<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended August 2, 1997
Commission File Number 333-26999
ANVIL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3801705
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
228 East 45th Street
New York, New York 10017
(address of principal executive office) (Zip Code)
Registrant's telephone number (212) 476-0300
(including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes No X
------- -------
At September 15, 1997, there were 290,000 shares of Class A Common Stock,
$0.01 par value (the "Class A Common") and 3,590,000 shares of Class B Common
Stock, $0.01 par value (the "Class B Common") of the registrant outstanding.
<PAGE>
Form 10-Q
ANVIL HOLDINGS, INC.
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF
AUGUST 2, 1997 (UNAUDITED) AND
FEBRUARY 1, 1997.......................................... 3
UNAUDITED CONSOLIDATED STATEMENTS
OF OPERATIONS FOR THE QUARTER AND
SIX MONTHS ENDED AUGUST 2, 1997
AND JULY 27, 1996......................................... 4
UNAUDITED CONSOLIDATED STATEMENTS
OF CASH FLOWS FOR THE SIX MONTHS
ENDED AUGUST 2, 1997 AND JULY 27, 1996.................... 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............. 10
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES...................................... 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................... 19
SIGNATURES................................................................. 20
2
<PAGE>
PART I--FINANCIAL STATEMENTS FORM 10-Q
ITEM 1. FINANCIAL STATEMENTS
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
AUGUST 2, FEBRUARY 1,
1997 1997*
----------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................ $ 10,766 $ 1,863
Accounts Receivable, less
allowance for doubtful accounts
of $700 and $874................................ 26,530 28,517
Inventories...................................... 30,784 32,471
Prepaid and refundable income taxes.............. 4,984 3,305
Deferred income taxes............................ 1,629 1,629
Prepaid expenses and other current assets....... 948 423
--------- --------
Total current assets........................... 75,641 68,208
PROPERTY, PLANT AND EQUIPMENT--Net................. 37,922 38,830
INTANGIBLE ASSETS--Net............................. 25,965 26,568
OTHER ASSETS....................................... 4,906 3,226
--------- --------
$ 144,434 $136,832
--------- --------
--------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Revolving credit facility borrowings........... $ 22,500 $ 14,400
Accounts payable................................ 9,868 9,360
Accrued expenses and other
current liabilities............................ 17,369 10,130
Current portion of long-term bank borrowings -- 4,850
--------- --------
Total current liabilities..................... 49,737 38,740
--------- --------
LONG-TERM BANK BORROWINGS......................... -- 41,475
--------
SUBORDINATED PROMISSORY NOTE...................... 7,869
--------
10-7/8% SENIOR NOTES.............................. 126,250 --
--------
DEFERRED INCOME TAXES............................. 1,697 3,535
--------- --------
OTHER LONG-TERM OBLIGATIONS....................... 1,966 1,827
--------- --------
REDEEMABLE PREFERRED STOCK (LIQUIDATION
VALUE, $31,188)................................ 29,196 --
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred Stock - old........................... 2
Common Stock - old.............................. 101
Common Stock - new:
Class a, $.01 par value, 12.5% authorized
500,000 shares, issued and outstanding at
August 2, 1997: 290,000 shares (aggregate
liquidation value, $30,373,000) 3 --
Class b, $.01 par value, authorized 7,500,000
shares, issued and outstanding at
August 2, 1997: 3,590,000 shares.............. 36 --
Additional paid-in capital..................... 12,803 23,054
Retained earnings (deficit).................... (77,254) 20,479
Loans receivable stockholders.................. -- (250)
--------- --------
Total stockholders equity (deficiency)....... (64,412) 43,386
--------- --------
$ 144,434 $ 136,832
--------- --------
--------- --------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------
* Derived from audited financial statements.
3
<PAGE>
Form 10-Q
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
FOR THE QUARTER ENDED FOR THE SIX MONTHS
ENDED
---------------------- ----------------------
AUGUST 2, JULY 27, AUGUST 2, JULY 27,
1997 1996 1997 1996
----------- --------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES.......................................................... $ 51,745 $ 56,678 $ 112,033 $ 115,230
COST OF GOODS SOLD................................................. 39,714 43,410 85,573 90,246
----------- --------- ---------- ----------
Gross profit..................................................... 12,031 13,268 26,460 24,984
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE........................ 5,483 4,801 11,611 10,077
SPECIAL COMPENSATION............................................... -- -- 10,915 --
AMORTIZATION OF INTANGIBLES........................................ 230 239 480 442
----------- --------- ---------- ----------
Operating income................................................. 6,318 8,228 3,454 14,465
OTHER INCOME (EXPENSE):
Interest expense................................................. (4,104) (1,612) (7,246) (3,322)
Interest income and other expense-net.............................. (177) (346) (355) (793)
----------- --------- ---------- ----------
Income (loss) before provision (benefit) for income taxes and
extraordinary item............................................. 2,037 6,270 (4,147) 10,350
PROVISION (BENEFIT) FOR INCOME TAXES............................... 815 2,508 (1,659) 4,140
----------- --------- ---------- ----------
INCOME (LOSS) BEFORE EXTRA-ORDINARY ITEM........................... 1,222 3,762 (2,488) 6,210
EXTRAORDINARY ITEM--Loss on extinguishment of debt (net of tax
benefit of $1,888)............................................... -- -- (2,757) --
----------- --------- ---------- ----------
NET INCOME (LOSS)PER COMMON SHARE:................................. $ 1,222 $ 3,762 $ (5,245) $ 6,210
----------- --------- ---------- ----------
----------- --------- ---------- ----------
Class A Common:
Income (loss) before extraordinary item.......................... $ 3.39 $ .3.69 $ 5.42 $ 6.96
----------- --------- ---------- ----------
Net income (loss)................................................ $ 3.39 $ .3.69 $ 4.71 $ 6.96
----------- --------- ---------- ----------
Class B Common:
Income (loss) before extraordinary item.......................... $ (0.25) $ 0.47 $ (1.76) $ 0.62
----------- --------- ---------- ----------
----------- --------- ---------- ----------
Net income (loss)................................................ $ (0.25) $ 0.47 $ (2.47) $ 0.62
----------- --------- ---------- ----------
----------- --------- ---------- ----------
Weighted average shares used in computing pro forma per share data:
Class A Common................................................... 290 290 290 290
----------- --------- ---------- ----------
----------- --------- ---------- ----------
Class B Common................................................... 3,590 3,590 3,590 3,590
----------- --------- ---------- ----------
----------- --------- ---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
Form 10-Q
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share data)
<TABLE>
FOR THE SIX MONTHS
ENDED
---------------------
AUGUST 2, JULY 27,
1997 1996
---------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................................................... $ (5,245) $ 6,210
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization....................................................... 3,243 3,173
Amortization of other assets........................................................ 951 796
Non-cash interest expense on subordinated note...................................... 121 606
Write-off of deferred financing fees................................................ 3,010 --
Non-cash compensation............................................................... 5,177 --
Non-cash interest expense........................................................... 1,706 --
Changes in operating assets and liabilities:
Accounts receivable................................................................. 1,987 (8,172)
Inventories......................................................................... 1,687 10,630
Prepaid and refundable income taxes................................................. (1,679) 4,161
Accounts payable.................................................................... 508 288
Accrued expenses and other current liabilities...................................... 7,239 3,440
Other--net.......................................................................... (2,196) 472
---------- ---------
Net cash provided by operating activities....................................... 16,509 21,604
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant & equipment............................................. (2,335) (1,960)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of new credit agreement--net............................................... 26,500
Repayment of old credit facility.................................................... (18,400) (9,100)
Repayment of long-term debt......................................................... (46,325) (1,800)
Repayment of subordinated promissory note........................................... (9,575) --
Proceeds of senior notes............................................................ 130,000 --
Redemption of old preferred stock................................................... (22,736) --
Exercise of stock options........................................................... 336 --
Repurchase of old common stock...................................................... (92,262) --
Proceeds from sale of units......................................................... 26,667 50
Issuance of new common stock........................................................ 13,063 --
Repayment of stockholder loans...................................................... 250 --
Expenses related to recapitalization................................................ (12,789) --
---------- ---------
Total cash (used in) financing activities....................................... (5,271) (10,850)
---------- ---------
NET INCREASE IN CASH........................................................................ 8,903 8,794
CASH AT BEGINNING OF PERIOD................................................................. 1,862 1,567
---------- ---------
CASH AT END OF PERIOD....................................................................... $ 10,765 $ 10,361
---------- ---------
Non-cash Investing and financing activities
-Redeemable preferred stock issued in lieu of
dividends............................................................................... $ 986 --
---------- ---------
---------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
Form 10-Q
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) Amounts in Thousands, Except Share Data
NOTE 1 -BUSINESS/PRINCIPLES OF CONSOLIDATION
Basis of Presentation: The accompanying consolidated financial statements
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. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the period ended August
2, 1997 are not necessarily indicative of the results that may be expected for
the year ending January 31, 1998 or any other period. The balance sheet at
February 1, 1997 has been derived from the audited financial statements at that
date. For further information, refer to the financial statements for the year
ended February 1, 1997.
Anvil Holdings, Inc. ("Holdings") together with its subsidiaries (the
"Company") are 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 products, under private label and its own
brand names, primarily to wholesalers and screen printers, principally in the
United States. The Company's operations are on a "52/53-week" fiscal year ending
on the Saturday closest to January 31. The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries, after elimination of significant intercompany accounts and
transactions.
NOTE 2--RECAPITALIZATION AND REFINANCING
Effective March 14, 1997, the Company completed a significant
recapitalization and refinancing plan, the major components of which are as
follows:
On 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"), certain management investors and other
existing shareholders of the Company (collectively, the "Existing Shareholders")
and Bruckmann, Rosser, Sherrill & Co., L.P. and certain of its employees and
affiliates (collectively, "BRS") completed a reorganization (the
"Recapitalization") pursuant to which: (i) the Company redeemed or repurchased a
substantial portion of its outstanding shares of capital stock; (ii) BRS
contributed $13,063 for the purchase of new common stock; (iii) 399 Venture and
the management investors reinvested a portion of their existing shares of common
stock of the Company, which were converted into shares of newly issued common
stock, and (iv) 399 Venture exchanged a portion of its existing preferred stock
for 3,333 shares of Senior Exchangeable Preferred Stock and new common stock.
6
<PAGE>
Form 10-Q
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) Amounts in Thousands, Except Share Data
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 (the "Units Offering"). Additionally, on March
14, 1997, the Company's wholly-owned subsidiary, Anvil Knitwear, Inc. ("Anvil")
sold $130,000 of 10 7/8% Senior Notes due 2007 ("Senior Notes"), guaranteed by
Holdings and Cottontops, Inc. ("Cottontops") an operating domestic subsidiary of
Anvil. The net proceeds from the Units and Notes offerings and borrowings under
the New Credit Agreement (see below) were used by the Company to: (i) redeem or
repurchase the outstanding common stock and preferred stock; (ii) repay the
balance outstanding under a then existing credit facility ("Old 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 a
previously-existing equity buy-out plan.
Concurrently with the Recapitalization, the Company repaid its borrowings
under the Old Credit Agreement and entered into an Amended and Restated Credit
Agreement ("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.
The Company used $33,250 of the borrowings under the New Credit Agreement to
finance a portion of the Recapitalization.
The New Credit Agreement requires the Company to comply with various
covenants, including maintaining certain financial ratios, and limiting
additional indebtedness, the payment of dividends, asset sales, acquisitions and
mergers. Additionally, the net proceeds from certain assets must, in certain
circumstances, be used to prepay borrowings under the credit facility. All
borrowings under this credit facility are secured by substantially all the
assets of Anvil including accounts receivable, inventories and property and
equipment.
As required by the Certificate of Designations relating to the 13% Senior
Exchangeable Preferred Stock, on June 15, 1997, the Company paid a stock
dividend of 39,431 shares ($986 liquidation value).
The Company recorded an extraordinary charge of $2,757, after applicable
income taxes, as a result of losses incurred in connection with certain of the
above refinancing transactions.
NOTE 3--RECENT EXCHANGE OFFERS
Holdings has completed an exchange offer which expired August 26, 1997 (as
extended), pursuant to which its 13% Series A Senior Exchangeable Preferred
Stock was exchanged on a share-for-share basis for its 13% Series B Senior
Exchangeable Preferred Stock, due 2009. Pursuant to the exchange offer,
1,198,566 shares ($29,964 liquidation value) were validly tendered and
exchanged.
Anvil has completed an exchange offer which expired August 22, 1997,
pursuant to which its 10-7/8% Series A Senior Notes were exchanged on a
dollar-for-dollar basis for its 10-7/8% Series B Senior Notes, due 2007.
Pursuant to the exchange offer, $129,000 principal amount were validly tendered
and exchanged.
7
<PAGE>
Form 10-Q
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) Amounts in Thousands, Except Share Data
The terms and conditions of the aforementioned Series B securities are
substantially identical to the Series A securities for which they were
exchanged, except that the Series B securities have been registered under the
Securities Act of 1933, as amended.
NOTE 4--SPECIAL COMPENSATION
In connection with the Recapitalization and refinancings effected during the
current fiscal year, the Company made significant compensatory payments to
members of management. Such amounts related to compensation earned by members of
management upon exercise of options, a special transaction bonus and payments
under a then existing equity buy-out plan. These payments aggregated $10,915,
and are considered by management to be nonrecurring in nature.
NOTE 5--INVENTORIES
Inventories at August 2, 1997 and February 1, 1997 consisted of the
following:
AUGUST 2, FEBRUARY 1,
1997 1997
----------- -----------
Finished goods.................... $ 17,853 $ 21,545
Work-in-process................... 5,345 4,326
Raw materials & supplies.......... 7,586 6,600
----------- -----------
$ 30,784 $ 32,471
----------- -----------
----------- -----------
NOTE 6--PRO FORMA (LOSS) EARNINGS PER SHARE
Pro Forma (loss) earnings 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.
NOTE 7--SUMMARIZED FINANCIAL DATA OF CERTAIN WHOLLY-OWED SUBSIDIARIES
Following is the summarized balance sheet data of Anvil and Cottontops.
Cottontops is a wholly-owned subsidiary of Anvil, which is a wholly-owned
subsidiary of Holdings.
<TABLE>
<CAPTION>
ANVIL KNITWEAR, INC. COTTONTOPS, INC.
----------------------- ------------------------
<S> <C> <C> <C> <C>
AUGUST 2, FEBRUARY 1, AUGUST 2, FEBRUARY 1,
1997 1997 1997 1997
---------- ----------- ----------- -----------
CURRENT ASSETS....................... $ 75,641 $ 68,208 $ 2,685 $ 2,671
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
TOTAL ASSETS......................... $ 144,434 $ 136,832 $ 3,076 $ 3,100
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
CURRENT LIABILITIES.................. $ 49,737 $ 38,740 $ 335 $ 1,403
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
LONG-TERM LIABILITIES................ $ 129,913 $ 46,837 $ 1,054 $ 1,202
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
TOTAL LIABILITIES.................... $ 179,650 $ 85,577 $ 1,389 $ 2,605
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
STOCKHOLDER'S EQUITY (DEFICIENCY).... $ (35,216) $ 51,255 $ 1,687 $ 495
---------- ----------- ----------- -----------
</TABLE>
8
<PAGE>
Form 10-Q
ANVIL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) Amounts in Thousands, Except Share Data
Following is the summarized statement of operations data of Anvil and
Cottontops for the periods indicated:
<TABLE>
<CAPTION>
ANVIL KNITWEAR, INC. COTTONTOPS, INC.
-------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
QUARTER ENDED
AUGUST 2, SIX MONTHS ENDED QUARTER ENDED SIX MONTHS ENDED
1997 AUGUST 2, 1997 AUGUST 2, 1997 AUGUST 2, 1997
------------- ----------------- --------------- -----------------
NET SALES................................... $ 51,745 $ 112,033 $ 741 $ 1,369
------------- ----------------- ------ -------
------------- ----------------- ------ -------
OPERATING INCOME (LOSS)..................... $ 6,318 $ 3,454 $ (91) $ (243)
------------- ----------------- ------ -------
------------- ----------------- ------ -------
INTEREST EXPENSE............................ $ 4,104 $ 7,246 -- --
------------- ----------------- ------ -------
------------- ----------------- ------ -------
NET INCOME (LOSS)........................... $ 1,222 $ (5,245) $ (45) $ (101)
------------- ----------------- ------ -------
------------- ----------------- ------ -------
</TABLE>
Holdings and Cottontops have fully and unconditionally, jointly and severally
guaranteed the Series A Senior Notes and the Series B Senior Notes. Complete
financial statements and other disclosures concerning Anvil and Cottontops
are not presented because management has determined they are not material to
investors. Holdings has no independent operations apart from its wholly-owned
subsidiary, Anvil, and its sole asset is the capital stock of Anvil. Anvil is
Holding's only direct subsidiary. Cottontops does not currently have material
operations or assets. In addition to Cottontops, Anvil has two other
non-guarantor direct subsidiaries: Anvil (Czech), Inc., a Delaware
corporation and A.K.H., S.A., organized in Honduras, and one non-guarantor
indirect subsidiary, Anvil SRO, organized in the Czech Republic (a direct
subsidiary of Anvil (Czech), Inc.) (collectively, the "Non-Guarantor
Subsidiaries"). Other than as stated herein, there are no other direct or
indirect subsidiaries of the Company. Management believes the Non-Guarantor
Subsidiaries are inconsequential both individually and in the aggregate.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FORM 10-Q
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides information with respect to the results of
operations of the Company for quarter and six month periods ended August 2, 1997
and July 27, 1996.
RESULTS OF OPERATIONS
GENERAL
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 generally 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.
The Company has been able to mitigate pricing pressures by: (i) increasing
its average product margin by continuing to introduce new products with higher
gross margins; (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 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 costs 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 prices. Historically, the Company has been
successful in mitigating the impact of fluctuating yarn prices.
As part of the increasing shift of production to lower cost, offshore
locations, the Company announced plans to close its Gibson, North Carolina
sewing facility. The shutdown is expected to be completed prior to the end of
September 1997. Management anticipates that the closing of this facility will
have no material effect on the Company's financial position or results of
operations.
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 8 times in fiscal 1996). The
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FORM 10-Q
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Company believes these efforts have been a major contributing factor to the
Company's ability to compete successfully in the imprinted activewear market.
QUARTER ENDED AUGUST 2, 1997 COMPARED TO QUARTER ENDED JULY 27, 1996
The following table sets forth, for each of the periods indicated, certain
statement of operations data, expressed as a percentage of net sales.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
---------------------------------
<S> <C> <C>
AUGUST 2, JULY 27,
1997 1996
--------------- ----------------
STATEMENT OF OPERATIONS DATA:
NET SALES............................................ 100.0% 100.0%
COST OF GOODS SOL.................................... 76.7 76.6
GROSS PROFIT......................................... 23.3 23.4
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES......... 10.6 8.5
INTEREST EXPENSE..................................... 7.9 2.8
EBITDA (1)............................................. $8.11 MILLION $10.06 MILLION
</TABLE>
- ------------------------
(1) EBITDA is defined as operating income plus depreciation and amortization.
EBITDA is not a measure of performance under generally accepted accounting
principles ("GAAP"). While 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 understands that
EBITDA is commonly used in evaluating a company's ability to service debt.
EBITDA should not be construed as an indication of the Company's operating
performance. 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. EBITDA
measure, herein, may not be comparable to other similarly titled measures of
other companies.
NET SALES
Net sales for the quarter ended August 2, 1997 decreased $4.9 million, or
8.7%, to $51.7 million from $56.6 million for the quarter ended July 27, 1996.
This decrease in net sales was primarily the result of a decline in sales volume
of approximately 10%. Such decline was compounded by a decrease in revenues of
approximately $0.5 million caused by generally lower selling prices for basic
T-shirts effected to meet competition. These declines were partially offset by
an increase in average selling price caused by a favorable change in product mix
to higher-priced products such as plackets and henleys, and the inclusion of
$0.8 million in sales of Cottontops.
GROSS PROFIT
Gross profit for the quarter ended August 2, 1997 decreased by $1.2 million,
or 9.3%, to $12.0 million from $13.2 million for the quarter ended July 27,
1996. This decrease was the result of the decrease in sales discussed above.
Gross profit margin was the same for both periods at approximately 23%. Margins
were maintained in spite of the sales decline through the obtaining of lower
yarn prices, improved manufacturing efficiencies and increased sales of the
aforementioned products with higher gross margins.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FORM 10-Q
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses (including distribution
expense) for the quarter ended August 2, 1997 increased by $0.7 million, or
14.2%, to $5.5 million from $4.8 million for the prior year's quarter ended July
27, 1996. As a percentage of net sales, selling, general and administrative
expenses increased to 10.6% from 8.5% in the quarter ended August 2, 1997
compared to the quarter ended July 27, 1996. This increase was caused by an
additional $0.3 million for the inclusion of the operating expenses of
Cottontops; $0.2 million for co-op advertising and other selling expenses to
meet competition and promote sales of new products; $0.2 million caused by
general and administrative wage and other increases; and $0.1 million in legal
and professional expenses. The aforementioned increases were partially offset
by a decline in distribution expense due to lower volume and more efficient
warehouse operations.
INTEREST EXPENSE
Interest expense for the quarter ended August 2, 1997 increased by $2.5
million, or 154.6%, to $4.1 million from $1.6 million for the prior year's
quarter. This increase in interest expense was the result of higher borrowings
in connection with the Recapitalization. Interest rates were also higher during
the current year's quarter compared to the same period in the prior year.
NET (LOSS) INCOME
Net income for the quarter ended August 2, 1997 was $1.2 million compared to
$3.8 million for the quarter ended July 27, 1996.
SIX MONTHS ENDED AUGUST 2, 1997 COMPARED TO SIX MONTHS ENDED JULY 27, 1996
The following table sets forth, for each of the periods indicated, certain
statement of operations data, expressed as a percentage of net sales.
<TABLE>
<CAPTION>
FISCAL SIX MONTHS ENDED
----------------------------------
<S> <C> <C>
AUGUST 2, JULY 27,
1997 1996
---------------- ----------------
STATEMENT OF OPERATIONS DATA:
NET SALES......................................... 100.0% 100.0%
COST OF GOODS SOLD................................ 76.4 78.3
GROSS PROFIT...................................... 23.6 21.7
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES...... 10.4 8.8
INTEREST EXPENSE.................................. 6.5 2.9
OTHER DATA:
EBITDA (1)........................................ $18.09 MILLION $18.08 MILLION
</TABLE>
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FORM 10-Q
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- -----------------------------------
(1) EBITDA is defined as operating income plus depreciation and amortization.
The period ended August 2, 1997 excludes a non-recurring charge of $10.9
million for special compensation. EBITDA is not a measure of performance
under generally accepted accounting principles ("GAAP"). While 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 understands that EBITDA is commonly used in evaluating
a company's ability to service debt. EBITDA should not be construed as an
indication of the Company's operating performance. 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. EBITDA measure, herein, may not be comparable to
other similarly titled measures of other companies.
NET SALES
Net sales for the six months ended August 2, 1997 decreased $3.2 million, or
2.8%, to $112.0 million from $115.2 million for the six months ended July 27,
1996. The increase in sales experienced during the first fiscal quarter was more
than offset by the decline in sales for the second quarter as discussed above.
On a year to date basis, the decrease in net sales was primarily the result of a
decline in sales volume of approximately 3%, which was further compounded by a
$0.9 million revenue decline due to the lower prices of basic T-shirts mentioned
above. This decline was partially offset by an increase in average selling
price caused by a favorable change in product mix to higher priced products, and
the inclusion of $1.4 million in sales of Cottontops.
GROSS PROFIT
Gross profit for the six months ended August 2, 1997 increased by $1.5
million, or 5.9%, to $26.5 million from $25.0 million for the six months ended
July 27, 1996. Gross profit margin increased to 23.6% for the six months ended
August 2, 1997 from 21.7% in the comparable period of the prior year. The
improvement in gross profit margin (most of which occurred during the Company's
first fiscal quarter) was primarily the result of obtaining lower yarn prices,
improved manufacturing efficiencies and increased sales of the aforementioned
products with higher gross margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses (including distribution
expense) for the six months ended August 2, 1997 increased by $1.5 million, or
15.2%, to $11.6 million from $10.1 million for the prior year's period ended
July 27, 1996. As a percentage of net sales, selling, general and administrative
expenses increased to 10.4% from 8.8 %. For the first half of the current fiscal
year compared to the same period in the prior year, $0.6 million is included for
the operating expenses of Cottontops; an additional $0.5 million was expended
for co-op advertising and other selling expenses to meet competition and promote
sales of new products; general and administrative wage and other increases
caused an additional $0.4 million in expenses; and there was an increase of $0.2
million in legal and professional expenses. The aforementioned increases were
partially offset by a decline in distribution expense due to lower volume and
more efficient warehouse operations.
13
<PAGE>
INTEREST EXPENSE
Interest expense for the six months ended August 2, 1997 increased by $3.9
million, or 118.1%, to $7.2 million from $3.3 million for the prior year's
period. This increase in interest expense was the result of higher borrowings in
connection with the Recapitalization. Interest rates were also higher during the
current year's quarter compared to the same period in the prior year.
NET (LOSS) INCOME
The net loss for six months ended August 2, 1997 was $5.2 million compared
to net income of $6.2 million for the six months ended July 27, 1996. The
increase in gross profit ($1.5 million) was more than offset by increases in
selling general and administrative and interest expense ($1.5 million and $3.9
million, respectively). Other non-operating expenses declined $0.4 million in
the current period. In addition, in the current six month period, there was a
charge of $10.9 million for "special compensation" (See Note 4 to the
consolidated financial statements) and an extraordinary charge of $2.7 million
(net of taxes) on extinguishment of debt (See Note 2 to the consolidated
financial statements). The tax benefit for the six months ended August 2, 1997
was $1.6 million versus a provision of $4.1 million during the same period of
the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically utilized funds generated from operations and
borrowings under its credit agreements to meet working capital and capital
expenditure requirements. Net cash generated by operating activities for its
previous two completed fiscal years totaled approximately $7.2 million and $23.8
million, respectively and totaled $16.5 million for the six months ended August
2, 1997.
During its preceding two completed 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 of machinery and equipment; and (iii) the acquisition of management
information systems hardware and software. Through August 2, 1997, the Company
has made $2.3 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 August 2, 1997, the Company had net working
capital of approximately $25.9 million, including approximately $26.5 million of
accounts receivable, approximately $30.8 million of inventories and
approximately $49.7 million in accounts payable, accrued expenses and revolving
credit loans.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FORM 10-Q
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 its domestic operating subsidiary and is secured by
substantially all of Anvil's assets and a pledge by Holdings of all of the
capital stock of Anvil. At August 2, 1997, the Company had $22,500 outstanding
borrowings under the New Credit Agreement at an interest rate of approximately
7.7%.
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: (1) 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.
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.
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
debentures into which the Senior Preferred Stock is convertible (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 (except to the
extent, among other things, the restricted payments are less than 50% of the
Consolidated Net Income of Anvil (as defined therein)), to incur additional
indebtedness, to encumber or sell assets, to enter into transactions with
affiliates, to enter into certain guarantees of indebtedness, to make
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FORM 10-Q
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 that
prohibit Anvil from declaring dividends or making other intercompany transfers
to Holdings in certain circumstances. Neither the Senior Note Indenture nor the
New Credit Agreement restricts Anvil's subsidiaries from declaring dividends
or making other intercompany transfers to Anvil.
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.
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.
For the year ending January 31, 1998, the adoption of SFAS No. 128 will not
have a material effect on the calculation of 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 (stocks, 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.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FORM 10-Q
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In June 1997, the Financial Account Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information". SFAS 130 established standards for
reporting comprehensive income and its components in a full set of
general-purpose financial statements. This Statement requires than an
enterprise (a) classify items of other comprehensive income by their nature
in a financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. SFAS 131
establishes standards for public business enterprises to report information
about operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes
standards for related disclosures about products and services, geographic
areas, and major customers. Both of the statements are effective for fiscal
periods beginning after December 15, 1997. The Company has not yet determined
the impact, if any, of adopting these standards.
FORWARD-LOOKING STATEMENTS
The Company is including the following cautionary statement in this Form
10-Q to make applicable and take advantage of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance, and underlying assumptions and other statements which are
other than statements of historical facts. From time to time, the Company may
publish or otherwise make available forward-looking statements of this nature.
All such subsequent forward-looking statements, whether written or oral and
whether made by or on behalf of the Company, are also expressly qualified by
these cautionary statements. Certain statements contained herein are
forward-looking statements and accordingly involve risks and uncertainties which
could cause actual results or outcomes to differ materially from those expressed
in the forward-looking statements. The forward-looking statements contained
herein are based on various assumptions, many of which are based, in turn, upon
further assumptions. The Company's expectations, beliefs and projections are
expressed in good faith and are believed by the Company to have a reasonable
basis, including without limitation, management's examination of historical
operating trends, data contained in the Company's records and other data
available from third parties, but there can be no assurance that management's
expectation, beliefs or projections will result or be achieved or accomplished.
In addition to the other factors and matters discussed elsewhere herein, the
factors listed on the following page are important factors that, in the view of
the Company, could cause actual results to differ materially from those
discussed in the forward-looking statements:
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FORM 10-Q
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1. Changes in economic conditions, in particular those which affect the
activewear market.
2. Changes in the availability and/or price of cotton yarn, in
particular if increases in the price of cotton yarn are not passed along to
the Company's customers.
3. Changes in senior management or control of the Company.
4. Inability to obtain new customers or retain existing ones.
5. Significant changes in competitive factors, including product
pricing conditions, affecting the Company.
6. Governmental/regulatory actions and initiatives, including, those
affecting financings.
7. Significant changes from expectations in actual capital expenditures
and operating expenses.
8. Occurrences affecting the Company's ability to obtain funds from
operations, debt or equity to finance needed capital expenditures and other
investments.
9. Significant changes in rates of interest, inflation or taxes.
10. Significant changes in the Company's relationship with its employees
and the potential adverse effects if labor disputes or grievance were to
occur.
11. Changes in accounting principles and/or the application of such
principles to the Company.
The foregoing factors could affect the Company's actual results and could
cause the Company's actual results during 1997 and beyond to be materially
different from any anticipated results expressed in any forward-looking
statement made by or on behalf of the Company.
The Company disclaims any obligation to update any forward-looking
statements to reflect events or other circumstances after the date hereof.
18
<PAGE>
ANVIL HOLDINGS, INC. AND SUBSIDIARIES Form 10-Q
PART II--OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
SEE NOTES 2 AND 3 TO FINANCIAL STATEMENTS.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
2.1 Recapitalization Agreement, dated as of February 21, 1997, by and among Citicorp
Venture Capital, Ltd., Bruckmann, Rosser, Sherrill & Co., Inc. ("BRS & Co."), Anvil
Holdings, Inc. ("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 Certificate of Incorporation of Holdings.*
3.4 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 Certificate of Designation of Holdings relating to Series B 13% Senior Exchangeable
Preferred Stock.
10.1 Series B 10-7/8% Senior Notes and Guarantees.
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* Exhibit was filed as the same exhibit number pursuant to a Registration
Statement on Form S-4 (SEC File No. 333-26999) and is incorporated herein by
reference
(b) Reports on Form 8-K
None.
Items 1, 3, 4 and 5 are not applicable and have been omitted.
19
<PAGE>
ANVIL HOLDINGS, INC. AND SUSBSIDIARIES Form 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ANVIL HOLDINGS, INC.
(Registrant)
/s/ Pasquale Branchizio
- -----------------------
Pasquale Branchizio
Vice President of Finance
(Principal Accounting Officer)
Dated: September 15, 1997
20
<PAGE>
Exhibit 4.6
ANVIL HOLDINGS, INC.
August 22, 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 a
meeting held on August 19, 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 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 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 Preferred
<PAGE>
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.
-2-
<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
-3-
<PAGE>
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 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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(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
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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 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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(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 person or by proxy, either in writing
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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 paragraph (h) hereof or fails to
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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
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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.
(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
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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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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
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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.
(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
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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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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, acquired or retired Equity Interests will not exceed $2.0
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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 placement
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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
substantially
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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
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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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"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
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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.
"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 pursuant to Standard Securitization
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<PAGE>
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
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<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.
* * * * *
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<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: /s/ Jacob Hollander
Name: Jacob Hollander
Title: Secretary
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<PAGE>
Exhibit 10.1
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 $128,500,000
ANVIL KNITWEAR, INC. promises to pay to Cede & Co. or registered assigns,
the principal sum of One Hundred and Twenty-Eight 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.
* * * * *
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<PAGE>
Dated: August 22, 1997
ANVIL KNITWEAR, INC.
By: /s/ Bernard Geller
-------------------------------------
Name: Bernard Geller
Title: Chief Executive Officer
By: /s/ Jacob Hollander
-------------------------------------
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: /s/ Christine Collins
-----------------------------
Authorized Signatory
Dated: August 22, 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 August 22, 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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<PAGE>
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
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<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
* * * * *
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<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>
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.
AI GLOBAL SENIOR NOTE
CUSIP No. 03734PAC5
No. 2 $500,000
ANVIL KNITWEAR, INC. promises 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.
* * * * *
-2-
<PAGE>
Dated: August 22, 1997
---------------
ANVIL KNITWEAR, INC.
By: /s/ Bernard Geller
-----------------------------------
Name: Bernard Geller
Title: Chief Executive Officer
By: /s/ Jacob Hollander
-----------------------------------
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: /s/ Christine Collins
-----------------------------
Authorized Signatory
Dated: August 22, 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 August 22, 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
-4-
<PAGE>
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
-5-
<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
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<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.
-8-
<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
* * * * *
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<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>
Principal Amount of this
Amount of decrease in Amount of increase in Global Senior Note Signature
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 August 22, 1997
---------------
ANVIL HOLDINGS, INC.
By: /s/ Bernard Geller
------------------------
Name: Bernard Geller
Title: President
ATTEST: /s/ Jacob Hollander
---------------------
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 August 22, 1997
---------------
COTTONTOPS, INC.
By: /s/ Bernard Geller
----------------------
Name: Bernard Geller
Title: Chairman of the Board
ATTEST: /s/ Jacob Hollander
------------------------
Jacob Hollander
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM ANVIL
HOLDINGS' FINANCIAL STATEMENTS INCLUDED IN ITS 10-Q FOR THE PERIOD ENDED AUGUST
2, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> JAN-31-1998 FEB-2-1997
<PERIOD-START> FEB-02-1997 FEB-02-1997
<PERIOD-END> AUG-2-1997 FEB-2-1997
<CASH> 10,766 1,863
<SECURITIES> 0 0
<RECEIVABLES> 26,530 28,517
<ALLOWANCES> 700 874
<INVENTORY> 30,784 32,471
<CURRENT-ASSETS> 75,641 68,208
<PP&E> 53,172 50,811
<DEPRECIATION> 15,250 11,981
<TOTAL-ASSETS> 144,434 136,832
<CURRENT-LIABILITIES> 49,737 38,740
<BONDS> 126,250 49,344
29,196 0
0 2
<COMMON> 39 103
<OTHER-SE> (64,451) 43,283
<TOTAL-LIABILITY-AND-EQUITY> 144,434 136,832
<SALES> 112,033 204,154
<TOTAL-REVENUES> 112,033 204,154
<CGS> 85,873 156,813
<TOTAL-COSTS> 23,006 22,636
<OTHER-EXPENSES> 353 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,246 7,912
<INCOME-PRETAX> (4,147) 17,208
<INCOME-TAX> (1,659) 6,883
<INCOME-CONTINUING> (2,468) 10,325
<DISCONTINUED> 0 0
<EXTRAORDINARY> (2,757) 0
<CHANGES> 0 0
<NET-INCOME> (5,245) 10,325
<EPS-PRIMARY> 4.71 13.72
<EPS-DILUTED> 0 0
</TABLE>
