS WITH ANVIL. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for Anvil or its Affiliates, and may otherwise deal with Anvil or
its Affiliates, as if it were not the Trustee.
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<PAGE>
13. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of Anvil, as such, shall not have any liability
for any obligations of Anvil under the Senior Notes or the Indenture or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Senior Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Senior Notes.
14. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS EXCHANGE DEBENTURE, WITHOUT REGARD TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.
15. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, Anvil has caused
CUSIP numbers to be printed on the Senior Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Senior Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
Anvil will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Anvil Knitwear, Inc.
228 East 45th Street
New York, New York 10017
Attention: Jacob Hollander
Telephone No.: (212) 476-0352
Telecopier No.: (212) 885-9411
* * * * *
8
<PAGE>
SCHEDULE OF CHANGES IN PRINCIPAL AMOUNT OF NOTE
The following changes in the principal amount of this Global Senior
Note have been recorded:
<TABLE>
<CAPTION>
Principal Amount of this
Amount of decrease in Amount of increase in Global Senior Note Signature of
Principal Amount of Principal Amount of following such decrease authorized officer of
Date of Transaction this Global Senior Note this Global Senior Note (or increase) Trustee
- ------------------- ----------------------- ----------------------- ------------------------ ---------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
ASSIGNMENT FORM
For value received, I or we assign and transfer this Senior Note to
________________________________________________________________________
________________________________________________________________________
(Print or type name, address and zip code of assignee)
________________________________________________________________________
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint ________________________ agent to transfer this Senior
Note on the books of Anvil. The agent may substitute another to act for him.
Date: __________________________
Your Signature: ______________________
(Sign exactly as your name appears on the
face of this Senior Note)
Signature Guarantee: _______________________________
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Senior Note purchased by Anvil
pursuant to Section 4.7 or 4.8 of the Indenture, check the box below:
/ / Section 4.7 / / Section 4.8
If you want to elect to have only part of the Senior Note purchased by
Anvil pursuant to Section 4.7 or Section 4.8 of the Indenture, state the amount
you elect to have purchased: $__________________
Date:____________________ Your Signature:_______________________________
(Sign exactly as your name appears on the Senior Note)
Tax Identification No.:_________________________
Signature Guarantee:__________________________________
<PAGE>
Unless and until it is exchanged in whole or in part for Senior Notes
in definitive form, this Senior Note may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede & Co.
or such other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.
<PAGE>
10-7/8% SERIES B SENIOR
NOTES DUE 2007
ANVIL KNITWEAR, INC.
CUSIP No. 03734PAC5
No. 1 $129,500,000
ANVIL KNITWEAR, INC. promises to pay to Cede & Co. or registered assigns,
the principal sum of One Hundred and Twenty-Nine Million Five Hundred Thousand
Dollars on March 15, 2007.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Reference is hereby made to the further provisions of this Senior Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Dated: July __, 1997
ANVIL KNITWEAR, INC.
By:____________________________________
Name: Bernard Geller
Title: Chief Executive Officer
By:____________________________________
Name: Jacob Hollander
Title: Executive Vice President
Certificate of Authentication:
This is one of the Senior Notes
referred to in the within-mentioned Indenture:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:________________________
Authorized Signatory
Dated: July __, 1997
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<PAGE>
10-7/8% SERIES B SENIOR
NOTES DUE 2007
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Anvil Knitwear, Inc., a Delaware corporation
("Anvil") promises to pay interest on the principal amount of this Senior
Note at 10-7/8% per annum from July __, 1997 until maturity. Anvil will pay
interest semi-annually in arrears on March 15 and September 15 of each year,
or if any such day is not a Business Day, on the next succeeding Business Day
(each an "Interest Payment Date"). Interest on the Senior Notes will accrue
from the most recent date to which interest has been paid or, if no interest
has been paid, from the date of issuance; PROVIDED that if there is no
existing Default in the payment of interest, and if this Senior Note is
authenticated between a record date referred to on the face hereof and the
next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; PROVIDED, FURTHER, that the first Interest
Payment Date shall be September 15, 1997. Anvil shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is
1% per annum in excess of the rate then in effect; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law)
on overdue installments of interest (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. METHOD OF PAYMENT. Anvil will pay interest on the Senior Notes
(except defaulted interest) to the Persons who are registered Holders of
Senior Notes at the close of business on the March 1 or September 1 next
preceding the Interest Payment Date, even if such Senior Notes are cancelled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Senior Notes will be payable as to principal, premium and interest at
the office or agency of Anvil maintained for such purpose within the City and
State of New York, or, at the option of Anvil, payment of interest may be
made by check mailed to the Holders at their addresses set forth in the
register of Holders, PROVIDED that payment by wire transfer of immediately
available funds will be required with respect to principal, interest and
premium, if any, on all Global Senior Notes and all other Senior Notes the
Holders of which shall have provided wire transfer instructions to Anvil or
the Paying Agent. Such payment shall be in such coin or currency of the
United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee under the
Indenture, will act as Paying Agent and Registrar. Anvil may change any
Paying Agent or Registrar without notice to any Holder. Anvil or any of its
Subsidiaries may act in any such capacity.
4. INDENTURE. Anvil issued the Senior Notes under an Indenture
dated as of March 14, 1997 ("Indenture") among Anvil, Anvil Holdings, Inc.,
Cottontops, Inc. and the other Subsidiary Guarantors (as defined therein) and
the Trustee. The terms of the Senior Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The
Senior Notes are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. The
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Senior Notes are unsecured obligations of Anvil limited to $130.0 million in
aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in clause 5(b) of this Senior Note, the
Senior Notes will not be redeemable at Anvil's option prior to March 15,
2002. Thereafter, the Senior Notes will be subject to redemption for cash at
the option of Anvil, in whole or in part, upon not less than 30 nor more than
60 days' notice, to each holder of Senior Notes to be redeemed at the
following redemption prices (expressed as percentages of principal amount
thereof), if redeemed during the twelve-month period beginning on March 15 of
each of the years indicated below, in each case together with any accrued and
unpaid interest thereon to the applicable redemption date:
YEAR PERCENTAGE
2002. . . . . . . . . . . . .105.438%
2003. . . . . . . . . . . . .103.625%
2004. . . . . . . . . . . . .101.813%
2005 and thereafter . . . . .100.000%
(b) Notwithstanding the provisions of clause 5(a) of this Senior
Note, at any time on or before March 15, 2000, Anvil may (but will not have
the obligation to) redeem for cash up to 40% of the original aggregate
principal amount of the Senior Notes at a redemption price of 110% of the
principal amount thereof, in each case plus any accrued and unpaid interest
thereon to the redemption date, with the net proceeds of a Public Equity
Offering; PROVIDED that at least 60% of the original aggregate principal
amount of the Senior Notes remains outstanding immediately after the
occurrence of such redemption; and PROVIDED, FURTHER, that such redemption
will occur within 60 days of the date of the closing of such Public Equity
Offering.
(c) Notices of redemption will be mailed by first class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Senior Notes are to be redeemed at its registered address.
Senior Notes in denominations larger than $1,000 may be redeemed in part but
only in integral multiples of $1,000, unless all of the Senior Notes held by
a Holder are to be redeemed. Unless Anvil defaults in making such redemption
payment, on and after the redemption date interest ceases to accrue on Senior
Notes or portions thereof called for redemption.
6. MANDATORY REDEMPTION. Anvil shall not be required to make any
mandatory redemption, purchase or sinking fund payments with respect to the
Senior Notes prior to the maturity date.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of
Senior Notes will have the right to require Anvil to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's
Senior Notes pursuant to the offer described below (the "Change of Control
4
<PAGE>
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon to the date of
purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, Anvil will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and
offering to repurchase Senior Notes pursuant to the procedures required by
the Indenture and described in such notice. Anvil will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Senior Notes as a result
of a Change of Control.
On the Change of Control Purchase Date, Anvil will, to the extent
lawful, (1) accept for payment all Senior Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Senior
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by Anvil. The Paying Agent will promptly mail to each
Holder of Senior Notes so tendered the Change of Control Payment for such Senior
Notes, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Senior Note equal in principal
amount to any unpurchased portion of the Senior Notes surrendered, if any;
PROVIDED that each such new Senior Note will be in a principal amount of $1,000
or an integral multiple thereof. Anvil will publicly announce the results of
the Change of Control Offer on the Change of Control Purchase Date.
(b) Anvil will not, and will not permit any of its Restricted
Subsidiaries to, engage in an Asset Sale in excess of $1.0 million unless (i)
Anvil (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair
market value, and in the case of a lease of assets, a lease providing for
rent and other conditions which are no less favorable to Anvil (or the
Restricted Subsidiary, as the case may be) in any material respect than the
then prevailing market conditions (evidenced in each case by a resolution of
the Board of Directors of such entity set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests sold or otherwise
disposed of, and (ii) at least 80% (100% in the case of lease payments) of
the consideration therefor received by Anvil or such Restricted Subsidiary is
in the form of cash or Cash Equivalents; PROVIDED that the amount of (x) any
liabilities (as shown on Anvil's or such Restricted Subsidiary's most recent
balance sheet or in the notes thereto, excluding contingent liabilities and
trade payables), of Anvil or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Senior Notes, or any
guarantee thereof) that are assumed by the transferee of any such assets and
(y) any notes or other obligations received by Anvil or any such Restricted
Subsidiary from such transferee that are promptly, but in no event more than
30 days after receipt, converted by Anvil or such Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, Anvil may apply such Net Proceeds (a) to reduce permanently long-term
Indebtedness of a Restricted Subsidiary, (b) to reduce permanently Indebtedness
(and, in the case of revolving Indebtedness, to reduce permanently the
commitments) under the New Credit Agreement, or (c) to an investment in another
business, the making of a capital expenditure or the acquisition of other
tangible assets, in each case, in the same or a similar line of business as
Anvil was engaged in on the date of the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the
5
<PAGE>
preceding sentence of this paragraph will be deemed to constitute "Excess
Proceeds." On the earlier of (i) the 366th day after an Asset Sale or (ii)
such date as the Board of Anvil or the Restricted Subsidiary determines not
to apply the Net Proceeds relating to such Asset Sale in the manner set forth
in (a), (b) or (c), if the aggregate amount of Excess Proceeds exceeds $5.0
million, Anvil will be required to make an offer to all Holders of Senior
Notes (an "Asset Sale Offer") to purchase the maximum principal amount of
Senior Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon to the date of purchase, in accordance
with the procedures set forth in the Indenture. To the extent that the
aggregate amount of Senior Notes tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, Anvil may use any remaining Excess Proceeds
for general corporate purposes. If the aggregate principal amount of Senior
Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds,
the Trustee shall select the Senior Notes to be purchased on a pro rata
basis. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and
Senior Notes may be exchanged as provided in the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and Anvil may require a
Holder to pay any taxes and fees required by law or permitted by the
Indenture. Anvil need not exchange or register the transfer of any Senior
Note or portion of a Senior Note selected for redemption, except for the
unredeemed portion of any Senior Note being redeemed in part. Also, it need
not exchange or register the transfer of any Senior Notes for a period of 15
days before a selection of Senior Notes to be redeemed or during the period
between a record date and the corresponding Interest Payment Date.
9. PERSONS DEEMED OWNERS. The registered Holder of a Senior Note
may be treated as its owner for all purposes.
10. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Senior Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the Senior Notes then outstanding (including consents obtained in connection
with a tender offer or exchange offer for Senior Notes), and any existing
default or compliance with any provision of the Indenture or the Senior Notes
may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Senior Notes. Without the consent of any
Holder of a Senior Note, the Indenture or the Senior Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Senior Notes in addition to or in place of certificated Senior
Notes, to provide for the assumption of Anvil's obligations to Holders of the
Senior Notes in case of a merger or consolidation, to make any change that
would provide any additional rights or benefits to the Holders of the Senior
Notes or that does not adversely affect the legal rights under the Indenture
of any such Holder, or to comply with the requirements of the Commission in
order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
11. DEFAULTS AND REMEDIES. Events of Default include: (i) default
for 30 days in the payment when due of interest on the Senior Notes; (ii)
default in payment when due of the principal of or premium, if any, on the
Senior Notes; (iii) failure by Anvil to comply with Section
6
<PAGE>
4.7, 4.8, 4.9, 4.10, 4.11 or 5.1 of the Indenture; (iv) failure by Anvil for
60 days after notice to comply with any of its other agreements in the
Indenture or the Senior Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by Anvil or any of its
Restricted Subsidiaries or Holdings (or the payment of which is guaranteed by
Anvil or any of its Restricted Subsidiaries or Holdings) whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of
the grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $5.0 million or more; (vi) failure
by Anvil or any of its Restricted Subsidiaries or Holdings to pay final
judgments aggregating in excess of $3.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days; (vii) except as permitted
by the Indenture, any Subsidiary Guarantee will be held in any judicial
proceeding to be unenforceable or invalid or will cease for any reason to be
in full force and effect or any Subsidiary Guarantor, or any Person acting on
behalf of any Subsidiary Guarantor, will deny or disaffirm its obligations
under the Subsidiary Guarantee; (viii) the Guarantee will be held in any
judicial proceeding to be unenforceable or invalid or will cease for any
reason to be in full force and effect or Holdings, or any Person acting on
behalf of Holdings, will deny or disaffirm its obligations under the
Guarantee and (ix) certain events of bankruptcy or insolvency with respect to
Holdings, Anvil or any of its Significant Subsidiaries or group of Restricted
Subsidiaries that, together, would constitute a Significant Subsidiary. If
any Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the then outstanding Senior Notes may
declare all the Senior Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising
from certain events of bankruptcy or insolvency with respect to Holdings,
Anvil, any Significant Subsidiary or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Senior
Notes will become due and payable without further action or notice. Holders
of the Senior Notes may not enforce the Indenture or the Senior Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Senior Notes may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders of the Senior Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the
Senior Notes then outstanding by notice to the Trustee may on behalf of the
Holders of all of the Senior Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default
or Event of Default in the payment of interest on, or the principal of,
premium on the Senior Notes. Anvil is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture, and Anvil is
required upon becoming aware of any Default or Event of Default, to deliver
to the Trustee a statement specifying such Default or Event of Default.
12. TRUSTEE DEALINGS WITH ANVIL. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for Anvil or its Affiliates, and may otherwise deal with Anvil or
its Affiliates, as if it were not the Trustee.
7
<PAGE>
13. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of Anvil, as such, shall not have any liability
for any obligations of Anvil under the Senior Notes or the Indenture or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Senior Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Senior Notes.
14. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS EXCHANGE DEBENTURE, WITHOUT REGARD TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.
15. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, Anvil has caused
CUSIP numbers to be printed on the Senior Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Senior Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
Anvil will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Anvil Knitwear, Inc.
228 East 45th Street
New York, New York 10017
Attention: Jacob Hollander
Telephone No.: (212) 476-0352
Telecopier No.: (212) 885-9411
* * * * *
8
<PAGE>
SCHEDULE OF CHANGES IN PRINCIPAL AMOUNT OF NOTE
The following changes in the principal amount of this Global Senior
Note have been recorded:
<TABLE>
<CAPTION>
Principal Amount of this
Amount of decrease in Amount of increase in Global Senior Note Signature of
Principal Amount of Principal Amount of following such decrease authorized officer of
Date of Transaction this Global Senior Note this Global Senior Note (or increase) Trustee
- ------------------- ----------------------- ----------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
ASSIGNMENT FORM
For value received, I or we assign and transfer this Senior Note to
___________________________________________________________________________
___________________________________________________________________________
(Print or type name, address and zip code of assignee)
___________________________________________________________________________
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint ________________________ agent to transfer this Senior
Note on the books of Anvil. The agent may substitute another to act for him.
Date: __________________________
Your Signature: ______________________
(Sign exactly as your name appears on the
face of this Senior Note)
Signature Guarantee: _______________________________
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Senior Note purchased by Anvil
pursuant to Section 4.7 or 4.8 of the Indenture, check the box below:
/ / Section 4.7 / / Section 4.8
If you want to elect to have only part of the Senior Note purchased by
Anvil pursuant to Section 4.7 or Section 4.8 of the Indenture, state the amount
you elect to have purchased: $__________________
Date:____________________ Your Signature:_______________________________
(Sign exactly as your name appears on the Senior Note)
Tax Identification No.:_________________________
Signature Guarantee:__________________________________
<PAGE>
GUARANTEE
Anvil Holdings, Inc., a Delaware corporation ("Holdings"), which term
includes any successors or assigns under the Indenture (the "Indenture") hereby
irrevocably and unconditionally guarantees (i) the due and punctual payment of
the principal of, premium, if any, and interest on the 10-7/8% Series B Senior
Notes due 2007 (the "Senior Notes") of Anvil Knitwear, Inc., a Delaware
corporation ("Anvil"), whether at stated maturity, by acceleration or otherwise,
the due and punctual payment of interest on the overdue principal, and premium
if any, and (to the extent permitted by law) interest on any interest, if any,
on the Senior Notes, and the due and punctual performance of all other
obligations of Anvil, to the Holders or the Trustee all in accordance with the
terms set forth in Article 10 of the Indenture, (ii) in case of any extension of
time of payment or renewal of any Senior Notes or any such other obligations,
that the same will be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise, and (iii) the payment of any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Guarantee.
The obligations of Holdings to the Holders and to the Trustee pursuant
to this Guarantee and the Indenture are expressly set forth in Article 10 of the
Indenture and reference is hereby made to such Indenture for the precise terms
of this Guarantee.
No stockholder, officer, director or incorporator, as such, past,
present or future of Holdings shall have any liability under this Guarantee by
reason of his or its status as such stockholder, officer, director or
incorporator.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon Holdings and its successors and assigns until
full and final payment of all of Anvil's obligations under the Senior Notes and
Indenture and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders, and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof. This is a
Guarantee of payment and not of collectibility.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Senior Note upon which this Guarantee
is noted shall have been executed by the Trustee under the Indenture by the
manual signature of one of its authorized officers.
THE TERMS OF ARTICLE 10 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS GUARANTEE, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.
<PAGE>
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Dated as of July __, 1997 ANVIL HOLDINGS, INC.
By: ______________________________
Name: Bernard Geller
Title: President
ATTEST: ________________________
Jacob Hollander
2
<PAGE>
SUBSIDIARY GUARANTEE
The Subsidiary Guarantor(s) listed below (hereinafter referred to as
the "Subsidiary Guarantors," which term includes any successors or assigns under
the Indenture (the "Indenture") and any additional Subsidiary Guarantors),
hereby irrevocably and unconditionally guarantee (i) the due and punctual
payment of the principal of, premium, if any, and interest on the 10-7/8% Series
B Senior Notes due 2007 (the "Senior Notes") of Anvil Knitwear, Inc., a Delaware
corporation, whether at stated maturity, by acceleration or otherwise, the due
and punctual payment of interest on the overdue principal, and premium if any,
and (to the extent permitted by law) interest on any interest, if any, on the
Senior Notes, and the due and punctual performance of all other obligations of
the Company, to the Holders or the Trustee all in accordance with the terms set
forth in Article 11 of the Indenture, (ii) in case of any extension of time of
payment or renewal of any Senior Notes or any such other obligations, that the
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise, and (iii) the payment of any and all costs and expenses (including
reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing
any rights under this Subsidiary Guarantee.
The obligations of each Subsidiary Guarantor to the Holders and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 11 of the Indenture and reference is hereby made to such
Indenture for the precise terms of this Guarantee.
No stockholder, officer, director or incorporator, as such, past,
present or future of each Subsidiary Guarantor shall have any liability under
this Subsidiary Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon each Subsidiary Guarantor and its successors
and assigns until full and final payment of all of the Company's obligations
under the Senior Notes and Indenture and shall inure to the benefit of the
successors and assigns of the Trustee and the Holders, and, in the event of any
transfer or assignment of rights by any Holder or the Trustee, the rights and
privileges herein conferred upon that party shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and conditions
hereof. This is a Guarantee of payment and not of collectibility.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Senior Note upon which
this Subsidiary Guarantee is noted shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized officers.
The Obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee shall be limited to the extent necessary to insure that it does not
constitute a fraudulent conveyance under applicable law.
THE TERMS OF ARTICLE 11 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
<PAGE>
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS GUARANTEE, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Dated as of July __, 1997
COTTONTOPS, INC.
By: __________________________
Name: Bernard Geller
Title: Chairman of the Board
ATTEST:_____________________
Jacob Hollander
2
<PAGE>
Asset Purchase Agreement
among
McGregor Corporation, Winston Mills, Inc.
Anvil Knitwear (Del.), Inc., Anvil
Knitwear, Inc. and Anvil Holdings, Inc.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS........................................................1
ARTICLE 2 PURCHASE AND SALE OF ASSETS.......................................32
2.1 Purchase and Sale.................................................32
2.2 Assumption of Liabilities and Obligations.........................36
2.3 Assignment of Contracts...........................................38
2.4 Purchase Price....................................................39
2.5 Adjustment of Cash Purchase Price; Estimate.......................39
2.6 Closing...........................................................45
2.7 Deliveries at the Closing.........................................45
ARTICLE 3 REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES............47
3.1 Organization and Good Standing of the Companies...................47
3.2 Interests in the Assets...........................................48
3.3 Capital Stock of Anvil Knitwear (Del.), Inc.......................48
3.4 Authority, Approvals and Consents.................................49
3.5 Financial Statements..............................................51
3.6 Absence of Material Adverse Change: Conduct of Business...........52
3.7 Legal Matters.....................................................53
3.8 Contracts.........................................................55
3.9 Employees.........................................................57
3.10 Employee Benefit Plans............................................58
3.11 Intellectual Property.............................................60
3.12 Brokers...........................................................61
3.13 Permits...........................................................62
3.14 Environmental Representation......................................62
3.15 Undisclosed Liabilities...........................................64
3.16 Business of Anvil Knitwear (Del.), Inc............................65
3.17 Taxes.............................................................66
3.18 No Other Representations or Warranties............................66
3.19 Affiliate Transactions............................................66
3.20 Payments from Anvil s.r.o.........................................67
ARTICLE 4 REPRESENTATIONS AND WARRANTIES REGARDING BUYER....................67
4.1 Organization and Good Standing of Buyer...........................68
4.2 Authority, Approvals and Consents.................................68
4.3 Brokers...........................................................70
4.4 Litigation........................................................70
4.5 Business of Holdings..............................................70
4.6 Holdings Stock....................................................70
4.7 Organization and Good Standing of Holdings........................70
i
<PAGE>
4.8 Holdings Authority to Execute and Perform Stockholders'
Agreement, Seller Note, etc.......................................71
4.9 Capitalization, Ownership of Holdings.............................73
4.10 Commitment Letter.................................................73
4.11 Title Insurance...................................................73
ARTICLE 5 COVENANTS.........................................................74
5.1 Access; Confidentiality...........................................74
5.2 Announcements.....................................................75
5.3 Conduct of Business Prior to the Closing..........................75
5.4 Consent; Cooperation..............................................77
5.5 [Intentionally Left Blank]........................................79
5.6 Hart-Scott-Rodino.................................................79
5.7 Further Assurances................................................79
5.8 Allocation of Purchase Price......................................79
5.9 Retention of Books and Records....................................79
5.10 Tax Matters.......................................................81
5.11 Employees.........................................................83
5.12 Notice of Developments............................................87
5.13 Exclusivity.......................................................88
5.14 Confidentiality Non-Solicitation..................................89
5.15 BNY Factoring Agreement...........................................90
5.16 Buyer's Financing and Title Insurance.............................90
5.17 [Intentionally Left Blank]........................................91
5.18 Stockholder's Agreement...........................................91
5.19 Guaranty Agreement................................................91
5.20 Business Interruption Insurance...................................91
5.21 SEC...............................................................92
5.22 Taxes.............................................................93
5.23 Computation of Workers' Compensation Reserve......................93
5.24 Special Procedures in Respect of Certain Environmental
Liabilities.......................................................94
5.25 Revision to Schedule..............................................95
5.26 Workers' Compensation.............................................97
ARTICLE 6 CONDITIONS TO THE OBLIGATIONS OF BUYER............................97
6.1 Representations and Warranties; Covenants.........................97
6.2 Authorization; Consents; Other Matters............................98
6.3 Instruments of Transfer...........................................98
6.4 Certificates......................................................99
6.5 Opinion of Counsel................................................99
6.6 Financing.........................................................99
6.7 Title Insurance and Surveys.......................................99
6.8 Employment Matters...............................................100
ARTICLE 7 CONDITIONS TO THE OBLIGATION OF THE SELLERS......................101
7.1 Representations and Warranties; Covenants........................101
7.2 Authorization; Consents..........................................102
ii
<PAGE>
7.3 Certificates.....................................................102
7.4 Instruments of Assumption........................................102
7.5 Opinion of Counsel...............................................103
ARTICLE 8 TERMINATION......................................................103
8.1 Termination......................................................103
8.2 Effect of Termination............................................105
8.3 Buyer's Knowledge of Sellers' Breach.............................109
8.4 Sellers' Right to Cure...........................................110
ARTICLE 9 SURVIVAL AND INDEMNIFICATION.....................................111
9.1 Survival of Representations, Warranties and Covenants............111
9.2 The Sellers' Indemnification.....................................112
9.3 Buyer's Indemnification..........................................119
9.4 Claims by Third Parties..........................................122
9.5 Environmental Identification Procedures..........................129
ARTICLE 10 MISCELLANEOUS....................................................140
10.1 Expenses.........................................................140
10.2 Headings.........................................................141
10.3 Notices..........................................................141
10.4 Assignment.......................................................142
10.5 Entire Agreement.................................................143
10.6 Amendment; Waiver................................................143
10.7 Counterparts.....................................................144
10.8 Governing Law....................................................144
10.9 Severability.....................................................144
10.10 Consent to Jurisdiction..........................................144
10.11 Third Person Beneficiaries.......................................145
10.12 Representations and Warranties; Schedules........................145
10.13 Arbitration......................................................146
SCHEDULES
Schedule 1.1(i) - Assumed Contracts
Schedule 1.1(ii) - Balance Sheet
Schedule 1.1(iii) - Employee Benefit Plans
Schedule 1.1(iv) - Environmental
Schedule 1.1(vi) - Licensed Intellectual Property
Schedule 1.1(vii) - Licenses and Permits
Schedule 1.1(ix) - Permitted Liens
Schedule 1.1(xi) - Owned Facilities
Schedule 2.1(viii) - Vehicles
Schedule 2.4 - Holdings Assets
Schedule 2.5(a)(i) - Adjustment Statement
Schedule 2.7(b)(iii)- Holdings Stock
Schedule 3.2(a) - Fixed Assets
Schedule 3.4 - Authority, Approvals and Consents
iii
<PAGE>
Schedule 3.5 - Financial Statements
Schedule 3.6 - Material Changes
Schedule 3.7(a) - Litigation
Schedule 3.7(b) - Non-Compliance
Schedule 3.8 - Material Agreements
Schedule 3.9 - Employee Compensation
Schedule 3.11 - Infringement
Schedule 3.19 - Affiliate Transactions
Schedule 4.2 - Contraventions
Schedule 4.3 - Buyer Commissions
Schedule 4.8 - Holdings Contraventions
Schedule 4.9 - Pro Forma Capitalization of Holdings
Schedule 5.23 - Workers' Compensation Methodology
Schedule 6.2 - Authorization; Consents of Seller
Schedule 6.7 - Title Insurance Requirements
Schedule 7.2 - Authorization; Consents of Buyer
EXHIBITS
EXHIBIT A Form of General Conveyance, Bill of Sale and Assignment
EXHIBIT B Form of Assignment and Assumption Instruments
EXHIBIT C [Intentionally Omitted]
EXHIBIT D Form of Deed
EXHIBIT E Form of Trademark Assignment
EXHIBIT F Stockholders, Agreement Term Sheet
EXHIBIT G-1 Culligan Guaranty
EXHIBIT G-2 Vestar Guaranty
EXHIBIT H Form of Seller Note
EXHIBIT I Commitment Letter
EXHIBIT J-1 Willkie Farr & Gallagher Opinion
EXHIBIT J-2 Kirkland & Ellis Opinion
iv
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT dated this 29th day of December, 1994, among McGregor
Corporation, a corporation formed under the laws of the State of New York
("McGregor"), Winston Mills, Inc., a corporation formed under the laws of the
State of Delaware ("Winston Mills", and together with McGregor, each a "Seller"
and collectively the "Sellers"), Anvil Knitwear (Del.), Inc., a corporation
organized under the laws of Delaware, Anvil Knitwear, Inc., a corporation formed
under the laws of the State of Delaware ("Buyer"), and Anvil Holdings, Inc. a
corporation organized under the laws of the State of Delaware ("Holdings").
WHEREAS, the Sellers desire to sell, and the Buyer and Holdings, together,
desire to purchase, all of the Sellers, assets comprising their Anvil Knitwear
division, which designs, manufactures and markets casual knitwear and athletic
wear, on the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the respective
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 In this Agreement (including the recitals hereto) and in the Schedules
and Exhibits hereto, except as expressly provided or as the context otherwise
requires:
<PAGE>
"Accountant" shall mean one of the six major independent certified
public accounting firms in the United States.
"Accounts Receivable" means the accounts receivable of the Sellers
occurring in the conduct of the Business including subject to Section 5.15
hereof amounts due from BNY Financial Corporation in respect of such accounts
receivable.
"Adjustment Statement" shall have the meaning assigned such term in
Section 2.5(a)(i) hereof.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. A Person will be deemed to control another Person if
such Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether through
the ownership of voting securities, partnership interests or other equity
interests, by contract or otherwise.
"Affiliated Group" means an affiliated group as defined in Section
15O4 of the Code (or any analogous combined, consolidated or unitary group
defined under state, local or foreign income Tax law, including Section 1563 of
the Code solely for the purpose of determining employee benefit Liabilities).
"Agreement" means this agreement, including all recitals, Schedules
and Exhibits hereto.
- 2 -
<PAGE>
"Another Transaction" shall have the meaning assigned to such term in
Section 5.13 hereof.
"Anvil Knitwear (Del.), Inc." means Anvil Knitwear (Del.), Inc., a
Delaware corporation.
"Anvil s.r.o." means Anvil s.r.o., a corporation organized under the
laws of the Czech Republic.
"Apollo" means Apollo E Partners, L.P., a limited partnership.
"Appraisal" shall have the meaning assigned such term in Section 5.8
hereof.
"Arbitrator" shall have the meaning assigned to such term in Section
9.2(a) hereof.
"Asheville Property" means all real property owned by Winston Mills
located in Swannanoa, North Carolina.
"Assets" shall have the meaning assigned to such term in Section 2.1
hereof.
"Associate" used to indicate a relationship with any Person means (A)
any corporation, partnership, joint venture or other entity of which such Person
is an officer or general partner or is, directly or indirectly, through one or
more intermediaries, the owner of 10% or more of (1) any class or type of equity
securities or other profits interest or (2) the combined voting power of
interests ordinarily entitled to vote for management or otherwise, and (B) any
trust or other estate in which such Person has a substantial beneficial interest
or as to
- 3 -
<PAGE>
which such Person serves as trustee or in a similar fiduciary capacity.
"Assumed Contracts" means all contracts, agreements, leases, licenses,
instruments and legal commitments of the Sellers relating primarily to the
Business or otherwise used in the conduct of the Business as it is presently
conducted, except those relating solely to Excluded Liabilities, which Assumed
Contracts shall specifically include, without limitation, all the Material
Agreements, Leases, Purchase Orders and Sales Orders, contracts related to the
Employee Benefit Plans which are welfare plans, service contracts, distribution
agreements and all contracts, agreements, leases, licenses, instruments and
legal commitments of the Sellers listed in Schedule 1.1(i).
"Assumed Liabilities" shall have the meaning assigned to such term in
Section 2.2 hereof.
"Astrum" means Astrum International Corporation, a Delaware
corporation.
"Aynor Property" means all real property owned by McGregor Corporation
located in Aynor, South Carolina.
"ENY" means BNY Financial Corporation.
"BNY Factoring Agreement" shall mean the Factoring Agreement dated
January 21, 1986, as amended, between McGregor and Irving Commercial Corporation
(now known as BNY).
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"Balance Sheet" means the combined balance sheet of the Business as of
October 1, 1994, which is set forth in column I of Schedule 1.1(ii) hereto.
"Balance Sheet Net Assets" means $63,000,000.
"Balance Sheet Net Asset Statement" means the statement of net assets
of the Business as of October 1, 1994, set forth in column IV of Schedule
1.1(ii) hereto giving effect to the adjustments to the Balance Sheet set forth
in columns II and III of Schedule 1.1(ii) hereto.
"Basis" means any past or present fact, situation, circumstance,
status, condition activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that is, as of the date of determination, the
primary cause of any specified consequence.
"Basket" shall have the meaning assigned to such term in Section
9.2(c)(iii) hereof.
"Breach Notice" shall have the meaning assigned to such term in
Section 8.3 hereof.
"Burr Ridge" shall have the meaning assigned to such term in Section
5.26 hereof.
"Business" means the business of the Sellers, Anvil Knitwear division
which designs, manufactures and markets casual knitwear and athletic wear
excluding any operation, division or other aspect of the Business that was sold,
transferred,
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terminated, discontinued or otherwise ceased to be operated by the
Sellers prior to the date hereof.
"Business Day" means any day that is not a Saturday, Sunday, or any
other day on which banks in the State of New York are authorized or required by
law to close.
"Business Employees" shall have the meaning assigned to such term in
Section 5.11(a) hereof.
"Buyer" shall have the meaning assigned to such term in the first
paragraph of the Agreement.
"Buyer Material Adverse Effect" means a material adverse effect on (a)
the business, operations, assets, liabilities, operating results or financial
condition of Buyer or Holdings or (b) Buyer's ability to execute and deliver
this Agreement, the ability of Holdings to execute and deliver the Seller Note
or Stockholders' Agreement or the ability of either of Buyer or Holdings to
perform its obligations hereunder or thereunder.
"Buyer's Retirement Plans" shall have the meaning assigned to such
term in Section 5.11(b) hereof.
"Buyer's Welfare Plans" shall have the meaning assigned to such term
in Section 5.11(b) hereof.
"Cash Purchase Price" shall have the meaning assigned to such term in
Section 2.4 hereof.
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"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act of 1980, as same may be amended, 42 U.S.C. Section 9601 ET
SEQ.
"Closing" means the closing of the purchase and sale of the Assets
pursuant to this Agreement.
"Closing Date" means the date on which the Closing occurs, as
determined by Section 2.6 of this Agreement.
"Closing Date Balance Sheet" means an audited combined balance sheet
of the Business as of the Closing Date, prepared by McGregor in accordance with
GAAP consistently applied with the Balance Sheet.
"Closing Date Combined Net Assets" means (i) combined total assets of
the Business minus (ii) combined total liabilities of the Business, computed by
making adjustments to the Closing Date Balance Sheet consistent with the
adjustments made to the Balance Sheet to give rise to the Balance Sheet Net
Asset Statement; PROVIDED, that Closing Date Combined Net Assets shall not
include the amount recorded as an investment in Anvil Knitwear (Del.), Inc., and
Closing Date Combined Net Assets shall not include Excluded Assets or Excluded
Liabilities but shall include all Taxes (except for income Taxes) accrued in
accordance with GAAP.
"Closing Date Combined Net Asset Statement" means a statement showing
the computation of Closing Date Combined Net Assets by making adjustments to the
Closing Date Balance Sheet
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consistent with the adjustments made to the Balance Sheet to give rise to the
Balance Sheet Net Asset Statement (except as otherwise provided in the
definition of Closing Date Combined Net Assets); PROVIDED, that, notwithstanding
GAAP, the reserve in respect of workers' compensation shall be calculated in
accordance with Section 5.23 hereof.
"Closing Deliveries" means the deliveries specified by paragraph 2.7
of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment Letter" means the commitment letter executed by
NationsBank on November 29, 1994 with respect to financing the purchase by Buyer
and Holdings of the Assets and the Special Assets.
"Companies" means, collectively, McGregor, Winston Mills and Anvil
Knitwear (Del.), Inc.
"Confidentiality Agreement" means the Confidentiality Agreement among
Vestar Equity Partners, L.P. and Sellers dated June 29, 1994.
"Confidential Information" shall have the meaning ascribed to such
term in the Confidentiality Agreement.
"Consent" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, certificate, exemption, order,
registration, declaration, filing, report or notice of, with or to any Person.
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"Consultation Period" shall have the meaning assigned to such term in
Section 9.2(a) hereof.
"Culligan" means Culligan International Company, a Delaware
corporation.
"Culligan Guaranty" means the Guaranty Agreement executed by Astrum
and Culligan International Company on the date hereof, a copy of which is
attached hereto as Exhibit G-1.
"CVC" means Citicorp Venture Capital, Ltd.
"Czech Consents" shall have the meaning assigned to such term in
Section 2.1(c)(A) hereof.
"Denial Notice" shall have the meaning assigned to such term in
Section 9.5(b) hereof.
"Determination Notice" shall have the meaning assigned to such term in
Section 9.2(a) hereof.
"Determination Period" shall have the meaning assigned to such term in
Section 9.2(a) hereof.
"Direct Claim" shall have the meaning assigned to such term in Section
9.5(b) hereof.
"Disclosure Schedule" shall have the meaning assigned to such term in
the preamble to Article 3 hereof.
"Election" shall have the meaning assigned to such term in Section
5.10(c) hereof.
"Employee Benefit Plans" means pension, profit sharing, incentive,
savings, bonus, deferred compensation, health and insurance plans, programs or
policies, including, but not
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limited to, all employee benefit plans, as such term is defined in Section 3(3)
of ERISA, that are currently maintained by McGregor or Winston Mills for the
benefit of McGregor's or Winston Mills's employees, respectively, whose
employment relates primarily to the Business, or their dependents, or under
which any past or present employee of McGregor or Winston Mills whose employment
relates or related primarily to the Business has any present or future rights
to benefits, as set forth in Schedule 1.1(iii) of the Disclosure Schedule.
"Environmental Arbitrator" shall have the meaning assigned to such
term in Section 9.5(b) hereof.
"Environmental Lien" means a Lien, either recorded or unrecorded, in
favor of any Governmental Authority relating to any Liability arising under
Environmental Requirements.
"Environmental Requirements" means all federal, state, local and
foreign statutes, regulations, ordinances and other provisions having the force
or effect of law, all judicial and administrative orders and determinations, and
all common law, in each case concerning pollution or protection of the
environment (including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes).
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Estimate" shall have the meaning assigned to such term in Section
2.5(b) hereof.
"Excluded Assets" shall mean only (i) all of the Sellers, right, title
and interest in and to all agreements, arrangements or understandings that
do not constitute Assumed Contracts;
(ii) corporate seal, minute books, charter documents, corporate stock
record books, original tax and financial records and such other books and
records as pertain to the organization, existence or share capitalization
of each Seller;
(iii) prepaid expenses to the extent such expenses relate
exclusively to Excluded As sets or that are not transferable to Buyer for
future periods;
(iv) tax accounts reflected as assets on the books of the Sellers and
all rights in and to any and all tax refunds and credits other than tax
accounts for which Buyer is assuming the corresponding liability;
(v) all rights of set-off, counterclaim and defenses to the extent
such rights of set-off, counterclaim and defenses relate exclusively to
Excluded Liabilities;
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(vi) all sums due to either Seller from the other Seller or from any
Affiliate of the Sellers (other than Anvil s.r.o.);
(vii) all cash of Sellers not expressly transferred to Buyer
hereunder; and
(viii) subject to Section 2.1(c) hereof, the Subsidiary Stock.
"Excluded Liabilities" shall mean all Liabilities of the Sellers
(except as otherwise provided in clause (xi) and clause (xiv) (which clause
(xiv) shall treat Anvil Knitwear (Del.), Inc. as if it were a Seller) of this
definition) (i) pursuant to this Agreement, (ii) relating to all income Taxes of
the Sellers and all other Taxes except, with respect to such other Taxes, to the
extent reflected in the Final Adjustment Amount, (iii) relating exclusively to
Excluded Assets, (iv) resulting from claims of the Pension Benefit Guaranty
Corporation, to indemnify any Person by reason of the fact that such Person was
a director or officer of any of the Companies or was serving at the request of
any Company, except to the extent the primary liability to which such
indemnification relates is assumed by Buyer under this Agreement, (vi) related
to costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, (vii) under any Tax sharing agreement to which
the Sellers are a party, (viii) attributable to, or the existence of which would
constitute, a breach of any
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representation or warranty or covenant made by the Sellers hereunder but only
to the extent the Sellers have Liability in respect of such breach under
Article 9 hereof, (ix) related to any costs, fees or expenses (including
attorney's fees incurred by or on behalf of the Sellers) incurred or arising
in connection with the termination of the BNY Factoring Agreement, (x) in
respect of any Indebtedness of the Sellers, (xi) subject to Section 5.24
hereof, with respect to matters, set forth in Schedule 1.1(iv) of the
Disclosure Schedule without regard to whether such Liabilities accrue to the
Buyer or the Companies, (xii) resulting from severance payments to employees of
the Sellers that result from the sale, pursuant to this Agreement, of the
Business, PROVIDED, that the Buyer does not take any action not contemplated by
this Agreement to cause such severance payments to be required, (xiii) resulting
from any offsite (I.E. real property other than the Owned Facilities or Leased
Facilities) treatment, storage, disposal or management of Hazardous Substances
(or any arrangement for offsite treatment, storage, disposal or management of
Hazardous Substance) on or prior to the Closing Date by or attributed to
Sellers, the Business, or the Owned Facilities or the Leased Facilities, (xiv)
resulting from the Sellers, affiliation (whether as a subsidiary, combined,
consolidated or unitary group member or otherwise) (on or before the Closing
Date (or, with respect to Anvil Knitwear (Del.), inc. on or before the Second
Closing
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Date)) with any other Person (other than Anvil s.r.o.), (xv) resulting
from the employment of any employee who is not a Transferred Business Employee,
(xvi) resulting from any operation, division or other aspect of the Business
that was sold, transferred, terminated, discontinued or otherwise ceased to be
operated by the Sellers prior to the date hereof, (xvii) resulting from sums due
from either Seller to the other Seller or to any Affiliate of the Sellers, and
(xviii) resulting from the ownership, operation, assets or liabilities of Anvil
s.r.o. or Anvil Knitwear (Del.), Inc.; PROVIDED, that Liabilities (other than
with respect to income Taxes or Transfer Taxes) described in this clause (xviii)
that result from the sale or transfer of the Special Assets that would not have
been incurred had the Special Assets not been so sold or transferred but the
capital stock of Anvil Knitwear (Del.), Inc. was sold and transferred shall not
be Excluded Liabilities.
"Final Adjustment Amount" shall have the meaning assigned such term in
Section 2.5(a)(iii) hereof.
"Financial Statements" shall have the meaning assigned to such term in
Section 3.5 hereof.
"Financing" shall have the meaning assigned to such term in Section
6.6 hereof.
"Finished inventory" shall mean the Sellers, finished products
relating to the Business, wherever located.
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"GAAP" means United States generally accepted accounting principles as
in effect on the date on which the document to which it refers relates, and in
respect of the Closing Date Balance Sheet, as in effect on October 1, 1994,
applied on a consistent basis.
"Gibson Property" means all real property owned by McGregor
Corporation located in Gibson, North Carolina.
"Governmental Approval" means any Consent of or with any Governmental
Authority.
"Governmental Authority" means any nation or government, and any state
or political subdivision thereof; any self-regulatory organization acting under
color of authority granted under any Legal Requirement; and any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, or any domestic, state, county, city or other political
subdivision thereof.
"Guaranty Agreement" shall have the meaning assigned to such term in
Section 5.19 hereof.
"Hazardous Substance" means any substance so designated pursuant to
CERCLA, petroleum and any similar substance with respect to which liabilities or
standards of conduct are imposed pursuant to Environmental Requirements.
"Holdings" shall have the meaning assigned to such term in the first
paragraph of this Agreement.
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"Holdings Stock" means the shares of common stock and preferred stock
of Holdings issued prior to or issuable at the Closing, including, without
limitation, such shares issuable to Culligan pursuant to the terms of this
Agreement.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indebtedness" shall mean, as to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding trade payables incurred in the Ordinary
Course of Business, (ii) the maximum amount available to be drawn under all
letters of credit issued for the account of such Person and all unpaid drawings
in respect of such letters of credit, (iii) all rental obligations which, under
GAAP, are or will be required to be capitalized on the books of such Person, in
each case taken at the amount thereof accounted for as indebtedness in
accordance with such principles, (iv) all obligations of such Person, excluding
trade payables incurred in the Ordinary Course of Business, to pay a specified
purchase price for goods or services, whether or not delivered or accepted,
I.E., take-or-pay and similar obligations, (v) all obligations under any
interest rate protection, hedging agreement or any other similar type of
agreement entered into with any Person, (vi) all obligations of such Person
guaranteeing or intended to guarantee any Indebtedness, leases, dividends or
other obligations, whether or
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not contingent, of any other Person in any manner, whether directly or
indirectly, and (vii) all Indebtedness of the types described in clause
(i) through (vi) of this definition secured by any Lien on any property owned
by such Person whether or not such Indebtedness has been assumed by such
Person, but Indebtedness shall exclude obligations arising under futures
contracts relating to the purchase of goods or materials used in the
Business.
"Indemnitee" shall have the meaning assigned to such term in Section
9.4(b).
"Indemnitor" shall have the meaning assigned to such term in Section
9.4(b).
"Intellectual Property" means all (i) patents, letters patent, design
patents, patent applications, design patent applications, inventions (whether or
not patent applications have been filed), or designs (whether or not patent
applications have been filed) (ii) trademarks, service marks, trade names
(whether registered or unregistered), logos, symbols or brands, (iii) copyrights
(whether registered or unregistered) and any applications therefor and (iv)
know-how, trade secrets, formulae, research and development data, new product
research data and manufacturing processes, technology, discoveries and
unpatented inventions, (v) computer software or other intellectual property, in
each case owned by McGregor or Winston Mills and used in the conduct of the
Business as presently conducted, including,
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without limitation, such intellectual property listed on Schedule 1.1(vi)
hereto.
"Inventory" means Finished Inventory and Other Inventory.
"Key Transferred Employee" means any of William Turner, Bernard
Geller, Anthony Corsano, Jacob Hollander or Patrick Branchizio.
"Kings Mountain Property" means all the real property owned by
McGregor Corporation located in Kings Mountain, North Carolina.
"Knowledge of the Sellers" (or words of similar meaning) means the
actual knowledge of Joseph Dempsey, Gregory Hunt and all other natural persons
who are members of management of Astrum and/or McGregor but are not members of
management or employees of the Business after the Closing.
"Leased Facilities" means the Mullins Leasehold and the New York
Offices.
"Leases" means all leases of real, personal or intangible property
used primarily in the Business under which either Seller is lessee or lessor (or
sublessee or sublessor), together with any options to purchase the underlying
property and leasehold improvements thereon, and in each case all other rights,
subleases, license permits, deposits and profits appurtenant to or related to
such leases and subleases.
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"Legal Requirements" in respect of any Person means all (a)
constitutions, treaties, statutes, laws (excluding the common law), ordinances,
codes, rules, regulations, standards, judgments, decrees, writs, rulings,
injunctions, orders and other requirements of any Governmental Authority, (b)
Governmental Approvals and (c) orders, decisions, injunctions, judgments, awards
and decrees of or agreements with any Governmental Authority.
"Liability" means any liability or obligation (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliqidated, and whether due or to
become due), including any liability for Taxes.
"LIBOR" means the one-month London interbank offered rate.
"Licensed Intellectual Property" means (i) patents, letters patent,
design patents, patent applications, design patent applications, inventions
(whether or not patent applications have been filed), or designs (whether or not
patent applications have been filed), (ii) trademarks, service marks, trade
names (whether registered or unregistered), trade dress, logos, symbols or
brands, (iii) copyrights (whether registered or unregistered) and any
applications therefor, (iv) know-how, trade secrets, formulae, research and
development data, new product research data and manufacturing processes,
technology,
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discoveries and unpatented inventions and (v) computer software, or other
intellectual property in each case not owned by McGregor or Winston Mills
and used in the conduct of the Business as it is presently conducted, including,
without limitation, such intellectual property identified as Licensed
Intellectual Property on Schedule 1.1(vi) hereto.
"Licenses and Permits" means all Governmental Authority permits,
authorizations and licenses which are held by any Seller relating to the
Business that it has the ability to convey to Buyer either (i) without the
consent of any Person or (ii) if the consent of any Person is required, as long
as such consent has been obtained, including, without limitation, those
described in Schedule 1.1(vii) hereto.
"Lien" means any encumbrance, charge, security interest, mortgage,
pledge, hypothecation, title defect, title retention agreement, lease, sublease,
license, occupancy agreement, easement, covenant running with the land,
encroachment, voting trust agreement, option, right of first offer or refusal,
proxy or lien, including but not limited to such Liens as may arise under any
contracts.
"Losses" means, in respect of Buyer or either Seller, any and all
losses, Liabilities, damages (including consequential damages), fines,
penalties, fees, lost profits, amounts paid in settlement, Taxes, costs
(including costs of investigation or enforcement), expenses and claims
(including, without limitation,
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interest, reasonable fees and disbursements of counsel, witness fees and court
costs, but excluding compensation paid to employees of Buyer or the Sellers or
their respective Affiliates, as the case may be), but excluding any punitive or
exemplary damages except to the extent payable to third parties PROVIDED,
HOWEVER, that Losses shall exclude any lost profits or consequential damages
resulting from Losses related to matters disclosed in the Phase I Environmental
Assessments or listed on Schedule 1.1 (iv) in respect of structures built after
the Closing Date (other than (x) industrial structures built as a result of
Legal Requirements or (y) replacement structures to the extent built over
substantially the same footprint of structures existing on the Closing Date);
PROVIDED, that in putting such structures (whether described in clause (x) or
(y) above) in place, Buyer used reasonable efforts to avoid incurring or
causing any Losses that might adversely affect the Sellers under the terms of
this Agreement.
"Management Group" means each of Anthony Corsano, Bernard Geller,
Jacob Hollander and William Turner.
"Material Adverse Effect" means, with respect to the Business, a
material adverse effect on the business, operations, assets, Liabilities,
operating results, or financial condition of the Business and, with respect to
the Sellers, a material adverse effect on the ability of either of the Sellers
to execute and
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deliver this Agreement and the Stockholders' Agreement and perform its
obligations hereunder and thereunder.
"Material Agreement" means each Seller Agreement that is material to
the operations, assets or financial condition of the Business.
"Materiality Condition" shall have the meaning assigned to such term
in Section 9.2(h) hereof.
"McGregor" shall have the meaning assigned to such term in the first
paragraph of this Agreement.
"McGregor's Savings Plan" shall have the meaning assigned to such term
in Section 5.11(e) hereof.
"Minimum Claim Amount" shall have the meaning assigned to such term in
Section 9.2(c)(ii) hereof.
"Mullins Leasehold" means the manufacturing plant leased by McGregor
and located in Mullins, South Carolina.
"Mullins Property" means all real property owned by McGregor located
in Mullins, South Carolina.
"Net Insurance Recovery" shall mean any insurance proceeds recovered
in respect of Losses less, in the case of all insurance other than title
insurance, 150% of the annual premium paid in the most current fiscal year in
respect of such insurance but shall not include any proceeds under any insurance
policy pursuant to which premiums are normally adjusted to reimburse the insurer
for any material part of proceeds paid out in previous years.
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"New York Offices" means the office space leased by McGregor and
located at 228 E. 45th Street, New York, New York.
"Non-Exclusion Notice" shall have the meaning assigned to such term in
Section 5.24(a) hereof.
"Notice of Disagreement" shall have the meaning assigned to such term
in Section 9.2(a) hereof.
"Objection Period" shall have the meaning assigned such term in
Section 2.5(a)(ii) hereof.
"Onsite Remedial Action" means any investigatory, remedial, cleanup,
corrective or compliance action undertaken after the Closing Date pursuant to
Environmental Requirements at, on, or with respect to conditions emanating or
migrating from, the owned Facilities or the Leased Facilities, for which
indemnification is provided under this Agreement.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice in the Business.
"Other Inventory" means all the raw materials, work in progress and
inventoriable supplies, products under research and development, demonstration
equipment, office and other supplies, parts, packaging materials and other
accessories related thereto which are held at, or are in transit from or to, the
locations at which the Business is conducted, or located at customers, or
employees' premises on consignment, in each case, which are used or held for use
by the Sellers in the conduct of the Business,
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including any of the foregoing purchased subject to any conditional sales or
title retention agreement in favor of any other Person, together with all
rights of the Sellers against suppliers of such inventories.
"Owned Facilities" means the Asheville Property, the Aynor Property,
the Gibson Property, the Kings Mountain Property, the Red Springs Property, the
Whiteville Property and the Mullins Property, a legal description of each of
such Owned Facilities is attached hereto as Schedule 1.1(xi) of the Disclosure
Schedule.
"PBGC Agreements" means the McCrory and Schenley Pension Plan Interim
extension Agreements dated May 12, 1993 among the Pension Benefit Guaranty
Corporation and McGregor and certain Affiliates of the Sellers.
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established, (ii ) any statutory encumbrance arising
in the Ordinary Course of Business by operation of law with respect to a
Liability that is not yet due or delinquent, (iii)(x) with respect to any Owned
Facilities, Leased Facilities, Leases and any personal property whose
depreciated book value on the Closing Date individually exceeds $100,000, those
matters that do not, in the aggregate, (A) interfere in any material respect
with access to, or the use or occupancy of, any such real or personal property
as used or occupied on the date hereof or (B) materially affect the
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commercial value of such real or personal property as used or occupied on the
date hereof, and (y) with respect to any personal property whose depreciated
book value on the Closing Date individually equals $100,000 or less, any
imperfection of title or similar Lien that, individually or in the aggregate
with other such Liens on such property, has not caused, and would not be
reasonably expected to have caused, a Material Adverse Effect, (iv) Liens that
are set forth on Schedule 1.1(ix) hereto, and (v) any Lien resulting from or
related to (a) the BNY Factoring Agreement, (b) the PBGC Agreements, (c) the
Amended and Restated Credit Agreement, dated as of November 30, 1993, among
Samsonite Corporation, Culligan International Company, McGregor and American
Tourister, Inc., as borrowers, and the banks party thereto from time to time,
Citicorp USA, Inc. and The First National Bank of Boston, as co-agents, and the
Citicorp USA, Inc., as administrative agent and the Security Agreement defined
therein or otherwise in respect of Indebtedness and (d) any consensual liens,
PROVIDED, that the Liens described in this clause (v) shall not be deemed
Permitted Liens on the Closing Date; (vi)(A) any Liens that are listed as
exceptions on Schedule B to any title insurance reports relating to the owned
Facilities provided to Buyer and included as part of Schedule 1.1(ix) to the
Disclosure Schedule and (B) any other Liens that first appear as exceptions to
such Schedule B following the delivery of the Title Report except such other
Liens that are
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caused by any act or omission of Seller; (vii) any state of facts in addition
to matters included as part of Schedule 1.1(ix) to the Disclosure Schedule
that an accurate survey would disclose, provided, that each difference shown
on such new survey from that included in the surveys included on Schedule
1.1(ix) to the Disclosure Schedule shall not (A) render title unmarketable,
(B) materially interfere with access to or the use or occupancy of any such
real property as used or occupied on the date hereof, or (C) materially affect
the commercial value of such real property as used or occupied on the date
hereof, and (viii) any Liens with respect to any Leased Facilities or Leases
that arise out of (A) the rights of any landlords (or any creditors thereof)
under any Lease, (B) fee mortgages or (C) other Liens affecting such properties
not created by act or omission of the Sellers.
"Person" means and includes an individual, corporation, partnership
(limited or general), joint venture, association, trust, limited liability
company, any other unincorporated organization or entity, or any governmental
entity or any department, political subdivision or agency thereto.
"Phase I Environmental Assessments" means the Phase I Environmental
Assessment of the Kings Mountain Property prepared by Professional Service
Industries, Inc. ("PSI") and dated October 20, 1994; the Phase I Environmental
Assessment of the Aynor Property prepared by PSI and dated October 19, 1994; the
Phase I Environmental Assessment of the Whiteville Property
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prepared by PSI and dated October 26, 1994; the Phase I Environmental Assessment
of the Mullins Property prepared by PSI and dated October 28, 1994; the
Phase I Environmental Assessment OIL the Gibson Property prepared by PSI and
dated October 26, 1994; the Preliminary Site Assessment Report of the Red
Springs Property prepared by PSI and dated January 22, 1992; the Phase I
Environmental Assessment and Compliance Audit Report of the Asheville Property
prepared by Aquaterra, Inc. and dated September 13, 1994, and the Soil and
Groundwater Sampling Report, Asheville Dyeing and Finishing, dated October 12,
1994, the receipt of which is acknowledged by Buyer.
"Post-Closing Tax Period" means any period or portion thereof that
begins after the Closing Date.
"Pre-Closing Tax Period" means any period or portion thereof that ends
on or before the Closing Date.
"Principal Management" means the authority to direct the handling of
the subject matter of the Direct Claim, and any onsite Remedial Action
associated with a Third Party Claim, including, without limitation, selection of
consultants, contractors, experts or advisors; evaluation, selection and
implementation of remedial measures; and negotiations with or challenges to any
Governmental Authorities and third parties.
"Property" means all of the real property and all material
improvements and fixtures on such real property and all material machinery,
equipment and other tangible-personal
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property used primarily in the conduct of the Business or otherwise used in the
conduct of the Business as it is presently conducted except for such material
improvements, fixtures, machinery, equipment and other tangible personal
property that is used pursuant to a lease or license.
"Purchase Orders" shall mean all of the Sellers, purchase orders,
contracts or other commitments to suppliers of goods and services for
undelivered materials, supplies or other items occurring in the Ordinary Course
of Business.
"Red Springs Property" means all real property owned by McGregor
Corporation located in Red Springs, North Carolina.
"Release" means any "release", as defined as such pursuant to CERCLA,
42 U.S.C. Section 9601(22), as that provision reads on the date of the Closing.
"Remedial Plan" shall have the meaning assigned such term in Section
9.5(b) hereof.
"Reserve Adjustment" shall have the meaning assigned such term in
Section 5.23(a) hereof.
"Sales Orders" shall mean all of the Sellers, sales orders, contracts
or other commitments to purchasers from the Sellers of goods and services
including, without limitation, all trade accounts receivable and all notes,
bonds and other evidences of indebtedness of and rights to receive payments, in
each case arising out of sales occurring in the Ordinary Course of Business and
the security agreements related thereto,
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including any rights of the Sellers with respect to any third-party collection
procedures or any other actions or proceedings which have been commenced in
connection therewith.
"Second Closing Date" shall mean the date on which the closing of the
sale of the SRO Equity or the Subsidiary Stock, as the case may be, to the Buyer
(or its Subsidiary) occurs.
"Seller" shall have the meaning assigned to such term in the first
paragraph of this Agreement.
"Seller Agreement" means any mortgage, indenture, note, agreement,
contract, lease, license, franchise, obligation, instrument or other commitment,
arrangement or understanding of any kind, to which McGregor or Winston Mills is
a party or by which the McGregor or Winston Mills or any of their respective
property may be bound or affected, in each case as it relates to the Business.
"Seller Note" shall have the meaning assigned to such term in Section
2.4(i)(b) hereof.
"Significant Event" shall have the meaning assigned to such term in
Section 5.23(a) hereof.
"Special Assets" shall have the meaning assigned to such term in
Section 2.1(c)(ii) hereof.
"Special Environmental Matters" means the matters disclosed in
Schedule 1.1(iv) other than in Part A thereof.
"SRO Equity" shall have the meaning assigned to such term in Section
2.1(c)(ii) hereof.
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<PAGE>
"SRO Receivable" shall have the meaning assigned to such term in
Section 2.1(c)(ii) hereof.
"Stockholders' Agreement" shall have the meaning assigned to such term
in Section 5.18 hereof.
"Subsidiary" in respect of any Person means any corporation with
respect to which such Person has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
"Subsidiary Stock" means all of the outstanding capital stock of Anvil
Knitwear (Del.), Inc.
"Tax" or "Taxes" means all taxes, charges, fees, levies or other
assessments, and all estimated payments thereof, including but not limited to
income, excise, property, sales, use, value added, environmental, franchise,
payroll, transfer, gross receipts, withholding, social security, and
unemployment taxes, imposed by any foreign, federal, state, county or local
government, or any subdivision or agency thereof, and any interest, penalty and
expense relating to such taxes, charges, fees, levies or other assessments.
"Tax Items" shall have the meaning assigned to such term in Section
9.2(a) hereof.
"Tax Returns" means all foreign, federal, state and local Tax returns,
reports and declarations which are due and required to be filed by any
applicable Tax law.
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"Third Party Claim" shall have the meaning assigned to such term in
Section 9.4(a) hereof.
"Title Report" shall have the meaning assigned to such term in Section
5.25 hereof.
"Transferee Savings Plan" shall have the meaning assigned to such term
in Section 5.11(e) hereof.
"Transferred Business Employees" shall have the meaning assigned to
such term in Section 5.11(a) hereof.
"Transfer Taxes" means all sales, use, transfer, real property
transfer, reporting, recording, stock transfer and other similar taxes and fees
arising out of or in connection with the transactions effected pursuant to this
Agreement.
"Vehicles" shall have the meaning assigned to such term in Section
2.1(viii) hereof.
"Vestar Guaranty" means the Guaranty Agreement executed by Vestar
Equity Partners, L.P. and CVC on the date hereof, a copy of which is attached
hereto as Exhibit G-2.
"Whiteville Property" means all real property owned by McGregor
Corporation located in Whiteville, North Carolina.
"Winston Mills" shall have the meaning assigned to such term in the
first paragraph of this Agreement.
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ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 PURCHASE AND SALE. (a) Subject to the terms and conditions herein set
forth, the Sellers shall, on the Closing Date, jointly and severally sell,
transfer, assign, convey and deliver to Buyer, and Buyer shall purchase and
acquire from the Sellers, all of the Sellers' right, title and interest in and
to the following assets (except for the Assets set forth on Schedule 2.4, which
Sellers shall sell, transfer, assign, convey and deliver to Holdings, and
Holdings shall purchase and acquire from Sellers, all of Sellers, right, title
and interest in and to in accordance with Section 2.1(b) hereof) (all of such
assets, including those set forth on Schedule 2.4 are collectively, the
"Assets"):
(i) the Assumed Contracts;
(ii) the Intellectual Property and the Licensed Intellectual
Property;
(iii) the Inventory;
(iv) the Accounts Receivable;
(v) the Licenses and Permits;
(vi) the Property;
(vii) all prepaid expenses arising primarily in the conduct
of the Business, PROVIDED, that, where applicable, the
underlying agreement to
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which such prepaid expense relates can be assigned to the
Buyer;
(viii) all motor vehicles listed on Schedule 2.1(viii) (the
"Vehicles");
(ix) all security deposits deposited by or on behalf of either
Seller as lessee or sublessee under the Leases, PROVIDED,
that the lease to which such security deposit relates can
be assigned to Buyer;
(x) all books and records owned by either Seller relating
primarily to the Business (including, without limitation,
marketing records, customer lists, warranty records, sales
records, employee and employee benefit records, licensing
records, sales literature, electronic data processing
programs and accounting records, and documents owned by
either Seller and used exclusively in connection with the
Business);
(xi) all other assets (A) owned by either Seller and (B)(I) used
primarily in the Business or (II) otherwise used in the
conduct of the Business as it is presently conducted,
including the fixed assets set forth in Schedule 3.2(a) of
the Disclosure Schedule,
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except for any that have been disposed of in the
Ordinary Course of Business; and
(xii) all cash on hand and in all bank accounts of the
Sellers relating to the Business (including checks on
hand and deposited) which Sellers elect to transfer to
Buyer on the Closing Date.
(b) Notwithstanding the provisions of Section 2.1(a), Holdings agrees
to purchase and acquire from Sellers all of the Sellers' right, title and
interest in and to the Assets set forth on Schedule 2.4 on the Closing Date and
Holdings hereby directs the Sellers to deliver, transfer and convey the Assets
set forth on Schedule 2.4 which Holdings would otherwise be entitled to receive
pursuant to this Section 2.1(b) to the Buyer at the Closing.
(c) on the Closing Date, Anvil Knitwear (Del.), Inc. shall sell,
transfer, assign, convey and deliver to Buyer (or its Subsidiary), and Buyer (or
its Subsidiary) shall purchase and acquire from Anvil Knitwear (Del.), Inc. all
of the right, title and interest of Anvil Knitwear (Del.), Inc. in and to (i)
any and all ownership interests in Anvil s.r.o. (the "SRO Equity") and (ii) all
receivables due to Anvil Knitwear (Del.), Inc. from Anvil s.r.o. (the "SRO
Receivable" and together with the SRO Equity, the "Special Assets"); PROVIDED,
that (A) with respect to the purchase and sale of the SRO Equity, all requisite
approvals
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and consents of the Governmental Authorities of the Czech Republic with
respect to the sale of the SRO Equity (the "Czech Consents") shall have been
obtained and (B) the conditions set forth in Articles 6 and 7 shall have
otherwise been obtained or waived. If the Czech Consents have not been obtained
on or prior to the Closing Date, Buyer shall only be obligated to purchase the
SRO Receivable at the Closing, but the full purchase price for the Special
Assets shall be paid at Closing. The Second Closing Date shall occur as soon as
practicable after the Czech Consents have been obtained and Sellers shall
reasonably cooperate with Buyer in obtaining the Czech Consents. Until the
occurrence of the Second Closing Date and subject to law, (x) Seller shall not
permit Anvil Knitwear (Del.), Inc. to take any action without Buyer's consent,
(y) Buyer or its subsidiary shall be entitled to direct, and shall have full
power and authority with respect to, the day to day operation and management of
Anvil s.r.o. and (z) the Sellers shall use commercially reasonable efforts to
refrain from taking any actions that would make the representations and
warranties contained in Article 3 hereof that relate to Anvil s.r.o. and Anvil
Knitwear (Del.), Inc. untrue as. of the Second Closing Date. On the Second
Closing Date, Anvil Knitwear (Del.), Inc. shall sell, transfer, assign, convey
and deliver to Buyer (or its Subsidiary), and Buyer (or its Subsidiary) shall
purchase and acquire from Anvil Knitwear (Del.), Inc., all of Anvil Knitwear
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(Del.), Inc.'s right, title and interest in and to the SRO Equity.
Notwithstanding the foregoing, if the Second Closing Date has not occurred by
the first anniversary of the Closing Date, the Buyer shall have the option to
require the Sellers to transfer the Subsidiary Stock in lieu of the SRO Equity
by giving the Sellers written notice of the Buyer's intent to exercise such
option, such notice not to be given later than 30 days after such first
anniversary. If such notice is given to Sellers, the Second Closing Date shall
occur within 5 Business Days of Sellers' receipt of such notice at which time
the Subsidiary Stock (together with stock powers endorsed in blank) shall be
delivered to Buyer (or its Subsidiary). Buyer shall promptly pay Sellers for
all reasonable ministerial costs incurred by Sellers in administering Anvil
Knitwear (Del.), Inc. between the Closing Date and Second Closing Date.
(d) Notwithstanding anything contained in this Section 2.1, the
Assets shall not include any Excluded Asset.
2.2 ASSUMPTION OF LIABILITIES AND OBLIGATIONS. Subject to the terms and
conditions herein set forth, Buyer shall, on the Closing Date, assume and become
responsible for all Liabilities of the Sellers (but not of Anvil Knitwear
(Del.), Inc.) related to the Business whether arising on, before or after the
Closing Date (collectively, the "Assumed Liabilities") including, without
limitation, the following:
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(i) all obligations of either Seller with respect to accounts
payable reflected or reserved against in the Balance Sheet
and those arising in the Ordinary Course of Business of the
Business since the date of the Balance Sheet;
(ii) all obligations of either Seller under the Assumed
Contracts, Licenses and Permits;
(iii) all Liabilities of the Business to the extent reflected
in the computation of the Final Adjustment Amount; and
(iv) all Liabilities relating to the Transferred Business
Employees (including, but not limited to, all liabilities
and obligations relating to deferred compensation benefits,
worker's compensation, unemployment compensation and other
government-mandated benefits, indemnity, life, hospital,
medical, surgical, disability, major medical, dental,
severance (other than severance payments described in clause
(xii) of the definition of Excluded Liabilities), vacation
pay, sick leave and other welfare benefits, and wrongful
termination, discrimination and similar employment laws.
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Notwithstanding anything contained in this Section 2.2, the Assumed Liabilities
shall not include any Excluded Liability.
2.3 ASSIGNMENT OF CONTRACTS. To the extent that the assignment of all or
any portion of any Assumed Contracts shall require the consent of the other
party thereto, this Agreement shall not constitute an agreement to assign the
same if an attempted assignment would constitute a breach thereof. The Sellers
will, at Sellers, expense, use their commercially reasonable efforts to obtain
prior to the earlier of the date required (if so required) or the Closing Date,
all authorizations, consents, approvals of, or notices to the other parties to
such Assumed Contracts for the assignment thereof to Buyer; PROVIDED, that such
commercially reasonable efforts shall not include monetary payments to third
parties. If the consent of the other party or parties to any such Assumed
Contract is not obtained in respect of any such Assumed Contract, the Sellers
and Buyer will cooperate in reasonable arrangements to deliver to Buyer the
benefits under any such Assumed Contract at the same cost and expense to Buyer
as it would have borne if such contract had been assigned to Buyer at the
Closing and Buyer shall reimburse Seller for such costs and expenses.
Notwithstanding any other provision of this Agreement, to the extent that such
arrangements cannot be made, Buyer shall have no rights and no Liabilities or
obligations pursuant to Section 2.2 or otherwise under this Agreement with
respect to any such Assumed Contract.
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2.4 PURCHASE PRICE. Upon and subject to the terms and conditions herein
set forth and in consideration of the sale, transfer, assignment and conveyance
of the Assets and the Special Assets to Buyer and Holdings, as applicable, (i)
at the Closing, (a) Buyer will pay to the Sellers $90,000,000 in consideration
for the Assets (other than those set forth in Schedule 2.4)and to Anvil Knitwear
(Del.), Inc. $2,500,000 for the Special Assets, subject to adjustment as
provided herein, (together, the "Cash Purchase Price"), payable by wire transfer
of immediately available funds, and (b) Holdings will deliver to McGregor, in
consideration of receiving the Assets that are set forth in Schedule 2.4, a
promissory note made by Holdings as of the Closing Date in favor of McGregor in
the face amount of $7,500,000, a copy of which is attached hereto as Exhibit H
(the "Seller Note") and (ii) at the Closing, Buyer will assume and become
responsible for the Assumed Liabilities.
2.5 ADJUSTMENT OF CASH PURCHASE PRICE; ESTIMATE.
(a) ADJUSTMENT OF CASH PURCHASE PRICE IN RESPECT OF CLOSING DATE NET
ASSETS. The Cash Purchase Price shall be subject to the following post-Closing
adjustment:
(i) Not later than 90 days after the Closing Date, the Sellers
shall deliver to Buyer the Closing Date Balance Sheet, the
Closing Date Combined Net Assets Statement and a statement
(the "Adjustment Statement") of the amount of
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the post-Closing adjustment payable by the Sellers to Buyer,
or by Buyer to the Sellers, as the case may be, as determined
pursuant to clause of this Section 2.5(a), each prepared by
the Sellers and audited by the Sellers, Accountant. The
Adjustment Statement shall also reflect any change to the
Closing Date Combined Net Asset Statement that is necessary
to reflect action taken by the Seller after the Closing
pursuant to Section 8.4 hereof that, had such action been
taken prior to the Closing, would have affected the Closing
Date Combined Net Asset Statement. From and after the
Closing, the Buyer shall provide the Sellers access to
books, records and personnel of the Business, as is
reasonably requested by Sellers in connection with the
preparation of the Adjustment Statement. A form of the
Adjustment Statement is attached hereto as Schedule
2.5(a)(i).
(ii) Buyer shall have 30 Business Days after delivery by the
Sellers of the Adjustment Statement (the "Objection Period")
to object to any item or items shown on the Closing
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Date Balance Sheet, the Closing Date Combined Net Asset
Statement or the Adjustment Statement. During the Objection
Period, Buyer shall have access to all work papers of the
Sellers and the Sellers' Accountant which were used in the
preparation and Audit of the Closing Date Balance Sheet, the
Closing Date Combined-Net Asset Statement and the Adjustment
Statement. If Buyer does not object during the objection
Period, the Closing Date Balance Sheet, the Closing Date
Combined Net Asset Statement and the Adjustment Statement
received by the Buyer shall be conclusive and binding on the
parties hereto and may not be challenged by any of them in
any forum. If Buyer does object during the Objection
Period, the Sellers shall have the right, without being
prejudiced by the fact that Sellers prepared and Sellers'
Accountant audited the Closing Date Balance Sheet, the
Closing Date Combined Net Asset Statement and the Adjustment
Statement, for ten Business Days after its receipt of
Buyer's objection to deliver to Buyer a notice setting forth
any additional
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items which the Sellers determine to be subject to dispute.
If the Sellers and Buyer are unable to resolve any dispute
with respect to the Closing Date Balance Sheet, the Closing
Date Combined Net Asset Statement or the Adjustment Statement
within 30 Business Days after delivery by Buyer of Buyer's
objections, the matter or matters in dispute shall be
submitted to such firm of Accountants as the Sellers and
Buyer may agree. If they cannot so agree, the Sellers shall
select one such firm and Buyer shall select another and the
two firms so chosen shall select a third firm of Accountants
to which such dispute shall be submitted. The accounting
firm chosen, whether by agreement of Buyer and the Sellers
or by their respective Accountants, shall be limited to
determining a value for those items on the Closing Date
Balance Sheet, the Closing Date Combined Net Asset Statement
or the Adjustment Statement that are disputed by Buyer or
Sellers in accordance with this Section 2.5(a) and are not
resolved by agreement between Buyer and the Sellers. The
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decision of such firm shall be conclusive and binding upon
the Sellers and Buyer, and may not be challenged by either
of them in any forum, and the fees and costs therefor shall
be borne by the parties in a proportion to be determined by
such accounting firm within three Business Days after the
later of the expiration of the objection Period and the date
upon which any disputes are resolved as provided above, an
amount equal to the absolute value of the Final Adjustment
Amount (as defined below) plus interest on the amount of
payment accrued from the Closing Date to the date of payment
at the rate of LIBOR plus 2.75% per annum, shall be paid by
Buyer to the Sellers if the amount in clause (x) of the next
sentence is greater than the amount in clause (y) of the next
sentence, or by the Sellers to Buyer if the amount in clause
(y) of the next sentence is greater than the amount in
clause (x) of the next sentence. Final Adjustment Amount
(the "Final Adjustment Amount") shall equal (x) Closing
Date Combined Net Assets, as adjusted as provided for in
Sections
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2.5(a)(i) and (ii) hereof, MINUS (y)(A) if the Cash Purchase
Price payable at Closing was increased pursuant to Section
2.5(b)(i), $63,000,000 plus the amount of any such increase,
or (B) if the Cash Purchase Price payable at Closing was
decreased pursuant Section to 2.5(b)(ii), $63,000,000 minus
the amount of any such decrease.
(b) ESTIMATED PURCHASE PRICE ADJUSTMENT. Five Business Days prior to
the Closing, the Sellers shall deliver to Buyer the Sellers, reasonable, good
faith estimate (the "Estimate") of the Closing Date Balance Sheet, the Closing
Date Combined Net Asset Statement and Adjustment Statement. The Cash Purchase
Price payable at Closing shall be adjusted as follows:
(i) If, pursuant to the Estimate, Closing Date Combined Net
Assets exceed $63,000,000, the Cash Purchase Price payable
at Closing shall be increased by such excess; or
(ii) If $63,000,000 exceeds Closing Date Combined Net Assets
pursuant to the Estimate, the Cash Purchase Price payable at
Closing shall be reduced by such excess.
(c) INCREASE IN CASH PURCHASE PRICE FOR SPECIAL ASSETS. The Cash
Purchase Price in respect of the Special Assets or Subsidiary Stock, as the case
may be, shall be increased by
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one-half (1/2) of all net advances paid directly or indirectly by Sellers to
Anvil s.r.o. from October 1, 1994 to the Closing Date; PROVIDED, that such
increase shall not exceed $425,000. No later than five (5) days before the
Closing Date, Seller shall provide Buyer with a computation of such advances
together with appropriate documentation supporting the same. Any dispute as to
the amount of such advance shall not delay or otherwise prevent the occurrence
of the Closing. The Buyer and Sellers agree that the occurrence of such
Closing shall not affect their respective rights arising from such dispute.
2.6 CLOSING. Subject to the conditions set forth in Articles 6 and 7 of
this Agreement, the Closing will take place at the offices of Kirkland & Ellis,
One Citicorp Center, 153 East 53rd Street, New York, New York 10022, as soon as
practicable following the date on which all conditions to the obligations of
Buyer and the Sellers under Articles 6 and 7 of this Agreement (other than those
requiring Closing Deliveries) will have been satisfied or waived. The Closing
shall occur at or before 12:00 noon New York City time on the Closing Date, and
will be elective as of the start of business on the Closing Date.
2.7 DELIVERIES AT THE CLOSING. Subject to the provisions of Articles 6
and 7 hereof, at the Closing:
(a) The Sellers will deliver, or cause to be delivered, to Buyer or
Holdings, as the case may be:
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(i) the instruments of transfer set forth in Section 6.3;
(ii) all opinions, certificates and other instruments and
documents contemplated under Article 6 to be delivered by
the Sellers at or prior to the Closing;
(iii) a Stockholders, Agreement duly executed by Culligan;
(iv) from Culligan, $9,000,000 in immediately available federal
funds by wire transfer to a bank account designated, at
least three days before the Closing Date, by Buyer as
consideration for the Holdings Stock to be received by
Culligan at the Closing.
(b) Buyer or Holdings, as the case may be, will deliver to the
Sellers or, where applicable, to Culligan:
(i) the Cash Purchase Price, as adjusted pursuant to Section
2.5(b), in immediately available federal funds by wire
transfer to a bank account designated at least three days
before the Closing Date by the Sellers
(ii) the Seller Note;
(iii) to Culligan, certificates representing Culligan's
ownership of the amounts of Holdings Stock set forth on
Schedule 2.7(b)(iii);
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(iv) to Culligan, a duly executed Stockholders' Agreement;
(v) the instruments of assumption set forth in Section 7.4; and
(vi) all opinions, certificates and other Article 7 to be
delivered by Buyer or the Sellers at or prior to the
Closing.
ARTICLE 3
REPRESENTATIONS AND
WARRANTIES REGARDING THE COMPANIES
Except as set forth in the disclosure schedule delivered by the Sellers to
the Buyer on the date hereof (the "Disclosure Schedule"), the Sellers hereby
jointly and severally represent and warrant to Buyer and Holdings as follows:
3.1 ORGANIZATION AND GOOD STANDING OF THE COMPANIES. Each of the
Companies (i) is a corporation duly incorporated, validly EXISTING and in good
standing under the laws of the jurisdiction of its organization, (ii) has the
corporate power and authority to own, lease and operate the property used in the
Business by it and to conduct the Business as it is now being conducted by it
and (iii) is qualified to do business and in good standing in all jurisdictions
where it is required to be qualified as a foreign
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corporation except for such failures to be so qualified as have not had and
would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect.
3.2 INTERESTS IN THE ASSETS. (a) The Sellers, taken together, have good
and valid title to all of the Assets (other than the Owned Facilities, Leased
Facilities, Intellectual Property and Licensed Intellectual Property, but
including inventory, Vehicles and Accounts Receivable) free and clear of all
Liens (other than Permitted Liens). The Accounts Receivable have arisen from
bona fide transactions in the ordinary Course of Business of the Sellers. The
Assets and the Excluded Assets constitute all the assets used in the conduct of
the Business as currently conducted by the Sellers and constitute all assets
owned or used by Sellers which are necessary for the conduct of the Business as
currently conducted. Schedule 3.2(a) of the Disclosure Schedule contains a true
and complete list of the fixed assets related to the Business as of December 21,
1994.
(b) The Sellers, taken together, have good and marketable title to
the Owned Facilities and valid and enforceable leasehold interests with respect
to the Leased Facilities, in each case free and clear of all Liens (other than
Permitted Liens).
3.3 CAPITAL STOCK OF ANVIL KNITWEAR (DEL.), INC. The authorized capital
stock of Anvil Knitwear (Del.), Inc. consists of 200 shares of common stock, no
par value, all of which shares
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are issued and outstanding and owned by McGregor. The Subsidiary Stock
constitutes all of the outstanding shares of common stock of Anvil Knitwear
(Del.), Inc., and all such shares have been duly authorized, validly issued and
are fully paid and nonassessable, are not subject to and have not been issued
in violation of any preemptive rights, have not been issued in violation of any
federal or state securities laws and McGregor has good and valid title to the
Subsidiary Stock free and clear of any Liens. There are no outstanding or
authorized options, warrants, rights, contracts, rights to subscribe or other
agreements or commitments to which any of the Companies is a party or which are
binding upon any of the Companies providing for the issuance, disposition or
acquisition of any capital stock of Anvil Knitwear (Del.), Inc. There are no
voting trusts, proxies or any other agreements or understandings with respect
to the voting of the Subsidiary Stock.
3.4 AUTHORITY, APPROVALS AND CONSENTS. Each of the Companies has the
corporate power and authority to enter, execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized and approved by
the Board of Directors of each of the Companies and no other corporate
proceedings on the part of any of the Companies are necessary to authorize and
approve this Agreement
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and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by each of the Companies and constitutes a valid and
binding obligation of such Company, enforceable against such Company in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors, rights generally or by the principles governing the
availability of equitable remedies. Except as otherwise set forth in Schedule
3.4 of the Disclosure Schedule, the execution, delivery and performance of this
Agreement by each Company and the consummation by each Company of the
transactions contemplated hereby do not and will not:
(a) contravene or otherwise violate any provisions of the Articles of
Incorporation or By-Laws of any of the Companies;
(b) (after notice or lapse of time or both) conflict with, result in
a breach of any provision of, constitute a default under, result
in the modification, acceleration or cancellation of, or give
rise to any right of termination in respect of, any contract,
agreement, commitment, understanding or arrangement of any kind
to which any of the Companies is a party and which relates to the
Business or by which any of the Assets (or, with respect to Anvil
Knitwear (Del.), any of the
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Special Assets) are bound except for such conflicts, breaches,
defaults, modifications, accelerations, cancellations or
terminations that have not had and would not be reasonably
expected to have a Material Adverse Effect;
(c) violate or conflict with any Legal Requirements applicable to the
Business conducted by Sellers, except for such violations and
conflicts as have not had and would not be reasonably expected to
have a Material Adverse Effect; or
(d) except for filings under the HSR Act and provision of notice to
the PBGC in connection with the PBGC Agreements, require any
Governmental Approval the absence of which would be reasonably
expected to have a Material Adverse Effect.
3.5 FINANCIAL STATEMENTS. Set forth at Schedule 3.5 of the Disclosure
Schedule are the following financial statements collectively, the "Financial
Statements"): (i) audited combined statements of financial position of the
Business as of January 29, 1994 and January 31, 1993 and the related combined
statements of earnings and cash flows for the years then ended; and (ii) the
Balance Sheet and the related statement of operating income and cash flows as of
and for the eight months ended October 1, 1994. The Financial Statements have
been prepared in accordance with GAAP applied on a consistent basis (except for
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the Balance Sheet which does not contain any footnotes) hereby and present
fairly the financial Position and results of operations of the Business
conducted by the Sellers.
3.6 ABSENCE OF MATERIAL ADVERSE CHANGE: CONDUCT OF BUSINESS. (a) Except
as set forth in Schedule 3.6 of the Disclosure Schedule, since October 1, 1994,
there has been no change, other than changes as a result of changes in market
conditions, applicable laws or economic conditions, in each case applicable to
businesses generally, in the financial position, business, assets, Liabilities,
results of operations or prospects of the Business conducted by the Sellers,
taken as a whole, that has had or would reasonably be expected to have a
Material Adverse Effect.
(b) Since October 1, 1994, the Sellers have conducted their
operations related to the Business in the Ordinary Course of Business, have used
commercially reasonable efforts to maintain their respective businesses, assets,
relations with employees, suppliers, licenses and operations related to the
Business as an ongoing business in accordance with past custom and practice.
Without limiting the generality of the foregoing, except as disclosed on
Schedule 3.6 of the Disclosure Schedule, since October 1, 1994, in each case as
related to the Business:
(i) neither of the Sellers has sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than in the
ordinary Course of Business;
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(ii) no party (including either of the Sellers) has accelerated,
terminated, modified, or canceled any contract, lease, sublease, license,
or sublicense (or series of related contracts, leases, subleases, licenses,
and sublicenses), excluding all Purchase Orders and Sales orders, involving
more than $250,000 to which either of the Sellers is a party or by which it
or its assets is bound; (iii) neither of the Sellers has made any capital
expenditure (or series of related capital expenditures) either involving
more than $250,000 or outside the ordinary Course of Business;
(iii) neither of the Sellers has made any capital investment
in, any loan to, or any acquisition of the securities or assets of any
other Person other than in the Ordinary Course of Business;
(iv) neither of the Sellers has canceled, compromised, waived, or
released any right or claim (or series of related rights and claims),
except for any right or claim (or series of rights or claims) under any
Purchase Order or Sales Orders, either involving more than $250,000 or
outside the Ordinary Course of Business; and
(v) neither of the Sellers has committed to any of the
foregoing.
3.7 LEGAL MATTERS. (a) Except as set forth on Schedule 3.7(a) of the
Disclosure Schedule, (i) there is no claim, action,
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suit, litigation, formal investigation or proceeding pending, or, to the
Knowledge of Sellers, threatened against Astrum, McGregor or Winston Mills
relating to the Business, which has a significant possibility of resulting in
(A) damages, penalties or similar awards in excess of $100,000 or (B) equitable
remedies having a Material Adverse Effect and (ii) neither McGregor nor
Winston Mills is subject to any judgment, decree, writ, injunction or order of
any Governmental Authority which is likely to have a Material Adverse Effect.
(b) Each of the Sellers has complied and is in compliance with all
Legal Requirements (excluding those relating to Environmental Requirements or
Taxes) governing or affecting its ownership and use of its properties and assets
and the conduct of the Business, except for such failures to comply or be in
compliance as have not had and would not be reasonably expected to have a
Material Adverse Effect. Except as set forth on Schedule 3.7(b) of the
Disclosure Schedule, neither McGregor nor Winston Mills has received any notice
asserting any noncompliance with any such Legal Requirement except for such
failures to comply as have not had and would not be reasonably expected to have
a Material Adverse Effect.
(c) Each of the Owned Facilities is in material compliance with all
applicable Legal Requirements excluding those relating to Environmental
Requirements or Taxes, and each constitutes a legal, conforming use and
structure under
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applicable zoning ordinances (excluding those, if any, related to Environmental
Requirements or Taxes) except where the failure to so comply or conform has not
had and would not be reasonably expected to have a Material Adverse Effect.
3.8 CONTRACTS. (a) Schedule 3.8 of the Disclosure Schedule lists as of
the date hereof all written contracts, agreements, commitments and personal
property leases to which either of the Sellers is a party, excluding Purchase
Orders and Sales Orders, which relate to the Business and which meet the
criteria specified in the paragraphs below:
(i) involve future expenditures or receipts or other performance
with respect to goods or services (excluding legal or accounting services
provided or to be provided in connection with the consummation of the
transactions contemplated hereby) having a contract price in excess of
$250,000;
(ii) leases, subleases, installment purchase or similar
arrangements for the use of personal property, or involving any license or
sublicense, in each case which involves a total consideration in excess of
$50,000 per annum;
(iii) employment agreements (excluding at-will employment)
and contracts related to the Employee Benefit Plans which are welfare
plans;
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(iv) involve a consulting relationship involving total
consideration in excess of $75,000 per year;
(v) contain commitments of suretyship, guaranty or
indemnification (except for guarantees, warranties and indemnities provided
by Sellers in respect of their products in the Ordinary Course of Business
and those having a contract value, in the aggregate, of $100,000 or less);
(vi) relate to the disposition or acquisition, other than in the
Ordinary Course of Business, of the assets or stock of, or any interest in,
any business enterprise;
(vii) are Material Agreements; or
(viii) contain an indenture, mortgage, pledge, credit (other
than credit terms offered to customers in the Ordinary Course of Business),
or other financing commitment for or in respect of Indebtedness from or to
any Person.
(b) Each contract, agreement, commitment and personal property lease
listed on Schedule 3.8 of the Disclosure Schedule is valid and in full force and
effect and no party thereto has repudiated any provision thereof, which
repudiation has had or would reasonably be expected to have a Material Adverse
Effect. The Sellers have delivered to Buyer a true and complete copy of any
commitment and personal property lease, as amended (if applicable), listed on
Schedule 3.8 of the Disclosure Schedule.
(c) Except as set forth on Schedule 3.8 of the Disclosure Schedule,
neither of the Sellers nor, to the Knowledge
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of Sellers, any other party to any contract, agreement, commitment or personal
property lease listed on Schedule 3.8 of the Disclosure Schedule, is in breach
of or default under any contract, agreement, commitment and personal property
lease listed on Schedule 3.8 of the Disclosure Schedule, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration thereunder except
for breaches or defaults which have not had and would not be reasonably
expected to have a Material Adverse Effect.
3.9 EMPLOYEES. (a) Attached hereto as Schedule 3.9 is a true and complete
list of the names of all employees of McGregor and Winston Mills employed as of
the date hereof in connection with the Business having a base salary of more
than $100,000 per annum along with each such employee's annual rate of salary or
hourly pay, total compensation for 1993 and social security number. As of the
date hereof, none of such employees is on long-term disability.
(b) None of the Sellers or any Affiliates is a party to any
collective bargaining agreements with respect to the Business. None of the
Companies has experienced, in connection with the Business, during the past 24
months any organized strikes, organized work stoppages or organized slow downs,
claims of pervasive unfair labor practices, or other pervasive disputes or
grievances. None of the Companies has committed any pervasive
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unfair labor practice with respect to the Business. To the Knowledge of the
Sellers, there is no organizational effort presently being made or threatened
by or on behalf of any labor union with respect to any non-unionized employees
of the Business.
3.10 EMPLOYEE BENEFIT PLANS. (a) The Sellers have heretofore provided to
Buyer a true and complete copy of each Employee Benefit Plan. Neither McGregor
nor any Affiliate is required, in connection with the Business, to make
contributions to any multi-employer plan (within the meaning of Section 3(37) of
ERISA) on behalf of any employee of McGregor or any such Affiliate who is
employed in connection with the Business. Except for Liability in connection
with the PBGC Agreements and the employment agreements with Bernard Geller and
Ross Castagna, neither McGregor nor any Affiliate has any Liability under any
defined benefit pension plan with respect to any employee who is employed in
connection with the Business.
(b) The McGregor Savings Plan (as defined in Section 5.11(e)) has
been maintained and administered in compliance with its terms and all applicable
laws and regulations. The McGregor Savings Plan will be filed with the IRS
within the remedial amendment period for obtaining a determination letter from
the IRS that such plan meets the requirements of a "qualified plan" under
Section 401(a) of the Code, and its related trust is exempt from Tax under
Section 501(a) of the Code and, to the Knowledge
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of Sellers, there are no facts that would reasonably be expected to cause the
loss of such qualification or exemption from Tax. None of McGregor or any
Affiliate, or any trustee or administrator or any other person, has engaged in
any transaction with respect to the McGregor Savings Plan which could result
in any Liability to the McGregor Savings Plan or to Buyer other than routine
benefit claims and as provided under Section 5.11(e). No actions, suits,
investigations or claims with respect to the McGregor Savings Plan or any
fiduciary or other person dealing with the McGregor Savings Plan are pending
or threatened, and no facts exist which could reasonably give rise to or be
expected to give rise to any such actions, suits, investigations or claims.
With respect to the McGregor Savings Plan, McGregor has complied with all
reporting and disclosure obligations to the Internal Revenue Service, the
Department of Labor and participants in a timely manner except for such
non-compliance as had not had, and would not be reasonably expected to have,
a Material Adverse Effect. With respect to the McGregor Savings Plan, Sellers
have heretofore provided to Buyer (i) a true and complete copy of the last IRS
Form 5500 (including all attachments), and (ii) all other governmental rulings,
determinations and opinions that relate to the McGregor Savings Plan.
(c) Except as provided in Section 5.11(d) and clause (xii) of the
definition of Excluded Liabilities, no severance or other similar plan
maintained by Sellers with respect to the
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Business Employees would cause Buyer to have any Liability as a result of this
transaction.
(d) All premiums and contributions that are due with respect to each
contract or other agreement under each employee welfare benefit plan maintained
by the Sellers with respect to the Business Employees have been made.
3.11 INTELLECTUAL PROPERTY. Except as set forth in Schedule 3.11 of
the Disclosure Schedule:
(a) the Sellers have the right to use the trademarks "ANVIL" and
"COTTON DELUXE and design" in the United States in relation to the products
presently manufactured by Sellers for the Business; the Intellectual Property
and Licensed Intellectual Property shall be transferred free and clear of all
Liens (other than Permitted Liens);
(b) the Sellers own and possess all right, title and interest in and
to the trademark registrations and trademark registration applications listed in
Schedule 1.1(vi); there are no trademark registrations, service mark
registrations, applications for trademark registration, applications for service
mark registration, patents, patent applications, design patents, design patent
applications, or copyright registrations owned by McGregor or Winston Mills and
used in the conduct of the Business as presently conducted, except as listed in
Schedule 1.1(vi);
(c) the Sellers have not granted any license or other right to use
the Intellectual Property to any third party;
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(d) to the Knowledge of Sellers, in the United States, the Sellers
have not infringed, misappropriated, or otherwise conflicted with any
intellectual property rights of any third party nor are the Sellers aware of any
infringement, misappropriation, or conflict that will occur as a result of the
continued operation of Sellers' Business as presently conducted or as presently
proposed to be conducted by Sellers;
(e) to the Knowledge of Sellers, in the United States, no claim by
any third party contesting the validity, enforceability, use, or ownership of
any Intellectual Property or Licensed Intellectual Property has been made, is
currently outstanding, or is threatened; and
(f) to the Knowledge of Sellers, in the United States, neither the
Sellers nor any officer of the Sellers has received any notice of, nor are aware
of any facts which indicate a likelihood of, any infringement or
misappropriation by, or conflict with, any third party with respect to the
Intellectual Property or the Licensed Intellectual Property.
3.12 BROKERS. Except for Bear Stearns & Co., Inc., which is acting for the
Sellers, the Sellers have neither employed or dealt with any broker or finder
nor have incurred or will incur any broker's, finder's or similar fee,
commission or expense, in each case in connection with the transactions
contemplated by this Agreement. Neither of the Sellers has any Liability to pay
any fees or commissions to any broker, finder, or agent with
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respect to the transactions contemplated by this Agreement for which the
Buyer could become liable or obligated.
3.13 PERMITS. The Sellers hold, and the Licenses and Permits constitute,
all permits, licenses, orders and approvals of all Governmental Authorities
required for the conduct of the Business as currently conducted by the Sellers
except for the absence of such permits, licenses, orders and approvals that have
not had and would not be reasonably expected to have a Material Adverse Effect.
All the Licenses and Permits, orders and approvals are in full force and effect
except for such failures to be in full force and effect as have not had, and
would not be reasonably expected to have, a Material Adverse Effect.
3.14 ENVIRONMENTAL REPRESENTATION. Except as set forth in Schedule 1.1(iv)
to the Disclosure Schedule and except as disclosed in the Phase I Environmental
Assessments,(a) McGregor and Winston Mills have, with respect to the Business,
complied, and they are in compliance, with all Environmental Requirements
enacted on or prior to Closing except for such failures to comply or be in
compliance as have not had, and would not reasonably be expected to have, a
Material Adverse Effect.
(b) The Sellers have not received any written or oral notice of
Liabilities relating to the facilities or operations of the Business and arising
under Environmental Requirements enacted on or prior to Closing, which
Liabilities or obligation have had, or would reasonably be expected to have, a
Material Adverse Effect.
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(c) To the Knowledge of Sellers, none of the following exists at any
property or facility owned or operated by McGregor or Winston Mills with respect
to the Business:
(A) Underground storage tanks or surface impoundments for the
storage or management of Hazardous Substances;
(B) Friable asbestos-containing material; or
(C) Materials or equipment containing polychlorinated biphenyls
in excess of 50 ppm.
(d) Neither McGregor nor Winston Mills has, with respect to the
Business, treated, stored, disposed of, arranged for or permitted the disposal
of, transported, handled, or Released any Hazardous Substance or owned or
operated a facility at which a Release has occurred, so as to give rise to
liabilities for response costs, natural resource damages or attorneys fees
pursuant to CERCLA or similar state Environmental Requirements enacted on or
prior to Closing which liabilities, costs, damages or fees have had, or would
reasonably be expected to have, a Material Adverse Effect.
(e) Neither McGregor nor Winston Mills has, with respect to the
Business, assumed or undertaken any liability, including, without limitation,
any obligation for corrective or remedial action, of any other Person relating
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to any Environmental Requirements enacted on or prior to Closing.
(f) No Environmental Lien (excluding any Permitted Lien) has attached
to any property owned, leased or operated by the Business.
(g) Without limiting the foregoing, no facts, events or conditions in
existence on or prior to the Closing Date relating to the Business, the Owned
Facilities or the Leased Facilities give rise to any Liabilities pursuant to
Environmental Requirements enacted on or prior to Closing including, without
limitation, any such Liabilities relating to onsite or offsite Releases or
threatened Releases of Hazardous Substances, except for such of the foregoing
that have not had, and would not reasonably be expected to have, a Material
Adverse Effect.
3.15 UNDISCLOSED LIABILITIES. Neither of the Sellers has any Liability
(excluding those relating to Environmental Requirements, Taxes or Legal
Requirements related to workers' compensation) with respect to the Business (and
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against either of the Sellers
giving rise to any Liability with respect to the Business), except for (i)
Liabilities set forth on the Closing Date Balance Sheet, (ii) Liabilities which
have arisen in the Ordinary Course of Business (including for purposes of this
clause (ii), Liabilities arising from any breach of product
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warranty, tort or violation of law or arising out of any charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand), (iii)
Liabilities set forth in the Disclosure Schedule, (iv) Liabilities not assumed
by the Buyer pursuant to this Agreement and (v) Liabilities resulting from
any breach of any contract, agreement, commitment or personal property lease
listed on Schedule 3.8 to the Disclosure Schedule or any infringement of the
intellectual property rights of any other Person. Notwithstanding the above,
for purposes of clause (ii) of this Section 3.15, a Liability shall be deemed
not to result from the Ordinary Course of Business if the amount of such
Liability (exclusive of costs of investigation and attorneys' fees related
thereto) exceeds $75,000.
3.16 BUSINESS OF ANVIL KNITWEAR (DEL.), INC. The certificate of
incorporation and bylaws of Anvil Knitwear (Del.), Inc. as currently in effect
are attached hereto at Schedule 3.16 of the Disclosure Schedule, and Sellers
have authorized no change to such documents. Other than Anvil s.r.o., Anvil
Knitwear (Del.), Inc. does not have and has never had any Subsidiaries and does
not own and has never owned directly or indirectly, or have and has never had
any investment in any of the capital stock of, or have and has never had any
similar ownership interest in, any Person. other than its investment in Anvil
s.r.o., Anvil Knitwear (Del.), Inc. has no assets or Liabilities and conducts no
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business nor has ever conducted any business and has good and valid title to the
Special Assets, free and clear of any Liens (other than Permitted Liens).
3.17 TAXES. The assumed Liabilities do not include any obligation to make
any payments that will be nondeductible under Section 2BOG of the Code (or any
corresponding provision of state, local or foreign income Tax law).
3.18 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article 3, the Sellers make
representation or warranty, express or implied, written or oral, and the Sellers
hereby disclaim any such representation or warranty (including without
limitation any warranty of merchantability or of fitness for a particular
purpose), whether by the Sellers or any of their officers, directors, employees,
agents, or representatives or any other Person, with respect to the Sellers or
the execution and delivery of this Agreement or the transactions contemplated
hereby, notwithstanding the delivery or disclosure to Buyer, any Affiliate or
Associate of Buyer or any of their officers, directors, employees, agents or
representatives or any other person of any documentation or other information by
the Sellers or any of their Affiliates, Associates, officers, directors,
employees, agents or representatives or any other person with respect to any one
or more of the foregoing.
3.19 AFFILIATE TRANSACTIONS. None of the Sellers, officers or directors
or, to the Knowledge of the Sellers, any of its employees related to or employed
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in the Business, is presently a party to any material transaction with Astrum or
the Sellers, including, without limitation, any arrangement (other than for
services in the ordinary Course of Business as officers, directors or employees
of Astrum or the Sellers) providing for (a) the furnishing of material services
by, (b) the rental of material real or personal property from, (c) any loan to,
or (d) otherwise requiring material payments to, any such Person. Schedule 3.19
sets forth a list of any severance payments payable by the Sellers or Astrum in
connection with the consummation as of the date hereof of the transactions
contemplated by this Agreement and will be amended from time to time to reflect
any additional amounts payable.
3.20 PAYMENTS FROM ANVIL S.R.O. None of Sellers or their Affiliates have
since October 1, 1994, received any payment of cash or property from Anvil
s.r.o. other than payments for goods sold or provided to Anvil s.r.o. by Sellers
or such Affiliates for fair consideration in the Ordinary Course of Business.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
REGARDING BUYER
Except as disclosed in this Agreement, Buyer hereby represents and warrants
to the Sellers as follows:
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4.1 ORGANIZATION AND GOOD STANDING OF BUYER. Buyer is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the power and authority to own, lease and operate the property
used in its business and to carry on its business as now being conducted. Buyer
is registered to do business and in good standing in all jurisdictions where it
is required to be qualified as a foreign corporation except where the failure to
be so qualified has not had and would not be reasonably expected to have a Buyer
Material Adverse.
4.2 AUTHORITY, APPROVALS AND CONSENTS. Buyer has the power and authority
to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized and approved by the board of directors of the Buyer, and no
other proceedings on the part of Buyer are necessary to authorize and approve
this Agreement and the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Buyer and constitutes a valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors, rights
generally or by the principles governing the availability of equitable
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remedies. Except as disclosed on Schedule 4.2, the execution, delivery and
performance of this Agreement by Buyer and the consummation of the transactions
contemplated hereby do not and will not:
(a) contravene or otherwise violate any provisions of the Articles of
Incorporation or By-Laws of Buyer;
(b) (after notice or lapse of time or both) conflict with, result in
a breach of any provision of, constitute a default under, result
in the modification, acceleration or cancellation of, or give
rise to any right of termination in respect of, any contract,
agreement, commitment, understanding or arrangement of any kind
to which Buyer is a party or to which Buyer is subject;
(c) violate or conflict with any Legal Requirements applicable to
Buyer or any of its business or property except for such
violations and conflicts as have not had and would not be
reasonably expected to have a Buyer Material Adverse Effect; or
(d) except for filings under the HSR Act, require any Governmental
Approval, the absence of which would be reasonably expected to
have a Buyer Material Adverse Effect.
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4.3 BROKERS. Except as set forth on Schedule 4.3, neither Buyer,
Holdings, nor any director, officer or employee of either of them, has employed
any broker or finder or has incurred or will incur any broker's, finder's or
similar fees, commissions or expenses, in each case in connection with the
transactions contemplated by this Agreement.
4.4 LITIGATION. There is no claim, action, suit, litigation, formal
investigation or proceeding pending or, to the Buyer's actual knowledge,
threatened, against Buyer or Holdings which has had or is reasonably expected to
have a Buyer Material Adverse Effect.
4.5 BUSINESS OF HOLDINGS. Holdings does not own directly or indirectly,
or have any investment in any of the capital stock of, or have any similar
ownership interest in, any Person other than Buyer.
4.6 HOLDINGS STOCK. As of the Closing Date, all the shares of Holdings
Stock(a) will have been duly authorized and validly issued, b) will be fully
paid and non-assessable, (c) will not be subject to and will not have been
issued in violation of any (d) will not have been issued in violation of any
federal or state securities laws.
4.7 ORGANIZATION AND GOOD STANDING OF HOLDINGS. Holdings (i) is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisidiction of its organization and (ii) is qualified to do
business and be in good standing in all jurisdictions where it is required to be
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qualified as a foreign corporation except for such failures to be so qualified
as would not, individually or in the aggregate, be reasonably expected to have a
Buyer Material Adverse Effect.
4.8 HOLDINGS AUTHORITY TO EXECUTE AND PERFORM STOCKHOLDERS' AGREEMENT,
SELLER NOTE, ETC. Holdings has the corporate power and authority to enter,
execute, deliver and perform the Stockholders' Agreement, to issue, execute and
deliver the Seller Note, to issue the Holdings Stock and to consummate the
transactions contemplated hereby and thereby. As of the Closing Date, such
execution , delivery, performance and issuance and the consummation of the
transactions contemplated hereby will have been duly authorized and approved by
the Board of Directors of Holdings and no other corporate proceedings on the
part of Holdings will be necessary to authorize and approve such execution,
delivery, performance and issuance and the transactions contemplated hereby. As
of the Closing Date, such execution, delivery, performance and issuance and the
consummation of the transactions contemplated hereby will have been duly
authorized and approved by the Board of Directors of Holdings and no other
corporate proceedings on the part of HOLDINGS will be necessary to authorize and
approve such execution, delivery, performance and issuance and the transactions
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contemplated hereby. As of the Closing Date, the Stockholders' Agreement and
the Seller Note will constitute valid and binding obligations of Holdings,
enforceable against Holdings accordance with their terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors, rights generally
or by the principles governing the availability of equitable remedies. Except
as otherwise set forth in Schedule 4.8, the execution, delivery, performance and
issuance of the Stockholders' Agreement, the Seller Note and the Holdings Stock
by Holdings and the consummation by Holdings of the transactions contemplated
hereby do not and will not:
(a) contravene or otherwise violate any provisions of the Articles of
Incorporation or By-Laws of Holdings;
(b) (after notice or lapse of time or both) conflict with, result in
a breach of any provision of, constitute a default under, result
in the modification, acceleration or cancellation of, or give
rise to any right of termination in respect of, any contract,
agreement, commitment, understanding or arrangement of any kind
to which Holdings is a party or to which Holdings is subject
except for such conflicts, breaches, defaults, modifications,
accelerations, cancellations or terminations as would not be
reasonably expected to have a Buyer Material Adverse Effect;
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(c) violate or conflict with any Legal Requirements applicable to
Holdings, except for such violations and conflicts as would not
be reasonably expected to have a Buyer Material Adverse Effect;
or
(d) except for filings under the HSR Act, require any Governmental
Approval the absence of which would be reasonably expected to
have a Buyer Material Adverse Effect.
4.9 CAPITALIZATION, OWNERSHIP OF HOLDINGS. Schedule 4.9 (i) sets forth
the pro forma capitalization of Holdings and (ii) the amount of equity
securities to be issued by Holdings to Culligan, in each case giving effect to
the transactions contemplated by this Agreement.
4.10 COMMITMENT LETTER. Attached hereto as Exhibit I hereto of is a true
and complete copy of the Commitment Letter.
4.11 TITLE INSURANCE. Schedule 1.1(ix) contains all exceptions to title in
respect of Assets in respect of which Buyer has obtained, directly or
indirectly, title insurance policies, binders or commitments (including, without
limitation, the Owned Facilities and the Mullins Leasehold) as set forth in such
policies, binders or commitments, as the case may be.
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ARTICLE 5
COVENANTS
5.1 ACCESS; CONFIDENTIALITY. Between the date hereof and the Closing,
each Seller will, and will cause Anvil Knitwear (Del.), Inc. to, during normal
business hours, (i) provide to Buyer and its representatives full access to the
premises, property, files, books, records, documents, and other information of
each Company concerning the Business, (ii) furnish to Buyer and its
representatives financial, technical, legal and operating data and other
information pertaining to the Business, (iii) make available for inspection and
copying by Buyer copies of any documents relating to the foregoing and (iv)
permit Buyer and its representatives to conduct reasonable interviews of the
employees, sales representatives and auditors of such Seller concerning the
Business; PROVIDED, HOWEVER, that (x) any such investigation will be conducted
in such a manner as not to interfere unreasonably with the operation of the
business of such Company (y) such Company may limit such access described in
clauses (i) through (iv) above to the extent such access could, in the
reasonable opinion of such Company's counsel, violate or give rise to liability
under applicable law or agreements applicable to the Sellers or its properties
and (z) such rights of access shall be subject to the existing lease, license or
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occupancy agreements. During the period from the date hereof to the Closing,
all information provided to Buyer or its representatives by or on behalf of the
Companies, or their representatives (whether pursuant to this Section 5.1 or
otherwise) will be governed and protected by the Confidentiality Agreement.
5.2 ANNOUNCEMENTS. Prior to the Closing, no party hereto will issue any
press release or otherwise directly or indirectly make any public statement or
furnish any statement or make any announcement to its customers with respect to
the transactions contemplated hereby without the prior consent of Buyer and
Sellers, except as may be required by law, and except that Buyer and the
Sellers, upon prior notice to the other, may make such announcements and
disclosures as may be required by GAAP, by the rules of any stock exchange on
which their securities are listed or by any other Legal Requirement and PROVIDED
FURTHER, that if either Buyer or Sellers make any announcement or disclosure
pursuant to this Section, the other party hereto shall be permitted to make
disclosure or announcement in respect of the subject matter of the first party's
disclosure or announcement.
5.3 CONDUCT OF BUSINESS PRIOR TO THE CLOSING. From the date hereof to the
Closing, except as may be consented to in writing by the Buyer or as otherwise
expressly provided for in this Agreement, each Seller shall (a) conduct the
Business only in the Ordinary Course of Business and (b) use its commercially
reasonable efforts to preserve the business organization of the Business
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conducted by the Sellers intact and preserve the of the suppliers, customers,
employees and others with whom business conducted by the Sellers will, and will
cause Anvil Knitwear (Del.), Inc. to, do the following:
(i) not change, or authorize any change to, the Articles of
Incorporation or By-Laws of Anvil Knitwear (Del.), Inc.;
(ii) not issue, sell or otherwise dispose of any capital stock of
Anvil Knitwear (Del.), Inc. nor grant any options, warrants or other rights
to purchase or obtain (including upon conversion or exercise) any capital
stock of Anvil Knitwear (Del.), Inc;
(iii) except for salary increase made annually with respect
to salaried employees in the Ordinary Course of Business, not provide for
any general increase in the wages, salaries, compensation, pension or other
benefits payable by the Business to its directors, officers or employees,
in each case without the prior consent of Buyer; PROVIDED, HOWEVER, that
this clause shall not prohibit increases to individual employees to the
extent budgeted for and in writing to Buyer prior to the date hereof;
(iv) refrain from making any disposition of any assets relating
to the Business, in the aggregate exceeding $100,000 in book value, other
than in the Ordinary Course of Business;
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(v) refrain from making any change in accounting methods,
principles or practices relating to the Business (except as otherwise
expressly provided in this Agreement);
(vi) refrain from adopting any Employee Benefit Plan for any of
the directors, officers or employees of the Business or modifying any such
existing Employee Benefit Plan; and
(vii) refrain from agreeing to do any of the foregoing items
(i) through (vi) of this Section 5.3.
5.4 CONSENT; COOPERATION. Subject to the terms and conditions hereof, the
Sellers and Buyer will use their commercially reasonable efforts:
(a) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all authorizations, consents,
orders, permits or approvals of, or notices to, or filings,
registrations or qualifications with, all Governmental
Authorities or any other Person that are required on their
respective parts, for the consummation of the transactions
contemplated by this Agreement;
(b) to defend, consistent with applicable principles and requirements
of law, any lawsuit or other legal proceeding, whether judicial
or administrative, whether brought derivatively or on behalf of
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third persons (including Governmental Authorities) challenging
this Agreement or the transactions contemplated hereby;
(c) to furnish to each other such information and assistance as may
reasonably be requested in connection with the foregoing; and
(d) to (i) take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by
this Agreement (excluding satisfying closing conditions in
Articles 6 and 7 hereof insofar as they relate to the truth of
representations and warranties but including otherwise satisfying
the closing conditions in Articles 6 and 7) and (ii) refrain
from taking any action which reasonably could be expected to
render any representation or warranty or covenant contained in
this Agreement untrue or incorrect in any material respect
(except to the extent a representation or warranty or covenant is
qualified by materiality in which case the Sellers and their
Affiliates will refrain from taking any action that would render
such representation or warranty or covenant untrue or incorrect)
as of Closing.
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5.5 [INTENTIONALLY LEFT BLANK]
5.6 HART-SCOTT-RODINO. As soon as practicable (but in no event later than
10 days) after the date hereof, Buyer and the prepare and file all documents
with the Federal Trade Commission and the United States Department of Justice
that are to comply with the HSR Act. The Sellers and Buyer will in good faith
promptly furnish all materials reasonably requested by any of the regulatory
agencies having jurisdiction over such filings. The Sellers and Buyer will
request early termination of the waiting period under the HSR Act.
5.7 FURTHER ASSURANCES. Any time after the Closing, the Sellers and Buyer
will promptly execute, acknowledge and deliver any assurances or documents
reasonably requested by Buyer or the Sellers, as the case may be, to satisfy, or
in connection with, its obligations hereunder.
5.8 ALLOCATION OF PURCHASE PRICE. Buyer shall prepare, or cause to be
prepared, an appraisal of the Assets, which appraisal acceptable to Sellers (the
"Appraisal"). Each of Buyer, Holdings and Sellers shall allocate the Purchase
Price among the Assets pursuant to Section 1060 of the Code in accordance with
fair market values of the Assets as set forth the Appraisal. Each of Buyer and
Sellers shall file Internal Revenue Service Form 8594 in a timely manner.
5.9 RETENTION OF BOOKS AND RECORDS. Buyer will retain all books, records
other documents that are included in the and are in existence on the Closing
Date for a period of three years after the Closing Date (except books, records
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and documents relating to Taxes, which will be maintained in accordance with
Section 5.10(b) hereof) and make the same available to the Sellers after the
Closing Date for examination and copying by the Sellers or their
representatives, at the Sellers, expense, upon reasonable notice. No such
books, records or document will be destroyed by Buyer without first advising the
Sellers in writing and providing the Sellers a reasonable opportunity to obtain
possession or make copies thereof at the Sellers' expense. Such books, records
and documents will only be made available to the Sellers if the Buyer reasonably
determines that Sellers have requested such access for a legitimate purpose
related to the operation of the Business prior to Closing, the Sellers agree to
limit their use of such books, records and documents to such purpose, and the
Sellers agree to keep such books, records and documents confidential.
Notwithstanding the foregoing, the Buyer agrees to provide, upon five Business
Days' notice from Sellers during which notice period Buyer may pursue reasonable
and necessary protection from any undesired disclosure, such books, records and
documents to the Sellers for the purposes of Sellers' compliance with any Legal
Requirement and use in any government proceeding.
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5.10 TAX MATTERS. The following provisions shall govern the allocation of
responsibility as between Buyer and Sellers for certain tax matters following
the Closing Date:
(a) CERTAIN TAXES. All Transfer Taxes incurred in connection with
this Agreement shall be paid by Sellers when due, up to a maximum
of $200,000, after which the Buyer shall pay all of such Transfer
Taxes up to a maximum of $200,000, after which all of such
Transfer Taxes shall be made by Buyer and Seller equally and
Sellers will, at their own expense, file all necessary Tax
Returns and other documentation with respect to all such Transfer
Taxes and, if required by applicable law, Buyer will, and will
cause its affiliates to, join in the execution of any such Tax
Returns and other documentation.
(b) COOPERATION ON TAX MATTERS. Buyer and Sellers shall cooperate
fully, as and to the extent reasonably requested by the other
party, in connection with any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include
the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any
such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional
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information and explanation of any material provided hereunder.
Buyer and Sellers agree (A) to retain all books and records with
respect to Tax matters pertinent to the Sellers relating to any
taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent
notified by Buyer or Sellers any extensions thereof) of the
respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to
give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records
and, if the other party so requests, the Buyer or Sellers, as the
case may be, shall allow the other party to take possession of
such books and records.
(c) SECTION 338(H)(10) ELECTION. Sellers agree, if so directed by
Buyer, after the Second Closing Date, to make an election under
Section 338(h)(10) of the Code with respect to a sale and
purchase of the stock of Anvil Knitwear (Del.), Inc. pursuant to
Section 2.1(c) hereof and to make any analogous elections under
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applicable state law provisions (including such state elections,
the "Election").
5.11 EMPLOYEES. (a) Effective as of the Closing Date, Buyer shall offer
employment to all employees of the Sellers or any Affiliate thereof who, on the
Closing Date, are actively employed in the Business, including those persons who
are absent from employment due to illness or injury, military service, or
authorized absence, but excluding those persons who are former employees,
retired employees or otherwise not actively in the Business ("Business
Employees"). Business Employees who accept such offers of employment from Buyer
are referred to herein as "Transferred Business Employees"; such employment by
Buyer shall commence upon the Closing Date at the same wages or salaries and
substantially similar employee benefits, in the aggregate, as provided by the
Sellers immediately prior to the Closing Date. Except as may be specifically
required by applicable law or any agreement assumed by Buyer, Buyer shall not be
obligated to continue any employment relationship of any Transferred Business
Employee for any period of time.
(b) Service by Transferred Business Employees with the Sellers or any
Affiliate thereof shall be recognized under each benefit program adopted,
maintained or contributed to by Buyer or any Affiliate for the Transferred
Business Employees providing retirement, savings or other deferred compensation
benefits (but not for purposes of benefit accrual) (the "Buyer's Retirement
Plans") and providing life, hospital, medical, surgical, disability, dental and
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similar welfare benefits (the "Buyer's Welfare Plans") for all purposes,
including, but not limited to, participation, vesting, coverage and level of
benefits, as applicable. Buyer shall waive, or shall cause its insurance
carriers and administrators to waive, all limitations as to pre-existing
condition exclusions and work exclusions, if any, with respect to participation
and coverage requirements applicable to Transferred Business Employee providing
retirement, savings or other deferred compensation benefits (but not for
purposes of benefit accrual) (the "Buyer's Retirement Plans") and providing
life, hospital, medical, surgical, disability, dental and similar welfare
benefits (the "Buyer's Welfare Plans") for all purposes, including, but not
limited to, participation, vesting, coverage and level of benefits, as
applicable. Buyer shall waive, or shall cause its insurance carriers and
administrators to waive, all limitations as to pre-existing condition exclusions
and work exclusions, if any, with respect to participation and coverage
requirements applicable to Transferred Business Employees under the Buyer's
Welfare Plans, and each Transferred Business Employee shall receive credit under
the Buyer's Welfare Plans for payments and co-payments under the Sellers'
Welfare Plans in satisfying any applicable deductible or out-of-pocket
requirements under the Buyer's Welfare Plans.
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(c) Each Transferred Business Employee will be credited by Buyer with
any unused vacation and sick leave service earned as of the Closing Date under
the vacation and sick leave policy of McGregor or any Affiliate thereof
applicable to such Transferred Business Employee, and the Sellers shall have no
liability therefor following the Closing Date. Buyer shall recognize service by
each Transferred Business Employee with McGregor or any Affiliate thereof for
purposes of determining entitlement to vacation and sick leave following the
Closing Date under the applicable vacation and sick leave policy of the Buyer.
(d) Prior to the Closing Date, and to the extent necessary to
implement this sentence, the Sellers shall amend the severance pay policies for
the Business Employees and take or cause to be taken all other action as may be
required to provide that severance or separation payments shall not be payable
to any Transferred Business Employee who is offered comparable with the Buyer or
an Affiliate of the Buyer pursuant to Section 5.11(a). Buyer shall indemnify
and hold the Sellers harmless from and against any Loss as a result of any
successful claim against the Sellers for the payment of severance benefits based
upon a determination that a Business Employee had not been offered "comparable
employment" by Buyer pursuant to Section 5.11(a). Buyer shall recognize service
by each Transferred business Employee with the Sellers or any Affiliate thereof
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for purposes of determining entitlement to and the amount of severance benefits
following the Closing Date under the applicable severance policy or plan of the
Buyer.
(e) Prior to the Closing Date, McGregor shall take all necessary and
appropriate action to value the assets and liabilities associated with the
accounts of each participant in McGregor's 401(k) tax-deferred savings plan
("McGregor's Savings Plan") who is not a Business Employee. As of such
valuation date: (i) the assets and liabilities associated with the accounts of
each such non-Business Employee's account under McGregor's Savings Plan shall be
transferred, including any promissory notes evidencing participant loan balances
of the non-Business Employees, in accordance with the applicable requirements of
Section 414(l) of the Code, to another 401(k) tax-deferred savings plan
maintained or established by McGregor or an Affiliate of McGregor (the
"Transferee Savings Plan"), (ii) McGregor shall cause McGregor's Savings Plan to
prohibit participation by non-Business Employees, and (iii) McGregor shall
thereafter remain liable for all claims arising under the Transferee Savings
Plan with respect to the transfer of assets and liabilities associated with the
non-Business Employees. Effective as of the Closing Date, McGregor shall
withdraw from, and Buyer shall assume all liabilities and obligations for claims
(including, but not limited to, all expenses related thereto) arising under,
McGregor's Savings Plan on and after the Closing Date PROVIDED, that Sellers
shall indemnify Buyer for any claims arising under McGregor's Savings Plan (or
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its successor) following the Closing Date with respect to employees who are not
Business Employees.
(f) Nothing herein expressed or implied shall confer upon any
employee of McGregor, Winston Mills or Buyer, upon any legal representative of
such employee, or upon any other person other than the parties to this
Agreement, any rights or remedies, including any right to employment or
continued employment for any specified period of time, of any nature or kind
whatsoever under or by reason of this Agreement. Nothing in this Agreement
shall be deemed to confer upon any person (or beneficiary thereof) any rights
under or with respect to any plan, program, arrangement, practice, policy or
procedure described in or contemplated by this Agreement, and each person ( and
any beneficiary thereof) shall be entitled to look only to the express terms of
any such plan, program, arrangement, practice, policy or procedure for his
rights thereunder. Nothing in this Agreement shall cause or result in the
duplication of any benefits to be paid or provided to or with respect to any
Transferred Business Employee under any employee benefit policies, plans,
arrangements, programs, practices or agreements maintained by Buyer and McGregor
and their Affiliates.
5.12 NOTICE OF DEVELOPMENTS. The Sellers will give prompt notice to the
Buyer of any fact, to the Knowledge of Sellers, that would, if it were true on
the Closing Date, constitute a breach of the Sellers, representations and
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warranties in this Agreement. Each party to this Agreement will give prompt
written notice to the others of any material development affecting the of such
party to consummate the transactions contemplated by this Agreement. Subject to
Section 5.25, no disclosure by any party to this Agreement pursuant to this
Section 5.12, however, shall be deemed to amend or supplement the Disclosure
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
5.13 EXCLUSIVITY. The Sellers agree that neither of them (including their
respective officers and directors), nor Apollo, nor Astrum nor any Subsidiary of
Astrum, will and the Sellers will instruct their agents not to, (a) enter into
any written or oral agreement or understanding with any person (other than the
Buyer or any other Person contemplated by this Agreement) regarding a sale of
any of the Companies or any substantial part of the assets of any of the
Companies, or a merger, consolidation, or recapitalization involving any of the
Companies ("Another Transaction"); (b) enter into or continue any negotiations
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with any Person (other than the Buyer or any other Person contemplated by
this Agreement) regarding the possibility of Another Transaction; or (c)
except for announcements and disclosure that are expressly permitted by this
Agreement, provide any non-public financial or other confidential or
proprietary information regarding the Companies (including this Agreement or
any financial information, projections, or proposals regarding the Companies'
businesses) to any Person (other than to the Buyer, its financing sources and
their respective representatives) whom the Sellers know, or have reason to
believe, would have any interest in acquiring the capital stock, assets or
business of the Companies, or would disclose such information to any such
Person.
5.14 CONFIDENTIALITY NON-SOLICITATION. (a) The Sellers will execute and
deliver to Buyer a confidentiality agreement in form and substance substantially
equivalent to the Confidentiality Agreement.
(b) The Sellers agree that for a period of four years from the
Closing Date neither the Sellers, Astrum, Apollo nor any direct or indirect
Subsidiary of Astrum shall, for themselves or for any other Person, directly
solicit, hire or take away or directly attempt to solicit, hire or take away any
Key Transferred Employee.
(c) The Sellers agree that for a period of four years from the
Closing Date neither the Sellers nor any of their Subsidiaries shall, for
themselves or for any other Person directly solicit or directly attempt to
solicit any Transferred Employee (who is not a Key Transferred Employee) and for
a period of two years neither the Sellers nor any of their Subsidiaries shall,
for themselves or for any other Person, directly hire any Transferred Employee
(who is not a Key Transferred Employee).
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5.15 BNY FACTORING AGREEMENT. (a) The Sellers agree to use commercially
reasonable efforts to obtain the termination of the BNY Factoring Agreement
insofar as it relates to the Assets, such that the Accounts Receivable include
claims against BNY outstanding on the Closing Date under the BNY Factoring
Agreement, on terms otherwise reasonably satisfactory to the Buyer. Buyer shall
cooperate with such efforts by Sellers by attempting to persuade NationsBank to
treat BNY claims as an asset which qualifies for the highest advance rate
applicable to accounts receivable under the Credit Agreement to be executed with
NationsBank and by taking other actions to assist the Sellers but which cause no
adverse economic impact on Buyer. If after the exercise of such efforts
NationsBank refuses to accept the position of Buyer then Sellers shall proceed
under clause (b) below.
(b) If the BNY Factoring Agreement cannot be terminated as
contemplated above, Sellers shall use commercially reasonable efforts to
reacquire the accounts receivable in respect of the Business held by BNY on the
Closing Date pursuant to the BNY Factoring Agreement and transfer the same to
the Buyer pursuant to this Agreement.
5.16 BUYER'S FINANCING AND TITLE INSURANCE. Buyer agrees to use
commercially reasonable efforts to obtain the financing described in the
Commitment Letter and agrees to obtain the title insurance and surveys described
in Section 6.7 hereof.
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5.17 [Intentionally Left Blank]
5.18 STOCKHOLDER'S AGREEMENT. Buyer agrees to draft, execute and deliver to
Sellers, and Sellers agree to have executed a Stockholders' Agreement providing
the substantive terms set forth in the term sheet attached at Exhibit F hereto
(the "Stockholders' Agreement"); PROVIDED, that the Sellers' obligation to have
the Stockholders' Agreement executed shall not arise unless such Stockholders'
Agreement is reasonably acceptable to the Sellers.
5.19 GUARANTY AGREEMENT. (a) Sellers agree that on the Closing Date
Culligan and Astrum shall execute and deliver to Buyer a Guaranty Agreement (the
"Guaranty Agreement"), a copy of which is attached hereto as Exhibit G-1.
(b) The Buyer agrees that on the date hereof Vestar Equity Partners,
L.P. and CVC shall have executed and delivered to Sellers the guaranty agreement
attached hereto as Exhibit G-2.
5.20 BUSINESS INTERRUPTION INSURANCE. The Buyer shall obtain and cause to
be in effect as of the Closing Date and for five years after the Closing Date
business interruption insurance reasonably satisfactory to Sellers; PROVIDED,
HOWEVER, that in no event shall the Buyer be obligated to make annual premium
payments that exceed 175% of the premiums paid by the Buyer for such insurance
coverage for the first year from and after the Closing Date.
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5.21 SEC. (a) The Sellers shall instruct KPMG Peat Marwick to audit, and
request that KPMG Peat Marwick deliver within 90 days after the Closing Date, an
audited combined statement of financial position of the Business as of the
Closing Date and an audited combined statements of earnings and of cash flows
of the Business for the period ended on the Closing Date and an audited combined
financial statements of the Business as of and for the fiscal years ended
January 31, 1993 and January 29, 1994 (including, for all such purposes, Anvil
Knitwear (Del.), Inc.), and the Sellers shall use commercially reasonable
efforts to prepare such statements and shall instruct KPMG Peat Marwick to audit
such statements in accordance with the requirements of the Securities and
Exchange Commission (the "SEC") as to form and content and the Buyer shall
cooperate reasonably in such preparation.
(b) Buyer agree (without regard to any termination of this Agreement
and without limitation of any kind) to pay the incremental fees and expenses of
KPMG Peat Marwick incurred by the Sellers in connection with the services
referred to in clause (a) of this Section that are attributable to (i) the audit
of the combined statement of earnings and of cash flows of the Business for the
period ended on the Closing Date and (ii) the compliance with the requirements
of the SEC in excess of the fees and expenses that would have been incurred in
the absence of compliance with the requirements of the SEC.
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(c) The Sellers shall further instruct KPMG Peat Marwick to deliver
such audited statements in draft form to Buyer after completion of such audit
but at least 15 days prior to delivering their report thereon, and upon
completion of such audit, the Sellers shall deliver (or instruct KPMG Peat
Marwick to deliver) such audit statements to Buyer.
5.22 TAXES. Sellers shall furnish to Buyer prior to the Closing a
certification pursuant to Treasury Regulation Section 1.1445-2(b)(2) that
Sellers are not foreign persons.
5.23 COMPUTATION OF WORKERS' COMPENSATION RESERVE. (a) Regardless of GAAP
the reserve for workers, compensation on the Closing Date Combined Net Asset
Statement will be computed by adjusting (the "Reserve Adjustment"), in
accordance with the methodology used in developing in Schedule 5.23 to the
Disclosure Schedule, upward or downward, the reserve therefor on the Balance
Sheet only in respect of events, settlements or actions of Governmental
Authorities occurring after October 1, 1994, but on or before the Closing Date.
(b) Promptly after the Closing Date, the parties will attempt in good
faith to agree on the Reserve Adjustment. If, no later than 20 days after the
Closing Date, they cannot so agree, they shall each appoint a recognized actuary
in the workers' compensation field to determine the Reserve Adjustment. If such
actuaries cannot so agree within 40 days of the Closing Date, they shall appoint
a third such actuary to determine the Reserve Adjustment whose decision shall be
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final and binding. Each party shall pay the fees and expenses of its actuary.
The third actuary's fees shall be apportioned between Buyer and Sellers as such
third actuary shall determine.
5.24 SPECIAL PROCEDURES IN RESPECT OF CERTAIN ENVIRONMENTAL LIABILITIES.
(a) A Liability in respect of Special Environmental Matters shall not be an
Excluded Liability if (i) after this fourth anniversary of the Closing Date
Seller notifies Buyer that it no longer wishes that such Liability be treated as
an Excluded Liability (a "Non-Exclusion Notice") and (ii) after the
determination of the amount of all Losses in respect of such Liability pursuant
to clause (b) below, Sellers pay the amount of such Losses to Buyer, after which
event Seller shall be deemed forever and irrevocably released by Buyer and its
assignees from all liability in respect of such Liability and such Liability
shall be deemed an Assumed Liability hereunder; PROVIDED, that the termination
of the treatment of such Liability as an Excluded Liability (and the aforesaid
release of the same and inclusion thereof as an Assumed Liability) shall not
occur before the fifth anniversary of the Closing Date; PROVIDED, FURTHER, that
the foregoing right to deliver a Non-Exclusion Notice shall not apply to
Liabilities described in clause (xiii) of the definition of Excluded
Liabilities.
(b) If the Seller gives Buyer a Non-Exclusion Notice, Seller and
Buyer shall promptly, utilizing the standards in Article 9 hereof, attempt to
agree on the computation of the Losses attributable to such Liability, together
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with all other obligations Sellers may have in respect thereof pursuant to
Article 9 hereto, as if Buyer had made a claim for indemnification for a Direct
Claim in respect of such Liability; PROVIDED, that the parties and the
Environmental Arbitrator shall consider the possibility of unknown matters
arising from such matter. If within 90 days after the giving of the
Non-Exclusion Notice, Buyer and Sellers are unable to agree on such amount, they
shall each submit the matter to the Environmental Arbitrator, which shall be
appointed as provided in Section 9.5(b)(ii)(D) hereof and which shall render a
decision in respect of such dispute as provided in Section 9.5(b)(ii)(D). After
delivery of a Non-Exclusion Notice, Buyer shall be entitled to conduct such
investigation at Sellers' expense as it reasonably deems appropriate to
determine the Losses attributable to said Liability and Seller shall pay the
reasonable expenses of such investigation. For purposes of Section 9.5, Buyer
shall have Principal Management of the investigation of such Liability.
(c) Sellers shall have the right after the Closing, at Sellers'
expense, subject to the reasonable requirements of the Business, to inspect and
investigate the matters set forth on Schedule 1.1(iv) to the Disclosure
Schedule.
5.25 REVISION TO SCHEDULE. (a) On or before noon (EST) on December 30,
1994, the Buyer shall inform Sellers in writing whether the draft Disclosure
Schedule delivered by Sellers to Buyer on the date hereof is acceptable to
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Buyer. If, as of such time Buyer does not inform Seller that such draft
Disclosure Schedule is acceptable, this Agreement shall terminate forthwith with
no liability or obligations whatsoever to any party hereto.
(b) If this Agreement does not terminate pursuant to clause (a) of
this Section 5.25, the Sellers shall deliver to the Buyer, prior to 12:01 a.m.
(EST) or December 31, 1994, a revised Disclosure Schedule to this Agreement
(except for revised Schedule 1.1(ix) which shall be delivered by Sellers within
three Business Days after the date on which the Buyer delivers to the Sellers a
completed current title report in respect of all of the Owned Facilities (the
"Title Report").
(c) Buyer and Sellers shall attempt, in good faith, to resolve any
disputes regarding the revisions to the Disclosure Schedule delivered pursuant
to clause (b) of this Section 5.25. If within five days after the date of
delivery of the revised Disclosure Schedule pursuant to clause (b) of this
Section 5.25. If within five days after the date of delivery of the revised
Disclosure Schedule pursuant to clause (b) of this Section 5.25. If within five
days after the date of delivery of the revised Disclosure Schedule pursuant to
clause (b) of this Section 5.25, Buyer and Seller are unable to resolve any and
all disputes, Buyer must elect to either (i) accept the revisions to the
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Disclosure Schedule delivered pursuant to clause (a) of this Section 5.25 in
their entirety or (ii) terminate this Agreement.
5.26 WORKERS' COMPENSATION. Buyer and Burr Ridge Insurance Company ("Burr
Ridge") shall use reasonable efforts to establish a reasonable procedure whereby
Buyer will reimburse Burr Ridge for any workers compensation claims paid by Burr
Ridge after the Closing that constitute Assumed Liabilities.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer required to be performed by it at the Closing are
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, each of which may be waived by Buyer; PROVIDED, that no
such waiver shall constitute a waiver of the Buyer's rights, or in any way
relieve the Sellers of any obligation, under Article 9 hereof.
6.1 REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations and
warranties of the Sellers contained in Article 3 of this Agreement will be true
and will be deemed to be made again as of the Closing (except for those that are
made as of a certain time, which shall be true as of such time), and the
covenants contained in Sections 5.3, 5.4(d)(ii) and 5.12 shall have been
performed, except for changes contemplated by this Agreement and except for such
failures to be true and to be performed that do not result in a Material Adverse
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Effect, determined after taking into account any adjustment to the Cash Purchase
Price pursuant to Section 2.5 hereof and any cure or mitigation effected by any
Seller. Each obligation of the Sellers required by Article 2 or 5 of this
Agreement (excluding the covenants contained in Section 5.3, 5.4(d)(ii) and
5.12) to be performed by it at or prior to the Closing will have been duly
performed in all material respects at or prior to the Closing; PROVIDED, that
the Sellers' obligations pursuant to Section 2.1 (other than the fourth sentence
of Section 2.1(c)) hereof and 2.7(a)(iii) and (iv), to the extent the same are
required to be performed on or before the Closing Date, will have been performed
in full. At the Closing, Buyer will have received certificates, dated as of the
Closing Date and duly executed by an executive officer of each Seller on behalf
of such Seller (without personal liability to such officer), to the effect that
the conditions set forth in the preceding sentences have been satisfied.
6.2 AUTHORIZATION; CONSENTS; OTHER MATTERS. (a) All authorizations,
consents, orders, permits, approvals, notices, filings, registrations and
qualifications listed on Schedule 62 will have been made or obtained.
(b) Any applicable waiting period under the HSR Act and the rules and
regulations promulgated thereunder will have expired or have terminated.
6.3 INSTRUMENTS OF TRANSFER. The Sellers shall have executed and
delivered to Buyer each of the following: (A) Bills of Sale, General Conveyance
and Assignment in the form of Exhibit A attached hereto, (B) Instruments of
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Assumption in the form of Exhibit B attached hereto, (C) Deeds in the form of
Exhibit D attached hereto, (D) Trademark Assignments in the form of Exhibit E
attached hereto, and (E) such other instruments of transfer necessary to effect
the transfer of Assets to Buyer under this Agreement, including, without
limitation, documents representing the conveyance of the Special Assets, subject
to obtaining the Czech Consents.
6.4 CERTIFICATES. Each Seller will have furnished Buyer with a
certificate of its respective officers reasonably satisfactory to Buyer to
evidence that each of the conditions set forth in this Article 6 has been
satisfied or waived, such certificates to be made without personal liability of
such officer signing such certificates.
6.5 OPINION OF COUNSEL. The Buyer shall have received from Willkie Farr &
Gallagher, counsel to the Sellers, an opinion addressed to Buyer and dated as of
the Closing Date in the form of Exhibit J with only such changes thereto as
Buyer and Sellers shall mutually agree.
6.6 FINANCING. The Buyer shall have obtained funding by NationsBank of
the financing described in the Commitment Letter set forth on Exhibit I hereto
(the "Financing").
6.7 TITLE INSURANCE AND SURVEYS. The Buyer and NationsBank as lender
shall have obtained (i) insurance policies from the title insurance company
insuring the title of Buyer to (and the mortgage lien of NationsBank), and
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surveys to and on, the Owned Facilities and the Mullins Leasehold, subject only
to Permitted Liens (for this purpose only, clause (vi)(B) of the definition of
Permitted Lien shall not apply) and (ii) surveys (a) sufficient to cause the
title insurance company to eliminate the general survey exceptions to such title
insurance, (b) that do not disclose any Liens not already disclosed in the
surveys and other matters listed in Schedule 1.1(ix) to the Disclosure Schedule,
that would not be Permitted Liens under clause (iii) (x) of the definition of
Permitted Liens under clause (iii)(x) of the definition of Permitted Liens, and
(c) that do not evidence any other Liens that are not Permitted Liens. The
insurance policies from such title insurance company shall be in such amounts
and with such endorsements as Buyer and/or NationsBank shall reasonably require
including, without limitation, comprehensive endorsements, zoning endorsements,
and extended coverage to the extent reasonably available. The Sellers agree to
execute such documents including, without limitation, GAP indemnities (with
respect to Sellers' acts only) and the other documents, if any, required to
cause such title insurance company to issue such policies to the extent set
forth in Schedule 6.7.
6.8 EMPLOYMENT MATTERS. If the Buyer notifies the Sellers that has
entered in arrangements which are reasonably satisfactory to the Buyer with
respect to the employment of each
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member of the Management Group and the purchase and sale of securities of
Holdings by each such member, and Buyer notifies the Sellers in writing that it
has irrevocably waived its right to terminate this Agreement pursuant to
Section 8.1(h) hereof, the Buyer shall have received from each member of the
Management Group executed agreements which effectuate such arrangements and
each such member shall have performed the obligations that are to be
performed such member prior to or at the Closing pursuant to such arrangements.
ARTICLE 7
CONDITIONS TO THE OBLIGATION OF THE SELLERS
The obligations of each Seller to be performed by it at the Closing are
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, each of which may be waived by the Sellers; PROVIDED, that
no such waiver shall constitute a waiver of the Sellers, rights under Article 9
hereof, or in any way relieve the Buyer of any obligation under such article.
7.1 REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations and
warranties of Buyer contained in this Agreement will be true and will be deemed
to be made again as of the Closing (except for those made as of a certain date,
which shall be true as of such date), except for changes contemplated by this
Agreement and failures to be true that do not result in a Buyer Material Adverse
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Effect. Each obligation of Buyer required by this Agreement to be performed by
it at or prior to the Closing will have been dully performed in all material
respects at or prior to the Closing; PROVIDED, that the Buyer's obligations in
Sections 2.2, 2.7(b)(i), (ii), (iii) and (iv) will have been performed in full.
At the Closing, the Sellers will have received a Certificate, dated the Closing
Date and duly executed by an executive officer of Buyer (without personal
liability to such officer) to the effect that the conditions set forth in the
preceding sentences have been satisfied.
7.2 AUTHORIZATION; CONSENTS. (a) All authorizations, consents, orders,
permits, approvals, notices, filings, registrations and qualifications listed on
Schedule 7.2 will have been made or obtained.
(b) Any applicable waiting period under the HSR Act and the rules and
regulations promulgated thereunder will have expired or been terminated.
7.3 CERTIFICATES. Buyer will have furnished the Sellers with a
certificate of its officers, reasonably satisfactory to Sellers, to evidence
that each of the conditions set forth in this Article 7 has been satisfied or
waived such certificate to be made without personal liability of such officer
signing such certificate.
7.4 INSTRUMENTS OF ASSUMPTION. Buyer shall have executed and delivered to
the Sellers each of the following: (A) Instruments of Assignment and Assumption
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in the form of Exhibit B hereto, and (B) such other instruments of assumption
necessary to effect the assumption of the Assumed Liabilities under the
Agreement.
7.5 OPINION OF COUNSEL. The Sellers shall have received from Kirkland &
Ellis, counsel to the Buyer and Holdings, an opinion addressed to the Sellers
and dated as of the Closing Date in the form attached hereto as Exhibit J with
only such changes as Buyer and Sellers shall mutually agree.
ARTICLE 8
TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual consent of Buyer and the Sellers;
(b) by Buyer, on or after January 31, 1995, if any condition
contained n Article 6 has not been satisfied or waived;
(c) by the Sellers, on or after January 31, 1995, if any condition
contained in Article 7 has not been satisfied or waived;
(d) by Buyer or the Sellers, if any Governmental Authority has issued
an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated
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by this Agreement, and such order, decree, ruling or other action
has become final and non-appealable;
(e) by Buyer, if any condition contained in Article 6 shall, prior to
the Closing, become incapable of fulfillment by January 31, 1995;
(f) by the Sellers, if any condition contained in Article 7 shall,
prior to the Closing, become incapable of fulfillment by January
31, 1995;
(g) by Sellers if, on or before 12:00 noon on the eighth day
following the date hereof, NationsBank shall not have indicated
in writing to the Buyer and Sellers (i) that it has completed its
business, legal and accounting due diligence relating to the
Business in all material respects other than due diligence
relating to appraisals), (ii) that nothing has come to its
attention in the due diligence review to date which would be the
basis for NationsBank to refuse to fund the loans contemplated in
its commitment and (iii) that nothing expressly set forth in the
term sheet for the Stockholders' Agreement as set forth in
Exhibit F hereto would be the basis for NationsBank to refuse to
fund the loans contemplated in its commitment;
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(h) prior to January 21, 1995, by Buyer if, on or before 12:00 noon
on January 20, 1995, Buyer has not entered into arrangements
reasonably satisfactory thereto in respect of the employment of
each member of the Management Group (or such lesser number of
members as Buyer may determine) and the purchase and sale of
securities of Holdings by each such member;
(i) by Buyer, as provided in Section 5.25(b)(ii) hereof; or
(j) by Sellers, if Buyer fails to deliver to Sellers the Title
Reports on or before January 6, 1995.
(k) by Sellers on or before December 30, 1994, if, regardless of the
provisions of Exhibit A to the Seller Note as of the date hereof,
such Exhibit A is not amended in a manner that is acceptable to
Sellers, Buyer and NationsBank.
If Buyer or the Sellers terminate this Agreement pursuant to the
provisions hereof, such termination will be effected by written notice to the
other party specifying the provision hereof pursuant to which such termination
is made.
8.2 EFFECT OF TERMINATION.
(a) Upon termination of this Agreement pursuant to Section 8.1
hereof:
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(i) this Agreement (other than this Section 8.2 and Section
5.21(b) hereof) will forthwith become null and void; and
(ii) (A) if terminated pursuant to Section 8.1 or 8.1(e) due to
the failure to fulfill the condition in Section 6.1 hereof
by virtue of the breach by Sellers of any representation or
warranty as of the date hereof, or the breach by Sellers of
any of the covenants contained in Section 5.3, 5.4(d) (ii)
or 5.12 hereof, which covenant breaches were not
specifically authorized by any Person whose knowledge
constitutes Knowledge of Sellers, the Buyer shall be
entitled to receive from the Sellers such costs and expenses
(including, without limitation, attorney's fees and costs of
enforcement of this Section 8.2(a)(ii)(A)) that (v) are
payable to third parties, (w) are reasonable and documented,
(x) are, in the case of legal fees and fees of other
professionals, based on normal billing rates for actual
time, (y) in any event do not in the aggregate exceed
$2,500,000 (excluding any costs of enforcement of this
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Section 8.2(a)(ii)(A)) and (z) incurred in connection with
the negotiation and preparation of, the consummation of the
transactions contemplated by, the termination of, or
otherwise in connection with, this Agreement, PROVIDED, that
Sellers shall have no obligation under this Section
8.2(a)(ii)(A) in respect of any such breaches in respect of
which any Seller notified Buyer in writing on or before the
later of (x) the date on which Buyer has notified Seller in
writing that Buyer has irrevocably waived its right to
terminate this Agreement pursuant to Section 8.1(h) hereof
or (y) the date on which Buyer has irrevocably waived its
right to terminate this Agreement as a result of a failure
of the condition contained in Section 6.8 hereof to be
fulfilled; (B) if terminated pursuant to Section 6.8 hereof
to be fulfilled; (B) if terminated pursuant to Section
8.1(b) or 8.1(e) due to the breach by Sellers of any
covenant contained in this Agreement (other than breaches of
Sections 5.3, 5.4(d)(ii) and 5.12 hereof, which breaches
were not specifically authorized by any Person whose
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knowledge constitutes Knowledge of Sellers), the Buyer shall
be entitled to receive from the Sellers as damages, an
amount (not to exceed $16 million) equal to the aggregate
amount of Losses paid, suffered or incurred by Buyer, as a
result of such breach; (C) if terminated pursuant to
Sections 8.1(c) or 8.1(f) due to the breach by Buyer of any
representation or warranty contained in this Agreement, the
Sellers shall be entitled to receive from Buyer such costs
and expenses (including, without limitation, attorney's fees
and costs of enforcement of this Section 8.2(a)(ii)(C))
which (v) are payable to third parties (w) are reasonable
and documented (x) are, in the case of legal fees and fees
of other professionals, based on normal billing rates for
actual time, (y) in any event do not in the aggregate exceed
$2,500,000 (excluding any costs of enforcement of this
Section 8.2(a)(ii)(C)) and (z) are incurred in connection
with the negotiation or preparation of, the consummation of
the transactions contemplated by, termination of or
otherwise in connection with, this
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Agreement; and (D) if terminated pursuant to Sections 8.1(c)
or 8.1(f) due to the breach by Buyer of any covenant
contained in this Agreement, the Sellers shall be entitled
to receive from the Buyer as damages, an amount equal to the
aggregate amount (not to exceed $16 million) of Losses paid,
suffered or incurred by Seller as a result of such breach.
(b) In addition to the foregoing, if the Sellers intentionally breach
their agreement to sell the Assets pursuant to the terms of this
Agreement, Buyer shall be entitled to the remedy of specific
performance.
8.3 BUYER'S KNOWLEDGE OF SELLERS' BREACH. If Seller gives Buyer or Buyer
gives Seller a written notice (a "Breach Notice") prior to the Closing Date to
the effect that, without regard to Condition, Seller has breached a
representation or warranty in Section 3 hereof or has breached the covenants in
Sections 5.3, 5.4(d)(ii) and 5.12 hereof which breaches of covenants were not
authorized by any Person whose knowledge constitutes Knowledge of Seller and,
notwithstanding such Breach the Closing occurs, any indemnification obligation
of Sellers pursuant to Article 9 hereof relating to any breach contained in any
Breach Notice shall be first satisfied by reduction of amounts due (whether in
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respect of principal or interest) on the Seller Note in the order of maturity
and then, if not fully satisfied thereby, at Sellers' option, either by payment
of cash or delivery by Culligan or its transferee to Holdings of such amount of
Holdings Stock as shall be necessary to restore the shareholders of Holdings
(other than Sellers and their Affiliates) to the financial position with respect
to their ownership of Holdings Stock as they would have been in had such breach
never occurred.
8.4 SELLERS' RIGHT TO CURE. Notwithstanding anything to the contrary in
this Agreement, if prior to or at the Closing, Seller becomes aware of any
breach of any representation or warranty contained in Article 3 of this
Agreement or of any covenant in Section 5.3, 5.4(d)(ii) or 5.12 hereof (whether
or not Buyer provides notice of such breach), Seller may undertake, in a writing
delivered to the Buyer prior to or at the Closing, to cure such breach or
breaches, in which event Buyers shall have no right to terminate this Agreement
pursuant to Article 8 hereof and no right to refuse to close the transaction
contemplated hereby as result of such breach or breaches, and Buyer's right to
be indemnified for all of such breaches, and Buyer's right to be indemnified for
all of such breaches after the Closing pursuant to Article 9 hereof shall not be
subject to the Minimum Claim Amount, the Basket or the limitation set forth in
Section 9.2(b); PROVIDED, that Seller's right under this Section 8.4 shall not
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apply unless (i) Losses resulting from such breaches can be cured by the payment
of cash within 30 days of the Closing Date and (ii) such Losses in the aggregate
are less than $7,000,0000.
ARTICLE 9
SURVIVAL AND INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Notwithstanding any otherwise applicable statute of limitations, no claims,
lawsuit, or other proceeding arising out of or related to the breach of any
representation or warranty contained in Article 3 or Article 4 hereof, or of any
covenant contained in Sections 5.3, 5.4(d)(ii) or 5.12 hereof which breach of
covenant was not specifically authorized by any Person whose knowledge
constitutes Knowledge of Sellers, may be made by any party hereto unless
reasonable notice of the specific basis of such claim, lawsuit or other
proceeding, is given to the other party thereto in accordance with Section
9.2(c)(i) or 9.3(c)(i), as the case may be, prior to the earlier of (i)
completion by the Buyer of its first full annual audit of the business and (ii)
15 months after the Closing Date, whether the claim is based on breach of
contract, breach of warranty, tort, strict liability or any other legal theory
(other than breaches of representations and warranties set forth in (a) Sections
3.2, 3.3 and 3.11(b) to the extent they relate to title, which shall survive to
such extent for five years after the Closing Date, (b) Sections 3.7 and 3.15,
which shall survive for two and one-half years after the Closing Date, (c)
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Section 3.14, which shall survive for five years after the Closing Date), and
(d) Section 3.17 which shall survive for the duration of the applicable statute
of limitation. No expiration of the survival of any representation or warranty
shall in any way effect the survival of any other indemnity obligations
contained in this Article 9, regardless of whether such indemnity obligations
relate to matters also covered by such representations and warranties.
9.2 THE SELLERS' INDEMNIFICATION. (a) If the Closing occurs, the Sellers,
subject to the limitations set forth in this Article 9, will jointly and
severally indemnify Buyer against and in respect of any and all Losses (a) other
than Losses to the extent accounted for pursuant to this Agreement in the
computation of the Final Adjustment Amount, (B) net of any Net Insurance
Recovery received by the Buyer with respect to any such Losses, (C) reduced by
the value of any net Tax benefit or Tax savings realized or reasonably
determined to be realizable by the Buyer as a result of or related to any such
Losses (including without limitation a Tax deduction or loss, basis adjustment
and/or shifting of income, deductions, gains, losses and/or credits), and (D)
increased by any Tax incurred or reasonably expected to be incurred by the Buyer
as a result of or related to any such Losses (including without limitation any
Tax related to the inclusion, if required by law, in gross income of insurance
proceeds or a payment pursuant to this Section 9.2(a)), that are
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paid, suffered or incurred by Buyer as a result of, (i) the breach of any
representation or warranty made by the Sellers in Article 3 of this Agreement
(excluding any breach of the representation in Section 3.6(a) insofar as such
breach relates to the prospects of the Sellers) and the breach of any covenant
contained in Section 5.3, 5.4(d)(ii) or 5.12, which breach of covenant was not
specifically authorized by any Person whose knowledge constitutes Knowledge of
Sellers, (ii) the breach of any covenant made by the Sellers in this agreement
excluding the breach of any covenant contained in Section 5.3, 5.4(d)(ii) or
5.12, which breach of covenant was not specifically authorized by any Person
whose knowledge constitutes Knowledge of Sellers, or (iii) any Excluded
Liability. For purposes of determining the Buyer's Losses, the value of a net
Tax benefit or Tax saving or the cost of a net Tax cost (the "Tax Items") shall
be determined by the Accountant of the Buyer using reasonable assumptions and
methods of valuation, including the marginal United States, state, local and
foreign income tax rate applicable (or reasonably expected to be applicable) to
the Buyer and applying to each Tax Item a discount rate in order to compute
such amount to present value equal to 10%. The Buyer will cause its Accountant
to provide the Sellers reasonable opportunity to consult with such Accountant
before such accountant completes its determination of the amount, value or cost
of such Tax Item, and will cause such Accountant to notify the Sellers in
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writing promptly upon the completion of such determination, such notice (the
"Determination Notice") to set forth in reasonable detail the determined amount
and the method of making such determination. In the event that the Sellers
shall disagree with such determination of the amount, value or cost of a Tax
Item, the Sellers shall notify the Buyer in writing of such disagreement within
thirty (30) days of the Sellers receipt of the Determination Notice, such notice
(the "Notice of Disagreement") to set forth in reasonable detail the basis for
such disagreement including the Sellers' estimate of the amount, value or cost
of the subject Tax Item and the method used in arriving at such estimate. The
Buyer shall provide to the Sellers such information as the Sellers shall
reasonably request in preparing, or considering whether to prepare, a Notice of
Disagreement. If the Sellers do not deliver a Notice of Disagreement to the
Buyer within such thirty-day period, each of shall be deemed to have agreed to
the determination set forth in the Determination Notice, which shall be final
and binding on each of the Sellers and the Buyer. If, within thirty (30) days
after receipt of the Notice of Disagreement by the Buyer (the "Consultation
Period"), the Sellers and the Buyer are unable to resolve their disagreement,
the Buyer, on the one hand, and the Sellers, on the other hand, shall promptly
instruct their respective Accountants to select within ten (10) days of the
earlier of the last day of the Consultation Period and the date on which the
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parties mutually acknowledge their inability to resolve their disagreement, a
third such firm, which shall be one of the six major independent certified
public accounting firms (the "Arbitrator"), to finally determine the amount,
value of cost of the disputed net Tax Item, which determination shall be made
within thirty (30) days of submission of the matter to the Arbitrator (the
"Determination Period") and shall be final and binding on the Buyer and the
Sellers. The Sellers and the Buyer shall each be entitled to submit during
the first fifteen (15) days of the Determination Period such memoranda and
analyses to the Arbitrator as they deem appropriate, and the Buyer shall make
available to the Sellers and the Arbitrator all working papers, tax returns,
and other documents as either shall reasonably request and that relate to the
disputed Tax Item. If the Arbitrator determines that the value of the
disputed net Tax benefit or Tax saving is greater than one hundred and fifteen
percent (115%) of the value set forth in the Determination Notice, or the
value of the disputed net Tax Cost is less than eighty-five percent (85%) of
the value or amount set forth in the Determination Notice, the fees, costs
and expenses of the Arbitrator shall be borne by the Buyer; otherwise the fees,
costs and expenses of the Arbitrator shall be borne by the Sellers.
(b) Notwithstanding anything to the contrary in this Agreement, the
aggregate liability of the Sellers pursuant to Section 9.2(a)(i) (other than
Losses incurred by reason of the breach of a representation or warranty
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contained in Sections 3.1, 3.2, 3.3 or 3.4 or Section 3.11(b) (with respect to
title only) or Section 3.17) will not exceed $27,000,000.
(c) Subject to Section 9.2(h) below, Sellers shall have no Liability
in respect of a claim for indemnification pursuant to Section 9.2(a)(i) unless
(i) notice of such claim (describing the basic facts or events, the existence or
occurrence of which constitute or have resulted in the alleged breach of a
representation or warranty made in this Agreement) has been given to the Sellers
during the survival period set forth in Section 9.1; (ii) each such claim
resulting from the single misrepresentation or breach that forms the basis for
such claim is for Losses (in the case of breaches of Section 3.7 hereof
exclusive of costs of investigation and attorneys' fees) in respect of which
Buyer would otherwise be entitled to be indemnified in this Article 9 (excluding
Section 9.2(c)(iii) hereof) equal to or in excess of $75,000 (the "Minimum Claim
Amount"); PROVIDED, that for purposes of this clause (ii) all claims for Losses
arising out of the same facts or events resulting in such misrepresentation or
breach shall be treated as a single claim; and PROVIDED, FURTHER, that the
Minimum Claim Amount shall not apply to any breach of Section 3.2 hereof after
the aggregate of all Losses pursuant to such breaches in respect of which Buyer
would otherwise be entitled to indemnification hereunder but for this clause
(ii) exceeds $250,000 in the
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aggregate, and (iii) Buyer has paid, suffered or incurred Losses by reason of
all breaches of the Sellers' representations and warranties, and covenants
contained in Section 5.3, 5.4(d)(ii) or 5.12 which breaches were not
specifically authorized by any Person whose knowledge constitutes Knowledge
of Sellers in respect of which Buyer would otherwise be entitled to be
indemnified under this Article 9 which Losses in the aggregate exceed
$1,200,000 (the "Basket"), after which the Sellers will be obligated to
indemnify Buyer for amounts in excess of such Basket; PROVIDED, HOWEVER, that
the limitations set forth in this clause (iii) shall not apply to Losses
incurred by reason of a breach of a representation or warranty contained in
Sections 3.1, 3.2, 3.3 or 3.4 or Section 3.11(b) (with respect to title only) or
Section 3.17.
(d) Any payment pursuant to this Article 9, made by the Sellers to
the Buyer, will be deemed an adjustment in the Cash Purchase Price.
(e) Any claim by the Buyer for indemnification under Section 9.2 must
be made in accordance with this Section 9.2.
(f) The rights of the Buyer under Sections 8.1, 8.2 and this Section
9.2 shall be the exclusive remedies of the Buyer with respect to breaches by the
Sellers of representations and warranties or covenants contained in this
Agreement, and, subject to Section 8.3 hereof, such rights shall not be
impaired, reduced or affected in any respect by any investigation conducted by
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the Buyer prior to Closing (even if the Buyer knew or had reason to know of a
breach hereunder at the time of Closing).
(g) In the event that the Sellers are obligated to indemnify the
Buyer pursuant to this Article 9, the Sellers will, upon payment of such
indemnity, be subrogated to all rights of the Buyer with respect to claims to
which such indemnification relates.
(h) For purposes of determining whether an event described in Section
9.2(a)(i) has occurred, (x) any requirement in any representation or warranty
that an event or fact by material or have a Material Adverse Effect in order for
such event or fact to constitute a misrepresentation or breach of such warranty
(a "Materiality Condition") shall be ignored, and if each of the claims for
indemnification for misrepresentations or breaches of warranty that are subject
to the Minimum Claim Amount exceeds the Minimum Claim Amount (determined as
provided in the provisos in Section 9.2(c)(ii) hereof), and the aggregate of all
such claims exceeds the Basket, in each case ignoring all Materiality
Conditions, the Buyer shall be indemnified in accordance with Article 9 hereof
and (y) the exceptions to the representations and warranties made in Section
3.14 herein, which exceptions (A) are set forth on the Phase I Environmental
Assessment and (B) are not described in Schedule 1.1(iv), shall be ignored.
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(i) Anything in this Agreement to the contrary notwithstanding, to
the extent any Liability of Buyer indemnified by Sellers hereunder includes lost
profits or consequential damages of Buyer, such Liability shall be first
satisfied by reduction of amounts due (whether in respect of principal or
interest) on the Seller Note in the order of maturity and then, if not fully
satisfied thereby, at Sellers' option, either by payment of cash or delivery to
Holdings by Culligan or its transferee of such amount of Holdings Stock as shall
be necessary to restore the shareholders of Holdings (other than Sellers and
their Affiliates) to the financial position with respect to their ownership of
Holdings Stock as they would have been in had such lost profits or consequential
damages never been incurred.
9.3 BUYER'S INDEMNIFICATION. (a) If the Closing occurs, the Buyer, subject
to the limitations set forth in this Article 9, will indemnify the Sellers
against and in respect of any and all Losses including, without limitation,
those arising under Environmental Requirements, net of any Net Insurance
Recovery received by the Sellers with respect to any such Losses, reduced by the
value of any net Tax benefit or Tax savings realized or reasonably determined to
be realizable by the Sellers as a result of or related to any such Losses
(including without limitation a Tax deduction or loss, basis adjustment and/or
shifting of income, deductions, gains, losses and/or credits) and increased by
any Tax incurred or reasonably expected to be incurred by the Sellers as a
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result of or related to any such Losses (including without limitation any Tax
related to the inclusion, if required by law, in gross income of insurance
proceeds or a payment pursuant to this Section 9.3(a)), that are paid, suffered
or incurred by the Sellers as a result of (i) the breach of any representation
or warranty made by the Buyer in Article 4 of this Agreement, (ii) the breach of
any covenant made by Buyer in this Agreement, (iii) any Assumed Liability, or
(iv) the operations of the Business after the Closing Date. For purposes of
determining the Seller's Losses, the value of a net Tax benefit or Tax saving or
the cost of a net Tax cost shall be determined by the Accountant for the
Sellers, using the assumptions and methods described in Section 9.2(a) and
subject to the procedures described therein).
(b) Notwithstanding anything to the contrary in this Agreement, the
aggregate Liability of the Buyer pursuant to Section 9.3(a)(i) (other than
Losses incurred by reason of the breach of a representation or warranty
contained in Sections 4.1, 4.2, 4.6, 4.7 or 4.8), will not exceed $27,000,000.
(c) Buyer shall have no Liability in respect of a claim for
indemnification pursuant to Section 9.3(a)(i) unless (i) notice of such claim
(describing the basic facts or events, the existence or occurrence of which
constitute or have resulted in the alleged breach of a representation or
warranty made in this Agreement) has been given to the Buyer during the survival
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period set forth in Section 9.1, (ii) each such claim resulting from the single
misrepresentation or breach that forms the basis for such claim is for Losses
equal to or in excess of $75,000; PROVIDED, that for purposes of this clause
(ii) all claims for Losses arising out of the same facts or events resulting in
such misrepresentations or breach shall be treated as a single claim; and (iii)
the Sellers have paid, suffered or incurred Losses by reason of all breaches of
the representations and warranties of Buyer in respect of which the Sellers
would otherwise be entitled to be indemnified under this Article 9 which Losses
in the aggregate exceed $1,200,00, after which the Buyer will be obligated to
indemnify the Sellers for amounts in excess of $1,200,000; PROVIDED, that the
limitations set forth in clause (iii) shall not apply to Losses incurred by
reason of a breach of a representation or warranty contained in Sections 4.1,
4.2, 446, 4.7 or 4.8.
(d) Any payment pursuant to this Article 9, made by Buyer Indemnitors
to the Sellers will be deemed an adjustment in the Cash Purchase Price.
(e) Any claim by the Sellers for indemnification under Section 9.3
will be made in accordance with this Section 9.3.
(f) The rights of the Sellers under Sections 5.21(b), 8.1, 8.2 and
this Section 9.3 will be the exclusive remedy of the Sellers with respect to
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breaches by Buyer of representations and warranties or covenants contained in or
made pursuant to this Agreement.
(g) In the event that the Buyer is obligated to indemnify the Sellers
pursuant to this Article 9, Buyer will, upon payment of such indemnity, be
subrogated to all rights of the Sellers with respect to claims to which such
indemnification relates.
9.4 CLAIMS BY THIRD PARTIES. If a party to this Agreement seeks indemnity
hereunder with respect to a claim by a third party:
(a) For the purposes of this Section 9.4 "Third Party Claim" means
any demand which has been made on, or communicated in writing to
Buyer, Holdings or Sellers on behalf of, any Person (other than
Buyer, Holdings or Sellers) which, if maintained or enforced,
might result in a claim for indemnification under Section 9.2 or
9.3 of this Agreement.
(b) Promptly upon receipt by Buyer, Holdings or Sellers (referred to
in this Section 9.4 as the "Indemnitee") of notice of any Third
Party Claim in respect of which the Indemnitee proposes to demand
indemnification from another party to this Agreement (referred to
in the context of this Section 9.4 as the "Indemnitor"), the
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Indemnitee shall forthwith give notice to that effect to the
Indemnitor; PROVIDED, HOWEVER, that no delay on the part of the
Indemnitee in notifying any Indemnitor shall relieve the
Indemnitor from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnitor hereby is damaged.
(c) The Indemnitor shall have the right, exercisable by giving notice
to the Indemnitee not later than 30 days after receipt of the
notice described in Section 9.4(b) to assume the control of the
defense, compromise or settlement of the Third Party Claim,
PROVIDED, HOWEVER, that the Indemnitor shall not have the right
to assume the defense of any claim giving rise to Losses with
respect to which the Indemnitor is not obligated to provide full
indemnification under this Article 9 unless there is a reasonable
likelihood that the portion of such Losses for which the
Indemnitor has an obligation to provide indemnification hereunder
exceeds the portion of such Losses for which the Indemnitor has
an obligation to provide indemnification hereunder. Neither the
Indemnitor nor the Indemnitee shall make any settlement of any
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claim which would give rise to Liability on the part of the other
party under this Article 9 without the prior written consent of
such party, which consent shall not be unreasonably withheld;
PROVIDED, HOWEVER, that (i) an Indemnitee may withhold consent
(and such withholding of consent shall be deemed reasonable) to
any settlement either involving the imposition of equitable
remedies or leaving unsettled related claims for equitable
remedies, (ii) the consent of the Indemnitor shall not be
required with respect to any settlement if (A) the sum of Losses
theretofore paid by the Indemnitor would equal or exceed
Twenty-Seven Million Dollars ($27,000,000.00) (if such claim is
subject to the provisions of Section 9.2(b) or 9.3(b), as the
case may be), and (B) the Indemnitor shall have received a
written statement reasonably satisfactory to it of the
Indemnitee's legal counsel to the effect that the Indemnitee's
Liability with respect to the Third Party Claim for which such
settlement is proposed may reasonably be expected to equal aor
exceed the Indemnitor's aggregate indemnification obligations
hereunder with respect to the settlement of any claim hereunder
shall constitute an acknowledgment
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by the Indemnitor of its obligation to indemnify the Indemnitee
with respect to such claim subject to the limitations set forth
in this Section 9.4. Whenever the Indemnitee or the Indemnitor
receives a firm offer to settle a claim for which indemnification
may be sought under this Article 9, it shall promptly notify the
other of such offer. If the Indemnitor refuses to accept such
offer within 10 Business Days after receipt of such offer (or
notice thereof), such claim shall continue to be contested and,
if such claim is within the scope of the Indemnitor's indemnity
contained in this Article 9, the Indemnitee shall be indemnified
pursuant to the terms hereof. If the Indemnitor notifies the
Indemnitee in writing that the Indemnitor desires to accept such
offer, but the Indemnitee refuses to accept such offer within
10 Business Days after receipt of such notice, the Indemnitee may
continue the contest of such claim and, in such event, the total
maximum Liability of the Indemnitor to indemnify or otherwise
reimburse the Indemnitee hereunder with respect to such claim
shall be limited and shall not exceed an amount determined with
reference to the amount of such offer, plus reasonable
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out-of-pocket costs and expenses (including reasonable attorneys'
fees and disbursements) to (but not from and after) the date of
notice that the Indemnitor desires to accept such offer adjusted
as provided in Sections 9.2(a) and 9.3(a) above, PROVIDED, that
this sentence shall not apply to any settlement of any claim
involving the imposition of equitable remedies. The Indemnitor
shall not be liable for any settlement of any action to which
it is entitled to consent hereunder and which is effected without
its consent (unless such consent is unreasonably withheld), but
if settled without the Indemnitor's consent pursuant to the terms
hereof, the Indemnitor agrees to indemnify and hold harmless the
Indemnitee form and against any Losses or Liability by reason of
such settlement or judgment, subject to the limitations of such
obligation set forth herein. The indemnification required by
this Article 9 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as
and when bills are received or Loss or Liability is incurred.
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(d) Upon the assumption of control by the Indemnitor as aforesaid,
the Indemnitor shall, at its expense, diligently proceed with the
defense, compromise or settlement of the Third Party Claim at the
Indemnitor's sole expense, including employment of counsel
reasonably satisfactory to the Indemnitee, and in connection
therewith, the indemnitee shall cooperate fully to make available
to the Indemnitor all pertinent information and witnesses under
Indemnitee's control and to make such assignments and take such
other steps as in the opinion of counsel for the Indemnitor are
necessary to enable the Indemnitor to conduct such defense,
provided always that the Indemnitee shall be entitled to
reasonable security from the Indemnitor for any expense, costs or
other liabilities to which it may be or may become exposed by
reason of such cooperation.
(e) The final determination of such Third Party Claim, including all
related costs and expenses, will be binding and conclusive upon
the parties hereto as to the validity or invalidity, as the case
may be, of such Third Party Claim against the Indemnitee
hereunder.
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(f) Should the Indemnitor fail to give notice to the Indemnitee as
provided in clause (c) hereof or in the event the Indemnitor
declines to undertake the defense of any such claim, action or
proceeding when first notified thereof, (i) the Indemnitee may
defend against (at the Indemnitor's cost and expense), or enter
into any settlement with respect to, the matter in any manner it
may deem appropriate and (ii) the Indemnitee shall keep the
Indemnitor reasonably advised as to the current status and
progress thereof.
(g) In the event the Indemnitor undertakes the defense of any such
claim, action or proceeding, the Indemnitee shall nevertheless be
entitled to participate in (but not direct) the defense thereof
with counsel of its own choice and at its own expense, and the
parties agree to cooperate fully with one another in connection
with the defense and/or settlement thereof.
(h) If the Indemnitee subsequently recovers all or part of the Third
Party Claim from any other Person legally obligated to pay the
claim, the Indemnitee shall forthwith repay to the Indemnitor the
amounts recovered up to an amount not
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exceeding the payment made by the Indemnitor to the Indemnitee
by way of indemnity.
9.5 ENVIRONMENTAL IDENTIFICATION PROCEDURES.
(a) Notwithstanding anything in this Agreement to the contrary, the
indemnification procedures sin this Section 9.5 shall apply to any claim for
indemnification arising from or relating to Environmental Requirements,
including without limitation, claims for indemnification pursuant to subsection
(xi) of the definition of Excluded Liabilities, the matters contemplated by
Section 5.24(b) hereof and claims for indemnification with respect to a breach
of the representations and warranties set forth in Section 3.14.
(b) (i) Any claim for indemnification that is subject to the
indemnification procedures set forth in this section, as described in
Section 9.4) shall be governed by the procedures set forth in Section 9.4.
Any Onsite Remedial Action associated with such Third Party Claim shall
additionally be subject to the procedures set forth in Sections 9.5(b)(ii)
below (it being understood that any inconsistencies between Section 9.4 and
Section 9.5(b)(ii) with respect to such Onsite Remedial Action shall be
resolved in favor of the provisions set forth in Section 9.5(b)(ii)).
(ii) Any claim for indemnification that is subject to the
indemnification procedures set forth in this section, as described in
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Section 9.5(a) above, that does not arise form a Third Party Claim is
hereinafter defined as a "Direct Claim," and shall be subject to the
following procedures:
(A) To make a Direct Claim for indemnification under this
section, Buyer shall notify Sellers of the claim in writing
promptly after learning of the existence of such claim,
which notice shall describe in reasonable detail the claim,
the amount thereof (if known and quantifiable), and a
reasonably detailed description of the facts giving rise to
such claim; PROVIDED, THAT the failure to so notify Sellers
shall not relieve Sellers of their obligations hereunder
except to the extent that (and only to the extent that) such
failure shall have caused the Losses for which Sellers are
obligated to be greater than such Losses would have been had
the Buyer given Sellers prompt notice hereunder. Such
notice shall be deemed given and Sellers shall be deemed to
have assumed Principal Management with respect to the
matters set forth on Schedule 1.1(iv) that are designated
with an asterisk.
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(B) (1) Upon assertion of a Direct Claim or the Onsite Remedial
Action associated with a Third Party Claim, Sellers
shall be entitled to assume Principal Management of the
subject matter of the Direct Claim or the Onsite
Remedial Action. To assume Principal Management,
Sellers must notify Buyers within thirty days (or such
other period as the parties may agree to in writing) of
said notice that they intend to assume Principal
Management. To assume Principal Management, Sellers
must also in such notice first acknowledge in writing
that they will undertake sole or principal
responsibility for the Direct Claim or Onsite Remedial
Action, subject to Sellers' right to rescind such
acknowledgment upon its reasonable determination, and
upon prompt written notice to Buyer (a "Denial Notice")
that it does not bear sole or principal liability for
under this agreement the Direct Claim or Onsite
Remedial Action. If Sellers have elected to assume
Principal Management, they shall no longer be entitled
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to issue a Denial Notice after the Sellers have
committed to a Governmental Authority to the
expenditure of any material costs in respect of the
Onsite Remedial Action. In the event Sellers either
elect not to undertake Principal Management or provide
Buyer with a Denial Notice, Buyer shall assume
Principal Management of the subject matter of the
Direct Claim or the Onsite Remedial Action. Any
acknowledgment of sole or principal responsibility by
Sellers shall be without prejudice to any Sellers'
rights to seek indemnity or contribution from any third
parties.
(2) The Party not exercising Principal Management with
respect to a particular claim shall be entitled, at its
sole cost and expense, to reasonably participate in the
management of such Direct Claim or Onsite Remedial
Action. Such participation shall include, without
limitation: (i) receiving
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copies of all reports, work plans and analytical data
submitted to governmental agencies, all notices or
other letters or documents received from governmental
agencies, any other documentation and correspondence
materially bearing to the Direct Claim or Onsite
Remedial Action, and notices of material meetings;
(ii) the opportunity to attend and participate in such
material meetings; and (iii) the right of reasonable
consultation with the party exercising Principal
Management. The party exercising Principal Management
in respect of a matter, prior to taking any action to
effect an Onsite Remedial Action, shall, unless not
practicable in view of exigent circumstances, prepare
a written paid describing the details of such action
("Remedial Plan") and provide the other party with
copies of the Remedial. Within 30 days of the date that
the Remedial Plan is provided, the party receiving the
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Remedial Plan shall notify the party that provided the
Remedial Plan, in writing, if it believes that the
Remedial Plan is not in conformity with the standards
set forth in this Section 9.5 and shall provide a
detailed explanation of the reasons for its conclusions.
The parties shall negotiate in good faith any dispute
arising form the Remedial Plan and attempt to resolve
any differences within twenty (20) days. If they are
unable to resolve their differences within that time
period, the matter shall be submitted to arbitration as
provided in Section 9.5(b)(ii)(D). Any material change
to the Remedial Plan shall be treated as a new Remedial
Plan subject to the procedures set forth in this
paragraph. Any costs incurred by either party pursuant
to this paragraph where the other party is exercising
Principal Management shall not be applied to the Basket
or the Minimum Claim Amount.
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(3) In the event they undertake Principal Management of any
matter, Sellers shall, upon reasonable notice to Buyer,
have reasonable access to the subject facility of
Buyer. Sellers shall undertake all activities that it
conducts or coordinates hereunder in a manner which
does not unreasonably interfere with the day-to-day
operation of such facility of Buyer.
(4) The party undertaking Principal Management hereunder
for any matter shall manage the matter in good faith
and in a responsible manner, and any activities
conducted in connection therewith shall be undertaken
promptly and concluded expeditiously using commercially
reasonable efforts, subject to the schedules and
approvals required by the applicable Governmental
Authorities. The parties agree to reasonably cooperate
with one another in connection with addressing any
Direct Claim or Onsite Remedial Action. Either party
make take such action as is reasonable under the
circumstances to respond to an actual or threatened
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emergency or imminent endangerment situation arising
from a Direct Claim or Onsite Redial Action, and if
such action is taken by the party that has not
undertaken Principal Management for such Direct Claim
or Onsite Remedial Action hereunder, the costs of such
action shall be included as part of the Direct Claim or
Onsite Remedial Action.
(C) The adequacy of any Onsite Remedial Action with respect to a
Third Party Claim or a Direct Claim shall be evaluated using
the following criteria. Such Onsite Remedial Action shall
be deemed adequate for purposes of satisfying the
obligations hereunder to the extent such Onsite Remedial
Action:
(1) Attains compliance in a reasonably cost-effective
manner with applicable Environmental Requirements,
including without limitation, all action levels or
cleanup standards promulgated thereunder, and any
lawful order or directive of an appropriate
Governmental Authority
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(subject to Sellers' right to challenge or negotiate
the appropriateness or scope of such order in good
faith and in compliance with law); and
(2) Interferes to the least extent reasonably practicable
with the operation at the affected property; PROVIDED,
that for purposes of this sentence, a determination of
what is "reasonably practicable" shall include an
evaluation of the relative costs and benefits of
proposed Onsite Remedial Actions.
An Onsite Remedial Action shall not be required to render
any affected Owned or Leased Facility suitable for use
beyond use as an industrial property, PROVIDED, HOWEVER,
that an Onsite Remedial Action shall meet all lawful
requirements imposed by a Governmental Authority. Except
with respect to indemnification obligations of Sellers
arising from a breach of the representations of Sellers
arising from a breach of the representations and warranties
of this Agreement relating to Environmental Requirements,
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Sellers' indemnification obligations shall include all
increases in the cost of an Onsite Remedial Action arising
out of changes in Environmental Requirements after the
Closing Date, until the completion of an Onsite Remedial
Action.
(D) If, after Sellers have elected to assume Principal
Management of a Direct Claim or the Onsite Remedial Action
associated with a Third Party Claim, a dispute arises with
respect to the management, investigation or remediation of
such Direct Claim or Onsite Remedial Action, the parties
agree to negotiate in good faith in an attempt to resolve
such dispute In the event (1) such dispute cannot be
resolved within twenty days of written notice of a dispute
(or such shorter period as exigent circumstances may
warrant) or (2) a dispute arises in connection with the
procedure described in Section 5.24(b) hereof, the parties
shall select within fourteen days thereafter (or such
shorter period as exigent circumstances may warrant) a
mutually satisfactory technical consultant, lawyer, or other
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person (the "Environmental Arbitrator"), who shall review
the information relevant to the dispute provided by the
parties and within thirty days (or such shorter period as
exigent circumstances may warrant, render a decision binding
upon the parties hereto irrespective of whether either party
contests or participates in the dispute resolution. Any
fees charged by the Environmental Arbitrator shall be
allocated as determined by the Environmental Arbitrator
between Buyer and Sellers. In making this determination,
the Environmental Arbitrator shall be bound by the standards
set forth in this Section 9.5 and, in the case of a dispute
in respect of the matters covered by Section 5.24(b),
Section 9.5 and Section 5.24(b). If an Environmental
Arbitrator cannot be agreed upon within the aforesaid
period, the parties shall direct the Center for Public
Resources, New York, New York, to immediately provide a list
of six potential arbitrators. From the list provided, each
party shall have the opportunity to strike one name, and the
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Center for Public Resources shall appoint the Environmental
Arbitrator from the remaining names. The final
determination of the Environmental Arbitrator shall be final
and binding on the parties and there shall be no appeal from
or reexamination of such final determination, except for
fraud, perjury, evident partiality or misconduct by the
Environmental Arbitrator prejudicing the rights of any
party, and to correct manifest clerical errors. Buyer and
Sellers may enforce any final determination of the
Environmental Arbitrator in any court of competent
jurisdiction.
ARTICLE 10
MISCELLANEOUS
10.1 EXPENSES. Except as expressly otherwise provided in Sections 5.10 and
8.2 of Article 9 hereof, the fees and expenses (including the fees of any
lawyers, accountants, investment bankers or others engaged by such party) in
connection with this Agreement and the transactions contemplated hereby whether
or not the transactions contemplated hereby are consummated will be paid by
Buyer with respect to Buyer and will be paid by the Sellers with respect to the
Sellers.
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10.2 HEADINGS. The section headings herein are for convenience of
reference only, do not constitute part of this Agreement and will not be deemed
to limit or otherwise affect any of the provisions hereof. References to
Sections, unless otherwise indicated, are references to Sections of this
Agreement.
10.3 NOTICES. All notices to be given pursuant to this Agreement to any
party must be in writing and will be deemed to have been validly given:
(a) if delivered by hand to an officer or agent of such party at its
address given below;
(b) if delivered by an overnight commercial courier (such as Federal
Express); or
(c) if delivered by telecopier transmission, to such party at its
address given below.
The address of each party for the purposes of this Agreement is as follows:
If to the Sellers:
McGregor Corporation
c/o Astrum Management Corp.
372 Washington Street
Wellesley, Massachusetts 02181
Attention: Mr. Joseph Dempsey
McGregor Corporation
600 Madison Avenue
11th Floor
New York, New York 10022
Attention: Jacob Hollander, Esq.
Facsimile: (212) 307-8115
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with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Laurence D. Weltman, Esq.
Facsimile: (212) 821-8111
If to Buyer:
Anvil Knitwear, Inc.
c/o Vestar Capital Partners
245 Park Avenue
New York, New York 10167
Attention: Daniel W. Miller
Facsimile: (212) 808-4922
with a copy to:
Kirkland & Ellis
655 Fifteenth Street, N.W., Suite 1200
Washington, D.C. 20005
Attention: Jack M. Feder
Facsimile: (202) 879-5200
Each party shall by notice to the other change its address for notice whenever
its existing address or facsimile number for notice changes.
10.4 ASSIGNMENT. This Agreement and all provisions hereof will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; PROVIDED, HOWEVER, that neither this Agreement
nor any right, interest, or obligation hereunder may be assigned to any party
hereto without the prior written consent of the other party except that Buyer
may, without the consent of the Sellers, assign Buyer's rights and interest
under this Agreement in connection with acquisition financing necessary to
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affect the transactions contemplated hereunder, PROVIDED, FURTHER, that no party
hereto or successor or assignee has the ability to subrogate any other Person to
any right or obligation under this Agreement. Notwithstanding anything to the
contrary contained in this Section 10.4, any assignment of Buyer's rights and
interests under this Agreement shall not relieve Buyer of any of its liabilities
or obligations hereunder.
10.5 ENTIRE AGREEMENT. This Agreement shall be of no force or effect until
executed and delivered by each of the parties hereto. This Agreement and the
documents contemplated hereby (which documents are not a part of or incorporated
by reference into this Agreement) embody the entire agreement and understanding
of the parties with respect to the transactions contemplated hereby and
supersedes all prior written or oral commitments, arrangements or understandings
with respect thereto (other than the Confidentiality Agreement, which will
terminate at the Closing). There is no restriction, agreement, promise,
warranty, covenant or undertaking with respect to the transactions contemplated
hereby other than those expressly set forth herein.
10.6 AMENDMENT; WAIVER. (a) This Agreement may only be amended or modified
in writing signed by the party against whom enforcement of any such amendment
or modification is sought.
(b) Any party hereto may, by an instrument in writing, waive
compliance with any term or provision of this Agreement on the part of such
other party hereto. The waiver by any party hereto of a breach of any term or
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provision of this Agreement will not be construed as a waiver of any subsequent
breach.
10.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which will be deemed an original.
10.8 GOVERNING LAW. This Agreement will be governed by the laws of the
State of New York and the laws of the United States applicable therein
(regardless of the laws that might be applicable under principles of conflicts
of law) as to all matters, including but not limited to matters of validity,
construction, effect and performance.
10.9 SEVERABILITY. If any one or more of the provisions of this Agreement
is held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement will not be
affected thereby, and the Sellers and Buyer will use their reasonable efforts to
substitute one or more legal and enforceable provisions which insofar as
practicable implement the purposes and intent hereof. To the extent permitted
by applicable law, each party waives any provision of law which renders any
provision of this Agreement invalid, illegal or enforceable in any respect.
10.10 CONSENT TO JURISDICTION. Buyer and each Seller hereby submit to
the exclusive jurisdiction of the courts of the State of New York solely in
respect of the interpretation enforcement of the provisions of this Agreement
and any related
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agreement and hereby waive, and agree not to assert, as a defense in any action,
suit or proceeding for the interpretation or enforcement of this Agreement and
any related agreement, that they are not subject thereto or that such action,
suit or proceeding may not be brought or is not maintainable in such courts or
that their property is exempt or immune from execution, that the suit, action
or proceeding is brought in an inconvenient forum, or that the venue of the
suit, action or proceeding is improper. Service of process with respect thereto
may be made upon Buyer or the Sellers mailing a copy thereof by registered or
certified mail, postage prepaid, to such party at its address as provided in
Section 10.3 hereof.
10.11 THIRD PERSON BENEFICIARIES. This Agreement is not intended to
confer any other Person any rights or remedies hereunder.
10.12 REPRESENTATIONS AND WARRANTIES; SCHEDULES. Neither the
specification of any dollar amount in the representations and warranties set
forth in Article 3 nor the provisions of Article 8 nor the indemnification
provisions of Article 9 nor the inclusion of any items in any Schedule to this
Agreement will be deemed to constitute an admission by the Sellers or Buyer, or
otherwise imply, that any such amounts or the items so included are material for
the purposes of this Agreement. The inclusion of any item on any Schedule to
the Disclosure Schedule shall in no way be deemed an acknowledgment of Sellers
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that the representation and warranty to which such Schedule relates (or any
other representation or warranty in the Agreement) would not be true without
such inclusion.
10.13 ARBITRATION. Buyer and each Seller agree that the resolution of
any dispute arising under or in connection with this Agreement within the
relevant time period, if any, stated in Article 9 shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and, subject to Section 10.10 hereof, judgment upon the
award rendered by the arbitrator(s) may be enforced in any court having
jurisdiction thereof. The parties shall pay the expenses of their own
representative, if any, and shall share equally all other costs of the
Arbitration, including the arbitrator's fees and expenses. The arbitrator(s)
shall award all legal fees, costs, and expenses related to the Arbitration to
the party the arbitrator(s) determine to be the prevailing party. The
Arbitration shall be held in New York City.
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IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be duly executed as of the day and year first above written.
McGREGOR CORPORATION
By:
-----------------------------------
Name: Joseph J. Dempsey, Jr.
Title: President
WINSTON MILLS, INC.
By:
-----------------------------------
Name: Joseph J. Dempsey, Jr.
Title: Vice President
ANVIL KNITWEAR (DEL.), INC.
By:
-----------------------------------
Name: Joseph J. Dempsey, Jr.
Title: Executive Vice President
ANVIL KNITWEAR, INC.
By:
-----------------------------------
Name:
Title:
ANVIL HOLDINGS, INC.
By:
-----------------------------------
Name:
Title:
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EXHIBIT A
GENERAL CONVEYANCE, BILL OF SALE
AND ASSIGNMENT
THIS GENERAL CONVEYANCE, BILL OF SALE AND ASSIGNMENT, dated as of January _
, 1995 from McGREGOR CORPORATION, a New York corporation, and WINSTON MILLS,
INC., a Delaware corporation (together, the "Sellers"), with respect to the
Anvil Knitwear division of McGregor Corporation ("Anvil Division"), to ANVIL
KNITWEAR, INC., a Delaware corporation (together with its successors and
assigns, the "Buyer"), is delivered pursuant to Sections 2.1 and 6.3 of that
certain Asset Purchase Agreement, dated December 1 1994 (the "Asset Purchase
Agreement"), by and among Sellers, Anvil Knitwear (Del.), Inc., Anvil Holdings,
Inc. and Buyer. Defined terms used herein without definition have the meanings
assigned to such terms in the Asset Purchase Agreement.
KNOW ALL PERSONS BY THESE PRESENTS that, pursuant to the terms and
conditions of the Asset Purchase Agreement and for the consideration set forth
therein, the receipt and sufficiency of which are hereby acknowledged by
Sellers, Sellers hereby jointly and severally sell, transfer, assign, convey and
deliver to Buyer forever all of Sellers, right, title and interest in and to the
Assets.
TO HAVE AND TO HOLD the same unto Buyer forever. Sellers hereby constitute
and appoint Buyer the true and lawful attorney or attorneys of Sellers, with
full power of substitution, in the name of Buyer or in the name of Sellers, but
by and on behalf of and for the sole benefit of Buyer, to demand and receive
from time to time any and all of the Assets and from time to time to institute
and prosecute, in the name of Sellers or otherwise on behalf of Sellers, any and
all proceedings at law, in equity or otherwise which Buyer may deem necessary or
desirable in order to receive, collect, assert or enforce any right, title,
benefit or interest of any kind in or to the Assets and to defend and compromise
any and all actions, suits or proceedings in respect thereof and to do all such
acts and things and execute any instruments in relation thereto as Buyer shall
deem advisable. Without limitation of any of the foregoing, Sellers hereby
authorize any authorized representative of Buyer to endorse or assign any
instrument, contract or chattel paper relating to the Assets. Sellers agree
that the foregoing appointment made and coupled with an interest and shall be
irrevocable by Sellers.
All of the terms and provisions of this General Conveyance, Bill of Sale
and Assignment will be binding upon Sellers and their successors and assigns and
will inure to the benefit of Buyer; PROVIDED, that nothing in this General
- 148 -
<PAGE>
Conveyance, Bill of Sale and Assignment, express or implied, is intended or
shall be construed to confer upon or give to any Person, firm, partnership,
corporation or other entity other than Buyer any rights or remedies under or by
reason of this General Conveyance, Bill of Sale and Assignment.
- 149 -
<PAGE>
K&E DRAFT: 5/14/97
ANVIL HOLDINGS, INC.
AMENDED AND RESTATED
1997 STOCK OPTION PLAN
<PAGE>
ANVIL HOLDINGS, INC.
AMENDED AND RESTATED
1997 STOCK OPTION PLAN
ARTICLE I
PURPOSE OF PLAN
The 1997 Amended and Restated Stock Option Plan (the "PLAN") of Anvil
Holdings, Inc., a Delaware corporation (the "COMPANY"), adopted by the Board
of Directors effective May 19, 1997, is intended to advance the best
interests of the Company by providing executives and other key employees of
the Company or any Subsidiary who have substantial responsibility for the
management and growth of the Company or any Subsidiary with additional
incentives by allowing such employees to acquire an ownership interest in the
Company. The Plan is a compensatory benefit plan within the meaning of Rule
701 under the Securities Act of 1933, as amended (the "SECURITIES ACT") and,
unless and until the Class B Common is publicly traded, the issuance of
options and Class B Common pursuant to the Plan is intended to qualify for
the exemption from registration under the Securities Act provided by Rule
701. The Plan amends and restates in its entirety the 1997 Stock Option Plan
of the Company originally adopted on March 14, 1997, in order to clarify
certain provisions.
ARTICLE II
DEFINITIONS
For purposes of the Plan the following terms have the indicated meanings:
"AUTHORIZATION DATE" has the meaning ascribed thereto in Section
5.9(a) hereof.
"BOARD" means the Board of Directors of the Company.
"CLASS A COMMON" means the Class A Common Stock, par value $0.01 per
share, of the Company.
"CLASS B COMMON" means the Class B Common Stock, par value $0.01 per
share, of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
"COMMITTEE" means the Compensation Committee or such other committee of
the Board as the Board may designate to administer the Plan or, if for any
reason the Board has not designated such a committee, the Board. The
Committee, if other than the Board, shall be composed of three or more
directors as appointed from time to time by the Board.
<PAGE>
"FAIR MARKET VALUE" per share on any given date means the average of the
closing prices of the sales of the Class B Common on all securities exchanges
on which such stock may at the time be listed, or, if there have been no
sales on any such exchange on any day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such day, or, if on
any day such stock is not so listed, the average of the representative bid
and asked prices quoted on the Nasdaq Stock Market as of 4:00 P.M., New York
time, or, if on any day such stock is not quoted on the Nasdaq Stock Market,
the average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization. If at any time
the Class B Common is not listed or quoted, the Fair Market Value per share
shall be determined by the Committee or the Board, giving effect to the
preferences and priorities set forth in the Company's Certificate of
Incorporation with respect to other series or classes of the Company's
capital stock, and also based on such other factors as the members thereof in
the exercise of their business judgment, consider relevant.
"INITIAL PUBLIC OFFERING" means an underwritten initial public offering
registered under the Securities Act, involving the sale by the Company of
shares of Class B Common.
"MEASUREMENT DATE" means the date on which any taxable income resulting
from the exercise of an Option is determined under applicable federal income
tax law.
"OPTION SHARES" shall mean (i) all shares of Class B Common issued or
issuable upon the exercise of an Option and (ii) all shares of Class B Common
issued with respect to the Class B Common referred to in clause (i) above by
way of stock dividend or stock split or in connection with any conversion,
merger, consolidation or recapitalization or other reorganization affecting
the Class B Common. Unless provided otherwise herein or in the Participant's
Option Agreement, Option Shares will continue to be Option Shares in the
hands of any holder other than the Participant (except for the Company), and
each such transferee thereof will succeed to the rights and obligations of a
holder of Option Shares hereunder.
"OPTIONS" has the meaning set forth in Article IV.
"PARTICIPANT" means any executive or other key employee of the Company
or any Subsidiary who has been selected to participate in the Plan by the
Committee or the Board.
"PERMITTED TRANSFEREE" means those persons to whom the Participant is
authorized pursuant to Section 6.3, to transfer Options.
"QUALIFYING SALE OF THE COMPANY" means a Sale of the Company in which
Bruckmann, Rosser, Sherrill & Co., L.P. and 399 Venture Partners, Inc.
(collectively, the "INVESTORS") receive proceeds which, when aggregated with
all other amounts received by the Investors with respect to their Common
Stock, results in a 35% blended internal rate of return on the Investors'
investment in the Class A Common and the Class B Common.
"QUALIFYING SECONDARY OFFERING" means a sale by the stockholders of the
Company, after an Initial Public Offering, of Class A Common and/or Class B
Common which provides gross proceeds (before deducting underwriting discounts
and expenses), when aggregated with all prior sales of Class A Common and
Class B Common, to the Company's stockholders of at least $32,200,000.
2
<PAGE>
"SALE NOTICE" has the meaning ascribed thereto in Section 5.9(a)
hereof.
"SALE OF THE COMPANY" means a merger or consolidation effecting a change
in control of the Company, a sale of all or substantially all of the assets
of the Company or a sale of a majority of the outstanding voting securities
of the Company effecting a change in control of the Company.
"SECURITIES ACT" has the meaning ascribed thereto in Article 1 hereof.
"SUBSIDIARY" means any subsidiary corporation (as such term is defined
in Section 424(f) of the Code) of the Company.
"TEN PERCENT SHAREHOLDER" means any person who owns stock representing
more than 10% of the total combined voting power of all classes of stock of
the Company or any Subsidiary.
"TERMINATION DATE" shall mean the date upon which such Participant's
employment with the Company and the Subsidiaries terminated.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Committee. Subject to the
limitations of the Plan, the Committee shall have the sole and complete
authority to: (i) select Participants, (ii) grant Options to Participants in
such forms and amounts as it shall determine, (iii) impose such limitations,
restrictions and conditions upon such Options as it shall deem appropriate,
(iv) interpret the Plan and adopt, amend and rescind administrative
guidelines and other rules and regulations relating to the Plan, (v) correct
any defect or omission or reconcile any inconsistency in the Plan or in any
Options granted under the Plan, and (vi) make all other determinations and
take all other actions necessary or advisable for the implementation and
administration of the Plan. The Committee's determinations on matters within
its authority shall be conclusive and binding upon the Participants, the
Company and all other persons. All expenses associated with the
administration of the Plan shall be borne by the Company. The Committee may,
as approved by the Board and to the extent permissible by law, delegate any
of its authority hereunder to such persons or entities as it deems
appropriate.
3
<PAGE>
ARTICLE IV
LIMITATION ON AGGREGATE SHARES
The number of shares of Class B Common with respect to which stock
purchase options ("OPTIONS") may be granted under the Plan shall not exceed,
in the aggregate, 188,948 shares, subject to adjustment in accordance with
Section 6.4; PROVIDED, that any Options that do not vest due to the failure
of the Company to meet the certain financial performance standards may, at
the discretion of the Committee, be granted to management employees of the
Company. To the extent any Options expire unexercised or are cancelled,
terminated or forfeited in any manner without the issuance of Class B Common
thereunder, such shares shall again be available under the Plan. The shares
of Class B Common available under the Plan may consist of authorized and
unissued shares, treasury shares or a combination thereof, as the Committee
shall determine.
ARTICLE V
AWARDS
5.1 GRANT OF OPTIONS. The Committee may grant Options to Participants
from time to time in accordance with this Article V. Options granted under
the Plan are intended, to the extent possible, to be "incentive stock
options" within the meaning of Section 422 of the Code; PROVIDED, that the
Committee may, in its discretion, grant Options intended as "nonqualified"
stock options. However, no Option granted hereunder shall be invalid because
of a failure to qualify as an incentive stock option (either because the
limitations of Section 422(d) of the Code are exceeded or otherwise). The
exercise price per share of Class B Common under each Option shall be
determined by the Committee or the Board at the time of grant; PROVIDED,
that, with respect to Options intended as "incentive stock options", such
exercise price shall be equal to or greater than the Fair Market Value of the
Class B Common on the date such Option is issued (110% of such Fair Market
Value in the case of an option issued to a Participant who is a Ten Percent
Shareholder). Subject to Section 5.6, Options shall be exercisable at such
time or times as the Committee shall determine. The Committee shall
determine the term of each Option, which term shall not exceed ten years from
the date of grant of the Option (five years in the case of any Option granted
to a Ten Percent Shareholder).
5.2 EXERCISE PROCEDURE. Options shall be exercisable, to the extent they
are vested, by written notice to the Company (to the attention of the Company's
Chief Administrative Officer) accompanied by payment in full of the applicable
exercise price. Payment of such exercise price may be made (i) in cash
(including check, bank draft, money order or wire transfer of immediately
available funds), (ii) in shares of Class B Common valued at their Fair Market
Value as of the date of exercise as provided in Section 5.3 below (to the extent
permitted by the Company's material agreements for indebtedness for borrowed
money) or (iii) in a combination of the foregoing.
5.3 EXCHANGE OF PREVIOUSLY ACQUIRED STOCK. At the discretion of the
Committee, exercised at the time of grant, the exercise price for the shares
being acquired upon the exercise of an Option may be paid, in full or in
part, by the delivery to the Company of Class B Common (to the extent
permitted by the Company's material agreements for indebtedness for borrowed
money). Any Class B Common so delivered shall be treated as the payment of
cash equal to the aggregate Fair Market Value on the date of delivery of such
Class B Common.
4
<PAGE>
5.4 WITHHOLDING TAX REQUIREMENTS.
(a) AMOUNT OF WITHHOLDING. It shall be a condition of the
exercise of any Option that the Participant exercising the Option make
appropriate payment or other provision acceptable to the Company with respect
to any withholding tax requirement arising from such exercise. The amount of
withholding tax required, if any, with respect to any Option exercise (the
"WITHHOLDING AMOUNT") shall be determined by a financial or other appropriate
officer of the Company, and the Participant shall furnish such information
and make such representations as such officer requires to make such
determination.
(b) WITHHOLDING PROCEDURE. If the Company determines that
withholding tax is required with respect to any Option exercise, the Company
shall notify the Participant of the Withholding Amount, and the Participant
shall pay to the Company an amount not less than the Withholding Amount. In
lieu of making such payment, the Participant may elect to pay the Withholding
Amount by either (i) delivering to the Company a number of shares of Class B
Common having an aggregate Fair Market Value as of the Measurement Date not
less than the Withholding Amount or (ii) directing the Company to withhold
(and not to deliver or issue to the Participant) a number of shares of Class
B Common, otherwise issuable upon the exercise of an Option, having an
aggregate Fair Market Value as of the Measurement Date not less than the
Withholding Amount. In addition, if the Committee approves, a Participant may
elect pursuant to the prior sentence to deliver or direct the withholding of
shares of Class B Common having an aggregate Fair Market Value in excess of
the minimum Withholding Amount but not in excess of the Participant's
applicable highest marginal combined federal income and state income tax
rate, as estimated in good faith by such Participant. Any fractional share
interests resulting from the delivery or withholding of shares of Class B
Common to meet withholding tax requirements shall be settled in cash. All
amounts paid to or withheld by the Company and the value of all shares of
Class B Common delivered to or withheld by the Company pursuant to this
Section 5.4 shall be deposited in accordance with applicable law by the
Company as withholding tax for the Participant's account. If the Treasurer or
other appropriate officer of the Company determines that no withholding tax
is required with respect to the exercise of any Option, but subsequently it
is determined that the exercise resulted in taxable income as to which
withholding is required (as a result of a disposition of shares or
otherwise), the Participant shall promptly, upon being notified of the
withholding requirement, pay to the Company, by means acceptable to the
Company, the amount required to be withheld.
5.5 NOTIFICATION OF INQUIRIES AND AGREEMENTS. Each Participant and
each Permitted Transferee shall notify the Company in writing within 10 days
after the date such Participant or Permitted Transferee (i) first obtains
knowledge of any Internal Revenue Service inquiry, audit, assertion,
determination, investigation, or question relating in any manner to the value
of Options granted hereunder; (ii) includes or agrees (including, without
limitation, in any settlement, closing or other similar agreement) to include
in gross income with respect to any Option granted under this Plan (A) any
amount in excess of the amount reported on Form 1099 or Form W-2 to such
Participant by the Company, or (B) if no such Form was received, any amount;
and/or (iii) exercises, sells, disposes of, or otherwise transfers an Option
acquired pursuant to this Plan. Upon request, a Participant or Permitted
Transferee shall provide to the Company any information or document relating
to any event described in the preceding sentence which the Company (in its
sole discretion) requires in order to calculate and substantiate any change
in the Company's tax liability as a result of such event.
5
<PAGE>
5.6 CONDITIONS AND LIMITATIONS ON EXERCISE. At the discretion of the
Committee, exercised at the time of grant, Options may vest, in one or more
installments, upon (i) the fulfilment of certain conditions, (ii) the passage
of a specified period of time, and/or (iii) the achievement by the Company or
any Subsidiary of certain performance goals.
(a) PERFORMANCE VESTING. Unless the Committee specifies otherwise
in the Option grant, the Option shall be subject to performance vesting and
shall vest with respect to 12.5% of the Option Shares that are subject to
such Option as of the end of each of the first four fiscal years of the
Company following the date of grant in the event that the Company achieves
certain financial performance targets which will be specified (or the method
of establishment of which will be specified) in each Option Agreement. In
addition to such performance vesting, the remaining 50% of the Option shall
be subject to milestone vesting in accordance with the provisions of Sections
5.6(b) and 5.6(c).
(b) SALE OF THE COMPANY. In the event of a Qualifying Sale of the
Company, all unvested Options (other than Options which did not vest because
the Company did achieve the requisite performance targets in a prior year as
set forth in Section 5.6(a) ("MISSED OPTIONS")) shall become immediately
vested, and all Missed Options shall immediately be terminated. All Options
(other than Missed Options) shall terminate if not exercised as of the date
of the Qualifying Sale of the Company or any other designated date (the
"DESIGNATED DATE") or all such Options (other than Missed Options) shall
thereafter represent only the right to receive the excess of the
consideration per share of Class B Common offered in such Qualifying Sale of
the Company over the exercise price of such Options. The Company shall give
all Participants notice of an impending Qualifying Sale of the Company at
least 15 days prior to the date of such Sale of the Company or the Designated
Date, whichever is earlier.
(c) Unless the Committee specifies otherwise in the Option grant,
in the event of an Initial Public Offering, 25% of the Options shall become
immediately vested; and in the event of subsequent, secondary public
offerings of Class B Common and/or Class A Common which result in aggregate
proceeds to the sellers thereof of more than $32.2 million (a "QUALIFYING
SECONDARY OFFERING"), an additional 25% of the Options shall become
immediately vested.
5.7 EXPIRATION OF OPTIONS.
(a) NORMAL EXPIRATION. In no event shall any part of any Option be
exercisable after the stated date of expiration thereof.
(b) EARLY EXPIRATION UPON TERMINATION OF EMPLOYMENT. Any part of any
Option that was not vested on a Participant's Termination Date shall expire and
be forfeited on such date, and any part of any Option that was vested on the
Termination Date shall also expire and be forfeited to the extent not
theretofore exercised on the thirtieth (30th) day (one year if termination is
caused by the Participant's death or disability) following the Termination Date,
but in no event after the stated date of expiration thereof.
6
<PAGE>
5.8 STOCKHOLDERS AGREEMENT. A holder of Option Shares shall become a
party to the Stockholders Agreement, dated as of March 14, 1997, by and among
the Company and certain of its stockholders (the "STOCKHOLDERS AGREEMENT"),
and the Option Shares shall be deemed Stockholder Shares for all purposes of
the Stockholders Agreement; PROVIDED, that if the Stockholders Agreement has
terminated by its terms, the provisions of this Section 5.8 shall no longer
apply.
ARTICLE VI
GENERAL PROVISIONS
6.1 WRITTEN AGREEMENT. Each Option granted hereunder shall be embodied
in a written agreement (the "OPTION AGREEMENT") which shall be signed by the
Participant to whom the Option is granted and shall be subject to the terms
and conditions set forth herein.
6.2 LISTING, REGISTRATION AND LEGAL COMPLIANCE. If at any time the
Committee determines, in its discretion, that the listing, registration or
qualification of the shares subject to Options upon any securities exchange
or under any state or federal securities or other law or regulation, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition to or in connection with the granting of Options or
the purchase or issuance of shares thereunder, no Options may be granted or
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free
of any conditions not acceptable to the Committee. The holders of such
Options will supply the Company with such certificates, representations and
information as the Company shall request and shall otherwise cooperate with
the Company in obtaining such listing, registration, qualification, consent
or approval. In the case of officers and other persons subject to Section
16(b) of the Securities Exchange Act of 1934, as amended, the Committee may
at any time impose any limitations upon the exercise of Options that, in the
Committee's discretion, are necessary or desirable in order to comply with
such Section 16(b) and the rules and regulations thereunder. If the Company,
as part of an offering of securities or otherwise, finds it desirable because
of federal or state regulatory requirements to reduce the period during which
any Options may be exercised, the Committee may, in its discretion and
without the Participant's consent, so reduce such period on not less than 15
days' written notice to the holders thereof.
6.3 OPTIONS NOT TRANSFERRABLE. Options may not be transferred other
than by will or the laws of descent and distribution and, during the lifetime
of the Participant to whom they were granted, may be exercised only by such
Participant (or, if such Participant is incapacitated, by such Participant's
legal guardian or legal representative). In the event of the death of a
Participant, Options which are not vested on the date of death shall
terminate; exercise of Options granted hereunder to such Participant, which
are vested as of the date of death, may be made only by the executor or
administrator of such Participant's estate or the person or persons to whom
such Participant's rights under the Options will pass by will or the laws of
descent and distribution.
7
<PAGE>
6.4 ADJUSTMENTS. In the event of a reorganization, recapitalization,
stock dividend or stock split, or combination or other change in the shares of
Class B Common, the Board or the Committee may, in order to prevent the dilution
or enlargement of rights under the Plan or outstanding Options, adjust (1) the
number and type of shares as to which options may be granted under the Plan, (2)
the number and type of shares covered by outstanding Options, (3) the exercise
prices specified therein and (4) other provisions of this Plan which specify a
number of shares, all as such Board or Committee determines to be appropriate
and equitable.
6.5 RIGHTS OF PARTICIPANTS. Nothing in the Plan shall interfere with or
limit in any way the right of the Company or any Subsidiary to terminate any
Participant's employment at any time (with or without cause), or confer upon any
Participant any right to continue in the employ of the Company or any Subsidiary
for any period of time or to continue to receive such Participant's current (or
other) rate of compensation. No employee shall have a right to be selected as a
Participant or, having been so selected, to be selected again as a Participant.
6.6 AMENDMENT, SUSPENSION AND TERMINATION OF PLAN. The Board or the
Committee may suspend or terminate the Plan or any portion thereof at any time
and may amend it from time to time in such respects as the Board or the
Committee may deem advisable; PROVIDED, that no such amendment shall be made
without stockholder approval to the extent such approval is required by law,
agreement or the rules of any exchange upon which the Class B Common is listed,
and no such amendment, suspension or termination shall impair the rights of
Participants under outstanding Options without the consent of the Participants
affected thereby, except as provided below. No Options shall be granted
hereunder after the tenth anniversary of the earlier of the adoption of the Plan
or its approval by the Company's shareholders.
6.7 AMENDMENT OF OUTSTANDING OPTIONS. The Committee may amend or modify
any Option in any manner to the extent that the Committee would have had the
authority under the Plan initially to grant such Option; PROVIDED, that except
as expressly contemplated elsewhere herein or in any agreement evidencing such
Option, no such amendment or modification shall impair the rights of any
Participant under any outstanding Option without the consent of such
Participant.
6.8 INDEMNIFICATION. In addition to such other rights of indemnification
as they may have as members of the Board or the Committee, the members of the
Committee shall be indemnified by the Company against (i) all costs and expenses
reasonably incurred by them in connection with any action, suit or proceeding to
which they or any of them may be party by reason of any action taken or failure
to act under or in connection with the Plan or any Option granted under the
Plan, and (ii) all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the Company) or
paid by them in satisfaction of a judgment in any such action, suit or
proceeding; PROVIDED, that any such Committee member shall be entitled to the
indemnification rights set forth in this Section 6.8 only if such member (1)
acted in good faith and in a manner that such member reasonably believed to be
in, and not opposed to, the best interests of the Company, and (2) with respect
to any criminal action or proceeding, (A) had no reasonable cause to believe
that such conduct was unlawful, and (B) upon the institution of any such action,
suit or proceeding a Committee member shall give the Company written notice
thereof and an opportunity to handle and defend the same before such Committee
member undertakes to handle and defend it on his own behalf.
8
<PAGE>
6.9 RESTRICTED SECURITIES. All Class B Common issued pursuant to the
terms of this Plan shall constitute "restricted securities," as that term is
defined in Rule 144 promulgated by the Securities and Exchange Commission
pursuant to the Securities Act, and may not be transferred except in compliance
with the registration requirements of the Securities Act or an exemption
therefrom.
* * * * *
9
<PAGE>
Exhibit 12.1
ANVIL HOLDINGS, INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
IN THOUSANDS, EXCEPT RATIO
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------------------------- -----------------------------
Three Three
Years Ended Months Ended Year Ended Months Ended
------------------------- ------------- ---------- -------------
1/27/96 2/1/97 4/27/96 2/1/97 5/3/97
--------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
EARNINGS:
Income before taxes 16,294 17,208 4,080 7,361 3,560
------ ------ ------ ------ ------
FIXED CHARGES:
Interest in Rent Espense 252 116 95 116 104
Interest Expense 8,844 7,912 1,710 17,759 4,313
------ ------ ------ ------ ------
Earnings 26,020 25,236 5,885 25,236 7,977
------ ------ ------ ------ ------
FIXED CHARGES:
Interest in Rent Expense 252 116 95 116 104
Interest Expense 8,844 7,912 1,710 17,759 4,313
------ ------ ------ ------ ------
FIXED CHARGES 9,096 8,028 1,805 17,875 4,417
------ ------ ------ ------ ------
Ration of Earnings to
Fixed Charges 2.9 3.1 3.3 1.4 1.8
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
<PAGE>
Exhibit 12.2
ANVIL HOLDINGS, INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
IN THOUSANDS, EXCEPT RATIOS
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------------------------- -----------------------------
Three Three
Years Ended Months Ended Year Ended Months Ended
------------------------- ------------- ---------- -------------
1/27/96 2/1/97 4/27/96 2/1/97 5/3/97
--------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
EARNINGS:
Income before taxes 16,924 17,208 4,080 7,361 3,560
------ ------ ------ ------ ------
FIXED CHARGES:
Interest in Rent Expense 252 116 95 116 104
Interest Expense 8,844 7,912 1,710 17,759 4,313
Preferred Dividends 2,620 2,962 741 7,893 2,133
------ ------ ------ ------ ------
Earnings 28,640 28,198 6,626 33,129 10,110
------ ------ ------ ------ ------
FIXED CHARGES:
Interest in Rent Expense 252 116 95 116 104
Interest Expense 8,844 7,912 1,710 17,759 4,313
Preferred Dividends 2,620 2,962 741 7,893 2,133
------ ------ ------ ------ ------
FIXED CHARGES 11,716 10,990 2,546 25,768 6,550
------ ------ ------ ------ ------
Ration of Earnings to
Fixed Charges & Preferred
Stock 2.4 2.6 2.6 1.3 1.5
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
<PAGE>
Exhibit 12.3
Anvil Holdings, Inc.
Computation of Ratios of EBITDA to Cash Interest Expense
In thousands, except ratios
Pro forma
-------------------------------
Year Ended Three Months Ended
---------- ------------------
2/1/97 5/3/97
EBITDA:
- -------
Operating Income 24,705 (2,864)
Depreciation & Amortization 8,245 1,928
Non-Recurring item 600
---------- -------------
EBITDA 33,550 9,979
Cash Interest Expense 16,752 4,071
Ratio of EBITDA to Cash
Interest Expense 2.0 2.5
---------- -------------
---------- -------------
<PAGE>
Exhibit 12.4
Anvil Holdings, Inc.
Computation of Ratios of net Debt to EBITDA
In thousands, except ratios
Pro forma
----------
Year Ended
----------
2/1/97
NET DEBT:
- ---------
Tota Debt (pro forma) 162,069
Cash & cash equivalents 1,863
----------
NET DEBT 160,206
----------
EBITDA:
- -------
Operating Income 24,705
Depreciation & Amortization 8,245
Non-Recurring item 600
----------
EBITDA 33,550
----------
Ratio of net Debt to EBITDA 4.8
----------
----------
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to the Registration
Statement 333-26999 of Anvil Holdings, Inc. on Form S-4 of our report dated
March 28, 1997, appearing (relating to $57,500,000, 13% Series B Senior
Exchangeable Preferred Stock due 2009) in the Prospectus, which is part of
this Registration Statement. We also consent to the reference to us under the
headings "Summary Historical and Pro Forma Financial Data", "Selected
Historical Financial Data" and "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of Anvil Holdings, Inc.,
listed in Item 21(b). The financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
New York, New York
June 27, 1997
<PAGE>
Exhibit 23.2
[KPMG PEAT MARWICK LLP LETTERHEAD]
The Board of Directors
Anvil Holdings, Inc.
The audit referred to in our report dated March 24, 1995, included the related
financial statement schedule for the year ended January 28, 1995, included in
the registration statement. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statement schedule based on our audit. In our opinion,
such financial statement schedule, when considered in relation to the basic
combined financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
We consent to the use of our reports included herein and to the reference to
our firm under the headings "Summary Historical and Pro Forma Financial
Data," "Selected Historical Financial Data" and "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
New York, New York
June 27, 1997
- -
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-03-1997
<PERIOD-START> FEB-02-1997
<PERIOD-END> MAY-03-1997
<CASH> 1,405
<SECURITIES> 0
<RECEIVABLES> 33,478
<ALLOWANCES> 616
<INVENTORY> 30,325
<CURRENT-ASSETS> 73,275
<PP&E> 52,137
<DEPRECIATION> 13,767
<TOTAL-ASSETS> 142,588
<CURRENT-LIABILITIES> 49,253
<BONDS> 126,153
28,164
0
<COMMON> 39
<OTHER-SE> (64,574)
<TOTAL-LIABILITY-AND-EQUITY> 142,588
<SALES> 60,288
<TOTAL-REVENUES> 60,288
<CGS> 45,859
<TOTAL-COSTS> 17,043
<OTHER-EXPENSES> 250
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,142
<INCOME-PRETAX> (6,184)
<INCOME-TAX> (2,474)
<INCOME-CONTINUING> (3,710)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,757)
<CHANGES> 0
<NET-INCOME> (6,467)
<EPS-PRIMARY> .97
<EPS-DILUTED> (2.15)
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
13% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2009
OF
ANVIL HOLDINGS, INC.
PURSUANT TO THE PROSPECTUS DATED _________, 1997
THE PREFERRED EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
__________, 1997 UNLESS EXTENDED.
TO: UNITED STATES TRUST COMPANY OF NEW YORK (THE "EXCHANGE AGENT")
BY REGISTERED OR CERTIFIED MAIL:
United States Trust Company of New York
843 Cooper Station
New York, New York 10276
Attn: Corporate Trust Operations
BY OVERNIGHT COURIER AND BY HAND AFTER 4:30 P.M.:
United States Trust Company of New York
770 Broadway - 13th Floor
New York, New York 10003
Attn: Corporate Trust Operations
BY HAND BEFORE 4:30 P.M.:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attn: Lower Level Corporate Trust Window
BY FACSIMILE: (212) 420-6152
Attn: Corporate Trust Operations
Confirm by telephone: (800) 548-6565
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF THIS INSTRUMENT VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The instructions accompanying this Letter of Transmittal should be read
carefully before this Letter of transmittal is completed
The undersigned acknowledges receipt of the Prospectus, dated
_____________, 1997 (the "Prospectus") of Anvil Holdings, Inc. (the "Company")
and the related Letter of Transmittal (the "Letter of Transmittal"), which
together describe the Company's offer (the "Preferred Exchange Offer") to
exchange $1,000 liquidation preference of its 13% Senior Exchangeable Preferred
Stock due 2009, Series B (the "New Senior Preferred Stock"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement, for each $1,000 liquidation preference of
its outstanding 13% Senior Exchangeable Preferred Stock due 2009 (the "Old
Senior Preferred Stock"), of which $30,000,000 aggregate liquidation preference
is outstanding. The term "Expiration Date" shall mean 5:00 p.m., New York City
time, on _________, 1997, unless the Company, in its sole discretion, extends
the Preferred Exchange Offer, in which case the term shall mean the latest date
and time to which the Preferred Exchange Offer is extended. The term "Holder"
with respect to the Preferred Exchange Offer means any person in whose name Old
Senior Preferred Stock are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder. Capitalized terms used but not defined herein have the respective
meanings set forth in the Prospectus.
<PAGE>
This Letter of Transmittal is to be used by holders of Old Senior Preferred
Stock if (i) certificates representing the Old Senior Preferred Stock are to be
physically delivered to the Exchange Agent herewith, (ii) tender of the Old
Senior Preferred Stock is to be made by book entry transfer to the Exchange
Agent's account at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in the Prospectus under the
caption "The Preferred Exchange Offer--Procedures for Tendering" by any
financial institution that is a participant in the Book-Entry Transfer Facility
and whose name appears on a security position listing as the owner of Old Senior
Preferred Stock (such participants acting on behalf of holders, are referred to
herein, together with such holders, as "Authorized Holders") or (iii) tender of
the Old Senior Preferred Stock is to be made according to the guaranteed
delivery procedures described in the Prospectus under the caption "The Preferred
Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2 below.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Preferred Exchange Offer. Holders who wish to tender their Old Senior
Preferred Stock must complete this letter in its entirety.
/ / CHECK HERE IF TENDERED OLD SENIOR PREFERRED STOCK IS BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ___________________________________________
Account Number: __________________________________________________________
Transaction Code Number: _________________________________________________
Aggregate liquidation preference of Tendered Old Senior Preferred Stock:
If Holders desire to tender Old Senior Preferred Stock pursuant to the
Preferred Exchange Offer and (i) time will not permit this Letter of
Transmittal, certificates representing Old Senior Preferred Stock or other
required document to reach the Exchange Agent prior to the Expiration Date, or
(ii) the procedures for book entry transfer cannot be completed prior to the
Expiration Date, such Holders may effect a tender of such Old Senior Preferred
Stock in accordance with the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Preferred Exchange Offer--Guaranteed Delivery
Procedures." See Instruction 2 below.
/ / CHECK HERE IF TENDERED OLD SENIOR PREFERRED STOCK IS BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT
AND COMPLETE THE FOLLOWING (SEE INSTRUCTION 2):
Name of Registered or Acting Holder(s): __________________________________
Window Ticket No. (if any): ______________________________________________
Date of Execution of Notice of Guaranteed Delivery: ______________________
Name of Eligible Institution
that Guaranteed Delivery: ________________________________________________
If Delivered by Book-Entry Transfer,
the Account Number: ______________________________________________________
Transaction Code Number: _________________________________________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER
THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
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<PAGE>
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE NEW
SENIOR PREFERRED STOCK.
Name: ____________________________________________________________________
Address: _________________________________________________________________
__________________________________________________________________________
Attention: _______________________________________________________________
List below the Old Senior Preferred Stock to which this Letter of
Transmittal relates. If the space provided below is inadequate, the certificate
numbers and aggregate liquidation preference of Old Senior Preferred Stock
should be listed on a separate signed schedule affixed hereto.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
<TABLE>
<CAPTION>
___________________________________________________________________________________________
BOX 1
DESCRIPTION OF OLD SENIOR PREFERRED STOCK*
___________________________________________________________________________________________
Aggregate Liquidation
Name(s) and Address(es) of Aggregate Liquidation Preference Tendered (must
Registered Holder(s) Certificate Preference Represented be an Integral Multiple
(Please fill in, if blank) Number(s) by Certificate(s) of $1,000)**
<S> <C> <C> <C>
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
Total
__________________________________________________________________________________________
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Aggregate Liquidation Preference
Tendered," any tendering Holder of Old Senior Preferred Stock will be
deemed to have tendered the entire aggregate liquidation preference
represented by the column labeled "Aggregate Liquidation Preference
Represented by Certificate(s)." If the space provided above is inadequate,
list the certificate numbers and aggregate liquidation preferences on a
separate signed schedule and affix the list to this Letter of Transmittal.
The minimum permitted tender is $1,000 in liquidation preference of Old
Senior Preferred Stock. All other tenders must be in integral multiples of
$1,000.
</TABLE>
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<PAGE>
BOX 2
SPECIAL REGISTRATION
INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY if certificates for Old Senior Preferred Stock in an
aggregate liquidation preference not tendered, or New Senior Preferred Stock
issued in exchange for Old Senior Preferred Stock accepted for exchange, are to
be issued in the name of someone other than the undersigned.
Issue certificate(s) to:
Name __________________________________________
(Please Print)
Address________________________________________
_______________________________________________
(Include Zip Code)
_______________________________________________
(Tax Indemnification or Social Security Number)
BOX 3
SPECIAL REGISTRATION
INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY if certificates for Old Senior Preferred Stock in an
aggregate liquidation preference not tendered, or New Senior Preferred Stock
issued in exchange for Old Senior Preferred Stock accepted for exchange, are to
be sent to someone other than the undersigned, or to the undersigned at an
address other than that shown above.
Deliver certificate(s) to:
Name___________________________________________
(Please Print)
Address________________________________________
_______________________________________________
(Include Zip Code)
_______________________________________________
(Tax Indemnification or Social Security Number)
BOX 4
BROKER-DEALER STATUS
/ / Check this box if the Beneficial Owner of the Old Senior Preferred Stock
is a Participating Broker-Dealer and such Participating Broker-Dealer
acquired the Old Senior Preferred Stock for its own account as a result
of market-making activities or other trading activities. IF THIS BOX IS
CHECKED, PLEASE SEND A COPY OF THIS LETTER OF TRANSMITTAL TO JACOB
HOLLANDER, VICE PRESIDENT OF THE COMPANY, VIA FACSIMILE: (212) 885-9411.
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<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Preferred Exchange Offer, the
undersigned hereby tenders to Anvil Holdings, Inc. (the "Company"), the
aggregate liquidation preference of Old Senior Preferred Stock indicated above.
Subject to and effective upon the acceptance for exchange of the aggregate
liquidation preference of Old Senior Preferred Stock tendered in accordance with
this Letter of Transmittal, the undersigned sells, assigns and transfers to, or
upon the order of, the Company all right, title and interest in and to the Old
Senior Preferred Stock tendered hereby. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent its agent and attorney-in-fact (with
full knowledge that the Exchange Agent also acts as the agent of the Company)
with respect to the tendered Old Senior Preferred Stock with the full power of
substitution to (i) present such Old Senior Preferred Stock and all evidences of
transfer and authenticity to, or transfer ownership of, such Old Senior
Preferred Stock on the account books maintained by the Book-Entry Transfer
Facility to, or upon, the order of, the Company, (ii) deliver certificates for
such Old Senior Preferred Stock to the Company and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company and
(iii) present such Old Senior Preferred Stock for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of beneficial
ownership of such Old Senior Preferred Stock, all in accordance with the terms
of the Preferred Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Senior
Preferred Stock tendered hereby and that the Company will acquire good, valid
and unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claims, when the same
are acquired by the Company. The undersigned hereby further represents that
any New Senior Preferred Stock acquired in exchange for Old Senior Preferred
Stock tendered hereby will have been acquired in the ordinary course of
business of the person receiving such New Senior Preferred Stock, whether or
not such person is the undersigned, that neither the undersigned nor any
other such person has any arrangement or understanding with any person to
participate in the distribution of such New Senior Preferred Stock and that
neither the undersigned nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act of 1933, as amended, of the
Company. In addition, the undersigned and any such person acknowledge that
(a) any person participating in the Preferred Exchange Offer for the purpose
of distributing the New Senior Preferred Stock must, in the absence of an
exemption therefrom, comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale of
the New Senior Preferred Stock and cannot rely on the position of the Staff
of the Securities and Exchange Commission enunciated in no-action letters and
(b) failure to comply with such requirements in such instance could result in
the undersigned or such person incurring liability under the Securities Act
for which the undersigned or such person is not indemnified by the Company.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer and purchase of the Old Senior
Preferred Stock tendered hereby. If the undersigned is not a broker-dealer,
the undersigned represents that it is not engaged in and does not intend to
engage in, a distribution of New Senior Preferred Stock. If the undersigned
is a broker-dealer that will receive New Senior Preferred Stock for its own
account in exchange for Old Senior Preferred Stock that were acquired as a
result of market-making activities or other trading activities, it
acknowledges that it will deliver a Prospectus in connection with any resale
of such New Senior Preferred Stock, however, by so acknowledging and by
delivering a Prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" the meaning of the Securities Act. Unless otherwise
notified in accordance with the instructions set forth herein in Box 3 under
"Broker-Dealer Status," the Company will assume that the undersigned is not a
Participating Broker-Dealer.
For purposes of the Preferred Exchange Offer, the Company shall be deemed
to have accepted validly tendered Old Senior Preferred Stock when, as and if
the Company has given oral or written notice thereof to the Exchange Agent.
If any Old Senior Preferred Stock tendered herewith are not accepted for
exchange pursuant to the Preferred Exchange Offer for any reason,
certificates for any such unaccepted Old Senior Preferred Stock will be
returned, without expense, to the undersigned at the address shown below or
to a different address as may be indicated herein in Box 3 under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
-5-
<PAGE>
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representative, successors and assigns.
The undersigned understands that tenders of Old Senior Preferred Stock
pursuant to the procedures described under the caption "The Preferred Exchange
Offer--Procedures for Tendering" in the Prospectus and in the instructions
hereto will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Preferred Exchange
Offer, subject only to withdrawal of such tenders on the terms set forth in the
Prospectus under the caption "The Preferred Exchange Offer--Withdrawal of
Tenders."
Unless otherwise indicated in Box 2 under "Special Registration
Instructions," please issue the certificates (or electronic transfers)
representing the New Senior Preferred Stock issued in exchange for the Old
Senior Preferred Stock accepted for exchange and any certificates (or
electronic transfers) for Old Senior Preferred Stock not tendered or not
exchanged, in the name(s) of the undersigned. Similarly, unless otherwise
indicated in Box 3 under "Special Delivery Instructions," please send the
certificates, if any, representing the New Senior Preferred Stock issued in
exchange for the Old Senior Preferred Stock accepted for exchange and any
certificates for Old Senior Preferred Stock not tendered or not exchanged
(and accompanying documents, as appropriate) to the undersigned at the
address shown below in the undersigned's signature(s). In the event that
both "Special Registration Instructions" and "Special Delivery Instructions"
are completed, please issue the certificates representing the New Senior
Preferred Stock issued in exchange for the Old Senior Preferred Stock
accepted for exchange in the name(s) of, and return any certificates for Old
Senior Preferred Stock not tendered or not exchanged to, the person(s) so
indicated. The undersigned understands that the Company has no obligation
pursuant to the "Special Registration Instructions" and "Special Delivery
Instructions" to transfer any Old Senior Preferred Stock from the name of the
registered Holder(s) thereof if the Company does not accept for exchange any
of the Old Senior Preferred Stock so tendered.
Holders who wish to tender their Old Senior Preferred Stock and (i) whose
Old Senior Preferred Stock are not immediately available or (ii) who cannot
deliver the Old Senior Preferred Stock, this Letter of Transmittal or any
other documents required hereby to the Exchange Agent prior to the Expiration
Date, may tender their Old Senior Preferred Stock according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The
Preferred Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2
regarding the completion of this Letter of Transmittal printed below.
The lines below must be signed by the registered holder(s) exactly as
their name(s) appear(s) on the Old Senior Preferred Stock or by a participant
in the Book-Entry Transfer Facility, exactly as such participant's name
appears on a security position listing as the owner of the Old Senior
Preferred Stock, or by person(s) authorized to become registered holder(s) by
a properly completed bond power from the registered holder(s), a copy of
which must be transmitted with this Letter of Transmittal. If Old Senior
Preferred Stock to which this Letter of Transmittal relate are held of record
by two or more joint holders, then all such holders must sign this Letter of
Transmittal.
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<PAGE>
_______________________________________________________________________________
PLEASE SIGN HERE WHETHER OR NOT
OLD SENIOR PREFERRED STOCK ARE BEING PHYSICALLY TENDERED HEREBY
X_________________________________________________________________ __________
Date
X_________________________________________________________________ __________
Date
Area Code and Telephone Number: __________________________________
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, then such person must (i) set forth his
or her full title below and (ii) submit evidence satisfactory to the Company
of such person's authority so to act. See Instruction 5 regarding the
completion of this Letter of Transmittal printed below.
Name(s):_______________________________________________________________________
(Please Print)
Capacity:______________________________________________________________________
Address:_______________________________________________________________________
(Include Zip Code)
_______________________________________________________________________________
_______________________________________________________________________________
MEDALLION SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution:____________________________
(Authorized Signature)
_______________________________________________________________________________
(Title)
_______________________________________________________________________________
(Name of Firm)
_______________________________________________________________________________
(Address, Include Zip Code)
_______________________________________________________________________________
(Area Code and Telephone Number)
Dated:_________________________________________________________________________
_______________________________________________________________________________
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<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE PREFERRED EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR OLD SENIOR
PREFERRED STOCK OR BOOK-ENTRY CONFIRMATIONS. Certificates representing the
tendered Old Senior Preferred Stock (or a confirmation of book-entry transfer
into the Exchange Agent's account with the Book-Entry Transfer Facility for
tendered Old Senior Preferred Stock transferred electronically), as well as a
properly completed and duly executed copy of this Letter of Transmittal (or
facsimile thereof), a Substitute Form W-9 (or facsimile thereof) and any other
documents required by this Letter of Transmittal must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. The
method of delivery of certificates for Old Senior Preferred Stock and all other
required documents is at the election and sole risk of the tendering holder and
delivery will be deemed made only when actually received by the Exchange Agent.
If delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. As an alternative to delivery by mail, the holder may
wish to use an overnight or hand delivery service. In all cases, sufficient
time should be allowed to assure timely delivery. Neither the Company nor the
Exchange Agent is under an obligation to notify any tendering holder of the
Company's acceptance of tendered Old Senior Preferred Stock prior to the
completion of the Preferred Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Old
Senior Preferred Stock but whose Old Senior Preferred Stock are not immediately
available and who cannot deliver their certificates for Old Senior Preferred
Stock (or comply with the procedures for book-entry transfer prior to the
Expiration Date), the Letter of Transmittal and any other documents required by
the Letter of Transmittal to the Exchange Agent prior to the Expiration Date
must tender their Old Senior Preferred Stock according to the guaranteed
delivery procedures set forth below. Pursuant to such procedures:
(i) such tender must be made by or through a firm which is a member
of a registered national securities exchange or of the National Association
of Securities Dealers, Inc., or a commercial bank or trust company having
an office or correspondent in the United States (an "Eligible
Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have
received from the holder and the Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail, or hand delivery) setting forth the name and address of the holder,
the certificate number or numbers of the tendered Old Senior Preferred
Stock, and the aggregate liquidation preference of tendered Old Senior
Preferred Stock and stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof),
together with the tendered Old Senior Preferred Stock (or a confirmation of
book-entry transfer into the Exchange Agent's account with the Book-Entry
Transfer Facility for Old Senior Preferred Stock transferred
electronically) and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and
(iii) such properly completed and executed Letter of Transmittal
and certificates representing the tendered Old Senior Preferred Stock in
proper form for transfer (or a confirmation of book-entry transfer into the
Exchange Agent's account with the Book-Entry Transfer Facility for Old
Senior Preferred Stock transferred electronically) must be received by the
Exchange Agent within five New York Stock Exchange trading days after the
Expiration Date.
Any holder who wishes to tender Old Senior Preferred Stock pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery relating to such Old Senior
Preferred Stock prior to the Expiration Date. Failure to complete the
guaranteed delivery procedures outlined above will not, of itself, affect the
validity or effect a revocation of any Letter of Transmittal form properly
completed and executed by a Holder who attempted to use the guaranteed delivery
person.
3. TENDER BY HOLDER. Only a holder of Old Senior Preferred Stock may
tender such Old Senior Preferred Stock in the Preferred Exchange Offer. Any
beneficial owner of Old Senior Preferred Stock who is not the registered holder
and who wishes to tender should arrange with such holder to execute and deliver
this Letter of Transmittal on such owner's behalf or must, prior to completing
and executing this Letter of Transmittal and delivering
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<PAGE>
such Old Senior Preferred Stock, either make appropriate arrangements to
register ownership of the Old Senior Preferred Stock in such owner's name or
obtain a properly completed bond power from the registered holder.
4. PARTIAL TENDERS. Tenders of Old Senior Preferred Stock will be
accepted only in integral multiples of $1,000 in aggregate liquidation
preference. If less than the entire aggregate liquidation preference of Old
Senior Preferred Stock is tendered, the tendering holder should fill in the
aggregate liquidation preference tendered in the column labeled "Aggregate
Liquidation Preference Tendered" of the box entitled "Description of Old Senior
Preferred Stock" (Box 1) above. The entire aggregate liquidation preference of
Old Senior Preferred Stock delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated. If the entire aggregate
liquidation preference of Old Senior Preferred Stock is not tendered, Old Senior
Preferred Stock for the aggregate liquidation preference of Old Senior Preferred
Stock not tendered and New Senior Preferred Stock exchanged for any Old Senior
Preferred Stock tendered will be sent to the holder at his or her registered
address (or transferred to the account of the Book-Entry Facility designated
above), unless a different address (or account) is provided in the appropriate
box on this Letter of Transmittal, as soon as practicable following the
Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
MEDALLION GUARANTEE OF SIGNATURE. If this Letter of Transmittal is signed by
the registered holder(s) of the Old Senior Preferred Stock tendered herewith,
the signatures must correspond with the name(s) as written on the face of the
tendered Old Senior Preferred Stock without alteration, enlargement, or any
change whatsoever. If this Letter of Transmittal is signed by a participant in
the Book-Entry Transfer Facility, the signature must correspond with the name as
it appears on the security position listing as the owner of the Old Senior
Preferred Stock.
If any of the tendered Old Senior Preferred Stock are owned of record by
two or more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Senior Preferred Stock are held in different names on
several Old Senior Preferred Stock, it will be necessary to complete, sign, and
submit as many separate copies of the Letter of Transmittal documents as there
are names in which tendered Old Senior Preferred Stock are held.
If this Letter of Transmittal is signed by the registered holder or
Acting Holder, and New Senior Preferred Stock are to be issued and any
untendered or unaccepted aggregate liquidation preference of Old Senior
Preferred Stock are to be reissued or returned to the registered holder or
Acting Holder, then, the registered holder or Acting Holder need not and
should not endorse any tendered Old Senior Preferred Stock nor provide a
separate bond power. In any other case (including if this Letter of
Transmittal is not signed by the Acting Holder), the registered holder or
Acting Holder must either properly endorse the Old Senior Preferred Stock
tendered or transmit a properly completed separate bond power with this
Letter of Transmittal (in either case, executed exactly as the name(s) of the
registered holder(s) appear(s) on such Old Senior Preferred Stock, and, with
respect to a participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Old Senior Preferred
Stock, exactly as the name(s) of the participant(s) appear(s) on such
security position listings), with the signature(s) on the endorsement or bond
power guaranteed by an Eligible Institution unless such certificates or bond
powers are signed by an Eligible Institution.
If this Letter of Transmittal or any Old Senior Preferred Stock or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations, or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing and
evidence satisfactory to the Company of their authority to so act must be
submitted with this Letter of Transmittal.
No medallion signature guarantee is required if (i) this Letter of
Transmittal is signed by the registered holder(s) of the Old Senior Preferred
Stock tendered herewith (or by a participant in the Book-Entry Transfer
Facility whose name appears on a security position listing as the owner of
the Tendered Old Senior Preferred Stock) and the issuance of New Senior
Preferred Stock (and any Old Senior Preferred Stock not tendered or not
accepted) are to be issued directly to such registered holder(s) (or, if
signed by a participant in the Book-Entry Transfer Facility, any New Senior
Preferred Stock or Old Senior Preferred Stock not tendered or not accepted
are to be deposited to such participant's account at such Book-Entry Transfer
Facility) and neither the "Special Delivery Instructions" (Box 3) nor the
"Special Registration Instructions" (Box 2) has been completed, or (ii) such
Old Senior Preferred Stock are tendered for the account of an Eligible
Institution. In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders
should indicate, in the applicable box, the name and address (or account at
the Book-Entry Transfer Facility) in which the New Senior Preferred Stock
and/or substitute Old Senior Preferred Stock for aggregate liquidation
preferences not tendered or not
-9-
<PAGE>
accepted for exchange are to be sent (or deposited), if different from the
name and address or account of the person signing this Letter of Transmittal.
In the case of issuance in a different name, the employer identification
number or social security number of the person named must also be indicated
and the indicated and the tendering holders should complete the applicable
box.
If no such instructions are given, the New Senior Preferred Stock (and
any Old Senior Preferred Stock not tendered or not accepted) will be issued
in the name of and sent to the Acting Holder of the Old Senior Preferred
Stock or deposited at such Acting Holders' account at the Book-Entry Transfer
Facility.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Old Senior Preferred Stock to it or
its order pursuant to the Preferred Exchange Offer. If, however, a transfer
tax is imposed for any reason other than the transfer and sale of Old Senior
Preferred Stock to the Company or its order pursuant to the Preferred
Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or on any other person) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or
exemption from taxes therefrom is not submitted with this Letter of
Transmittal, the amount of transfer taxes will be billed directly to such
tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Old Senior Preferred Stock listed in
this Letter of Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law required that a
holder of any Old Senior Preferred Stock which are accepted for exchange must
provide the Company (as payor) with its correct taxpayer identification
number ("TIN"), which, in the case of a holder who is an individual, is his
or her social security number. If the Company is not provided with the
correct TIN, the Holder may be subject to a $50 penalty imposed by Internal
Revenue Service. (If withholding results in an over-payment of taxes, a
refund may be obtained.) Certain holders (including, among other, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting
a TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report a interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to
backup withholding. If the Old Senior Preferred Stock are registered in more
than one name or are not in the name of the actual owner, see the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of tendered Old
Senior Preferred Stock will be determined by the Company, in its sole
discretion, which determination will be final and binding. The Company
reserves the right to reject any and all Old Senior Preferred Stock not
validly tendered or any Old Senior Preferred Stock, the Company's acceptance
of which would, in the opinion of the Company or its counsel, be unlawful.
The Company also reserves the right to waive any conditions of the Preferred
Exchange Offer or defects or irregularities in tenders of Old Senior
Preferred Stock as to any ineligibility of any holder who seeks to tender Old
Senior Preferred Stock in the Preferred Exchange Offer. The interpretation
of the terms and conditions of the Preferred Exchange Offer (includes this
Letter of Transmittal and the instructions hereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Senior Preferred Stock must
be cured within such time as the Company shall determine. The Company will
use reasonable efforts to give notification of defects or irregularities with
respect to tenders of Old Senior Preferred Stock, but shall not incur any
liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive, or modify specified conditions in the Preferred Exchange Offer
in the case of any tendered Old Senior Preferred Stock.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Old Senior Preferred Stock on transmittal of this Letter
of Transmittal will be accepted.
-10-
<PAGE>
12. MUTILATED, LOST, STOLEN, OR DESTROYED Old Senior Preferred Stock.
Any tendering holder whose Old Senior Preferred Stock have been mutilated,
lost, stolen, or destroyed should contact the Exchange Agent at the address
indicated above for further instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance and requests for additional copies of the Prospectus
may be directed to the Exchange Agent at the address specified in the
Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Preferred
Exchange Offer.
14. ACCEPTANCE OF TENDERED OLD SENIOR PREFERRED STOCK AND ISSUANCE OF
New Senior Preferred Stock; RETURN OF Old Senior Preferred Stock. Subject to
the terms and conditions of the Preferred Exchange Offer, the Company will
accept for exchange all validly tendered Old Senior Preferred Stock as soon
as practicable after the Expiration Date and will issue New Senior Preferred
Stock therefor as soon as practicable thereafter. For purposes of the
Preferred Exchange Offer, the Company shall be deemed to have accepted
tendered Old Senior Preferred Stock when, as and if the Company has given
written and oral notice thereof to the Exchange Agent. If any tendered Old
Senior Preferred Stock are not exchanged pursuant to the Preferred Exchange
Offer for any reason, such unexchanged Old Senior Preferred Stock will be
returned, without expense, to the undersigned at the address shown above (or
credited to the undersigned's account at the Book-Entry Transfer Facility
designated above) or at a different address as may be indicated under
"Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuit to the limited
withdrawal rights set forth in the Prospectus under the caption "The
Preferred Exchange Offer--Withdrawal of Tenders."
-11-
<PAGE>
_______________________________________________________________________________
PAYOR'S NAME: ANVIL HOLDINGS, INC.
_______________________________________________________________________________
Part 1--PLEASE PROVIDE YOUR TAX- Social Security Number
PAYER IDENTIFICATION NUMBER or TIN
("TIN") IN THE BOX AT RIGHT AND
CERTIFY BY SIGNING AND DATING _____/_____/_____
BELOW
_______________________________________________________________________________
Part 2-Check the box if you are NOT subject to backup with-
holding under the provisions of section 3408(a)(1)(C) of the
Internal Revenue Code because (1) you have not been notified
that you are subject to backup withholding as a result of
failure to report all interest of dividends or (2) the Internal
Revenue Service has notified you that you are no longer subject
to backup withholding. / /
_______________________________________________________________________________
CERTIFICATION--UNDER THE PENALTIES OF PER-
JURY, I CERTIFY THAT THE INFORMATION PROVIDED
ON THIS FORM IS TRUE, CORRECT AND COMPLETE. Part 3--
SUBSTITUTE SIGNATURE DATE Awaiting TIN--> / /
_______________________________________________________________________________
FORM W-9 Name (if joint names, list first and circle the name
DEPARTMENT OF THE of the person or entity whose number you enter in Part I
TREASURY INTERNAL below. See instructions if your name has changed.)
REVENUE SERVICE ___________________________________________________________
Address
___________________________________________________________
PAYER'S REQUEST City, State and ZIP Code
FOR TAXPAYER ___________________________________________________________
IDENTIFICATION List account number(s) here (optional)
NUMBER (TIN) ___________________________________________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE PREFERRED
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
-12-
<PAGE>
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
ANVIL HOLDINGS, INC.
13% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2009
This form must be used by a holder of 13% Senior Exchangeable Preferred
Stock due 2009 (the "Old Senior Preferred Stock") of Anvil Holdings, Inc. (the
"Company"), who wishes to tender Old Senior Preferred Stock to the Exchange
Agent pursuant to the guaranteed delivery procedures described in the "The
Preferred Exchange Offer--Guaranteed Delivery Procedures" of the Prospectus,
dated ________, 1997 (the "Prospectus"), and in Instruction 2 to the related
Letter of Transmittal. Any holder who wishes to tender Old Senior Preferred
Stock pursuant to such guaranteed delivery procedures must ensure that the
Exchange Agent receives this Notice of Guaranteed Delivery prior to the
Expiration Date of the Preferred Exchange Offer. Capitalized terms not defined
herein have the meanings ascribed to them in the Prospectus or the Letter of
Transmittal.
THE PREFERRED EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON_________ 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
TO: UNITED STATES TRUST COMPANY OF NEW YORK
(THE "EXCHANGE AGENT")
BY REGISTERED OR CERTIFIED MAIL:
United States Trust Company of New York
843 Cooper Station
New York, New York 10276
Attn: Corporate Trust Operations
BY OVERNIGHT COURIER AND BY HAND AFTER 4:30 P.M.:
United States Trust Company of New York
770 Broadway - 13th Floor
New York, New York 10003
Attn: Corporate Trust Operations
BY HAND BEFORE 4:30 P.M.:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attn: Lower Level Corporate Trust Window
BY FACSIMILE: (212) 420-6152
Attn: Corporate Trust Operations
Confirm by telephone: (800) 548-6565
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the liquidation preference
of Old Senior Preferred Stock set forth below pursuant to the guaranteed
delivery procedures set forth in the Prospectus and in Instruction 2 of the
Letter of Transmittal.
The undersigned hereby tenders the Old Senior Preferred Stock listed below:
<TABLE>
<CAPTION>
___________________________________________________________________________________________________________
CERTIFICATE NUMBER(S) (IF KNOWN) OF OLD SENIOR PREFERRED AGGREGATE LIQUIDATION AGGREGATE LIQUIDATION
STOCK OR ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY PREFERENCE REPRESENTED PREFERENCE TENDERED
<S> <C> <C>
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
PLEASE SIGN AND COMPLETE
___________________________________________________________________________________________________________
Signatures of Registered Holder(s) or Date:________________, 1997
Authorized Signatory: Address:______________________________________________________
_________________________________________ ______________________________________________________________
_________________________________________ Area Code and Telephone No.:__________________________________
Name of Registered Holder(s): ___________
_________________________________________
_________________________________________
___________________________________________________________________________________________________________
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly as their name(s) appear on
certificates for Old Senior Preferred Stock or on a security position listing as the owner of Old Senior
Preferred Stock, or by person(s) authorized to become Holder(s) by endorsements and documents transmitted
with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or representative capacity,
such person must provide the following information.
Please print name(s) and address(es)
Name(s):___________________________________________________________________________________________________
Capacity:__________________________________________________________________________________________________
Address(es):_______________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
</TABLE>
-2-
<PAGE>
_______________________________________________________________________________
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended, guarantees deposit with the Exchange Agent of the
Letter of Transmittal (or facsimile thereof), together with the Old Senior
Preferred Stock tendered hereby in proper form for transfer (or confirmation
of the book-entry transfer of such Old Senior Preferred Stock into the
Exchange Agent's account at Book-Entry Transfer Facility described in the
Prospectus under the caption "The Preferred Exchange Offer--Guaranteed
Delivery Procedures" and in the Letter of Transmittal) and any other required
documents, all by 5:00 p.m., New York City time, on the fifth New York Stock
Exchange trading day following the Expiration Date.
Name of Firm:________________________ ______________________________________
Address: ____________________________ Authorized Signature
_____________________________________ Name:__________________________________
Area Code and Telephone No.:_________ Title:_________________________________
Date:____________________________, 1997
_______________________________________________________________________________
DO NOT SEND SENIOR PREFERRED STOCK WITH THIS FORM. ACTUAL SURRENDER OF SENIOR
PREFERRED STOCK MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED
LETTER OF TRANSMITTAL.
_______________________________________________________________________________
-3-
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery and
any other documents required by this Notice of Guaranteed Delivery must be
received by the Exchange Agent at its address set forth herein prior to the
Expiration Date. The method of delivery of this Notice of Guaranteed Delivery
and any other required documents to the Exchange Agent is at the election and
sole risk of the holder, and the delivery will be deemed made only when
actually received by the Exchange Agent. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. As an
alternative to delivery by mail, the holders may wish to consider using an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. For a description of the guaranteed
delivery procedures, see Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Senior
Preferred Stock referred to herein, the signature must correspond with the
name(s) written on the face of the Old Senior Preferred Stock without
alteration, enlargement, or any change whatsoever. If this Notice of
Guaranteed Delivery is signed by a participant of the Book-Entry Transfer
Facility whose name appears on a security position listing as the owner of
Old Senior Preferred Stock, the signature must correspond with the name shown
on the security position listing as the owner of the Old Senior Preferred
Stock.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Old Senior Preferred Stock listed or a
participant of the Book-Entry Transfer Facility, this Notice of Guaranteed
Delivery must be accompanied by appropriate bond powers, signed as the name
of the registered holder(s) appears on the Old Senior Preferred Stock or
signed as the name of the participant shown on the Book-Entry Transfer
Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should
so indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and
requests for assistance and requests for additional copies of the Prospectus
may be directed to the Exchange Agent at the address specified in the
Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Preferred
Exchange Offer.
-4-
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
ANVIL HOLDINGS, INC.
13% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2009
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
________,1997 (the "Prospectus"), of Anvil Holdings, Inc. (the "Company"),
and the accompanying Letter of Transmittal (the "Letter of Transmittal"),
that together constitute the Company's offer (the "Preferred Exchange
Offer"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Preferred Exchange Offer with respect to the 13% Senior Exchangeable
Preferred Stock due 2009 (the "Old Senior Preferred Stock") held by you for
the account of the undersigned.
The aggregate face amount of the Old Senior Preferred Stock held by you for
the account of the undersigned is (FILL IN AMOUNT):
$____________ of the 13% Senior Exchangeable Preferred Stock due 2009.
With respect to the Preferred Exchange Offer, the undersigned hereby
instructs you (CHECK APPROPRIATE BOX):
/ / TO TENDER the following Old Senior Preferred Stock held by you for the
account of the undersigned (INSERT LIQUIDATION PREFERENCE OF OLD
SENIOR PREFERRED STOCK TO BE TENDERED, IF ANY):
$_____________________
/ / NOT TO TENDER any Old Senior Preferred Stock held by you for the
account of the undersigned.
If the undersigned instructs you to tender the Old Senior Preferred Stock
held by you for the account of the undersigned, it is understood that you are
authorized (a) to make, on behalf of the undersigned (and the undersigned, by
its signature below, hereby makes to you), the representation and warranties
contained in the Letter of Transmittal that are to be made with respect to
the undersigned as a beneficial owner, including but not limited to the
representations that (i) the undersigned's principal residence is in the
state of (fill in state) ___________, (ii) the undersigned is acquiring the
New Senior Preferred Stock in the ordinary course of business of the
undersigned, (iii) the undersigned is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate in the distribution of the New Senior Preferred Stock, (iv) the
undersigned acknowledges that any person participating in the Preferred
Exchange Offer for the purpose of distributing the New Senior Preferred Stock
must comply with the registration and prospects delivery requirements of the
Securities Act of 1933, as amended (the "Act"), in connection with a
secondary resale transaction of the New Senior Preferred Stock acquired by
such person and cannot rely on the position of the Staff of the Securities
and Exchange Commission set forth in no-action letters that are discussed in
the section of the Prospectus entitled "The Preferred Exchange Offer--Resale
of the New Senior Notes," and (v) the undersigned is not an "affiliate," as
defined in Rule 405 under the Act, of the Company; (b) to agree, on behalf of
the undersigned, as set forth in the Letter of Transmittal; and (c) to take
such other action as necessary under the Prospectus or the Letter of
Transmittal to effect the valid tender of such Notes.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER THE
EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE NEW SENIOR
PREFERRED STOCK.
________________________________________________________________________________
/ / Check this box if the Beneficial Owner of the Old Senior Preferred Stock
is a Participating Broker-Dealer and such Participating Broker-Dealer
acquired the Old Senior Preferred Stock for its own account as a result
of market-making activities or other trading activities. IF THIS BOX IS
CHECKED, PLEASE SEND A COPY OF THESE INSTRUCTIONS TO JACOB HOLLANDER,
VICE PRESIDENT OF THE COMPANY, VIA FACSIMILE: (212) 885-9411.
_______________________________________________________________________________
<PAGE>
________________________________________________________________________________
SIGN HERE
Name of beneficial owner(s):____________________________________________________
Signature(s):___________________________________________________________________
Name (PLEASE PRINT):____________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Telephone number:_______________________________________________________________
Taxpayer Identification or Social Security Number:______________________________
Date:___________________________________________________________________________
________________________________________________________________________________
-2-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 1 OF 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501 (a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
- Payments of interest not generally subject to backup withholding include
the following:
- Payments of interest and obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payor.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.-
Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYOR. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041 A(a),
6045, and 6050A.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend, interest,
or other payments to give taxpayer identification numbers to payors who must
report the payments to the IRS. The IRS uses the number for identification
purposes. Payors must be given the numbers whether or not recipients are
required to file tax returns. Payors must generally withhold 20% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payor. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Certifications or affirmations
may subject you to criminal penalties including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2 OF 2
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYOR--
Social Security numbers have nine digits separated by two hyphens: e.g. 000-00-
0000. Employer identification numbers have nine digits separated by only one
hyphen: e.g. 00-0000000. The table below will help determine the number to give
the Payor.
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF:
1. For an individual account The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if combined funds, any one
of the individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint funds, either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is the only
contributor, the minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under State law
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying number of the
personal representative or trustee unless
the legal entity itself is not designated
in the account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public safety
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish the
ward's, minor's or incompetent person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
