<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1999.
REGISTRATION NO. 333-74609
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1 TO
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
GILDAN ACTIVEWEAR INC./
LES VETEMENTS DE SPORTS GILDAN INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CANADA 2253 NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CODE NUMBER) NUMBER)
</TABLE>
725 MONTEE DE LIESSE
VILLE SAINT-LAURENT, QUEBEC
CANADA, H4T 1P5
(514) 735-2023
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------------
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NEW YORK 10019
(212) 664-1666
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------------
Copies of all correspondence to:
<TABLE>
<S> <C>
GARY I. HOROWITZ, ESQ. STEPHEN M. BESEN, ESQ.
SIMPSON THACHER & BARTLETT WEIL, GOTSHAL & MANGES LLP
425 LEXINGTON AVENUE 767 FIFTH AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10153
(212) 455-2000 (212) 310-8000
</TABLE>
---------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
---------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
please check the following box. [ ]
If this Form is filed to register additional securities for an Offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same Offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
Offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
EXPLANATORY NOTE
The prospectus relating to the Class A Subordinate Voting Shares registered
hereby to be offered in the United States (the "U.S. Prospectus") is set forth
following this page. The prospectus relating to the Class A Subordinate Voting
Shares registered hereby to be offered in Canada (the "Canadian Prospectus")
will consist of alternate pages set forth following the U.S. Prospectus and the
balance of the pages included in the U.S. Prospectus for which no alternate page
is provided. The U.S. Prospectus and the Canadian Prospectus are identical
except that they contain different front, inside front and back cover pages and
different "Prospectus Summary--The Offering", "Capitalization", "Legal Matters"
and "Underwriting" sections. The U.S. Prospectus contains additional sections
under the captions "Price Range of Our Shares", "Risk Factors--Because We Are a
Canadian Company, You May Not Be Able To Enforce Civil Liabilities Under the
U.S. Federal Securities Laws Against Us", "Taxation", "Exchange Controls",
"Experts" and "Where You Can Find More Information", and the Canadian Prospectus
contains additional sections under the captions "Table of Contents",
"Explanatory Note", "Risk Factors--Dilution", "Dilution", "Prior Issuances",
"Price Range and Trading Volume of the Class A Subordinate Voting Shares",
"Material Contracts", "Auditors, Transfer Agent and Registrar", "Eligibility for
Investment", "Quebec Stock Savings Plan", "Purchasers' Statutory Rights",
"Certificate of the Company" and "Certificate of the Underwriter".
<PAGE> 3
The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any jurisdiction where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED APRIL 15, 1999.
PROSPECTUS
3,000,000 CLASS A SUBORDINATE VOTING SHARES
LOGO
GILDAN ACTIVEWEAR INC.
This is a public offering of 3,000,000 Class A Subordinate Voting Shares of
Gildan Activewear Inc. Gildan Activewear Inc. is selling all of the 3,000,000
Class A Subordinate Voting Shares offered under this prospectus.
We have two classes of authorized share capital, the Class A Subordinate
Voting Shares and the Class B Multiple Voting Shares. The economic rights of
each class of share capital are identical, but the voting rights and conversion
rights differ. Holders of Class A Subordinate Voting Shares are entitled to one
vote per share on all matters while holders of Class B Multiple Voting Shares
are entitled to eight votes per share on most matters. The Class A Subordinate
Voting Shares are not convertible into Class B Multiple Voting Shares. The Class
B Multiple Voting Shares are convertible into Class A Subordinate Voting Shares
on a share-for-share basis at the option of the holder. Conversion of Class B
Multiple Voting Shares into Class A Subordinate Voting Shares occurs
automatically under some circumstances and is required under other
circumstances.
Our Class A Subordinate Voting Shares are listed on the American Stock
Exchange under the symbol "GIL" and on both The Montreal Exchange and The
Toronto Stock Exchange under the symbol "GIL.A". On April 14, 1999, the last
reported sale price per Class A Subordinate Voting Share was US$12.81 on the
American Stock Exchange, Cdn$18.25 (last closing price on March 24, 1999) on The
Montreal Exchange and Cdn$19.35 on The Toronto Stock Exchange.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 TO READ ABOUT CERTAIN RISKS THAT YOU
SHOULD CONSIDER BEFORE BUYING OUR CLASS A SUBORDINATE VOTING SHARES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price............................... US$ US$
Underwriting discounts and commissions.............. US$ US$
Proceeds, before expenses, to us.................... US$ US$
</TABLE>
------------------------------
The underwriters may, under some circumstances, purchase up to an
additional 450,000 Class A Subordinate Voting Shares from us at the public
offering price less the underwriting discount to cover over-allotments.
The underwriters are severally underwriting the Class A Subordinate Voting
Shares being offered. The underwriters expect to deliver the shares against
payment in New York, New York on , 1999.
------------------------------
BEAR, STEARNS & CO. INC.
NESBITT BURNS SECURITIES INC.
THE ROBINSON-HUMPHREY COMPANY
WASSERSTEIN PERELLA SECURITIES, INC.
THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Presentation of Financial
Information.......................... i
Cautionary Statement Regarding Forward-
looking Statements................... ii
Prospectus Summary..................... 1
Risk Factors........................... 8
Use of Proceeds........................ 16
Dividends.............................. 16
Exchange Rates......................... 17
Capitalization......................... 18
Price Range of Our Shares.............. 19
Selected Consolidated Financial
Information.......................... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 22
Business............................... 29
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management............................. 43
Certain Relationships and Related
Transactions......................... 52
Principal Shareholders................. 55
Description of Share Capital........... 56
Description of Certain Indebtedness.... 63
Shares Eligible for Future Sale and
Escrow Arrangements.................. 65
Taxation............................... 67
Exchange Controls...................... 72
Underwriting........................... 73
Legal Matters.......................... 74
Experts................................ 75
Where You Can Find More Information.... 75
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
PRESENTATION OF FINANCIAL INFORMATION
Gildan Activewear Inc. prepares its financial statements in Canadian
dollars and in accordance with accounting principles generally accepted in
Canada ("Canadian GAAP"). These principles conform in all material respects with
accounting principles generally accepted in the United States ("U.S. GAAP"),
except as described in note 19 to the consolidated financial statements of
Gildan Activewear Inc. included elsewhere in this prospectus. "Consolidated
Financial Statements" refers to consolidated statements of income, retained
earnings and changes in financial position of Gildan Activewear Inc. for
ten-month fiscal 1996, fiscal 1997, first fiscal quarter 1998, fiscal 1998 and
first fiscal quarter 1999, and the consolidated balance sheets at September 29,
1996, October 5, 1997, October 4, 1998 and January 3, 1999, and the related
notes thereto.
Unless otherwise specified, all references in this prospectus to "dollars",
"$" or "Cdn$" are to Canadian dollars.
Solely for your convenience, we provide some financial information relating
to our business in U.S. dollars based on exchange rates indicated. We caution
you that the amounts and rates used may not always be consistent with those used
in preparation of our Consolidated Financial Statements.
The following table sets forth the terms we use in this prospectus to refer
to our fiscal periods:
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED REFERENCE
------------------- ---------
<S> <C>
November 30, 1993 fiscal 1993
December 2, 1994 fiscal 1994
December 1, 1995 fiscal 1995
September 29, 1996 ten-month fiscal 1996
October 5, 1997 fiscal 1997
January 4, 1998 first fiscal quarter 1998
October 4, 1998 fiscal 1998
January 3, 1999 first fiscal quarter 1999
October 3, 1999 fourth fiscal quarter 1999
October 3, 1999 fiscal 1999
October 1, 2000 fiscal 2000
</TABLE>
i
<PAGE> 5
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus are forward-looking. These
forward-looking statements appear in the "Prospectus Summary--Gildan Activewear
Inc.--Growth Strategy", "Use of Proceeds", "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business" sections of
this prospectus. We typically use words such as "anticipate", "believe", "plan",
"expect", "intend", "future", "will", "may" and similar expression to identify
forward-looking statements. In addition, we may make forward-looking statements
in future filings with the U.S. Securities and Exchange Commission and with the
securities commissions in Canada and in written material, press releases and
oral statements issued by us or on our behalf.
Our actual results could differ materially from those anticipated from the
forward-looking statements depending on risks, uncertainties and assumptions
about us and the industry in which we operate, including, among other things:
- our ability to implement our growth strategy;
- the supply and price of cotton yarn;
- competition in the activewear industry;
- our relationship with major wholesale distributor customers;
- anticipated trends in the activewear industry;
- changes in international trade protection policies; and
- social, political and economic conditions in countries other than the
United States and Canada where we have operations.
All forward-looking statements in this prospectus are based on information
available to us on the date of this prospectus. We do not undertake to update
any forward-looking statements that we may make in this prospectus or otherwise.
ii
<PAGE> 6
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information you
should consider before you invest in the Class A Subordinate Voting Shares
(together with the Class B Multiple Voting Shares, the "Equity Shares"). You
should read the entire prospectus carefully. Unless the context indicates
otherwise, "Gildan", "we", "us" and "our" refer to Gildan Activewear Inc. and
its subsidiaries. Unless otherwise indicated, all information in this prospectus
assumes no exercise of the underwriters' over-allotment option.
GILDAN ACTIVEWEAR INC.
We are a rapidly growing, vertically-integrated manufacturer and marketer
of premium quality branded basic activewear for sale principally into the
wholesale imprinted activewear segment of the North American apparel market. We
manufacture and sell premium quality 100% cotton T-shirts and placket collar
golf shirts as well as premium quality sweatshirts, in a variety of weights,
sizes, colors and styles. In April 1999, we launched a new line of 50%
cotton/50% polyester T-shirts, which we expect to begin shipping to our
customers in fourth fiscal quarter 1999. We sell our products as "blanks",
meaning without design, which are ultimately decorated with designs and logos
for sale to consumers.
We believe that we are one of the low-cost producers of premium quality
branded activewear. Our costs are low as a result of our modern,
vertically-integrated textile operations and offshore sewing facilities in the
Caribbean Basin and Central America. We market and sell our products through the
wholesale channel of distribution, which is largely comprised of distributors,
but also includes the largest screenprinters and embroiderers. We believe that
our Gildan Activewear(TM) brand name is widely associated with premium quality
merchandise and competitive pricing. We plan to capitalize on and strengthen
this brand awareness by introducing new products and extending our existing
product lines over the next few years.
Over the past several years, we have significantly increased our customer
base and increased our sales and cash flow. From fiscal 1993 through fiscal
1998, our sales grew from $30.9 million to $215.4 million and our earnings
before interest, taxes, depreciation and amortization (EBITDA) grew from $2.8
million to $29.8 million, representing compounded annual growth rates of 49.5%
and 63.3%, respectively. Sales for first fiscal quarter 1999 were $45.1 million,
which represented an increase of 41.8% over sales for first fiscal quarter 1998.
OPERATING STRATEGY
We believe that we have been able to rapidly increase our market presence
by focusing on selected product lines with premium quality features and selling
our products at competitive prices. We attribute our strong operating
performance to our:
- EMPHASIS ON PREMIUM QUALITY PRODUCTS. We offer our products in a wide
variety of weights, sizes, colors and styles. All of our T-shirts are
made with pre-shrunk cotton fabric, feature top-stitched seamless
collars and double stitched hems, and are quarter-turned to eliminate
the center crease which would otherwise result from the production
process. We ensure the premium quality of our products by applying
stringent quality control procedures at all stages of the production
process.
1
<PAGE> 7
- COMPETITIVE PRICING AND LOW-COST OPERATIONS. We are able to price our
products competitively because of our success in achieving low
production and operating costs. We accomplish this by:
- locating the majority of our sewing operations in the Caribbean Basin
and Central America, where we benefit from lower labor costs;
- using only modern, automated facilities;
- locating our knitting and dyeing facilities in the Province of Quebec,
where we benefit from an abundant supply of low-cost energy and water,
resources necessary for the manufacturing, dyeing and finishing of
fabric; and
- selling to the wholesale channel which enables us to use a small sales
force and avoid the costs and complexities of selling to the retail
channel.
- CONTROLLED DISTRIBUTION TO THE WHOLESALE CHANNEL. While our major
competitors focus primarily on sales directly to the retail apparel
industry, we market our products through the wholesale distribution
channel, which is principally comprised of distributors and major
garment imprinters. As part of this controlled distribution strategy, we
limit the number and monitor the quality of our distributors and sell
only to the largest garment decorators. We believe that this focused
strategy enables us to:
- foster strong customer and brand loyalty among our distributors and
decorators;
- establish control over the marketing and orderly distribution of our
products;
- effectively plan and predict production; and
- manage expected increases in demand.
- MODERN, VERTICALLY-INTEGRATED OPERATIONS. We intend to continue to
acquire modern, automated equipment for all aspects of our manufacturing
process to maximize production capacity and achieve high efficiency
rates. Over the past three fiscal years, we have spent approximately
$36.4 million on such improvements. Our operations are
vertically-integrated, which means that we knit, dye, finish, cut and
sew our products at our facilities. This enables us to maximize profit
margins and monitor quality at all stages of the production process.
- EXPERIENCED MANAGEMENT TEAM. Our top five senior executives
collectively have more than 100 years of industry experience.
GROWTH STRATEGY
We have a comprehensive long-term strategy to sustain our strong unit and
dollar sales growth. The key elements of our strategy are:
- INCREASING SALES TO NEW AND EXISTING CUSTOMERS. To increase sales, we
plan to:
- continue to develop new business with our existing customers as a
result of our enhanced production and distribution capacity and the
introduction of new products;
- pursue additional wholesale distributors which we believe will
generate substantial sales growth without adversely affecting sales to
our existing customers; and
- further develop our "mill direct" program which targets some of the
largest screenprinters and embroiderers in North America which, due to
their size, require larger quantities than distributors can typically
provide. Our mill direct customers include, among others, Nike Canada
Ltd. and Fortune Fashion, Inc., a major supplier of decorated T-shirts
to The Walt Disney Company.
2
<PAGE> 8
- BROADENING PRODUCT OFFERING. We also intend to increase our sales
through the introduction of complementary product lines and new
products. In fiscal 1999, in response to customer demand, we introduced:
- a new lightweight T-shirt, the Famous T(TM), to compete in the
lower-priced market segments;
- placket collar golf shirts, which we believe to be one of the fastest
growing product categories in the imprinted activewear industry; and
- a new 50% cotton/50% polyester T-shirt, the Ultra-Blend(TM), which is
our initial entry into the blended T-shirt market.
- EXPANDING PRODUCTION AND DISTRIBUTION CAPACITY. To satisfy the
increasing demand for our existing products and to introduce new
products, we are expanding our production and distribution facilities
through equipment acquisitions and new facility construction. Under our
investment plans, in fiscal 1999, we:
- added knitting, dyeing and finishing machines and plan to add
additional machinery;
- expanded the capacity of our Company-operated sewing facilities in
Honduras by acquiring one of our sewing contractors, moving one of our
operations into a larger facility and continuing to invest in new
sewing equipment;
- began building a facility in Barbados, which we expect to be
operational by summer 1999, to provide additional sewing capacity for
placket collar golf shirts;
- opened a 210,000-square foot distribution center in Miami, Florida,
which replaced our 67,000-square foot distribution center in
Champlain, New York, to service our U.S. market and targeted Western
European markets; and
- will open a 60,000-square foot distribution center in Ville
Saint-Laurent, Quebec to service our Canadian markets.
- ENTERING NEW MARKETS. We plan to use the same strategy which has led to
our success in North America to expand our selling territory to include
Western Europe, with an initial emphasis on the United Kingdom. We
anticipate shipping our products to distributors in Western Europe by
fiscal 2000.
RECENT DEVELOPMENTS
In February 1999, we established an international subsidiary, Gildan
Activewear SRL, headquartered in Bridgetown, Barbados, which we expect to be
responsible for all of our non-Canadian sales and to manage all related
activities, such as manufacturing, warehousing, distribution, marketing and
customer service. We also expect to manufacture placket collar golf shirts in
Barbados. We anticipate that our operations in Barbados will benefit from a
favorable tax treaty between Barbados and Canada.
In the second quarter of fiscal 1999, we obtained $35.0 million in new
financings. We issued a $15.0 million subordinated note due 2004, to Le Fonds de
solidarite des travailleurs du Quebec (the "Fund"), one of the largest venture
capital firms in Canada. We also issued a $15.0 million subordinated note due
2004 to Capital d'Amerique CDPQ Inc., a subsidiary of Caisse de depot et
placement du Quebec. Caisse is the largest pension fund in Canada and one of the
largest institutional investors in North America. Concurrently with the debt
financing, Capital d'Amerique CDPQ Inc. purchased 444,444 of our Class A
Subordinate Voting Shares at the market price prevailing on the date of the
commitment letter, for an aggregate purchase price of $5.0 million.
On March 31, 1999, we entered into a new revolving loan agreement with a
banking syndicate led by National Bank of Canada providing for maximum
borrowings equal to the lesser of (a) $90.0 million and (b) a borrowing base
calculated in accordance with a specified inventory and receivables formula. The
new facility expires on March 31, 2002 and replaces our previously existing
revolving loan arrangements with another Canadian chartered bank.
------------------------
Our principal executive offices are located at 725 Montee de Liesse, Ville
Saint-Laurent, Quebec, Canada H4T 1P5, and our telephone number at that address
is (514) 735-2023.
3
<PAGE> 9
THE OFFERING
Class A Subordinate Voting
Shares Offered................ 3,000,000
Equity Shares Outstanding
After the Offering:
Class A Subordinate Voting
Shares(1)................ 10,347,444
Class B Multiple Voting
Shares........................ 3,047,000
Total.................... 13,394,444
Relative Rights of Equity
Shares........................ The economic rights of the Class A Subordinate
Voting Shares and the Class B Multiple Voting
Shares are identical, but the voting rights and
conversion rights differ.
The holders of the Class A Subordinate Voting
Shares are entitled to one vote per share on
all matters while the holders of the Class B
Multiple Voting Shares are entitled to eight
votes per share on most matters. In addition,
the holders of Class A Subordinate Voting
Shares, voting as a separate class, are
entitled to elect two of our directors. The
remaining directors are elected by holders of
Class A Subordinate Voting Shares and Class B
Multiple Voting Shares, voting as a single
class, with each Class A Subordinate Voting
Share entitled to one vote and each Class B
Multiple Voting Share entitled to eight votes.
As a result, holders of Class B Multiple Voting
Shares have, and will continue to have,
substantial control over most matters submitted
to a vote of the shareholders, including the
election of directors. See "Description of
Share Capital--Equity Shares--Voting Rights".
After giving effect to this offering, Harco
Holdings Ltd., the sole holder of Class B
Multiple Voting Shares, will own approximately
22.7% of the total outstanding Equity Shares
and will have approximately 70.2% of the voting
power of Gildan. See "Principal Shareholders".
The Class A Subordinate Voting Shares are not
convertible into any other class of shares,
including Class B Multiple Voting Shares. The
Class B Multiple Voting Shares are convertible
into Class A Subordinate Voting Shares on a
share-for-share basis at the option of the
holder. The Class B Multiple Voting Shares are
automatically converted into Class A
Subordinate Voting Shares under some
circumstances and are required to be so
converted under other circumstances. See
"Description of Share Capital--Equity
Shares--Conversion".
- -------------------------
(1) Based on Class A Subordinate Voting Shares outstanding at April 14, 1999.
Excludes 995,000 Class A Subordinate Voting Shares subject to options which
may be granted under our stock option plan. At April 14, 1999, options to
buy 756,500 Class A Subordinate Voting Shares were outstanding, of which
180,666 will become exercisable on June 16, 2000. See "Management-- Stock
Option Plan". If the underwriters exercise their over-allotment option in
full, we would offer an aggregate of 450,000 additional Class A Subordinate
Voting Shares, and 10,797,444 Class A Subordinate Voting Shares would be
outstanding after the offering.
4
<PAGE> 10
Use of Proceeds............... We estimate the net proceeds from this offering
to be approximately Cdn$52.8 million, which we
plan to use initially to repay borrowings under
our revolving loan agreement. Subsequently, we
intend to use the newly available borrowing
capacity under our revolving loan agreement for
planned expansion of production and
distribution capacity. See "Use of Proceeds".
Dividend Policy............... We currently intend to retain available funds
for the development and expansion of our
business. Accordingly, we do not intend to pay
dividends on our shares in the foreseeable
future. See "Dividends".
American Stock Exchange
Symbol........................ GIL
The Montreal Exchange/The
Toronto Stock Exchange
Symbol........................ GIL.A
RISK FACTORS
For a description of certain risks that you should consider before you buy
Class A Subordinate Voting Shares, see "Risk Factors" on page 8.
5
<PAGE> 11
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The summary consolidated financial information presented below is derived
from Gildan's consolidated financial statements for, and as of the end of,
fiscal 1994 and fiscal 1995, which have been audited by Richter, Usher &
Vineberg, Chartered Accountants, and Gildan's consolidated financial statements
for, and as of the end of, ten-month fiscal 1996, fiscal 1997 and fiscal 1998,
which have been audited by KPMG LLP, Chartered Accountants. The summary
consolidated financial information for the twelve months ended and as of
September 29, 1996, for the first fiscal quarter ended January 4, 1998, and for
the first fiscal quarter ended and as of January 3, 1999 is derived from the
unaudited consolidated financial statements of Gildan, which in the opinion of
management have been prepared on the same basis as the audited financial
statements, reflecting all adjustments necessary, which consist only of normal
recurring adjustments, for a fair presentation of such information.
The Consolidated Financial Statements have been prepared in accordance with
Canadian GAAP. These principles conform in all material respects with U.S. GAAP,
except as described in note 19 to the Consolidated Financial Statements. The
information presented below should be read in conjunction with the Consolidated
Financial Statements included elsewhere in this prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
TEN-MONTH TWELVE
FISCAL YEAR ENDED PERIOD MONTHS FISCAL YEAR ENDED
----------------- ENDED ENDED ---------------------------------
DEC. 2, DEC. 1, SEPT. 29, SEPT. 29, OCT. 5, OCT. 4,
1994 1995 1996 1996(1) 1997 1998
------- ------- --------- ----------- -------- ----------------------
CDN$ CDN$ CDN$ CDN$ CDN$ CDN$ US$(2)
------- ------- --------- ----------- -------- -------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA (CANADIAN GAAP):
Sales.................. $45,896 $64,868 $70,448 $80,045 $119,844 $215,428 $147,876
Cost of sales.......... 36,621 51,854 56,367 64,294 93,059 164,850 113,289
------- ------- ------- ------- -------- -------- --------
Gross profit........... 9,275 13,014 14,081 15,751 26,785 50,578 34,587
Selling, general and
administrative
expenses.............. 5,852 9,053 8,360 9,629 12,471 20,796 14,248
Depreciation and
amortization
expenses.............. 940 1,764 1,633 2,026 2,337 4,063 2,782
Writeoff of advances... -- 924 -- 281 -- -- --
------- ------- ------- ------- -------- -------- --------
Operating income....... 2,483 1,273 4,088 3,815 11,977 25,719 17,557
Interest expense....... 1,382 2,709 2,507 2,997 2,974 5,032 3,460
Loss on settlement of
debt.................. -- -- -- -- -- 819 565
------- ------- ------- ------- -------- -------- --------
Income (loss) before
income taxes.......... 1,101 (1,436) 1,581 818 9,003 19,868 13,532
Income taxes
(recovery)............ 327 (249) 608 314 3,338 6,700 4,583
------- ------- ------- ------- -------- -------- --------
Net income (loss)...... $ 774 $(1,187) $ 973 $ 504 $ 5,665 $ 13,168 $ 8,949
======= ======= ======= ======= ======== ======== ========
Net income per share
(basic)............... $ 1.65(3) $ 1.12
Number of shares
(weighted avg.)....... 7,999 7,999
OTHER DATA (CANADIAN
GAAP):
Gross profit margin.... 20.2% 20.1% 20.0% 19.7% 22.3% 23.5% 23.5%
Operating income
margin................ 5.4% 2.0% 5.8% 4.8% 10.0% 11.9% 11.9%
Capital expenditures... $ 6,997 $ 2,514 $ 6,390 $ 7,204 $ 5,439 $ 24,588 $ 17,031
EBITDA(4).............. $ 3,423 $ 3,037 $ 5,721 $ 5,841 $ 14,314 $ 29,782 $ 20,339
SELECTED OPERATING DATA
(UNAUDITED):
Dozens of T-shirts
sold.................. 1,365 1,697 1,899 2,950 5,721
Dozens of sweatshirts
sold.................. 103 63 85 158 195
------- ------- ------- -------- --------
Total dozens sold...... 1,468 1,760 1,984 3,108 5,916
======= ======= ======= ======== ========
<CAPTION>
FIRST FISCAL QUARTER ENDED
---------------------------------------
JAN. 4, JAN. 3,
1998 1999
----------- -------------------------
CDN$ CDN$ US$(2)
----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF INCOME
DATA (CANADIAN GAAP):
Sales.................. $31,812 $45,109 $29,253
Cost of sales.......... 25,969 33,079 21,451
------- ------- -------
Gross profit........... 5,843 12,030 7,802
Selling, general and
administrative
expenses.............. 3,617 7,195 4,666
Depreciation and
amortization
expenses.............. 746 1,763 1,143
Writeoff of advances... -- -- --
------- ------- -------
Operating income....... 1,480 3,072 1,993
Interest expense....... 848 1,543 1,001
Loss on settlement of
debt.................. -- -- --
------- ------- -------
Income (loss) before
income taxes.......... 632 1,529 992
Income taxes
(recovery)............ 332 550 357
------- ------- -------
Net income (loss)...... $ 300 $ 979 $ 635
======= ======= =======
Net income per share
(basic)............... $ 0.10 $ 0.06
Number of shares
(weighted avg.)....... 9,950 9,950
OTHER DATA (CANADIAN
GAAP):
Gross profit margin.... 18.4% 26.7% 26.7%
Operating income
margin................ 4.7% 6.8% 6.8%
Capital expenditures... $ 6,362 $11,564 $ 7,498
EBITDA(4).............. $ 2,226 $ 4,835 $ 3,136
SELECTED OPERATING DATA
(UNAUDITED):
Dozens of T-shirts
sold.................. 820 1,192
Dozens of sweatshirts
sold.................. 59 41
------- -------
Total dozens sold...... 879 1,233
======= =======
</TABLE>
6
<PAGE> 12
<TABLE>
<CAPTION>
DEC. 2, DEC. 1, SEPT. 29, OCT. 5, OCT. 4, JAN. 3,
1994 1995 1996 1997 1998 1999
------- ------- --------- ----------- -------- --------
CDN$ CDN$ CDN$ CDN$ CDN$ CDN$
------- ------- --------- ----------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
(CANADIAN GAAP):
Working capital.............. $ 2,119 $ 1,149 $ 5,010 $15,406 $ 33,134 $ 34,222
Total assets................. 33,784 34,589 52,770 77,365 165,678 211,438
Total debt(5)................ 26,593 28,585 42,793 61,712 112,348 157,129
Shareholders' equity......... 7,191 6,004 9,977 15,653 53,330 54,309
<CAPTION>
<S> <C>
BALANCE SHEET DATA
(CANADIAN GAAP):
Working capital..............
Total assets.................
Total debt(5)................
Shareholders' equity.........
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
TEN-MONTH ------------------------------------- FIRST FISCAL QUARTER
PERIOD ENDED OCT. 5, ENDED
SEPT. 29, 1996 1997 OCT. 4, 1998 JAN. 3, 1999
-------------- ----------- ---------------------- --------------------
CDN$ CDN$ CDN$ US$(2) CDN$ US$(2)
-------------- ----------- ------- ----------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL STATEMENT DATA (U.S. GAAP):
Net income.................................... $ 973 $5,036 $12,438 $ 8,453 $ 975 $ 632
Net income (loss) per share................... (0.58) (2.36) 2.63(3) 1.79 0.10 0.06
Total assets.................................. 52,770 76,764 164,788 107,620 210,555 137,321
Total debt(5)................................. 48,343 82,590 112,317 73,352 157,108 102,464
Shareholders' equity.......................... 4,427 (5,826) 52,471 34,268 53,447 34,857
Cash flows from operations.................... (5,738) (4,797) (17,476) (11,413) (29,126) (18,996)
Cash flows from investing activities.......... (7,735) (6,539) (26,537) (17,331) (12,987) (8,470)
Cash flows from financing activities.......... 13,473 11,336 44,013 28,744 42,113 27,466
</TABLE>
- -------------------------
(1) The data for the unaudited twelve-month period ended September 29, 1996
combine our unaudited data for the 62-day period ended December 1, 1995 and
our audited data for ten-month fiscal 1996.
(2) U.S. dollar amounts are provided for convenience only. For the statement of
income data, the U.S. dollar amounts are calculated using a weighted average
of the Bank of Canada monthly average exchange rates. For the balance sheet
data and the cash flow items, the U.S. dollar amounts are calculated using
Bank of Canada closing rates, which were $1.5312 Canadian dollars per U.S.
dollar at October 4, 1998 and $1.5333 Canadian dollars per U.S. dollar at
January 3, 1999.
(3) The principal reason for the difference between net income per share of
$1.65 under Canadian GAAP and net income per share of $2.63 under U.S. GAAP
is the difference in the calculation of the weighted average number of
shares outstanding. Under Canadian GAAP, 7,998,657 were outstanding, whereas
under U.S. GAAP, 4,384,399 were outstanding. The primary difference between
the weighted average number of shares outstanding calculations relates to
the treatment of Class "A" Preferred Shares which were reclassified
concurrently with our initial public offering in June 1998.
(4) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA is included because we believe that some investors use
this information as one measure of a company's historical ability to service
debt. However, you should not consider EBITDA as an alternative to net
earnings as an indicator of our operating performance or as an alternative
to cash flow as a measure of our overall liquidity as presented in the
Consolidated Financial Statements. EBITDA as presented may not be comparable
to similar computations presented by other companies.
(5) Total debt consists of total bank debt, current liabilities, other loans
payable, secured and unsecured long-term debt, including capitalized leases
and future taxes.
7
<PAGE> 13
RISK FACTORS
You should carefully consider the following risk factors in conjunction
with the other information contained in this prospectus before you invest in the
Class A Subordinate Voting Shares.
OUR INDUSTRY IS EXTREMELY COMPETITIVE
The wholesale imprinted activewear segment of the North American apparel
market includes a number of significant competitors, and the activewear segment
overall is extremely competitive. Some of our competitors are larger, more
diversified, have substantially greater resources and, because they spin their
own yarn, are more vertically integrated than we are. These factors may give
them a competitive advantage over us.
Our primary competitors are the major U.S.-based manufacturers of basic
branded activewear for the wholesale and retail channels. These manufacturers
include Anvil Knitwear, Inc., the Bassett-Walker division of VF Corporation, the
Delta Apparel division of Delta Woodside Industries, Inc., Fruit of the Loom,
Inc., the Hanes Corporation division of Sara Lee Corporation, the Jerzees
division of Russell Corporation, Oneita Industries, Inc. and Tultex Corporation.
Some of these manufacturers have moved the majority of their sewing operations
"offshore" to lower-cost operating environments.
We also compete with manufacturers of activewear outside the United States,
which may have substantially lower labor costs.
Our ability to remain competitive in the areas of quality, price,
marketing, product development, manufacturing, distribution and order processing
will, in large part, determine our future success. We cannot assure you that we
will continue to compete successfully.
OUR INDUSTRY IS SUBJECT TO PRICING PRESSURES
Prices in our industry have been declining over the past several years
primarily as a result of the trend to move sewing operations offshore and the
introduction of new manufacturing technologies. Products sewn offshore cost less
to make primarily because labor costs are lower. Some manufacturers have used
these cost savings to reduce prices. Prices have also declined in recent years
because of inventory dumping. Some manufacturers have engaged in this practice
because they overproduced inventory as a result of excess plant and equipment
capacity.
To remain competitive, we adjust our prices from time to time in response
to these industry-wide pricing pressures. For example, in response to inventory
dumping, we incurred expenses of approximately $4.2 million in customer rebates
in each of fiscal 1997 and fiscal 1998.
In the future, our financial performance may be negatively affected by
these pricing pressures if:
- we are forced to reduce our prices and we cannot reduce our production
costs; or
- our production costs increase and we cannot increase our prices.
THE EFFECT OF CHANGING INTERNATIONAL TRADE REGULATION ON OUR RESULTS OF
OPERATIONS IS UNCERTAIN
The textile and apparel industries in both the United States and Canada
have historically received a relatively higher degree of international trade
protection than some other industries. However, this protection is diminishing
as a result of the implementation of trade agreements reached in the last ten
years. The ultimate effect of the changes in quotas, duties and tariffs on our
business is uncertain.
8
<PAGE> 14
QUOTAS
In 1995, the Agreement on Textiles and Clothing came into effect, requiring
importing countries, including the United States, Canada and Western Europe, to
eliminate quotas on imports of textiles and apparel from exporting countries by
2005. This could result in increased competition from developing countries which
historically have lower labor costs. This agreement only applies to countries
that are members of the World Trade Organization. China and Taiwan, each a major
apparel manufacturing country, currently remain outside the World Trade
Organization. However, both are seeking membership and if either or both were to
be admitted into the World Trade Organization on terms that did not allow for
the imposition of quotas against their products, this could have a material
adverse effect on our business because it would result in increased competition
from countries with significantly lower labor costs.
None of our products is currently subject to quotas into the United States,
which accounted for 86% of our total sales in fiscal 1998. However, it is
possible that, during the ten-year quota phase-out period, the United States
will impose quotas on some or all of our products assembled in Honduras, El
Salvador, Haiti and Nicaragua. The imposition of quotas could have a material
adverse effect on our business.
FUTURE TRADE AGREEMENTS
Efforts have been made in the United States to extend some of the trade
benefits in the North American Free Trade Agreement ("NAFTA") to the Caribbean
Basin Initiative ("CBI") countries, such as Honduras, El Salvador, Haiti and
Nicaragua. It is not known whether this legislation will come into effect nor
what its terms would be. Under all pending legislative proposals, there would be
no duty on goods sewn in CBI countries upon entry into the United States if the
fabric were knit in the United States from yarn spun in the United States. The
adoption of this legislation in the United States could adversely affect our
operations because we knit all of our fabric in Canada. If any of these
proposals were adopted into law, all of our goods sewn in the Caribbean and
subsequently exported to the United States would remain subject to duty whereas
some of our competitors that knit their fabric in the United States from yarn
spun in the United States would no longer be subject to duty. This outcome would
give some of our competitors an advantage over us. See "Business--Competition"
and "Business--Trade Regulatory Environment".
OUR RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED BY THE TREND TO GRANT
EXTENDED PAYMENT TERMS
Increased inventory costs, delays in collecting receivables and returns of
inventory could negatively impact our business if:
- wholesale distributors for the activewear industry demand and receive
longer payment terms than are currently granted; or
- consignment of inventory becomes common within the activewear industry.
Wholesale distributors in the activewear industry generally warehouse inventory
for a longer period than participants in other distribution channels and
therefore receive longer payment terms. Historically, we have extended credit
terms of 90 and 120 days to new customers to assist them in building inventory.
In response to the seasonality of the activewear business, we have at times
offered, and are currently offering, extended terms of 150 to 180 days to select
existing customers, generally during our first two fiscal quarters. In addition,
one activewear manufacturer recently introduced the practice of consigning
products to wholesale distributors, which could become a trend in the activewear
industry.
9
<PAGE> 15
OUR RAPID GROWTH COULD SIGNIFICANTLY STRAIN MANAGERIAL AND FINANCIAL RESOURCES
AND OPERATING SYSTEMS
Our sales have grown from $30.9 million for fiscal 1993 to $215.4 million
for fiscal 1998. This rapid growth has placed increasing demands on our
managerial and financial resources and operating systems, and will continue to
do so as we pursue our expansion strategy.
We cannot guarantee that we will continue to manage growth effectively. In
the future, we could experience manufacturing problems or product delivery
delays due to factors such as:
- the diversion of management's resources;
- construction delays in connection with the expansion or renovation of
existing or future facilities;
- the training and integration of local labor at our offshore facilities;
- ramping up production at new facilities; and
- the introduction of new product lines.
If we cannot meet our manufacturing and delivery commitments on a timely basis,
we could lose sales and our reputation in the marketplace could be damaged.
Examples of our recent growth include:
- expanding our knitting facility in Ville Saint-Laurent in fiscal 1998;
- purchasing an additional dyeing and finishing plant in Montreal in
fiscal 1998;
- leasing a plant in Honduras in fiscal 1998 to establish a second
offshore Gildan-operated sewing facility;
- creating a new international subsidiary in fiscal 1999 headquartered in
Barbados, which we expect to be responsible for all of our non-Canadian
sales and to manage all related activities;
- establishing a new distribution center in Miami in fiscal 1999;
- establishing a new distribution center in Ville Saint-Laurent in fiscal
1999;
- building a sewing facility in Barbados, which is scheduled to begin
operations in summer 1999, to increase our production of placket collar
golf shirts; and
- purchasing one of our Honduran sewing contractors.
WE RELY ON A SMALL NUMBER OF SIGNIFICANT CUSTOMERS, SOME OF WHICH HAVE BEEN OR
COULD BE ACQUIRED BY OUR COMPETITORS
We sell our products to approximately 100 customers. In fiscal 1998, our
top three customers, Broder Bros., Co., Pluma Corporation (the Frank L. Robinson
Company subsidiary and the Stardust Corporation subsidiary) and Alpha Shirt,
accounted for 26.6%, 9.6% and 7.4% of sales, respectively, and our top ten
customers accounted for 68.5% of total sales. If any of our significant
customers substantially reduces its purchases or ceases to buy from us and we
cannot replace that business with sales to other customers on similar terms, our
business would be materially adversely affected.
In addition, in fiscal 1998, one of our competitors, Pluma Corporation,
expanded into the wholesale distribution channel by purchasing Frank L. Robinson
Company and Stardust Corporation, two of our wholesale distributor customers.
Although this purchase has not had an impact on our sales to these customers to
date, we cannot predict whether we will be able to maintain or expand our
historical levels of sales to them in the future. In addition, we cannot predict
whether any of our other wholesale
10
<PAGE> 16
distributor customers will be acquired by our competitors, and if so, what
impact this would have on our business.
We do not have any purchase contracts with our wholesale distributor
customers, except for a contract we entered into with Pluma Corporation in
connection with its acquisitions of Frank L. Robinson Company and Stardust
Corporation. Although we have maintained long-term relationships with many of
our wholesale distributor customers, we cannot assure you that historic levels
of business from any of our customers will continue or increase in the future.
OUR PERFORMANCE COULD BE ADVERSELY AFFECTED BY DIFFICULTIES IN THE RETAIL
INDUSTRY
Historically, the apparel industry has been subject to substantial cyclical
variations due, in part, to significant changes and difficulties in the retail
industry. Significant and sustained difficulties at the retail level may
adversely affect the wholesale activewear sector in general and our business. In
addition, a recession in the U.S. or Canadian economy or uncertainties regarding
future economic prospects that affect consumer spending habits would have a
material adverse effect on our business.
WE ARE SUBJECT TO RISKS OF FLUCTUATIONS IN THE SUPPLY AND PRICE OF COTTON YARN
Cotton yarn is the principal raw material we use in the manufacture of our
products. In recent years, there have been significant shortages in the supply
of cotton. Unlike some of our competitors, we do not spin our own yarn. Instead,
we obtain substantially all of our yarn from three U.S.-based spinners. In
fiscal 1998, Parkdale Mills Inc., Mayo Yarns, Inc. and Frontier Spinning Mills,
LLC accounted for 56.0%, 23.0% and 16.5%, respectively, of our total yarn
purchases. Any interruption in the availability of sufficient quantities of
quality yarn would have a material adverse effect on our business. See
"Business--Raw Materials".
The price of yarn has fluctuated substantially over the past several years
due to price volatility in the cotton industry. We enter into one-year supply
agreements with spinners which allow us to lock in the price of yarn for the
fiscal year, but do not otherwise hedge. Our supply agreements do not protect us
in the event of price increases in following fiscal years. Our supply agreements
also do not enable us to benefit from price decreases which might occur during
the given fiscal year. In either scenario, our business may be materially
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business--Raw Materials".
OUR CARIBBEAN BASIN OPERATIONS ARE SUBJECT TO POLITICAL, SOCIAL AND ECONOMIC
RISK
In fiscal 1998, approximately 83% of our products were sewn outside of the
United States and Canada. Our thirteen offshore sewing facilities are located in
Honduras, El Salvador, Haiti, Mexico and Nicaragua. The following table
provides, for the periods indicated, (a) the number of sewing facilities we
operate, or that are operated for us, in each offshore country, (b) the
percentage of total offshore sewing production generated by the largest facility
in each country and (c) the percentage of total offshore sewing production
generated in each country.
<TABLE>
<CAPTION>
COUNTRY PERCENTAGE OF TOTAL OFFSHORE
(NUMBER OF FACILITIES IN PRODUCTION IN FISCAL 1998 BY PERCENTAGE OF TOTAL OFFSHORE
EACH COUNTRY AT JANUARY 3, 1999) LARGEST FACILITY IN EACH COUNTRY PRODUCTION IN FISCAL 1998
- --------------------------------------- -------------------------------- ----------------------------
<S> <C> <C>
Honduras (seven)....................... 26% 62%
El Salvador (two)...................... 12 14
Haiti (two)............................ 12 12
Mexico (one)........................... 6 6
Nicaragua (one)........................ 6 6
</TABLE>
11
<PAGE> 17
Some of these countries have experienced political, social and economic
instability in the past several years. We cannot predict the future political,
social or economic stability of these countries or the impact on our business of
changes, if any, in the political, social or economic conditions in these
countries.
The three facilities we operate directly, which are located in Honduras,
can import and export goods on a duty-free basis and the profits we generate
through these facilities are generally exempt from income tax. We anticipate
that our future operations in Barbados will benefit from advantageous tax
treatment as well. If these tax benefits are reduced, eliminated or, in the case
of Barbados, fail to materialize, our business could be materially adversely
affected.
OUR INDUSTRY IS SUBJECT TO SEASONALITY RISKS
Typically, demand for our products is higher during the third and fourth
quarters of each fiscal year than in the first and second quarters of each
fiscal year. Based on discussions with our customers at the beginning of each
fiscal year, we produce and store finished goods inventory to meet the expected
demand for delivery in the second half of the fiscal year. If, after producing
and storing inventory in anticipation of third and fourth quarter deliveries,
demand is significantly less than expected, we may have to hold inventory for
extended periods of time, or sell excess inventory at reduced prices. In either
case, our profits would be reduced. Excess inventory could also result in slower
production, lower plant and equipment utilization and lower fixed operating cost
absorption, all of which would have a negative impact on our business. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Seasonality".
WE DEPEND ON KEY PERSONNEL TO MAINTAIN OUR COMPETITIVE POSITION
Our ability to maintain our competitive position is largely dependent on
the personal efforts and abilities of our senior management, particularly H.
Gregory Chamandy, Chairman of the Board and Chief Executive Officer, Glenn J.
Chamandy, President and Chief Operating Officer, and Edwin B. Tisch, Executive
Vice President, Manufacturing. Each of H. Gregory Chamandy, Glenn J. Chamandy
and Edwin B. Tisch has entered into an employment agreement with us. See
"Management--
Employment Agreements and Change of Control Agreements". We currently do not
maintain key person life insurance for key executives. The loss of the services
of any of these executives could have a material adverse effect on our business.
In addition, we believe that our success is dependent on our ability to
attract and retain additional qualified employees, and the failure to recruit or
retain additional skilled personnel could have a material adverse effect on our
business.
OUR OPERATIONS ARE SUBJECT TO ENVIRONMENTAL REGULATION
We are subject to various environmental and occupational health and safety
laws and regulations in our operations in the United States, Canada and
offshore. Compliance with those laws and regulations has not had a material
adverse effect on our business. However, future events, such as:
- a change in existing laws and regulations;
- the enactment of new laws and regulations;
- a release of hazardous substances on or from our properties or any
associated offsite disposal location; or
- the discovery of contamination from prior activities at any of our
properties,
12
<PAGE> 18
may give rise to compliance costs that could have a material adverse effect on
our business. See "Business--Environmental Regulation".
OUR OPERATIONS MAY SUFFER FROM YEAR 2000 COMPUTER PROBLEMS
Most of our computer systems, including those used to manage procurement,
production, inventory control, distribution and accounting functions, as well as
some of our manufacturing equipment, are susceptible to the Year 2000 problem.
We use both internal and external resources to ensure that our systems and
equipment will be Year 2000 compliant. We also plan to install a new Year 2000
compliant accounting system, which will replace our current accounting system.
We cannot assure you that these measures will successfully identify and
eliminate all possible Year 2000 problems in our systems and equipment. If we
fail to identify or eliminate any Year 2000 problems, our business could be
harmed.
The failure of our customers and suppliers to be prepared for Year 2000
problems presents risks to us which we cannot quantify at this time. If any of
the computer systems of these customers fail due to the "Year 2000" problem, our
business could be harmed. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Compliance".
CURRENCY AND EXCHANGE RATE FLUCTUATIONS MAY ADVERSELY AFFECT OUR OPERATIONS
Most of our business is transacted in U.S. dollars. The exchange rate
between Canadian dollars and U.S. dollars has fluctuated significantly over the
last several years. Any strengthening in the value of the Canadian dollar
against the U.S. dollar could result in lower sales and earnings for us when
translated into Canadian dollars.
In addition, because we pay the employees at our three Honduran facilities
in Honduran Lempiras, any weakening in the value of the Canadian or U.S. dollar
against the Lempira could have a material adverse effect on our business. Any
Gildan-owned facility established outside of Canada and the United States may
face a similar currency risk.
WE ARE CONTROLLED BY HARCO
Harco Holdings Ltd. ("Harco") is a Canadian corporation controlled jointly
by H. Gregory Chamandy, our Chairman and Chief Executive Officer, and Glenn J.
Chamandy, our President and Chief Operating Officer. Harco owns all of our
outstanding Class B Multiple Voting Shares. Because the Class B Multiple Voting
Shares have eight votes per share, H. Gregory Chamandy and Glenn J. Chamandy,
through their ownership of Harco, will have, after giving effect to the sale of
the Class A Subordinate Voting Shares offered hereby, approximately 70.2% of the
voting power of Gildan. See "Principal Shareholders". Accordingly, H. Gregory
Chamandy and Glenn J. Chamandy will be able to elect all of the directors, other
than the two directors elected solely by the Class A Subordinate Voting Shares
voting as a separate class, for so long as they retain more than 50.0% of the
voting power of Gildan. See "Management--Board of Directors".
OUR ABILITY TO ISSUE PREFERRED SHARES COULD DELAY OR PREVENT A CHANGE IN CONTROL
TRANSACTION
Our Articles authorize the issuance of an unlimited number of First
Preferred Shares and Second Preferred Shares (collectively, the "Preferred
Shares"), which our board of directors may issue in one or more series and
determine the conversion and other rights and preferences of any such series
without any further action on the part of the shareholders. The issuance of
Preferred Shares could be used to delay or prevent a change in control
transaction by:
- discouraging an unsolicited acquisition proposal;
13
<PAGE> 19
- discouraging a proxy contest;
- making more difficult the acquisition of a substantial block of Class A
Subordinate Voting Shares; or
- limiting the price that investors might be willing to pay for Class A
Subordinate Voting Shares.
POTENTIAL SALES OF CLASS A SUBORDINATE VOTING SHARES COULD RESULT IN A DECLINE
IN THE MARKET PRICE OF THE CLASS A SUBORDINATE VOTING SHARES
The market price of the Class A Subordinate Voting Shares could decline as
a result of sales of a large number of Class A Subordinate Voting Shares in the
market after this offering, or the perception that such sales could occur. These
factors also could make it more difficult for us to raise funds through future
offerings of share capital.
Immediately after the offering, we will have outstanding 13,394,444 Equity
Shares. In addition, 995,000 Class A Subordinate Voting Shares are subject to
options which may be granted under our stock option plan. At April 14, 1999,
options to buy 756,500 Class A Subordinate Voting Shares were outstanding, of
which 180,666 will become exercisable on June 16, 2000.
All of our outstanding share capital, except for the Equity Shares held by
"affiliates" (as defined in Rule 144 of the U.S. Securities Act of 1933, as
amended (the "U.S. Securities Act")), will be freely tradeable without
restriction under the U.S. Securities Act. The Equity Shares held by the H.
Gregory Chamandy Family Trust, the Glenn Chamandy Family Trust, the Shirley
Chamandy Family Trust and the Tisch Family Trust (collectively, the "Trusts"),
the Fund and Harco are deemed to be "restricted securities" (as defined in Rule
144). Therefore, the Equity Shares owned by them are not freely tradeable and
may be sold only subject to the timing, manner and volume restrictions of Rule
144 or under a registration statement or pursuant to an exemption therefrom. See
"Shares Eligible for Future Sale and Escrow Arrangements".
Pursuant to a registration rights agreement, Harco, the Fund and the Trusts
generally have the right to require us to register the Class A Subordinate
Voting Shares held by them under the U.S. Securities Act. See "Certain
Relationships and Related Transactions--Registration Rights Agreement". However,
the resale by Harco, the Fund and the Trusts of their Equity Shares is subject
to lock-up provisions and escrow arrangements described under "Shares Eligible
for Future Sale and Escrow Arrangements" and "Underwriting".
THE PRICE OF OUR SHARES MAY FLUCTUATE SIGNIFICANTLY
The following factors, among others, could cause the market price of the
Class A Subordinate Voting Shares to fluctuate significantly:
- adverse changes in our results of operations, including as described in
this "Risk Factors" section;
- the limited number of outstanding Class A Subordinate Voting Shares that
trade;
- changes in the U.S. or Canadian apparel industry in general or the
activewear industry in particular;
- failure to meet the projections of securities analysts; or
- other developments affecting us or our competitors.
14
<PAGE> 20
In addition, in recent years stock markets have experienced extreme price
and volume fluctuations. This volatility has had a significant effect on the
market prices of securities issued by many companies for reasons unrelated to
their operating performance.
WE DO NOT INTEND TO PAY DIVIDENDS
We do not intend to pay dividends because we plan to retain all of our
earnings in the foreseeable future to develop and expand our business. Our
future dividend policy will depend on our earnings, capital requirements,
financial condition, bank facilities and other factors the board of directors
considers relevant. See "Dividends". In addition, some of our credit facilities
and debt instruments require the consent of the lenders before paying dividends.
See "Description of Certain Indebtedness".
BECAUSE WE ARE A CANADIAN COMPANY, YOU MAY NOT BE ABLE TO ENFORCE CIVIL
LIABILITIES UNDER THE U.S. FEDERAL SECURITIES LAWS AGAINST US
We are incorporated in Canada under the Canada Business Corporations Act.
Our registered office as well as a substantial portion of our assets are located
outside the United States. Also, most of our directors and officers and some of
the experts named in this prospectus reside outside the United States.
Therefore, it may be difficult to serve process upon us or them in the United
States or to collect upon a judgment obtained in the United States against us or
them. Ogilvy Renault, our Canadian counsel, has advised us that there is doubt
as to the enforceability of:
- liabilities predicated on U.S. federal securities laws determined in
original actions in the Province of Quebec; and
- judgments of U.S. courts obtained in actions based upon the civil
liability provisions of U.S. federal securities laws in the courts of
the Province of Quebec.
Moreover, no treaty exists between the United States and Canada for the
reciprocal enforcement of foreign court judgments. Consequently, you may be
effectively prevented from pursuing remedies under U.S. federal securities laws
against us or them.
WE HAVE DISCRETION OVER THE USE OF NET PROCEEDS
We have not specifically allocated a substantial portion of the net
proceeds of the offering. Consequently, we will retain a significant amount of
discretion over the application of such proceeds. Because of the number and
variability of factors that determine our use of net proceeds of the offering,
we cannot assure you that such applications will not vary substantially from our
current intentions. Presently, we intend to use these funds initially to repay
our borrowings under our revolving loan agreement. Subsequently, we intend to
use the newly available borrowing capacity under our revolving loan agreement
for planned expansion of production and distribution capacity.
15
<PAGE> 21
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 3,000,000 Class A
Subordinate Voting Shares offered hereby will be US$35.4 million (US$40.8
million if the underwriters' over-allotment option is exercised in full) based
on an assumed public offering price of US$12.81 per share and after deducting
estimated underwriting discounts and commissions and estimated offering expenses
payable by us. Based on the inverse of the Noon Buying Rate (as defined under
"Exchange Rates") on April 14, 1999 of Cdn$1.00 per US$0.6698, the net proceeds
from the sale of the 3,000,000 Class A Subordinate offered hereby are estimated
to be $52.8 million ($60.9 million if the underwriters' over-allotment option is
exercised in full).
We plan to use these funds initially to repay borrowings under our
revolving loan agreement. Subsequently, we intend to use the newly available
borrowing capacity under our revolving loan agreement for planned expansion of
production and distribution capacity.
DIVIDENDS
Except for an aggregate dividend of $500,000 (US$354,887, based on an
exchange rate of 1.41 Canadian dollars per U.S. dollar at November 12, 1997)
which was declared on Gildan's then existing Class "A" common shares and Class
"A" preferred shares on November 12, 1997 and subsequently distributed in 1998,
Gildan has not declared or paid any dividends on its shares. We anticipate that
all of our earnings in the foreseeable future will be retained for the
development and the expansion of our business and, therefore, we have no current
plans to pay dividends. Future dividend policy will depend on our earnings,
capital requirements, financial condition, bank facilities and other factors
considered relevant by the board of directors. In addition, certain of our
credit facilities and debt instruments require the consent of the lenders prior
to the payment of dividends. See "Description of Certain Indebtedness".
16
<PAGE> 22
EXCHANGE RATES
Fluctuations in the exchange rates between the Canadian dollar and the U.S.
dollar will affect the U.S. dollar price of the Class A Subordinate Voting
Shares.
The following table sets forth the average, high, low and period-end Noon
Buying Rate announced by the Federal Reserve Bank of New York (each, a "Noon
Buying Rate").
<TABLE>
<CAPTION>
CANADIAN DOLLARS/U.S. DOLLAR NOON BUYING RATE
-------------------------------------------------------------------
TEN-MONTH
PERIOD ENDED
FISCAL YEAR SEPTEMBER 29, FISCAL YEAR
---------------- ------------- ---------------- FIRST FISCAL
1994 1995 1996 1997 1998 QUARTER 1999
------ ------ ------------- ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Average(1)................... 1.3614 1.3741 1.3683 1.3707 1.4522 1.5430
High......................... 1.3954 1.4238 1.3822 1.3995 1.5770 1.5570
Low.......................... 1.3103 1.3285 1.3530 1.3310 1.3718 1.5175
Period End................... 1.3720 1.3660 1.3632 1.3713 1.5505 1.5375
</TABLE>
- -------------------------
(1) The average rate is the average of the exchange rates on the last day of
each month during the applicable period.
On April 14, 1999, the Noon Buying Rate was 1.4929 Canadian dollars per
U.S. dollar.
We did not use these exchange rates to calculate the U.S. dollar
equivalents provided for fiscal 1998 and first fiscal quarter 1999 under
"Prospectus Summary--Summary Consolidated Financial Information", and "Selected
Consolidated Financial Information". Rather, for the statement of income data,
we used a weighted average of the Bank of Canada monthly average exchange rates,
and for the balance sheet data and cash flow items, we used Bank of Canada
closing rates, which were $1.5312 Canadian dollars per U.S. dollar at October 4,
1998 and $1.5333 Canadian dollars per U.S. dollar at January 3, 1999.
17
<PAGE> 23
CAPITALIZATION
The following table sets forth our capitalization at March 7, 1999 (a) on
an actual basis and (b) as adjusted to give effect to the sale of the Class A
Subordinate Voting Shares offered hereby at an assumed public offering price of
US$12.81 ($19.13, based on the inverse of the Noon Buying Rate on April 14, 1999
of Cdn$1.00 per US$0.6698) per Class A Subordinate Voting Share, after deducting
the estimated underwriting discounts and commissions and estimated offering
expenses payable by us.
The table should be read in conjunction with the Consolidated Financial
Statements and related notes thereto included elsewhere in this prospectus,
which include a summary of differences between Canadian GAAP and U.S. GAAP. See
"Use of Proceeds", "Selected Consolidated Financial Information" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
<TABLE>
<CAPTION>
AT MARCH 7, 1999
----------------------------
ACTUAL AS ADJUSTED(1)
----------- --------------
(CDN$ IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Short-term debt:
Bank indebtedness......................................... $ 72,489 $ 19,696(2)
Current portion of long-term debt......................... 6,089 6,089
-------- --------
Total short-term debt................................ $ 78,578 $ 25,785
======== ========
Long-term debt(3)........................................... $ 69,024 $ 69,024
Shareholders' equity:
First Preferred Shares, without par value, unlimited
number authorized; 0 issued and outstanding at March 7,
1999; as adjusted, 0 issued and outstanding............ -- --
Second Preferred Shares, without par value, unlimited
number authorized; 0 issued and outstanding at March 7,
1999; as adjusted, 0 issued and outstanding............ -- --
Class A Subordinate Voting Shares, without par value,
unlimited number authorized; 7,347,444 shares issued
and outstanding at March 7, 1999; as adjusted,
10,347,444 shares issued and outstanding(4)............ 34,375 87,168
Class B Multiple Voting Shares, without par value,
unlimited number authorized; 3,047,000 shares issued
and outstanding at March 7, 1999; as adjusted,
3,047,000 shares issued and outstanding................ 5,083 5,083
Contributed surplus....................................... 323 323
Retained earnings(5)...................................... 19,528 19,528
-------- --------
Total shareholders' equity........................... 59,309 112,102
-------- --------
Total capitalization.............................. $128,333 $181,126
======== ========
</TABLE>
- ---------------
(1) Assumes that the net proceeds are US$35.4 million ($52.8 million, based on
the inverse of the Noon Buying Rate on April 14, 1999 of Cdn$1.00 per
US$0.6698), after deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by us.
(2) This debt may be reborrowed.
(3) Includes capitalized leases. See note 7 to the Consolidated Financial
Statements.
(4) The number of Class A Subordinate Voting Shares outstanding does not reflect
995,000 Class A Subordinate Voting Shares subject to options which may be
granted under our stock option plan, of which options to buy 756,500 Class A
Subordinate Voting Shares were outstanding at March 7, 1999. See
"Management--Stock Option Plan" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
(5) At January 3, 1999.
18
<PAGE> 24
PRICE RANGE OF OUR SHARES
Since our initial public offering in June 1998, our Class A Subordinate
Voting Shares have traded on the American Stock Exchange under the symbol "GIL"
and The Montreal Exchange and The Toronto Stock Exchange under the symbol
"GIL.A". The following table sets forth, for each of the fiscal quarterly
periods indicated, the high and low closing prices of the Class A Subordinate
Voting Shares as reported on each of the respective exchanges:
<TABLE>
<CAPTION>
THE TORONTO
AMERICAN STOCK THE MONTREAL STOCK
EXCHANGE EXCHANGE EXCHANGE
------------------- --------------- ---------------
HIGH LOW HIGH LOW HIGH LOW
-------- -------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year Ended October 4, 1998
Third Quarter(1)................... US$7.00 US$6.31 $10.30 $ 9.25 $10.35 $ 9.25
Fourth Quarter..................... 9.25 6.00 14.25 9.25 14.00 9.20
Fiscal Year Ended October 3, 1999
First Quarter...................... 8.38 6.38 12.50 10.00 12.50 10.05
Second Quarter..................... 13.25 7.38 20.25 11.50 20.25 11.75
Third Quarter(2)................... 13.06 12.75 (3) (3) 19.75 19.00
</TABLE>
- -------------------------
(1) Trading began June 17, 1998.
(2) Through April 14, 1999.
(3) The last closing price was $18.25 on March 24, 1999.
On April 14, 1999, the last reported sale price of the Class A Subordinate
Voting Shares was US$12.81 per share on the American Stock Exchange. The last
closing price of the Class A Subordinate Voting Shares on The Montreal Exchange
was $18.25 on March 24, 1999 and The Toronto Stock Exchange was $19.35 on April
14, 1999. As at March 15, 1999, there were approximately six holders of record
in the United States, holding approximately 2,825,800 Class A Subordinate Voting
Shares, which represents 38.46% of the outstanding Class A Subordinate Voting
Shares.
19
<PAGE> 25
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated financial information presented below is derived
from Gildan's consolidated financial statements for, and as of the end of,
fiscal 1994 and fiscal 1995, which have been audited by Richter, Usher &
Vineberg, Chartered Accountants, and Gildan's consolidated financial statements
for, and as of the end of, ten-month fiscal 1996, fiscal 1997 and fiscal 1998,
which have been audited by KPMG LLP, Chartered Accountants. The selected
consolidated financial information for the twelve months ended and as of
September 29, 1996, for the first fiscal quarter ended January 4, 1998, and for
the first fiscal quarter ended and as of January 3, 1999 is derived from the
unaudited consolidated financial statements of Gildan, which in the opinion of
management have been prepared on the same basis as the audited financial
statements, reflecting all adjustments necessary, which consist only of normal
recurring adjustments, for a fair presentation of such information.
The Consolidated Financial Statements have been prepared in accordance with
Canadian GAAP. These principles conform in all material respects with U.S. GAAP,
except as described in note 19 to the Consolidated Financial Statements. The
information presented below should be read in conjunction with the Consolidated
Financial Statements included elsewhere in this prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
TEN-MONTH TWELVE-
FISCAL YEAR ENDED PERIOD MONTH FISCAL YEAR ENDED
----------------- ENDED ENDED ----------------------------------
DEC. 2, DEC. 1, SEPT. 29, SEPT. 29, OCT. 5, OCT. 4, OCT. 4,
1994 1995 1996 1996(1) 1997 1998 1998
------- ------- --------- ----------- -------- -------- -----------
CDN$ CDN$ CDN$ CDN$ CDN$ CDN$ US$(2)
------- ------- ------- ------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
(CANADIAN GAAP):
Sales..................... $45,896 $64,868 $70,448 $80,045 $119,844 $215,428 $147,876
Cost of sales............. 36,621 51,854 56,367 64,294 93,059 164,850 113,289
------- ------- ------- ------- -------- -------- --------
Gross profit.............. 9,275 13,014 14,081 15,751 26,785 50,578 34,587
Selling, general and
administrative
expenses................. 5,852 9,053 8,360 9,629 12,471 20,796 14,248
Depreciation and
amortization expenses.... 940 1,764 1,633 2,026 2,337 4,063 2,782
Writeoff of advances...... -- 924 -- 281 -- -- --
------- ------- ------- ------- -------- -------- --------
Operating income.......... 2,483 1,273 4,088 3,815 11,977 25,719 17,557
Interest expense.......... 1,382 2,709 2,507 2,997 2,974 5,032 3,460
Loss on settlement of
debt..................... -- -- -- -- -- 819 565
------- ------- ------- ------- -------- -------- --------
Income (loss) before
income taxes............. 1,101 (1,436) 1,581 818 9,003 19,868 13,532
Income taxes (recovery)... 327 (249) 608 314 3,338 6,700 4,583
------- ------- ------- ------- -------- -------- --------
Net income (loss)......... $ 774 $(1,187) $ 973 $ 504 $ 5,665 $ 13,168 $ 8,949
======= ======= ======= ======= ======== ======== ========
Net income per share
(basic).................. $ 1.65(3) $ 1.12
Number of shares (weighted
avg.).................... 7,999 7,999
OTHER DATA (CANADIAN
GAAP):
Gross profit margin....... 20.2% 20.1% 20.0% 19.7% 22.3% 23.5% 23.5%
Operating income margin... 5.4% 2.0% 5.8% 4.8% 10.0% 11.9% 11.9%
Capital expenditures...... $ 6,997 $ 2,514 $ 6,390 $ 7,204 $ 5,439 $ 24,588 $ 17,031
EBITDA(4)................. $ 3,423 $ 3,037 $ 5,721 $ 5,841 $ 14,314 $ 29,782 $ 20,339
SELECTED OPERATING DATA
(UNAUDITED):
Dozens of T-shirts sold... 1,365 1,697 1,899 2,950 5,721
Dozens of sweatshirts
sold..................... 103 63 85 158 195
------- ------- ------- -------- --------
Total dozens sold......... 1,468 1,760 1,984 3,108 5,916
======= ======= ======= ======== ========
<CAPTION>
FIRST FISCAL QUARTER ENDED
---------------------------------------
JAN. 4,
1998 JAN. 3, 1999
----------- -------------------------
CDN$ CDN$ US$(2)
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA
(CANADIAN GAAP):
Sales..................... $31,812 $45,109 $29,253
Cost of sales............. 25,969 33,079 21,451
------- ------- -------
Gross profit.............. 5,843 12,030 7,802
Selling, general and
administrative
expenses................. 3,617 7,195 4,666
Depreciation and
amortization expenses.... 746 1,763 1,143
Writeoff of advances...... -- -- --
------- ------- -------
Operating income.......... 1,480 3,072 1,993
Interest expense.......... 848 1,543 1,001
Loss on settlement of
debt..................... -- -- --
------- ------- -------
Income (loss) before
income taxes............. 632 1,529 992
Income taxes (recovery)... 332 550 357
------- ------- -------
Net income (loss)......... $ 300 $ 979 $ 635
======= ======= =======
Net income per share
(basic).................. $ 0.10 $ 0.06
Number of shares (weighted
avg.).................... 9,950 9,950
OTHER DATA (CANADIAN
GAAP):
Gross profit margin....... 18.4% 26.7% 26.7%
Operating income margin... 4.7% 6.8% 6.8%
Capital expenditures...... $ 6,362 $11,564 $ 7,498
EBITDA(4)................. $ 2,226 $ 4,835 $ 3,136
SELECTED OPERATING DATA
(UNAUDITED):
Dozens of T-shirts sold... 820 1,192
Dozens of sweatshirts
sold..................... 59 41
------- -------
Total dozens sold......... 879 1,233
======= =======
</TABLE>
20
<PAGE> 26
<TABLE>
<CAPTION>
DEC. 2, DEC. 1, SEPT. 29, OCT. 5, OCT. 4, JAN. 3,
1994 1995 1996 1997 1998 1999
------- ------- --------- ----------- -------- -----------
CDN$ CDN$ CDN$ CDN$ CDN$ CDN$
------- ------- ------- ------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
(CANADIAN GAAP):
Working capital............ $ 2,119 $ 1,149 $ 5,010 $15,406 $ 33,134 $ 34,222
Total assets............... 33,784 34,589 52,770 77,365 165,678 211,438
Total debt(5).............. 26,593 28,585 42,793 61,712 112,348 157,129
Shareholders' equity....... 7,191 6,004 9,977 15,653 53,330 54,309
<CAPTION>
<S> <C> <C>
BALANCE SHEET DATA
(CANADIAN GAAP):
Working capital............
Total assets...............
Total debt(5)..............
Shareholders' equity.......
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
TEN MONTH PERIOD ---------------------------- FIRST FISCAL QUARTER
ENDED SEPT. 29, OCT. 5, OCT. 4, OCT. 4, ENDED JAN. 3,
1996 1997 1998 1998 1999
---------------- ------- ------- -------- ----------------------
CDN$ CDN$ CDN$ US$(2) CDN$ US$(2)
------- ------- ------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL STATEMENT DATA (U.S. GAAP):
Net income............................................. $ 973 $ 5,036 $12,438 $ 8,453 $ 975 $ 632
Net income (loss) per share............................ (0.58) (2.36) 2.63(3) 1.79 0.10 0.06
Total assets........................................... 52,770 76,764 164,788 107,620 210,555 137,321
Total debt(5).......................................... 48,343 82,590 112,317 73,352 157,108 102,464
Shareholders' equity................................... 4,427 (5,826) 52,471 34,268 53,447 34,857
Cash flows from operations............................. (5,738) (4,797) (17,476) (11,413) (29,126) (18,996)
Cash flows from investing.............................. (7,735) (6,539) (26,537) (17,331) (12,987) (8,470)
Cash flows from financing activities................... 13,473 11,336 44,013 28,744 42,113 27,466
</TABLE>
- ---------------
(1) The data for the unaudited twelve-month period ended September 29, 1996
combine our unaudited data for the 62-day period ended December 1, 1995 and
our audited data for ten-month fiscal 1996.
(2) U.S. dollar amounts are provided for convenience only. For the statement of
income data, the U.S. dollar amounts are calculated using a weighted average
of the Bank of Canada monthly average exchange rates. For the balance sheet
data and the cash flow items, the U.S. dollar amounts are calculated using
Bank of Canada closing rates, which were $1.5312 Canadian dollars per U.S.
dollar at October 4, 1998 and $1.5333 Canadian dollars per U.S. dollar at
January 3, 1999.
(3) The principal reason for the difference between net income per share of
$1.65 under Canadian GAAP and net income per share of $2.63 under U.S. GAAP
is the difference in the calculation of the weighted average number of
shares outstanding. Under Canadian GAAP, 7,998,657 were outstanding, whereas
under U.S. GAAP, 4,384,399 were outstanding. The primary difference between
the calculations relates to the treatment of Class "A" Preferred Shares
which were reclassified concurrently with our initial public offering in
June 1998.
(4) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA is included because we believe that some investors use
this information as one measure of a company's historical ability to service
debt. However, you should not consider EBITDA as an alternative to net
earnings as an indicator of operating performance or as an alternative to
cash flow as a measure of our overall liquidity as presented in the
Consolidated Financial Statements. EBITDA as presented may not be comparable
to similar computations presented by other companies.
(5) Total debt consists of total bank debt, current liabilities, other loans
payable, secured and unsecured long-term debt, including capitalized leases
and future taxes.
21
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements included elsewhere in this prospectus.
CHANGE OF YEAR END
Effective September 29, 1996, we changed our fiscal year end from the first
Friday following November 29 to the first Sunday following September 28. The
effective result of this change was to create a ten-month fiscal 1996
("ten-month fiscal 1996"), compared to a twelve-month period ended December 1,
1995 ("fiscal 1995") and a twelve-month period ended October 5, 1997 ("fiscal
1997"). The primary purpose of the change was to recognize that our primary
selling season is completed by the end of September of each year.
As a result of this change, the Consolidated Financial Statements and
Management's Discussion and Analysis compare fiscal 1997 to ten-month fiscal
1996. Information is also provided for an unaudited twelve-month period ended
September 29, 1996 ("unaudited twelve-month 1996") to facilitate a more
meaningful understanding of trends through comparison of like periods. The
Consolidated Financial Statements have been prepared in accordance with Canadian
GAAP. These principles conform in all material respects with U.S. GAAP, except
as described in note 19 to the Consolidated Financial Statements. The
information below should be read in conjunction with the Consolidated Financial
Statements included elsewhere in this prospectus.
RESULTS OF OPERATIONS
Our results of operations are affected by several factors, including: (a)
competition; (b) general economic conditions; (c) raw material costs; (d) mix of
products sold; and (e) plant utilization. Some activewear products of the type
which we manufacture are generally available from multiple sources and our
customers purchase products from more than one source. Sweatshirts and colored
T-shirts are generally more profitable than white T-shirts. Accordingly, our
overall gross profit margin is affected by our product mix. In addition, plant
utilization levels are significant drivers of our profitability due to the
capital intensive nature of our operations.
Prices in the industry have been declining over the past several years
primarily as a result of the trend to move sewing productions offshore by some
manufacturers of basic activewear and the introduction of new manufacturing
technologies. In addition, in recent years, some T-shirt and sweatshirt
manufacturers have overproduced inventory as a result of excess plant and
equipment capacity. This oversupply of inventory has on occasion led to
inventory dumping, resulting in price reductions for T-shirts and sweatshirts.
To remain competitive, we adjust our pricing structure from time to time in
response to such industry-wide price changes.
We generally have been able to mitigate pricing pressures by (a) continuing
to improve and modernize our manufacturing processes to reduce production costs
and (b) moving the majority of our sewing operations offshore to benefit from
the lower wage rate environment. However, in response to price reductions
initiated by our competitors, we incurred expenses of approximately $4.2 million
in customer rebates in each of fiscal 1997 and fiscal 1998. See "Risk
Factors--Our Industry Is Subject to Pricing Pressures".
The largest component of our cost of goods sold is the cost of cotton yarn.
Unlike some of our competitors, we do not spin our own yarn. Instead, we obtain
substantially all of our yarn from three yarn suppliers and place our orders at
the beginning of each fiscal year. In so doing, we can protect against
22
<PAGE> 28
yarn price increases during the fiscal year. However, we may be competitively
disadvantaged if yarn prices decrease during the fiscal year. See "Risk
Factors--We Are Subject to Risks of Fluctuations in Cotton Yarn Supply and
Price" and "Business--Raw Materials".
The following table presents the major components of our Statements of
Income as a percentage of sales:
<TABLE>
<CAPTION>
AUDITED UNAUDITED AUDITED AUDITED UNAUDITED UNAUDITED
SEPTEMBER 29, SEPTEMBER 29, OCTOBER 5, OCTOBER 4, JANUARY 4, JANUARY 3,
1996 1996 1997 1998 1998 1999
10 MONTHS 12 MONTHS 12 MONTHS 12 MONTHS 3 MONTHS 3 MONTHS
------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales........................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................ 80.1 80.3 77.7 76.5 81.6 73.3
----- ----- ----- ----- ----- -----
Gross profit................. 19.9 19.7 22.3 23.5 18.4 26.7
Selling, general and
administrative expenses.... 11.8 12.0 10.4 9.7 11.4 16.0
Depreciation and amortization
expenses................... 2.3 2.5 1.9 1.9 2.4 3.9
Writeoff of advances......... -- 0.4 -- -- -- --
----- ----- ----- ----- ----- -----
Operating income............. 5.8 4.8 10.0 11.9 4.6 6.8
Interest expense............. 3.6 3.8 2.5 2.3 2.7 3.4
Loss on settlement of debt... -- -- -- 0.4 -- --
----- ----- ----- ----- ----- -----
Income before income taxes... 2.2 1.0 7.5 9.2 1.9 3.4
Income taxes................. 0.8 0.4 2.8 3.1 1.0 1.2
----- ----- ----- ----- ----- -----
Net income................... 1.4% 0.6% 4.7% 6.1% 0.9% 2.2%
===== ===== ===== ===== ===== =====
</TABLE>
FIRST FISCAL QUARTER 1999 COMPARED TO FIRST FISCAL QUARTER 1998
Sales: Sales increased by $13.3 million to $45.1 million for first fiscal
quarter 1999 from $31.8 million for first fiscal quarter 1998. This 41.8%
increase was due to higher sales, primarily to existing customers. These sales
resulted from greater product availability due to increased production capacity.
Gross Profit: Gross profit increased to 26.7% of sales in first fiscal
quarter 1999 from 18.4% of sales in first fiscal quarter 1998. The improvement
was due to factors such as lower raw material costs (primarily yarn) and higher
efficiencies in both textile and sewing operations.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased to 16.0% of sales in first fiscal quarter 1999
from 11.4% of sales in first fiscal quarter 1998. The increase in selling,
general and administrative expenses resulted from the following:
- the transition from the Champlain distribution center to the Miami and
Montreal distribution centers resulted in higher training costs and
lower efficiencies. See "Business--Manufacturing Operations and
Facilities--Distribution Operations";
- the transfer of products from the Champlain distribution center to the
Miami distribution center also resulted in additional costs;
- the creation of our international sales office in Barbados resulted in
additional overhead as the new operation was established; and
23
<PAGE> 29
- an increase in our staffing and executive ranks during first fiscal
quarter 1999 in anticipation of the higher volumes we expect to ship in
fiscal 1999 resulted in increased administrative costs.
Depreciation and Amortization Expenses: Depreciation and amortization
expenses increased to 3.9% of sales in first fiscal quarter 1999 from 2.4% of
sales in first fiscal quarter 1998. This increase was principally due to capital
expenditures incurred in fiscal 1998 to expand production capacity.
Interest Expense: Interest expense rose to 3.4% of sales in first fiscal
quarter 1999 from 2.7% of sales in first fiscal quarter 1998. This is the result
of total interest-bearing debt levels that were 88.7% higher than those during
first fiscal quarter 1998. The additional debt was used to fund capital
expenditures and working capital requirements.
Income Taxes: The effective income tax rate was 36.0% in first fiscal
quarter 1999 compared to 52.5% in first fiscal quarter 1998 mainly due to the
difference in the amount of unrecognized tax losses incurred by some of our
subsidiaries of $11,000 in the first fiscal quarter 1999 compared to $63,000 in
the first fiscal quarter 1998.
YEAR ENDED OCTOBER 4, 1998 COMPARED TO YEAR ENDED OCTOBER 5, 1997
Sales: Sales increased by $95.6 million to $215.4 million for fiscal 1998
from $119.8 million for fiscal 1997. This 79.8% increase was due to higher sales
to existing customers and the addition of new customers. Existing customers
accounted for 40% of the increase and new customers accounted for 60%. The
impact of higher unit sales was partially offset by lower average selling prices
during fiscal 1998 due to industry-wide customer rebate programs in the United
States.
Gross Profit: Gross profit increased to 23.5% of sales in fiscal 1998 from
22.3% of sales in fiscal 1997. This improvement was due to:
- increased absorption of factory overhead as a result of the higher
production volume;
- lower costs due to the increase in offshore sewing production; and
- the elimination of custom duties in Canada on cotton yarn of U.S.
origin.
The increase in gross profit margin was partly offset by (a) the ice storm that
hit the Province of Quebec and Northern New York State in January 1998,
disrupting shipping and manufacturing activities and (b) lower average selling
prices during fiscal 1998.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses declined to 9.7% of sales in fiscal 1998 from 10.4% of
sales in fiscal 1997. This is the result of our ongoing commitment to grow sales
at a faster rate than expenses.
Depreciation and Amortization Expenses: Depreciation and amortization
expenses remained stable at 1.9% of sales for both fiscal 1998 and fiscal 1997.
Interest Expense: Interest expense declined to 2.3% of sales during fiscal
1998 from 2.5% of sales in fiscal 1997. Our initial public offering in the third
quarter of fiscal 1998 and the subsequent use of proceeds to repay long-term
debt contributed to the reduction of interest expense as a percentage of sales.
Settlement of Debt: Loss on settlement of debt in the amount of $0.8
million relates to a penalty incurred on the prepayment of $6.7 million of
long-term debt in connection with the initial public offering.
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<PAGE> 30
Income Taxes: The effective income tax rate was 33.7% in fiscal 1998
compared to 37.1% in fiscal 1997. The reduction of income taxes is due to the
favorable tax treatment arising from the purchase of fixed assets used in the
manufacturing process.
YEAR ENDED OCTOBER 5, 1997 COMPARED TO TEN MONTHS ENDED SEPTEMBER 29, 1996
Sales: Sales increased by $49.3 million, or 69.9%, to $119.8 million in
fiscal 1997 from $70.5 million in ten-month fiscal 1996 (and increased by $39.8
million, or 50.0%, from $80.0 million in unaudited twelve-month 1996). This
increase was primarily due to the addition of several major wholesale
distributor customers during fiscal 1997. Broder Bros., the largest of these
distributors, represented $23.5 million of sales. To a lesser extent, sales
growth was due to an increase in sales to existing customers. The impact of the
increase in unit sales was partially offset by lower prices during fiscal 1997
due to industry-wide customer rebate programs in the United States.
Gross Profit: Gross profit increased to 22.3% of sales in fiscal 1997 from
19.9% of sales in ten-month fiscal 1996 (and 19.7% of sales in unaudited
twelve-month 1996). The increase in gross profit was due to the following
factors:
- a shift of the majority of our sewing production from the United States
and Mexico to the Caribbean Basin and Central America in fiscal 1997;
- increased operating efficiencies;
- increased sales of higher margin sweatshirts, which were 14.5% of sales
in fiscal 1997 compared to 11% of sales in ten-month fiscal 1996 (and
12.6% of sales in unaudited twelve-month 1996); and
- a reduction in our reliance on higher-priced outside knitting and dyeing
contractors in fiscal 1997.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses decreased to 10.4% of sales in fiscal 1997 from 11.8% of
sales in ten-month fiscal 1996 (and 12.0% of sales in unaudited twelve-month
1996). This improvement resulted from cost containment efforts combined with
growth in sales.
Depreciation and Amortization Expenses: Depreciation and amortization
expenses decreased to 1.9% of sales in fiscal 1997 from 2.3% of sales in
ten-month fiscal 1996 (and 2.5% of sales in unaudited twelve-month 1996) as a
result of our sales growth.
Interest Expense: Interest expense decreased to 2.5% of sales in fiscal
1997 from 3.6% of sales in ten-month fiscal 1996 (and 3.8% of sales in unaudited
twelve-month 1996) as (a) we leveraged off of higher sales and (b) interest
rates on our outstanding indebtedness declined.
Income Taxes: The effective tax rate was 37.1% in fiscal 1997 compared to
38.5% in ten-month fiscal 1996 (and 38.4% in unaudited twelve-month 1996).
LIQUIDITY AND CAPITAL RESOURCES
The principal sources of our liquidity have been bank loans, equipment and
mortgage loans, unsecured and subordinated debt, cash generated from our
operations and the proceeds from the initial public offering completed during
the third quarter of fiscal 1998. Following the offering, we believe that, based
upon current levels of operations and anticipated growth, we will be able to
satisfy our ongoing cash requirements through the end of fiscal 2000 primarily
with cash flow from operations, supplemented
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<PAGE> 31
by borrowings under our revolving loan agreement as well as other financing and
loan facilities which may be entered into following the offering.
Bank Loans: Pursuant to our revolving loan agreement with a banking
syndicate led by a Canadian chartered bank executed on March 31, 1999, we have a
revolving credit facility in the aggregate amount of $90.0 million, subject to a
"borrowing base" limitation as defined in the loan agreement. At March 31, 1999,
we had approximately $85.0 million in outstanding loans and $5.0 million of
additional availability, based on our borrowing base at that time. The revolving
loan agreement expires on March 31, 2002. The interest rate under the credit
facility is variable. At March 31, 1999, the annual interest rate was 7.375% for
Canadian dollar borrowings and 9.125% for U.S. dollar borrowings. The revolving
loan agreement:
- is secured by substantially all of our personal (moveable) property and
guaranteed by certain of our subsidiaries;
- imposes certain operating restrictions on us; and
- requires us to maintain specific financial ratios and levels.
See "Description of Certain Indebtedness--Revolving Loan Agreement".
Equipment and Mortgage Loans: We have relationships with several lenders
which have provided financing by way of secured loans, mortgages, conditional
sales contracts and capitalized leases. At March 7, 1999, these financings
totalled $29.3 million, with the largest amount due to a single lender totaling
$16.5 million, and bore interest at annual rates ranging from 5.9% to 13.0%. See
"Description of Certain Indebtedness--Secured Equipment and Mortgage Loans".
Unsecured and Subordinated Debt: We have unsecured and subordinated debt.
At March 31, 1999, this indebtedness totalled $45.9 million, principally
represented by:
- a $15.0 million unsecured and subordinated debenture due 2003 issued to
the Fund, bearing interest at an annual rate of 11.0%;
- a $15.0 million unsecured and subordinated debenture due 2004 issued to
the Fund, bearing interest at an annual rate of 12.0% for the first two
years and 13.0% for the next three years; and
- a $15.0 million unsecured and subordinated debenture due 2004, bearing
interest at an annual rate of 12.5%, issued to Capital d'Amerique CDPQ
Inc.
See "Description of Certain Indebtedness--The Fund" and "Description of Certain
Indebtedness--Capital d'Amerique CDPQ Inc.".
Cash Flow from Operations: For fiscal 1998, our operations generated cash,
before changes in non-cash working capital, of $18.8 million. Our investment in
working capital amounted to $36.0 million, resulting in a net use of $17.2
million, compared to a net use of $4.2 million in fiscal 1997. Cash used in
operating working capital for fiscal 1998 was largely attributed to an increase
in receivables and inventories of $24.5 million and $40.2 million, respectively,
and offset by an increase in accounts payable and accrued liabilities of $27.5
million.
- The increase in receivables was attributed to the increase in sales over
the prior year. The majority of receivables were credit insured.
- The increase in inventories was required to support the planned growth
in sales for fiscal 1999 which we expect to result from (a) the increase
in sales to existing customers, (b) the introduction of new products and
(c) the expansion of our distribution channels.
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<PAGE> 32
- The increase in accounts payable and accrued liabilities was
attributable to the build-up of inventories during fiscal 1998.
While we have been generally unable to fund our growth from operations
only, especially in light of the high levels of capital expenditures incurred
during the past three years, we have been able to fund our growth through bank
loans and other debt and equity financings.
Proceeds from Offerings: The sale of 3,000,000 Class A Subordinate Voting
Shares offered in connection with our initial public offering in June 1998
contributed $25.9 million in new funds. Of this amount, approximately $6.7
million was used to repay some of our secured and unsecured debt, $2.5 million
was used to buy back a stock option owned by the Fund, $0.8 million was used to
pay prepayment penalties and the balance was used to reduce bank indebtedness.
The sale of 444,444 Class A Subordinate Voting Shares offered in a private
placement to Capital d'Amerique CDPQ Inc. in February 1999 contributed $5.0
million in new funds, which were used for general corporate purposes, including
working capital.
CAPITAL EXPENDITURES
Capital expenditures were $2.5 million in fiscal 1995, $6.4 million in
ten-month fiscal 1996, $5.4 million in fiscal 1997, $24.6 million in fiscal 1998
and $11.6 million in first fiscal quarter 1999. The substantial portion of
fiscal 1998 capital expenditures was used to acquire a second dyeing and
finishing plant and purchase new equipment for the knitting, dyeing and
finishing and sewing facilities. We expect that additional capital expenditures
will be required in future years to meet continued growth expectations. We
anticipate spending a total of approximately $30.0 million in fiscal 1999 to
further update production and distribution facilities and enhance the
information systems used to support our growth.
INFLATION AND EXCHANGE RATES
Inflation generally affects us by increasing the interest expense of
floating rate indebtedness and by increasing the cost of labor, equipment and
raw materials. We do not believe that inflation has had any material effect on
our business during the periods discussed herein.
Most of our business is transacted in U.S. dollars. The exchange rate
between Canadian dollars and U.S. dollars has fluctuated significantly over the
last several years. Any strengthening in the value of the Canadian dollar
against the U.S. dollar could result in lower sales and earnings for Gildan when
translated into Canadian dollars.
FINANCIAL INSTRUMENTS
We use interest rate swap arrangements to manage risks from fluctuations in
interest rates and foreign exchange contracts to manage risks from fluctuations
in the exchange rate between Canadian dollars and U.S. dollars. We do not use
derivative financial instruments for trading purposes.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs which use two digits
rather than four to define the applicable year. As a result, date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This programming flaw could cause system failures or miscalculations which
disrupt normal business activities. We have commenced a comprehensive plan to
upgrade all of our management information and other computer systems which are
not yet Year 2000 compliant. These systems include those used to manage
procurement, production, inventory control,
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<PAGE> 33
distribution, finance and accounting functions. Having completed our evaluation
of these systems, we currently estimate that the total costs associated with
making our systems Year 2000 compliant will be approximately $1.0 million, the
majority of which will be incurred in calendar year 1999. These costs will be
expensed as incurred.
As part of our Year 2000 preparations, we are in the process of upgrading
our distribution, inventory control, production and procurement systems so that
they are Year 2000 compliant. We anticipate completing the upgrade by June 1999.
We recently began analyzing the extent of our exposure to risks of Year 2000
non-compliance by third parties with whom we have an ongoing business
relationship, such as suppliers and customers. As part of this process, we are
sending letters to third parties to inquire about their Year 2000 readiness.
However, at this time, we are unable to estimate the extent of material
non-compliance by these parties and the risks we might face as a result. We
intend to complete our analysis and follow-up to these inquiries by May 1999.
In order to ensure that these timetables are met, we have assigned two
full-time employees to work exclusively on the Year 2000 project, and we use the
services of additional staff on an "as needed" basis.
We also employ outside resources, including a consulting firm, to assist us
in evaluating our systems and equipment, and to assist us in implementing
necessary remedial measures. We have completed a full inventory of all items
needing evaluation and have begun our analysis of changes to be made. We expect
to complete all modifications and testing by August 1999.
In addition, as a result of our rapid growth, we plan to install a new
accounting system by September 1999 that is Year 2000 compliant. In case of
unexpected delays in installing this software, we are developing a contingency
plan to make our current accounting software Year 2000 compliant by September
1999. We estimate the costs of implementing the new accounting system to be
approximately $0.5 million. These costs are in addition to the estimated costs
directly related to our Year 2000 compliance efforts.
We are designing contingency plans for worst case scenarios regarding
potential Year 2000 problems. We expect these contingency plans to be in place
by the end of September 1999. See "Risk Factors -- Our Operations May Suffer
from Year 2000 Computer Problems".
RECENT ACCOUNTING PRONOUNCEMENTS
In 1997, the Canadian Institute of Chartered Accountants and the Financial
Accounting Standards Board, in a joint project, established identical standards
for the way that public business enterprises report information about operating
segments in interim and annual financial statements. The recommendations of the
Canadian Institute of Chartered Accountants Handbook Section 1701 "Segment
Disclosures" are effective for fiscal years beginning on or after January 1,
1998. Statement of Financial Accounting Standards No. 131, "Disclosures About
Segments of an Enterprise and Related Information" is effective for fiscal years
beginning on or after December 15, 1997.
In June 1998, the Canadian Institute of Chartered Accountants issued
Handbook Section 1540 "Cash Flow Statements". The recommendations are effective
for fiscal years beginning on or after August 1, 1998. Section 1540 establishes
standards for the way that companies report information about the historical
changes in cash and cash equivalents in interim and annual financial statements.
We were not required to, and did not, adopt these sections for our fiscal
1998 consolidated financial statements. These sections had no material effect on
our 1998 consolidated financial statements. We are currently evaluating what, if
any, additional disclosures may be required when we do adopt the recommendations
of these sections.
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<PAGE> 34
BUSINESS
We are a rapidly growing, vertically-integrated manufacturer and marketer
of premium quality branded basic activewear for sale principally into the
wholesale imprinted activewear segment of the North American apparel market. We
manufacture and sell premium quality 100% cotton T-shirts and placket collar
golf shirts as well as premium quality sweatshirts, in a variety of weights,
sizes, colors and styles. In April 1999, we launched a new line of 50%
cotton/50% polyester T-shirts. We expect to begin shipping this new product to
our customers in fourth fiscal quarter 1999. We sell our products as "blanks",
which are ultimately decorated with designs and logos for sale to consumers.
Over the past several years, we have significantly increased our customer
base and increased sales and cash flow. From fiscal 1993 through fiscal 1998,
our sales grew from $30.9 million to $215.4 million and our EBITDA grew from
$2.8 million to $29.8 million, representing compounded annual growth rates of
49.5% and 63.3%, respectively. Sales for first fiscal quarter 1999 were $45.1
million, which represented an increase of 41.8% over sales for first fiscal
quarter 1998.
COMPANY OVERVIEW
We were incorporated on May 8, 1984 pursuant to the Canada Business
Corporations Act under the name of Textiles Gildan Inc. At our inception, we
focused our activities on the manufacture of textiles and produced and sold
finished fabric as a principal product line. However, in 1992, we redefined our
operating strategy and, by 1994, our operations focused exclusively on the
manufacture and sale of activewear for the wholesale distribution market. In
March 1995, we changed our name to Gildan Activewear Inc./Les Vetements de
Sports Gildan Inc. On June 16, 1998, in conjunction with our initial public
offering, we filed Articles of Amendment to, among other things, remove the
private company restrictions contained in our charter documents and change the
structure of our authorized share capital.
OPERATING STRATEGY
We believe that our focus on manufacturing selected product lines with
premium quality features and selling our products at competitive prices, coupled
with an innovative marketing strategy emphasized by our controlled distribution,
is the reason we have been able to rapidly increase our market presence. We
attribute our strong operating performance to our strategy which is composed of
the following principal components:
- EMPHASIS ON PREMIUM QUALITY PRODUCTS. We offer our products in a wide
variety of weights, sizes, colors and styles. All of our T-shirts are
made with pre-shrunk cotton fabric, feature top-stitched seamless
collars and double stitched hems, and are quarter-turned to eliminate
the center crease which would otherwise result from the production
process. To ensure the premium quality of our products, we apply
stringent quality control procedures at all stages of the production
process, both at our facilities and those of our contractors. We believe
that our commitment to consistently produce premium quality, value-added
products at competitive prices enhances our long-term relationships with
our customers.
- COMPETITIVE PRICING AND LOW-COST OPERATIONS. We believe that our
combination of competitive prices and premium quality products provides
superior value to our customers. We are able to price our products
competitively because of our success in maintaining low production and
operating costs. We accomplish this by:
- locating the majority of our sewing operations in the Caribbean Basin
and Central America, where we benefit from lower labor costs;
- using only modern, automated facilities;
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<PAGE> 35
- locating our knitting and dyeing facilities in the Province of Quebec,
where we benefit from an abundant supply of low-cost energy and water,
resources necessary for the manufacturing, dyeing and finishing of
fabric; and
- selling to the wholesale channel which enables us to use a small sales
force and avoid the costs and complexities of selling to the retail
channel.
- CONTROLLED DISTRIBUTION TO THE WHOLESALE CHANNEL. While our major
competitors focus primarily on sales directly to the retail apparel
industry, we market our products through wholesale channels of
distribution, which is principally comprised of distributors and major
garment imprinters. As part of this controlled distribution strategy, we
limit the number and monitor the quality of our distributors, which
comprise the largest component of our customer base. We sell only to the
largest garment decorators, and direct orders from smaller ones to our
customers. We believe that this focused strategy enables us to:
- foster strong customer and brand loyalty among our distributors and
decorators;
- establish control over the marketing and orderly distribution of our
products;
- effectively plan and predict production; and
- manage expected increases in demand.
- MODERN, VERTICALLY-INTEGRATED OPERATIONS. We believe that our modern,
vertically-integrated operations, which have been designed and developed
to support our operating strategy, provide us with the flexibility and
efficiency to meet our customers' needs. We intend to continue to
acquire modern, automated equipment for all aspects of our manufacturing
process to maximize production and achieve high efficiency rates. Over
the past three fiscal years, we have spent $36.4 million on such
improvements. Our operations are vertically-integrated, which means that
we knit, dye, finish, cut and sew our products at our facilities. This
enables us to maximize profit margins and monitor quality at all stages
of the production process.
- EXPERIENCED MANAGEMENT TEAM. Our top five senior executives
collectively have more than 100 years of industry experience. Our
strategy of locating all of our capital and technology-intensive textile
manufacturing operations within one hour of our executive offices
facilitates a proactive management philosophy.
GROWTH STRATEGY
We have a comprehensive long-term strategy to sustain our strong unit and
dollar sales growth. The key elements of this strategy are:
- INCREASING SALES TO NEW AND EXISTING CUSTOMERS. To increase sales, we
plan to:
- continue to develop new business with our existing customers as a
result of our enhanced production and distribution capacity and the
introduction of new products;
- pursue additional wholesale distributors which we believe will
generate substantial sales growth without adversely affecting sales to
our existing customers; and
- further develop our "mill direct" program which targets some of the
largest screenprinters and embroiderers in North America which, due to
their size, require larger quantities than distributors can typically
provide. Our mill direct customers include, among others, Nike Canada
Ltd. and Fortune Fashion, Inc., a major supplier of decorated T-shirts
to The Walt Disney Company.
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- BROADENING PRODUCT OFFERING. We also intend to increase our sales to
existing customers through the introduction of complementary product
lines and new products. In fiscal 1999, in response to customer demand,
we introduced:
- a new lightweight T-shirt, the Famous T(TM), to enable Gildan to
effectively compete in the lower priced market segments;
- placket collar golf shirts, which we believe to be one of the fastest
growing product segments in the imprinted activewear industry; and
- a new 50% cotton/50% polyester T-shirt, the Ultra-Blend(TM), which is
our initial entry into the blended T-shirt market.
- EXPANDING PRODUCTION AND DISTRIBUTION CAPACITY. To satisfy the
increasing demand for our existing products and to introduce new
products, we are expanding our production and distribution facilities
through equipment acquisitions and new facility construction. Under our
investment plans, in fiscal 1999, we:
- added knitting, dyeing and finishing machines and plan to add
additional machinery;
- expanded the capacity of our Company-operated sewing facilities in
Honduras by acquiring one of our sewing contractors, moving one of our
operations into a larger facility and continuing to invest in new
sewing equipment;
- began building a facility in Barbados, which we expect to be
operational by summer 1999, to provide additional sewing capacity for
placket collar golf shirts;
- opened a 210,000-square foot distribution center in Miami, which
replaced our 67,000-square foot distribution center in Champlain, to
service our U.S. market and targeted Western European markets; and
- will open a 60,000-square foot distribution center in Ville
Saint-Laurent to service our Canadian markets.
- ENTERING NEW MARKETS. We plan to use the same strategy which has led to
our success in North America to expand our selling territory to include
Western Europe, with an initial emphasis on the United Kingdom. We
anticipate shipping our products to distributors in Western Europe by
fiscal 2000.
INDUSTRY OVERVIEW
We focus principally on sales of T-shirts, placket collar golf shirts and
sweatshirts, in "blank" form, to the wholesale imprinted activewear market.
"Imprinted" activewear is typically imprinted or embroidered with a logo, design
or character before it reaches the consumer. Imprinted activewear is either
branded or private label. Branded products reach consumers carrying the
manufacturer's label, whereas products sold on a private label basis reach
consumers carrying the brand name of the customer. Based on publicly available
information, we believe that sales of imprinted T-shirts at the wholesale level
in the United States were US$6.1 billion for 1997 and are growing at an annual
rate of 4-5%. We estimate that blended fabric T-shirts, such as 50% cotton/50%
polyester T-shirts, comprise approximately 33% of this market.
We believe that growth in the imprinted activewear market has been driven
primarily by:
- significant development of the entertainment/sports licensing and
merchandising businesses;
- substantial growth in the ad specialty business, for example, corporate
advertising;
- a greater use and acceptance of casual dress in the workplace;
- a growing consumer preference for apparel with a relaxed feel and look;
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<PAGE> 37
- a substantial increase in tourism; and
- an increasing emphasis on physical fitness.
Over the past several years, casual wear has become increasingly acceptable
in a wider array of settings. In the workplace, for example, many employers have
adopted more flexible dress codes, resulting in greater consumer demand for
casual wear, including T-shirts, knit shirts and sweatshirts. Based on publicly
available information, we believe that 90% of United States companies now allow
their employees to wear casual clothing to work, either regularly or on special
occasions, as compared to 63% in 1992. In addition, a growing emphasis on
physical fitness has spurred a substantial increase in sports participation and,
as a result, has created a heightened demand for activewear. For example, based
on published reports, from 1987 to 1996, the number of people in the United
States participating more than once in the ten most popular sports increased by
approximately 36.8 million. Furthermore, significant improvements in activewear
apparel, ranging from enhanced product characteristics--pre-shrunk 100% cotton
fabrics, improved fabric weight, blends and construction--to increased product
variety--including new sizes, colors and styles--have enhanced consumer appeal.
We believe these trends will continue to generate demand for activewear products
for the foreseeable future.
The activewear market is characterized by low fashion risk compared to many
other apparel markets. While opportunity exists for product innovations and
differentiation, basic garment styles generally are not driven by trends or
fads. The activewear industry is also characterized by significant barriers to
entry, including:
- substantial capital expenditures required for vertically-integrated
production;
- large investments in inventories and working capital;
- strong supplier relationships; and
- established customer relationships.
PRODUCTS
Historically, we have manufactured two principal product lines: premium
quality 100% cotton T-shirts and premium quality 90% cotton/10% polyester
sweatshirts in a variety of weights, sizes, colors and styles. We market and
sell these products under the Gildan Activewear(TM) brand name and have
historically classified them into three categories: midweight, heavyweight and
superweight. In 1999, we introduced a new lower weight T-shirt, the Famous
T(TM). As part of our growth strategy, in fiscal 1999 we increased our product
offerings to include 100% cotton placket collar golf shirts. In April 1999, we
launched a new 50% cotton/50% polyester T-shirt, the Ultra-Blend(TM), which we
expect to begin shipping to our customers in fourth fiscal quarter 1999. All of
our products carry a sub-brand name, for example, Ultraweight Cotton(TM), which
has been developed to reinforce our emphasis on premium quality. The following
table sets forth, for the periods indicated, certain information regarding sales
of our activewear products.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
SEPTEMBER 29, 1996 OCTOBER 5, 1997 OCTOBER 4, 1998
----------------------------- ------------------------------ ------------------------------
GROSS AVG. SALES GROSS AVG. SALES GROSS AVG. SALES
DOZENS PRICE PER DOZENS PRICE PER DOZENS PRICE PER
SALES SOLD DOZEN SALES SOLD DOZEN SALES SOLD DOZEN
------- ------ ---------- -------- ------ ---------- -------- ------ ----------
(IN THOUSANDS, EXCEPT PRICE PER DOZEN)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
T-shirts............. $69,979 1,899 $ 36.85 $102,367 2,950 $ 34.70 $195,623 5,721 $ 34.19
Sweatshirts.......... 10,066 85 118.42 17,477 158 110.61 19,805 195 101.56
------- ----- -------- ----- -------- -----
Total/Avg............ $80,045 1,984 $119,844 3,108 $215,428 5,916
======= ===== ======== ===== ======== =====
<CAPTION>
FIRST FISCAL QUARTER ENDED
JANUARY 3, 1999
-----------------------------
GROSS AVG. SALES
DOZENS PRICE PER
SALES SOLD DOZEN
------- ------ ----------
<S> <C> <C> <C>
T-shirts............. $40,728 1,192 $ 34.17
Sweatshirts.......... 4,381 41 106.85
------- -----
Total/Avg............ $45,109 1,233
======= =====
</TABLE>
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T-SHIRTS
In fiscal 1998, T-shirts represented approximately 90% of our sales. We
produce T-shirts in a variety of weights, sizes, colors and styles, including
short and long-sleeved shirts, henleys and pocketed and mockneck products. Our
primary T-shirt offerings are the Famous T(TM) T-shirt (4.8 oz. per sq. yd.),
the Gildan Activewear Heavyweight Cotton(TM) T-shirt (5.3 oz. per sq. yd.), the
recently introduced Gildan Activewear Ultra-Blend(TM) T-shirt (5.5 oz. per sq.
yd.), the Gildan Activewear UltraCotton Heavyweight(TM) T-shirt (6.1 oz. per sq.
yd.) and the Gildan Activewear SupraCotton Superheavyweight(TM) T-shirt (7.0 oz.
per sq. yd.). Each of these T-shirt lines incorporates styles with enhanced
features such as quarter-turned creaseless fronts, shoulder to shoulder tape
reinforcement, double stitching, tubular seamless neck and body, and 38 stitches
per inch.
SWEATSHIRTS
In fiscal 1998, sweatshirts represented approximately 10% of our sales. We
produce sweatshirts in a variety of weights, sizes, colors and styles. Our
primary sweatshirt offerings are the Gildan Activewear Heavyweight Cotton(TM)
Sweatshirt (7.0 oz. per sq. yd.), the Gildan Activewear UltraCotton
Heavyweight(TM) Sweatshirt (9.0 oz. per sq. yd.) and the Gildan Activewear
SupraCotton Superheavyweight(TM) Sweatshirt (12.0 oz. per sq. yd.).
PLACKET COLLAR GOLF SHIRTS
In fiscal 1999, we introduced placket collar golf shirts in a variety of
weights, sizes, colors and styles. Our placket collar golf shirts include the
Gildan Activewear UltraCotton Heavyweight(TM) Placket Collar Golf Shirt (6.1 oz.
per sq. yd.) in jersey fabric, with or without a pocket, and the Gildan
Activewear UltraCotton Heavyweight(TM) Placket Collar Golf Shirt (7.0 oz. per
sq. yd.) in pique fabric.
MARKETING AND SALES
We market our products directly to our customers through our sales force.
Unlike our major competitors, we do not maintain regional sales offices.
Instead, our sales personnel work from home offices. This allows us to incur
lower selling expenses than many of our major competitors. Sales management is
divided into two divisions: Canada and international, which is comprised
principally of the United States and Western Europe.
Our marketing strategy concentrates exclusively on the wholesale
distribution channel catering to screenprinters, embroiderers and decorators. We
promote ourselves through appearances at tradeshows and magazine advertising. We
also engage in various forms of co-operative advertising with our major
customers, including print advertising, catalogs and mailings. We believe that
we have been innovative in maximizing the impact of our marketing to create a
strong awareness of our products in the screenprinter and embroiderer market.
CUSTOMERS
In fiscal 1998, we sold our products in the United States and Canada, which
accounted for approximately 86% and 14% of total sales, respectively. We are
also developing a network of distributors in Western Europe and we expect to
ship our products to distributors in the United Kingdom in fiscal 2000. We
currently sell our products to approximately 100 customers. In fiscal 1998, our
top three customers, Broder Bros., Co., Pluma Corporation (the Frank L. Robinson
Company subsidiary and the Stardust Corporation subsidiary) and Alpha Shirt,
accounted for 26.6%, 9.6% and 7.4% of total sales, respectively, and our top ten
customers accounted for 68.5% of total sales.
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Approximately 95% of total sales in fiscal 1998 were made through our
wholesale distributors. The balance of sales consisted of sales to our mill
direct customers, which include some of the largest screenprinters and
embroiderers in North America and, on a private label basis, Nike Canada Ltd.
and Boca/Au Coton. Our screenprinter and embroider customers are capable of
purchasing our minimum container order sizes (for example, 5,000-6,000 dozen) in
accordance with our terms. These sales are made in cooperation with our
wholesale distributors, which provide smaller fill-in orders. Under the mill
direct program, we will supply our products to Fortune Fashion, Inc., a major
supplier of decorated T-shirts to The Walt Disney Company.
We do not have any purchase agreements with our wholesale distributor
customers, except for a contract we entered into with Pluma Corporation in
connection with its acquisitions of Frank L. Robinson Company and Stardust
Corporation. Instead, we meet with these customers at the beginning of each
fiscal year to ascertain their projected requirements and then plan our
production and marketing strategy accordingly. Our wholesale distributor
customers then send purchase orders to us during the course of the fiscal year.
Our experience with this practice has been favorable, since customer projections
have historically been reliable indicators of actual orders.
RAW MATERIALS
Cotton yarn is the principal raw material we use in the manufacture of our
products. In fiscal 1998, we purchased all of our yarn from U.S.-based spinners.
Although Parkdale Mills Inc., Mayo Yarns, Inc. and Frontier Spinning Mills, LLC
accounted for approximately 56.0%, 23.0% and 16.5%, respectively, of our yarn in
fiscal 1998, we believe that the yarn we use may be purchased from a number of
sources. Our practice has been to enter into one-year yarn supply agreements at
the beginning of each fiscal year based on a projected budget. This allows us to
fix our price of yarn for the year, and, consequently, to insulate the largest
part of our raw material cost from adverse price fluctuations. Each of our
supply agreements require the spinner to supply, and Gildan to purchase, a fixed
quantity of yarn for the year at a fixed price. To date, we have not experienced
any significant shortages of raw materials, even during periods of cotton
shortage.
We also purchase chemicals and dyestuff, mainly from Clariant International
AG, Bayer AG and BASF Aktiengesellschaft, and purchase thread from a variety of
suppliers. These raw materials have historically been available in adequate
supply.
MANUFACTURING OPERATIONS AND FACILITIES
We currently operate nine major facilities:
- a knitting plant in Ville Saint-Laurent, Quebec, which knits all of the
fabric from which our products are manufactured and also houses our
executive offices;
- a dyeing and finishing plant in Montreal, Quebec;
- a dyeing and finishing plant in Valleyfield, Quebec;
- a cutting plant in Malone, New York, which cuts all of the fabric from
which our products are manufactured;
- a sewing plant in Montreal, Quebec, which sews all products for sale in
Canada;
- three sewing plants in Honduras; and
- a distribution center in Miami, Florida.
In addition to the nine major facilities we operate, we use the sewing
services of ten contractors in the Caribbean Basin and Mexico on an exclusive
basis. We expect the recently acquired Montreal distribution center, which will
service all our Canadian sales, to be fully operational by the end of April
1999.
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<PAGE> 40
The following diagram illustrates the present flow of our products through
our vertically-integrated operations.
DIAGRAM
- -------------------------
* We expect the Montreal distribution center to be fully operational by the
end of April 1999.
TEXTILE OPERATIONS
Knitting. We conduct all of our knitting operations at our central
knitting facility in Ville Saint-Laurent, Quebec. We operate circular knitting
machines at this facility, producing jersey, fleece and ribbing in body-sized
fabrics in tubular form using cotton and cotton/polyester yarns. Substantially
all of our knitting equipment is less than five years old, and we believe that
such equipment is among the latest technology available to the knitting
industry. As part of our expansion strategy, we will continue to acquire
additional knitting equipment.
Dyeing and Finishing. Knitted fabric is batched for bleaching and dyeing
and is taken to our dyeing and finishing facilities in Valleyfield and Montreal.
We have invested approximately $30 million to acquire, modernize and expand
operations at these facilities. These capital expenditures have resulted in a
substantial improvement in the quality of fabrics and a significant reduction in
the percentage of redyes, yield losses and claims with respect to off-shade,
unevenness and roping flaws in the fabric. These capital improvements have also
been directed to modernize production planning and control. These facilities
have been very effective in meeting our needs.
CUT AND SEW OPERATIONS
Cutting. All of the fabric produced at the Montreal and Valleyfield plants
is shipped to our automated cutting facility in Malone, New York, which began
operations in July 1994 and serves as the cutting department for all of our
sewing requirements.
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<PAGE> 41
Sewing. We conduct our sewing operations for products sold in Canada at
our 54,000-square foot facility in Montreal. The facility is automated and
operates on a group incentive basis designed to maximize productivity and output
while maintaining our rigorous quality control system. This plant provides us
with the ability to effectively service the Canadian marketplace.
We conduct offshore sewing operations at thirteen facilities, three of
which we operate out of leased premises located in Honduras. Of the remaining
ten facilities, four are located in Honduras, two in El Salvador, two in Haiti,
one in Mexico and one in Nicaragua. These thirteen facilities provide us with
substantially all of our non-Canadian market sewing assembly requirements. Most
of the ten facilities owned by third parties are used by us under exclusive
contract arrangements. Our contractual arrangements with these independent
operators have initial terms ranging between one and three years (with
provisions for renewal), and provide us with a predetermined price and
production output as well as the right of reasonable access to enforce our
quality control procedures. We are currently negotiating the purchase of the
operations of one of our Honduran contractors. Our offshore sewing management
team, headquartered in San Pedro Sula, Honduras, maintains regular production
and quality reviews at all thirteen of the offshore facilities. We expect to
begin operations at a sewing facility in Barbados, which will provide additional
sewing capacity for placket collar golf shirts, in summer 1999.
We have invested significant managerial resources in ensuring that the
working conditions at our offshore sewing facilities meet or exceed the
standards imposed by Canadian occupational health and safety laws. We
contractually obligate our contractors to follow prescribed employment policies
requiring, for example, minimum employee age of sixteen years and a clean and
safe work environment. To ensure that these employment standards are
appropriate, we have worked with the Canadian International Development Agency,
a Canadian federal governmental agency, to secure the services of professionals
who specialize in social/gender analysis and environmental audits with respect
to developing nations.
DISTRIBUTION OPERATIONS
During fiscal 1998, we distributed all of our products to our customers
directly from our 67,000-square foot distribution center in Champlain, New York.
In June 1998, we began leasing a 210,000-square foot facility located in Miami,
Florida. This facility brings our distribution operations closer to the main
port of entry of most of our products into the United States from the Caribbean
Basin where they are sewn. This facility became operational in October 1998 and
has replaced the Champlain facility which will close in April 1999. As a result
of our rapid growth, we plan to replace the Miami distribution center with a
larger facility in the same geographic region in calendar year 2000.
To better service our Canadian customers, in November 1998 we acquired a
60,000-square foot distribution center in Ville Saint-Laurent, Quebec. This
distribution center is expected to be fully operational by the end of April
1999.
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<PAGE> 42
PROPERTIES
The following table sets forth the location, use and approximate size of
each of our principal properties, and indicates whether it is owned or leased,
and if leased, when the lease expires.
<TABLE>
<CAPTION>
APPROXIMATE AREA OWNED OR
LOCATION USE IN SQUARE FEET LEASED LEASE EXPIRATION(1)
- -------------------------------- ----------------------------- ---------------- -------- -------------------
<S> <C> <C> <C> <C>
Ville Saint-Laurent, Quebec Executive offices 17,000 Leased 2016
Knitting facility 93,000 Leased 2016
Bridgetown, Barbados Executive office 11,000 Owned n/a
Sewing facility(2) 11,000 Owned n/a
Valleyfield, Quebec Dyeing and finishing facility 63,000 Owned n/a
Montreal, Quebec Dyeing and finishing facility 88,000 Owned n/a
Malone, New York Cutting facility 87,000 Leased 2003
Montreal, Quebec Sewing facility 54,000 Leased (3)
San Pedro Sula, Honduras Sewing facility 43,000 Leased 2012
El Progreso, Honduras Sewing facility 73,000 Leased 2013
Choloma, Honduras Sewing facility 34,000 Leased 2001
Ville Saint-Laurent, Quebec Distribution facility(4) 60,000 Owned n/a
Champlain, New York Distribution facility(5) 67,000 Leased 1999
Miami, Florida Distribution facility 210,000 Leased 2000
</TABLE>
- -------------------------
(1) Includes renewals.
(2) This facility is under construction. We expect to begin production of
placket collar golf shirts at this facility in summer 1999.
(3) This facility is comprised of three buildings with separate leases which
expire in 2002, 2003 and 2004.
(4) We plan to begin distribution operations at this facility during April 1999.
(5) Distribution operations at this facility are winding down and will cease by
the end of April 1999.
We believe that all of these facilities, whether owned or leased, are well
maintained and in good operating condition. We expect to accommodate our
anticipated sales growth through ongoing maintenance and improvement of our
manufacturing facilities, together with the opening of our Miami distribution
center and the planned openings of our new sewing plant in Barbados and our
Montreal distribution center.
SUBSIDIARIES
We have eight wholly-owned subsidiaries:
- Gildan Activewear (Barbados) Inc., a Barbados corporation, which is the
holding company for Gildan Activewear San Jose, S.A., Gildan Activewear
El Progreso, S.A. and Winners Manufacturing, S.A.;
- Gildan Activewear Properties (BVI) Inc., a British Virgin Islands
corporation, which owns the facility in Barbados that will house both
the executive offices of Gildan Activewear SRL and the sewing facility
for placket collar golf shirts;
- Gildan Activewear El Progreso, S.A., a Honduras corporation, which
operates a sewing facility in Honduras;
- Gildan Activewear Malone, Inc., a New York corporation, which cuts
fabric and also operates the Champlain distribution center. This
distribution center will, however, be phased out by the end of April
1999;
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<PAGE> 43
- Gildan Activewear Miami, Inc., a Florida corporation, which operates the
Miami distribution center;
- Gildan Activewear San Jose, S.A., a Honduras corporation, which operates
a second sewing facility in Honduras;
- Gildan Activewear SRL, a Barbados corporation, which is responsible for
all of our non-Canadian sales and related activities; and
- Winners Manufacturing, S.A., a recently acquired Honduras corporation,
which operates a third sewing facility in Honduras whose name will be
changed to Gildan Activewear San Miguel, S.A.
QUALITY CONTROL
Our quality control team has adopted strict standards and procedures to
ensure the quality of our products. Our quality control team enforces
plant-specific quality control standards at the facilities we own and monitors
quality control at the facilities run by offshore contractors. As a result of
our quality control team's efforts, we have not experienced any significant
quality claims from our customers or end-users.
MANAGEMENT INFORMATION SYSTEMS
We have invested in information technology as a tool to:
- reduce overall costs;
- enhance the efficiency of our garment design and manufacturing; and
- support the sale and distribution of our products to our customers.
Our production software processes customer orders, schedules production for such
orders and monitors the products ordered during all stages of production, from
knitting to sewing and during packaging and distribution. We believe that our
information technology has been effective in meeting our needs. We have
evaluated various Enterprise Resource Planning (ERP) systems, and, on March 25,
1999 we signed a contract for the implementation, during fiscal 1999 and fiscal
2000, of a new ERP package comprising financial, manufacturing, sales management
and distribution modules. These new systems will enhance our information
technology capabilities which, in turn, will support our planned growth. See
"Management Discussion and Analyses of Financial Condition and Results of
Operations--Year 2000 Compliance".
SEASONALITY
The activewear business is seasonal. Demand for our products is higher
during the third and fourth quarters than in the first two quarters of each
fiscal year. We meet with our customers at the beginning of each fiscal year to
ascertain their projected requirements and then plan our production and
marketing strategy accordingly. Based on these discussions, we produce and store
finished goods inventory in order to meet the expected demand for delivery in
the second half of the fiscal year. This practice enables us to plan for the
expected demand for delivery during the year. Our experience with this practice
has been favorable, as customers' projections have been sufficiently reliable in
the past. However, if after producing and storing inventory in anticipation of
third and fourth quarter deliveries, demand is significantly less than expected,
we may be required to hold inventory for an extended period of time at our
expense, or sell the excess inventory at reduced prices, thereby reducing
profits. See "Risk Factors--Our Industry Is Subject to Seasonality Risks".
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<PAGE> 44
COMPETITION
The wholesale imprinted activewear segment of the North American apparel
market includes a number of significant competitors, and the activewear segment
overall is extremely competitive. Our primary competitors are the major
U.S.-based manufacturers of basic branded activewear for the wholesale and
retail channels. These manufacturers include Anvil Knitwear, Inc., the
Bassett-Walker division of VF Corporation, the Delta Apparel division of Delta
Woodside Industries, Inc., Fruit of the Loom, Inc., the Hanes Corporation
division of Sara Lee Corporation, the Jerzees division of Russell Corporation,
Oneita Industries Inc., and Tultex Corporation. Some of these manufacturers have
moved the majority of their sewing operations offshore to reduce operating costs
by lowering labor costs. We also compete with manufacturers of activewear
outside the United States, which may have substantially lower labor costs.
We compete primarily on the basis of quality and price. We produce only
premium quality products. We are able to price our products competitively
because of our success in maintaining low production and operating costs. We
accomplish this by:
- locating the majority of our sewing operations in the Caribbean Basin
and Central America, where we benefit from lower labor costs;
- using only modern, automated facilities;
- locating our knitting and dyeing and finishing facilities in the
Province of Quebec, where we benefit from an abundant supply of low-cost
energy and water, resources necessary for the manufacturing, dyeing and
finishing of fabric; and
- selling to the wholesale channel which enables us to us to use a small
sales force and avoid the costs and complexities of selling to the
retail channel.
Our vertically-integrated operations allow us to produce activewear from
our own fabrics, further maximizing profit margins, reducing transportation
costs and enabling us to monitor quality. Furthermore, we have been innovative
in product development, incorporating premium quality features without
compromising our comparative price advantage.
Our ability to remain competitive in the areas of quality, price,
marketing, product development, manufacturing, distribution and order processing
will, in large part, determine our future success. Anticipated changes in the
regulatory environment affecting the textile and apparel industries may also
affect the competitive pressures facing us. See "--Trade Regulatory
Environment".
TRADE REGULATORY ENVIRONMENT
The textile and apparel industries in both the United States and Canada
have historically received a relatively higher degree of international trade
protection than some other industries. However, this protection is diminishing
as a result of the implementation of trade agreements reached in the last ten
years. So far, we have been able to adapt to this changing international
regulatory climate. In order to maintain our competitiveness in the future, we
must continue to adapt to future changes in trade protection, including changes
reflected in existing trade agreements and changes that may be decided
unilaterally by the governments of the countries and regions in which we and our
competitors operate. We have structured our operations in order to minimize the
impact that the current regulatory trade regime would have on the movement of
inputs and the sale of final products internationally. For example, by cutting
fabric in the United States, we can use favorable tariff provisions that would
be unavailable if the cutting were done in Canada. However, we believe that,
taken as a whole, the current regulatory trade regime is no more burdensome to
us than to our competitors.
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<PAGE> 45
WORLD TRADE ORGANIZATION
In 1995, the Agreement on Textiles and Clothing came into effect, requiring
importing countries, including the United States and Canada, to eliminate quotas
on imports of textiles and apparel from exporting countries by 2005.
The Agreement on Textiles and Clothing establishes a new set of criteria to
be applied by World Trade Organization member nations against other World Trade
Organization members during the ten-year phase-in period. This regime permits
the temporary imposition of additional quotas on textile and apparel exports in
the event such exports are causing, or threatening to cause, serious damage to
the industry in the importing nation. Although China and Taiwan currently remain
outside the World Trade Organization, both are seeking membership. If either
China or Taiwan were to be admitted into the World Trade Organization on terms
that did not allow for the imposition of quotas against their products, this
could have a material adverse effect on us because it would increase competition
with products from countries with low labor costs.
The United States maintains bilateral textile quota agreements under the
Agreement on Textiles and Clothing with the countries in which Gildan assembles
its garments, except Mexico. See "--NAFTA". None of our product categories is
currently subject to quotas into the United States under these bilateral
agreements. It is possible that during the World Trade Organization quota
phase-out period, the United States could impose quotas on some or all of our
products from these countries in conformity with its World Trade Organization
obligations. Our Caribbean-made products are not subject to quotas in Canada, as
Canada does not have bilateral textile quota agreements with the Caribbean
countries in which we produce garments.
The World Trade Organization also obtains commitments from all members to
reduce tariffs over a ten-year period. The United States is committed to tariff
reductions in the textile and apparel sector, but, compared to other industries,
these reductions are very small, and textiles and apparel remain one of the most
highly tariff-protected U.S. industries. Because our cutting operations are
performed in the United States, we are able to take advantage of the duty
deduction on finished garments imported into the United States under sub-heading
9802.00.80, Harmonized Tariff Schedules of the United States (formerly item
807.00, Tariff Schedules of the United States) for the value of the fabric cut
in the United States and sewn outside the United States. The dutiable portion of
the garment is assessed with duty at the Most Favored Nation rates bound in
accordance with the World Trade Organization obligations, except for goods sewn
in Mexico or Canada, which are subject to NAFTA rates, as discussed below. When
such garments are then sent to Canada from the United States, they must pay the
full Most Favored Nation rate of duty, which is currently 21%, but are eligible
for duty drawback on the duty paid into the United States on Caribbean imports.
NAFTA
NAFTA was implemented on January 1, 1994. This agreement establishes a free
trade area among the United States, Mexico and Canada. The United States and
Canada had previously implemented a bilateral free trade agreement which was
incorporated into NAFTA. None of the benefits of NAFTA applies to our goods sewn
outside of the three NAFTA countries and exported to the United States for
distribution.
All NAFTA-originating merchandise was removed from quota upon
implementation on January 1, 1994. NAFTA-originating merchandise generally
requires goods to be made in a NAFTA country from the yarn stage forward. In
other words, the yarn must be spun or extruded in a NAFTA country, the fabric
must be woven or knitted in a NAFTA country, and the apparel must be cut and
assembled in a NAFTA country to be considered NAFTA-qualifying. Certain
exceptions and additional criteria for
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<PAGE> 46
qualification to these requirements are set forth in NAFTA. Because we knit our
fabric in Canada from United States yarn, our garments sewn in either Canada or
Mexico are NAFTA-qualifying and quota free. Our garments sewn in facilities
located offshore, other than Mexico, do not qualify for any of the benefits of
NAFTA, including preferential tariff treatment.
NAFTA provides for the eventual unrestrained trade in all non-NAFTA
originating textiles and clothing among the three nations by 2004. Only goods
from Mexico were previously under quota into the United States, and there were
no quotas on textile and apparel goods traded between Canada and the United
States. Some non-NAFTA originating textile and apparel goods from Mexico
exported to the United States were immediately removed from quota, other items
will be integrated in three stages, January 1, 1994, January 1, 2001 and January
1, 2004.
NAFTA sets forth a schedule to provide duty-free trade for textile and
apparel goods originating in Canada, the United States or Mexico. The tariffs
for NAFTA-originating textiles and apparel traded between the United States and
Canada were eliminated effective January 1, 1998, pursuant to the tariff
phase-out schedule carried over into NAFTA from the previous United
States-Canada Free Trade Agreement. Thus, our Canadian-sewn goods imported into
the United States were duty free as of January 1, 1998.
The tariffs on some Mexican NAFTA-originating products, including our
products, were eliminated on January 1, 1994 for imports into the United States
and Canada. Other NAFTA-originating products were subject to staged duty
reductions effective on January 1, 1994 and gradually phased-out over a six-or
ten-year period.
Non-NAFTA originating apparel goods cut or sewn in the NAFTA territory from
non-NAFTA originating yarn or fabric are entitled to receive NAFTA duty rates up
to "tariff preference levels". A tariff preference level is a quota which allows
non-NAFTA originating goods to receive the same duty treatment as qualifying
goods until that quota is reached. There is no provision in NAFTA for the
removal of these limits, although certain U.S. interests are seeking to
renegotiate certain of the tariff preference levels.
FUTURE TRADE AGREEMENTS
NAFTA may be expanded in the future to include other countries. Both Mexico
and Canada have implemented free trade agreements with Chile. The United States
has announced its intention to expand the scope of NAFTA, with Chile being the
first country to join. Recent efforts have also been made by the United States
to extend the benefits of NAFTA to the CBI countries. It is not known whether
this legislation will come into effect nor what its terms will be. Under all
pending legislative proposals, there would be no duty on goods sewn in CBI
countries upon entry into the United States if the fabric were knit in the
United States from yarn spun in the United States. The adoption of this
legislation in the United States could adversely affect our operations because
we knit all of our fabric in Canada. Thus, all of our goods sewn in the
Caribbean and subsequently exported to the United States would remain subject to
duties whereas some of our competitors that knit their fabric in the United
States from yarn spun in the United States would no longer be subject to these
duties. This outcome would give an advantage to some of our competitors.
In addition, the Free Trade Agreement of the Americas is moving forward.
This agreement would open a free trade area among the 34 nations of the western
hemisphere. Negotiations have begun and are slated to end in 2005.
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EMPLOYEES
At March 31, 1999, we employed approximately 3,400 full-time employees. Our
sewing contractors in Honduras, Mexico, Haiti, El Salvador and Nicaragua employ
approximately 3,400 additional persons. Of our 3,400 full-time employees,
approximately 250 are covered by collective bargaining agreements. Approximately
135 employees at the Valleyfield dyeing and finishing facility are covered by a
collective bargaining agreement that expires on October 31, 2001 and
approximately 115 employees at the Montreal dyeing and finishing facility are
covered by a collective bargaining agreement that expires on December 31, 2001.
We consider our relations with our employees to be very good and, as of the date
of the prospectus, we have not experienced any work stoppages that have had a
material impact on our operations.
INTELLECTUAL PROPERTY
We own several registered trademarks, including, among others, "Gildan" in
Canada and the United States, the Gildan "logo" in Canada, and "Gildan
Activewear" in several countries in Europe, Central America, South America and
Asia and in Australia. Applications for the registration of a number of other
trademarks, including "Gildan Activewear", are pending in Canada, the United
States and several other countries.
We believe that the rights to our trademarks are significant assets in
Canada and the United States. We have and intend to continue to maintain our
trademarks and the relevant registrations, and will actively pursue the
registration of trademarks in Canada, the United States and abroad.
ENVIRONMENTAL REGULATION
All of our operations are subject to various environmental and occupational
health and safety laws and regulations. Because we monitor environmental issues,
we believe that we are in compliance with the regulatory requirements of those
jurisdictions in which our facilities are located. We will continue to make
expenditures to comply with these requirements, and we do not believe that
compliance will have a material adverse effect on our business. As is the case
with manufacturers in general, if a release of hazardous substances occurs on or
from our properties or any associated offsite disposal locations, or if
contamination from prior activities is discovered at any of our properties, we
may be held liable. While the amount of such liability could be material, we
endeavor to conduct our operations in a manner that reduces such risks.
LEGAL PROCEEDINGS
There are no material legal proceedings pending against us.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning our directors
and executive officers at April 14, 1999.
<TABLE>
<CAPTION>
NAME AND MUNICIPALITY OF RESIDENCE AGE POSITION
- ----------------------------------------- --- -----------------------------------------
<S> <C> <C>
H. Gregory Chamandy...................... 40 Chairman of the Board and Chief Executive
Montreal, Quebec, Canada Officer
Glenn J. Chamandy........................ 37 Director, President and Chief Operating
Town of Mount Royal, Quebec, Canada Officer
Edwin B. Tisch........................... 61 Director, Executive Vice President,
Hampstead, Quebec, Canada Manufacturing
William H. Houston III(3)................ 64 Director
Memphis, Tennessee, United States
Daniel Laporte(1)(2)(3).................. 52 Director
Westmount, Quebec, Canada
Norman M. Steinberg(1)(2)(3)............. 49 Director
Cote St-Luc, Quebec, Canada
Robert M. Baylis(1)...................... 60 Director
Rowayton, Connecticut, United States
Richard P. Strubel(2).................... 59 Director
Chicago, Illinois, United States
Gino Martel.............................. 40 Secretary
Montreal West, Quebec, Canada
Shirley Chamandy......................... 60 Treasurer
Montreal, Quebec, Canada
Ken Cieply............................... 44 Vice President, Finance and
Administration
Hampstead, Quebec, Canada
George Sam Yu Sum........................ 41 Vice President, Operations
Hampstead, Quebec, Canada
David Cherry............................. 42 President of Gildan Activewear SRL
Bridgetown, Barbados
Barry H. Mademann........................ 59 Vice President, Textile Manufacturing
Baie D'Urfe, Quebec, Canada
Francois Vinette......................... 43 Vice President, Information Technology
Dollard-des-Ormeaux, Quebec, Canada
Ira Kaminsky............................. 57 President of Gildan Activewear El
Progreso,
San Pedro Sula, Honduras S.A., Gildan Activewear San Jose, S.A.
and
Gildan Activewear (Barbados) Inc.
</TABLE>
- -------------------------
(1) Member of the audit committee.
(2) Member of the compensation committee.
(3) Member of the corporate governance committee.
H. Gregory Chamandy is the co-founder of Gildan and has served as Chairman
of the Board and Chief Executive Officer since December 1994, prior to which he
served in various executive capacities
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with Gildan. Mr. Chamandy has been involved in various Chamandy family textile
and apparel businesses for over twenty years. Mr. Chamandy has been a director
of Gildan since 1984.
Glenn J. Chamandy is the co-founder of Gildan and has served as President
and Chief Operating Officer since December 1994, prior to which he served in
various executive capacities with Gildan. Mr. Chamandy has been involved in
various Chamandy family textile and apparel businesses for over eighteen years.
Mr. Chamandy has been a director of Gildan since 1984.
Edwin B. Tisch has served as Executive Vice President, Manufacturing since
April 1998 and was Vice President, Manufacturing from 1987 to 1998. Mr. Tisch
has been involved in the textile and apparel businesses in Canada and Europe for
over thirty years. Mr. Tisch has been a director of Gildan since January 1996.
William H. Houston III has served as an associate with Flanagan Trading
Corporation since 1996 and as a senior consultant with Sandler and Travis Trade
Advisory Services, a firm he joined in 1990. Prior to accepting that position,
he served as U.S. Ambassador/Chief Textile Negotiator for the United States
Trade Representative during 1987 and 1988. He also worked with Sparks Companies,
Inc., an international consulting firm specializing in the agricultural sector,
during 1994 and 1995, and continues to operate World Trade Link, an
international business consulting firm he founded in 1988. He is a past
president of the Cotton Foundation and the Delta Council. Mr. Houston has been a
director of Gildan since November 1997.
Daniel Laporte has served as Vice President, Investment for the Fund, one
of the largest venture capital funds in Canada, since June 1996. From February
1994 to June 1996, Mr. Laporte served as Investment Advisor and Portfolio
Manager for the Fund. Prior to joining the Fund, Mr. Laporte was a Vice
President with the venture capital arm of The Royal Bank of Canada, RBC Capital.
Mr. Laporte has been a director of Gildan since January 1996.
Norman M. Steinberg is a partner of Ogilvy Renault, our Canadian counsel,
and a member of its management committee. He has been associated with Ogilvy
Renault since 1976 and he is a director of various companies and non-profit
organizations, such as the Montreal Symphony Orchestra and Centaur Theatre. He
is also the President of the Canadian Club of Montreal. Mr. Steinberg has been a
director of Gildan since March 1998.
Robert M. Baylis is currently director of The International Forum, an
executive education program of the Wharton School and is a director of various
companies, including New York Life Insurance Company, Host Marriott Corporation
and Covance, Inc. Mr. Baylis retired from the position of Vice Chairman of CS
First Boston in 1996, after thirty-three years with this investment banking firm
or associated corporations. He was Chairman and Chief Executive Officer of CS
First Boston Pacific Inc./ Hong Kong from 1993 to 1994. Mr. Baylis has been a
director of Gildan since February 1999.
Richard P. Strubel acts as a trustee of the institutional and retail mutual
funds managed by Goldman, Sachs & Co. and is a managing director of Tandem
Partners, Inc., a privately held management services firm which he formed in
1990. He is also trustee of the Northern Institutional Funds, a family of
institutional mutual funds managed by the Northern Trust Company, and a director
of Kaynar Technologies Inc., a leading manufacturer of aircraft fasteners based
in Orange, California listed on the NASDAQ. Mr. Strubel was President of
Northwest Industries, which included Fruit of the Loom and BVD among its
operating entities, from 1982 to 1983. Mr. Strubel has been a director of Gildan
since February 1999.
Gino Martel has served as Secretary since March 1998. Mr. Martel is also a
partner of Hart, Saint-Pierre, our Canadian counsel. He has been employed by
Hart, Saint-Pierre since 1985.
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<PAGE> 50
Shirley Chamandy has served as Treasurer since Gildan's inception. Ms.
Chamandy has been involved in various Chamandy family textile and apparel
businesses for over thirty-three years.
Ken Cieply, CA has served as Vice President, Finance and Administration
since July 1994. Mr. Cieply is a Chartered Accountant. Prior to joining Gildan,
Mr. Cieply served six years as Vice President of Finance for Rosilco
International Ltd., a major manufacturer and importer of textiles. Mr. Cieply
began his audit career with KPMG.
George Sam Yu Sum has served as Vice President, Operations since 1998.
Previously, he served as Director of Operations. Prior to joining Gildan in
1995, Mr. Sam Yu Sum spent sixteen years with Dominion Textiles where he served
in various managerial capacities, from manufacturing to sales.
David Cherry has served as President of Gildan Activewear SRL since
February 1999. He served as Vice President, Logistics from July 1998 to February
1999. Prior to joining Gildan, he was employed by Fruit of the Loom for over
twenty years, where his last position was Vice President of Distribution and
Logistics.
Barry H. Mademann has served as Vice President, Textile Manufacturing since
June 1998. Prior to joining Gildan, he served as Vice President for Jockey
International for thirteen years. He was also a principal at Kurt Salmon
Associates for twelve years.
Francois Vinette has served as Vice President, Information Technology since
August 1998. Prior to joining Gildan, he served for two years as Senior Project
Director at IBM Canada Ltd. Prior to IBM, he served for sixteen years as MIS
project director for several other companies.
Ira Kaminsky has served as the President of Gildan Activewear San Jose,
S.A., Gildan Activewear (Barbados) Inc. and Gildan Activewear El Progreso, S.A.
since June 1997, February 1997 and June 1998, respectively. From January 1997 to
June 1997, he served as Production Manager, Offshore. Prior to joining Gildan,
Mr. Kaminsky worked for Val-Dor, Inc., a sewing contractor.
H. Gregory Chamandy and Glenn J. Chamandy are brothers and Shirley Chamandy
is their mother.
BOARD OF DIRECTORS
Our board of directors currently consists of eight members. Each director
is elected at the annual meeting of shareholders to serve until the next annual
meeting or until a successor is elected or appointed. At each annual meeting of
shareholders, two directors, called the Class A Directors, are elected by the
holders of Class A Subordinate Voting Shares only, voting as a separate class.
Messrs. Baylis and Houston are the current Class A Directors. The remaining
directors are elected by the Class A Subordinate Voting Shares and the Class B
Multiple Voting Shares, voting together as a single class, with holders of the
Class A Subordinate Voting Shares having one vote per share and holders of the
Class B Multiple Voting Shares having eight votes per share. If there are no
longer any Class B Multiple Voting Shares outstanding on the date of any meeting
of shareholders at which directors are to be elected, then all of our directors
will be elected by the holders of Class A Subordinate Voting Shares. Because of
the voting rights attached to the Class B Multiple Voting Shares, holders of the
Class B Multiple Voting Shares may be able to elect all of the directors other
than the Class A Directors even when the number of outstanding Class B Multiple
Voting Shares represents a very small proportion of the Equity Shares
outstanding. See "Risk Factors--We are Controlled by Harco" and "Description of
Share Capital". Executive officers are appointed annually and serve at the
discretion of the board of directors.
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<PAGE> 51
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors has an audit committee, a compensation committee and
a corporate governance committee. The audit committee is responsible for
recommending to the board of directors the engagement of our independent
auditors and reviewing with the independent auditors the scope and results of
the audits, our internal accounting controls, audit practices and the
professional services furnished by the independent auditors. The compensation
committee reviews the performance of most of our executive officers and our
operating subsidiaries, makes recommendations to the board on, among other
things, the compensation of senior executives and administers our stock option
plan. The corporate governance committee is responsible for matters relating to
corporate governance.
COMPENSATION OF DIRECTORS
Each director who is not a salaried officer of Gildan or any of its
subsidiaries (a "Non-Executive Director") receives the following compensation
for services during his term of office:
- a basic annual retainer of $8,000 payable in quarterly installments for
services as a director;
- an additional annual retainer of $1,000 ($3,500 in the case of the
chairman of the committee) for services on a committee of the board of
directors;
- $1,000 for each board or committee meeting attended, or $500 in the case
of meetings held on the same day as another meeting for which the
Non-Executive Director is already being paid a fee; and
- reimbursement for travel and other out-of-pocket expenses incurred in
attending board or committee meetings.
Non-Executive Directors residing in the United States receive the foregoing
amounts in U.S. dollars. For example, the basic annual retainer paid is
US$8,000, as opposed to the U.S. dollar equivalent of Cdn$8,000.
In addition to the base compensation described above, Non-Executive
Directors may also be granted options under our stock option plan, as described
under "--Stock Option Plan". During fiscal 1998, options covering 5,000 Class A
Subordinate Voting Shares were granted to each of the Non-Executive Directors
then in office at an exercise price of $10.29 (US$7.00) per Class A Subordinate
Voting Share.
COMPENSATION STRATEGY
We recently developed and implemented a formal strategic policy regarding
the compensation of our executives (and other non-production employees). This
policy is intended to ensure that our executives receive total compensation that
(a) is competitive with the compensation received by executives employed by a
group of comparable companies selected by us (the "reference market"), (b) links
the executives' interests with those of the shareholders and (c) rewards
superior performance. The policy is comprised of three components:
- the base compensation strategy which is intended to align base salaries,
benefits and perquisites with the median of the reference market;
- the short-term incentive plan, which is our annual incentive plan and
aims at providing bonuses which bring the total cash compensation
received by our executives to the 75th percentile of total cash
compensation received by executives in the reference market, if all of
our financial objectives are met or exceeded; and
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<PAGE> 52
- the long-term incentive plan, which is our stock option plan and is
intended to bring the total compensation received by our executives to
the 75th percentile of total compensation received by executives in the
reference market.
EXECUTIVE COMPENSATION
The aggregate amount of compensation we paid to our directors and executive
officers as a group (15 persons) for fiscal 1998 was approximately $2.3 million.
The following table sets forth certain compensation information for the
Chief Executive Officer and the four other most highly compensated executive
officers (collectively, the "Named Executive Officers") for services rendered in
all capacities during fiscal 1997 and fiscal 1998.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SHARES
------------------------------------- UNDERLYING
OTHER ANNUAL OPTIONS
FISCAL SALARY BONUS COMPENSATION(1) GRANTED
NAME AND PRINCIPAL POSITIONS YEAR ($) ($) ($) (#)
- ---------------------------- ------ ------- ------- --------------- ------------
<S> <C> <C> <C> <C> <C>
H. Gregory Chamandy.................. 1998 298,000 249,558(2)(3) 26,086(4)(5) 88,000
Chairman of the Board and 1997 131,151 100,000 40,319(5)(6) --
Chief Executive Officer
Glenn J. Chamandy.................... 1998 298,000 249,558(2)(3) 35,449(5)(7) 88,000
President and 1997 146,498 100,000 28,282(5)(8) --
Chief Operating Officer
Edwin B. Tisch....................... 1998 298,000 249,558(2)(3) 4,758(9) 88,000
Executive Vice President, 1997 125,922 100,000 19,646(10) --
Manufacturing
Ken Cieply........................... 1998 194,000 43,090(3) -- 57,000
Vice President, 1997 173,826 115,034 373 --
Finance and Administration
George Sam Yu Sum(11)................ 1998 143,749 33,317(3) -- 30,000
Vice President, 1997 -- -- -- --
Operations
</TABLE>
- -------------------------
(1) Perquisites and other personal benefits which in the aggregate do not
exceed 10% of the total annual salary and bonus of a Named Executive
Officer for the year have been excluded.
(2) These bonus amounts include a special bonus of $155,000 granted to each of
H. Gregory Chamandy, Glenn J. Chamandy and Edwin B. Tisch.
(3) Given that our annual incentive plan came into effect on May 1, 1998,
incentive bonuses included in these amounts correspond to 5/12ths of the
annual bonuses calculated pursuant to the annual incentive plan.
(4) This amount includes $23,993 of interest benefit, imputed at an annual rate
of 7.0%, on loans made available to the Named Executive Officer and his
associates. See "--Indebtedness of Directors and Officers".
(5) No amount has been included in this column on account of imputed interest
on a loan in the amount of $1,712,769 ($990,000 in 1997) extended by us to
Harco which, up to July 1998, was non-interest bearing, because such loan
was extended otherwise than in connection with the Named Executive
Officers' compensation.
(6) This amount includes $15,051 relating to a housing benefit and $17,292 of
interest benefit, imputed at an annual rate of 6.0%, on loans made
available to the Named Executive Officer and his associates. See
"--Indebtedness of Directors and Officers".
(7) This amount includes $33,826 of interest benefit, imputed at an annual rate
of 7.0%, on loans made available to the Named Executive Officer and his
associates. See "--Indebtedness of Directors and Officers".
(8) This amount includes $20,306 of interest benefit, imputed at an annual rate
of 6.0%, on loans made available to the Named Executive Officer and his
associates. See "--Indebtedness of Directors and Officers".
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<PAGE> 53
(9) This amount includes $2,091 of interest benefit, imputed at an annual rate
of 7.0%, on loans made available to the Named Executive Officer and his
associates. See "--Indebtedness of Directors and Officers".
(10) This amount includes $11,077 relating to a housing benefit extended to Mr.
Tisch.
(11) Mr. Sam Yu Sum was appointed to his current position effective April 1998
and was not an executive officer of Gildan prior to that time. Accordingly,
only his compensation for 1998 is reported in this table.
ANNUAL INCENTIVE PLAN
Our annual incentive plan, known as the Gildan Supplemental Cash
Opportunity for Results Exceeded ("SCORE"), is intended to promote our financial
performance. All full-time, permanent salaried employees are eligible for
bonuses under our annual incentive plan. For a given fiscal year, if both our
actual net earnings exceed the forecasted net earnings and our actual return on
net assets exceeds the forecasted return on net assets by 5% each, we will pay a
bonus based on a pre-determined target percentage of each eligible employee's
base compensation.
STOCK OPTION PLAN
Our stock option plan came into effect in June 1998 and is designed to
assist in attracting and retaining executives and other key employees and to
better align their interests with those of the shareholders. The stock option
plan provides for the granting of options to non-employee directors, officers
and other key employees of Gildan and its subsidiaries. The compensation
committee administers the stock option plan on behalf of the board of directors.
Grant levels depend on the position of the employee and are based on the highest
of the closing prices of the Class A Subordinate Voting Shares on The Montreal
Exchange, The Toronto Stock Exchange and the American Stock Exchange on the
trading day immediately preceding the effective date of the grant of the options
("Gildan Market Value").
Options must be exercised during a period established by the compensation
committee which may not be longer than ten years from the effective date of the
grant. The exercise price payable for each Class A Subordinate Voting Share
covered by an option is equal to the Gildan Market Value.
995,000 Class A Subordinate Voting Shares have been reserved for issuance
under the stock option plan. Our stock option plan provides that, unless
shareholder approval is obtained, the number of Class A Subordinate Voting
Shares reserved for issuance pursuant to the exercise of options thereunder as
well as under other share compensation arrangements will be limited to 10% of
the Equity Shares issued and outstanding. Our stock option plan further provides
for certain limits on the number of Class A Subordinate Voting Shares which we
may issue to insiders and their associates in any one-year period under all of
our share compensation arrangements.
At April 14, 1999, employees and non-employee directors of Gildan had been
granted options to subscribe for a total of 756,500 Class A Subordinate Voting
Shares at prices ranging from $10.29 to $16.50 per share, as shown in the
following table.
<TABLE>
<CAPTION>
DIRECTORS AND OTHER
EXECUTIVE OFFICERS EMPLOYEES
OF GILDAN OF GILDAN
------------------ ---------
<S> <C> <C>
Number of options granted.................................. 501,000 255,500
</TABLE>
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<PAGE> 54
OPTIONS GRANTED DURING FISCAL 1998
The table below shows information regarding grants of stock options made to
the Named Executive Officers under our stock option plan during fiscal 1998.
<TABLE>
<CAPTION>
PERCENTAGE OF MARKET VALUE
SHARES TOTAL OF SHARES
UNDERLYING OPTIONS UNDERLYING
OPTIONS GRANTED TO OPTIONS ON THE
GRANTED EMPLOYEES IN EXERCISE PRICE DATE OF GRANT EXPIRATION
NAME (#) FISCAL YEAR (CDN$/SHARE) (CDN$/SHARE) DATE
- ---- ---------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
H. Gregory Chamandy............. 88,000 13.9% $10.29 $10.29 June 15, 2008
Glenn J. Chamandy............... 88,000 13.9 10.29 10.29 June 15, 2008
Edwin B. Tisch.................. 88,000 13.9 10.29 10.29 June 15, 2008
Ken Cieply...................... 57,000 9.0 10.29 10.29 June 15, 2008
George Sam Yu Sum............... 30,000 4.7 10.29 10.29 June 15, 2008
</TABLE>
AGGREGATED OPTION EXERCISES DURING FISCAL 1998 AND FISCAL YEAR-END OPTION
VALUES
The following table summarizes, for each of the Named Executive Officers,
(a) the number of stock options, if any, exercised during fiscal 1998, (b) the
aggregate value realized upon exercise, which is the difference between the
market value of the underlying shares on the exercise date and the exercise or
base price of the option, (c) the total number of unexercised options, if any,
held at October 4, 1998 and (d) the aggregate value of unexercised in-the-money
options at fiscal year-end, which is the difference between the exercise or base
price of the options and the market value of the Class A Subordinate Voting
Shares on October 1, 1998, which was $11.25 (US$7.32, based on the inverse of
the Noon Buying Rate on October 1, 1998 of Cdn$1.00 per US$0.6507) per share.
The aggregate values indicated with respect to unexercised in-the-money options
at fiscal year-end have not been, and may never be, realized. These options have
not been, and may not be exercised, and actual gains, if any, on exercise will
depend on the value of our Class A Subordinate Voting Shares on the date of
exercise.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES AGGREGATE FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED ON VALUE (#) ($)
EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
H. Gregory Chamandy.. -- -- -- 88,000 -- $84,480
Glenn J. Chamandy.... -- -- -- 88,000 -- 84,480
Edwin B. Tisch....... -- -- -- 88,000 -- 84,480
Ken Cieply........... -- -- -- 57,000 -- 54,720
George Sam Yu Sum.... -- -- -- 30,000 -- 28,800
</TABLE>
INDEBTEDNESS OF DIRECTORS AND OFFICERS
At March 31, 1999, the aggregate amount owed to us or our subsidiaries by
all of our current directors, officers and employees, and former directors,
officers and employees as of such date, was approximately $1,552,000, exclusive
of travel advances as permitted by Canadian securities laws. No portion of such
indebtedness was advanced in connection with a purchase of our securities or
those of our subsidiaries. The following table provides information regarding
indebtedness owed to us by each individual who currently is or at any time
during fiscal 1998 has been a director or officer of Gildan, or an associate of
any of the foregoing.
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<PAGE> 55
TABLE OF INDEBTEDNESS OF
DIRECTORS AND OFFICERS
OTHER THAN UNDER SECURITIES PURCHASE PROGRAMS
<TABLE>
<CAPTION>
INVOLVEMENT OF THE LARGEST AMOUNT AMOUNT
CORPORATION OR OUTSTANDING FOR OUTSTANDING AT
NAME SUBSIDIARY FISCAL 1998 MARCH 31, 1999
- ---- ------------------ --------------- --------------
<S> <C> <C> <C>
H. Gregory Chamandy.................. Lender $ 426,587(1)(2) $ 750,000(2)(3)
Glenn J. Chamandy.................... Lender 529,655(2)(4) 750,000(2)(4)
Edwin B. Tisch....................... Lender 30,075(5) 27,850(5)
</TABLE>
- -------------------------
(1) Includes an amount of $260,000 we advanced to Gregco Holdings Inc., which is
wholly owned by H. Gregory Chamandy. This amount was repaid in full in
February 1999.
(2) Does not include an amount of $1,712,769 ($3,703,793 as at March 31, 1999),
we advanced to Harco, which is controlled by H. Gregory Chamandy and Glenn
J. Chamandy, and an amount of $3,360,000 which Harco borrowed from a third
party and with respect to which we have issued a guaranty which was
cancelled on November 19, 1998. With respect to the advance we made to
Harco, at March 31, 1999, approximately $1,686,000 bears interest at an
annual rate of 8.5% while the balance is interest free.
(3) This amount is payable in ten equal and consecutive annual installments,
without interest, beginning December 1, 1999.
(4) Includes an amount of $320,000 advanced by us to Glennco Holdings Inc., a
company wholly owned by Glenn J. Chamandy. This amount was repaid in full in
March 1999.
(5) Of this amount, $15,350 is owed to us by Mr. Tisch with respect to a
"dwelling loan", for which principal is payable at a rate of $2,500 per
year.
Approval of any such loans must be obtained in accordance with our formal
policy with respect to potential conflicts of interest. See "Certain
Relationships and Related Transactions--Conflicts of Interest Policy".
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL AGREEMENTS
We have entered into employment agreements (the "Employment Agreements")
with certain of our key employees, including H. Gregory Chamandy, Glenn J.
Chamandy, Edwin B. Tisch, Ken Cieply, George Sam Yu Sum and Francois Vinette.
The Employment Agreements provide that we will pay the executive a base salary,
the level of which will be reviewed annually in accordance with our policies.
The Employment Agreements have an indefinite term. Nonetheless, we may terminate
the executive at any time without making any severance payments upon his death,
disability, breach of his Employment Agreement or for cause. In addition, the
executive may terminate his employment at any time upon prior written notice
ranging from one to six months. Each Employment Agreement provides that if we
terminate the employment of the executive for any reason other than those stated
above or take any action which could be construed as constructive dismissal,
then the executive is entitled to:
- an amount equal to 24 months' base salary (12 months in the case of
Messrs. Cieply, Sam Yu Sum and Vinette), paid out, at the executive's
option, either as a one-time payment or as monthly or bi-weekly
installments, as the case may be, covering the 24 months or the 12 months
following termination, as the case may be (the "Termination Period");
- a one-time payment equal to 24 months of the target annual bonus
established under the annual incentive plan (in favor of H. Gregory
Chamandy, Glenn J. Chamandy and Edwin B. Tisch only);
- continuation of group insurance benefits, except short and long-term
disability, for the Termination Period, ceasing upon new employment, if
earlier;
- any earned bonus, for example, a bonus with respect to a previous fiscal
year, that would otherwise be payable to the executive during Termination
Period pursuant to the annual incentive plan;
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<PAGE> 56
- the right to exercise vested options pursuant to the stock option plan
within 90 days following termination of employment; and
- the payment of any earned but unused vacation days and any amounts due
under the executive's business expense and personal spending accounts, as
authorized.
The Employment Agreements also provide that, following termination, the
executive will not:
- disclose to any person or use for his own purpose any confidential
information or knowledge relating to Gildan;
- solicit during the Termination Period any of our customers with the
intent of selling them any products which are similar to or, competing
with our products; or
- induce, entice or hire any of our employees.
We have also entered into change of control agreements (the "Change of
Control Agreements") with each of H. Gregory Chamandy, Glenn J. Chamandy, Edwin
B. Tisch, Ken Cieply, George Sam Yu Sum and Francois Vinette. Under these
agreements, in the event of potential change of control (as defined in the
Change of Control Agreements), the executive agrees to remain employed by us
until the earliest of (a) 365 days from the date of the potential change of
control, (b) his termination of employment by death or disability or (c) his
termination of employment by us without cause or by the executive with good
reason. The Change of Control Agreements also provide that if a change of
control occurs and we terminate the executive without cause, or if the executive
terminates his employment for good reason, then the executive will be entitled
to:
- his full base salary, subject to withholding, through the date of
termination;
- a one-time payment, subject to withholding, equal to 36 month's base
salary (24 months in the case of Messrs. Cieply, Sam Yu Sum and Vinette);
- any amounts, subject to withholding, required to be paid to him under
the stock option plan;
- a one-time payment, subject to withholding, equal to 36 months (24
months in the case of Messrs. Cieply, Sam Yu Sum and Vinette) of the
target annual bonus established under the annual incentive plan;
- continuation of employee benefits for 36 months (24 months in the case
of Messrs. Cieply, Sam Yu Sum and Vinette), ceasing upon new employment,
if earlier; and
- any earned but unused vacation days.
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<PAGE> 57
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CONFLICTS OF INTEREST POLICY
We have put into effect a formal policy to address any potential conflicts
of interest that may arise in connection with any material transaction involving
Gildan and one of our officers or directors. Under this policy, each director or
officer who:
- is a party to any material contract or proposed material contract with
us; or
- has a material interest in, or is a director or officer of, any entity
which is a party to any material contract or proposed contract with us,
is required to disclose in writing to us the nature and extent of any such
interest and, in the case of directors, is required to abstain from voting upon
any resolution to approve the contract in question, unless such contract:
- provides for our benefit or the benefit of one of our affiliates
security for money lent to or obligations undertaken by the director;
- relates primarily to the remuneration of a director, officer, employee
or agent of Gildan or an affiliate of Gildan;
- is for indemnity of insurance; or
- is an agreement with one of our affiliates.
The manner and timing of the disclosures contemplated by this policy, as well as
the extent to which directors may be required to abstain from voting in
connection with such contracts under this policy, have been established in
accordance with, and by reference to, the applicable provisions of the Canada
Business Corporations Act.
TRANSACTIONS WITH AFFILIATES
The following are the only material transactions we entered into since
January 1, 1996, or propose to enter into, in which any existing or proposed
director, officer or principal shareholder of Gildan, or any associates or
affiliates thereof, has had or expects to have a material interest.
OUR PRINCIPAL SHAREHOLDERS
Harco: We lease the facility containing our executive offices and knitting
operations in Ville Saint-Laurent from Harco. We paid rent of approximately
$364,000, $420,000 and $545,485 in ten-month fiscal 1996, fiscal 1997 and fiscal
1998, respectively. We believe that the terms of this transaction are no less
favorable to us than could have been obtained if the transaction was entered
into with an unaffiliated third party.
We guaranteed Harco's mortgage on the Ville Saint-Laurent facility. The
total amount of such indebtedness guaranteed at September 29, 1996, October 5,
1997 and October 4, 1998 was $1,990,000, $2,360,000 and $3,360,000,
respectively. This guaranty was cancelled on November 19, 1998.
In 1996, in connection with the mortgage renewal on the Ville Saint-Laurent
facility, we made a loan to Harco, which was non-interest bearing. Since June
1998 this loan bears interest, currently at an annual rate of 8.5%. At January
3, 1999, the aggregate amount of such indebtedness was approximately $1,700,000.
In February 1999, we advanced $2.0 million to Harco. This advance does not
bear interest and is payable on demand.
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<PAGE> 58
In 1987, we became indebted to Harco in the amount of $383,000, which
amount was repaid in August 1998. Interest expenses incurred during ten-month
fiscal 1996, fiscal 1997 and fiscal 1998 were approximately $28,000, $24,000 and
$19,750, respectively.
We had loans since January 1, 1996 which had been guaranteed by Harco, H.
Gregory Chamandy, Glenn J. Chamandy and Shirlco Holding Ltd., a corporation then
controlled by Shirley Chamandy which has since been amalgamated with Harco. At
January 3, 1999, only Harco continued to guarantee loans which at that date
totalled approximately $2,903,000 in aggregate principal amount.
The Fund: We granted to the Fund two options, on January 31, 1996 and May
9, 1997, respectively, each of which was exercisable for $500,000 and allowed
the Fund to purchase 3% of our outstanding voting shares, on a fully-diluted
basis. In June 1998, the Fund exercised the first of the two options and
received 291,294 Class "A" preferred shares and 29.13 Class "A" common shares at
a price per share of $1.72. At the same time, we repurchased the second of these
two options for $2.5 million.
Also, in June 1998, we exercised an option, granted in August 1997, to
redeem 581,500 Class "A" preferred shares and 58.15 Class "A" common shares held
by the Fund, for an aggregate consideration of $100,000, at a price per share of
$0.17. We believe that the terms of our transactions with the Fund, as a whole,
are on terms no less favorable to us than could have been obtained if the
transactions were entered into with an unaffiliated third party.
We have also obtained from the Fund $30.0 million in financing, comprised
of:
- a $15.0 million unsecured and subordinated debenture due June 25, 2003,
bearing interest at an annual rate of 11.0%, which replaced three then
outstanding unsecured and subordinated debentures totalling $15.0
million; and
- a $15.0 million unsecured and subordinated debenture due June 15, 2004,
bearing interest at an annual rate of 12.0% for the first two years and
13.0% of the next three years.
OUR OFFICERS AND DIRECTORS
Gino Martel: We have retained Hart, Saint-Pierre as our corporate counsel
since 1984. Mr. Martel, the Secretary of Gildan, is a partner of Hart,
Saint-Pierre. We paid legal fees to Hart, Saint-Pierre of $91,333, $271,542 and
$419,597 in ten-month fiscal 1996, fiscal 1997 and fiscal 1998, respectively. We
believe that the terms of our relationship with Hart, Saint-Pierre are no less
favorable to us than could be obtained from an independent third party.
Norman M. Steinberg: We have retained Ogilvy Renault as our counsel in
connection with various securities matters since November 1997. Mr. Steinberg, a
director of Gildan, is a partner of Ogilvy Renault. We paid legal fees to Ogilvy
Renault of $706,853 in fiscal 1998. We believe that the terms of our
relationship with Ogilvy Renault are no less favorable to us than could be
obtained from an independent third party.
William H. Houston III: We have paid advisory and legal fees to various
affiliates of Sandler & Travis Trade Advisory Services, for which Mr. Houston,
one of our directors, serves as Senior Consultant. In ten-month fiscal 1996,
fiscal 1997 and fiscal 1998, we paid US$10,320, US$50,118 and US$19,703 in fees
to such affiliates, respectively. Sandler & Travis Trade Advisory Services acts
as our advisor in reclaiming duty drawback payments from the U.S. government,
and its affiliate, Sandler, Travis & Rosenberg, provides us with legal advice
regarding trade regulatory issues. We believe that the terms of our
relationships with these affiliated entities are no less favorable to us than
could be obtained from an independent third party.
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INDEBTEDNESS OF DIRECTORS AND OFFICERS
For a detailed description of indebtedness owed to us by our directors and
officers during fiscal 1998, see "Management--Indebtedness of Directors and
Officers".
REGISTRATION RIGHTS AGREEMENT
Harco, the Fund and the Trusts have the right to require us to register the
Class A Subordinate Voting Shares or the Class B Multiple Voting Shares (upon
their conversion to Class A Subordinate Voting Shares), as the case may be, held
by them under the U.S. Securities Act. Pursuant to the registration rights
agreement, Harco, the Fund and the Trusts are granted an unlimited number of
demand and piggy-back registration rights, except that no demand registration
may be effected within one year after any other demand registration. We have
agreed to pay all expenses incurred in connection with all piggy-back
registrations and with the first five demand registrations, and will share
expenses ratably with Harco, the Fund and the Trusts in connection with any
additional demand registrations. The registration rights agreement provides for
indemnities between us and Harco, the Fund and the Trusts for certain
liabilities arising under the U.S. Securities Act.
AGREEMENTS BETWEEN HARCO AND THE FUND
Harco and the Fund have entered into an agreement (the "Agreement") with
respect to the election of directors. Pursuant to the Agreement, for so long as
the Fund holds at least 5% of the outstanding Equity Shares,
- the Fund will abstain from voting its Class A Subordinate Voting Shares
in the election of the Class A Directors;
- the Fund will vote its Class A Subordinate Voting Shares in accordance
with Harco's written instructions in the election of the non-Class A
Directors; and
- Harco will vote its Class B Multiple Voting Shares for one director
designated by the Fund.
The Agreement further provides that, for so long as the Fund holds at least
15% of the outstanding Equity Shares, Harco will vote its Class B Multiple
Voting Shares for an additional director designated by the Fund, which designee
must be reasonably acceptable to Harco. Currently, Mr. Laporte is the director
who was designated by the Fund and Mr. Strubel is the additional designated
director.
Both parties' obligations under the Agreement terminate upon the Fund's
ceasing to hold at least 5% of the outstanding Equity Shares and with respect to
any of the Fund's Class A Subordinate Voting Shares transferred to a third
party.
Harco and the Fund also entered into an agreement which provides that Harco
may not transfer any Class B Multiple Voting Shares to a third party, unless:
- the transfer is pursuant to a takeover bid or a Permitted Transfer, as
described under "Description of Share Capital--Equity
Shares--Conversion"; or
- the Fund is entitled to transfer to the third party the same number of
Class A Subordinate Voting Shares, and on the same terms and conditions,
as Harco is transferring.
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PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of our Class A Subordinate Voting Shares and our Class B Multiple
Voting Shares as of February 28, 1999 by (a) each person known by us to own
beneficially 10% or more of any class of Equity Shares and (b) all of our
directors and executive officers as a group. Unless otherwise indicated, the
address for each person listed is c/o Gildan Activewear Inc., 725 Montee de
Liesse, Ville Saint-Laurent, Quebec, Canada H4T 1P5. See "Risk Factors--We Are
Controlled by Harco".
<TABLE>
<CAPTION>
CLASS A
SUBORDINATE VOTING PERCENTAGE OF CLASS B
SHARES OWNED CLASS A MULTIPLE VOTING
BEFORE OFFERING SUBORDINATE SHARES OWNED PERCENTAGE OF
---------------------- VOTING SHARES ---------------------- TOTAL VOTING
PERCENTAGE OWNED AFTER PERCENTAGE POWER AFTER
NAME OF BENEFICIAL OWNER NUMBER OF CLASS OFFERING(1) NUMBER OF CLASS OFFERING(1)
- ------------------------ --------- ---------- ------------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Harco(2)................ -- -- -- 3,047,000 100% 70.20%
H. Gregory Chamandy
Family Trust(3)....... 856,300 11.65% 8.28% -- -- 2.47
Glenn Chamandy Family
Trust(3).............. 856,300 11.65 8.28 -- -- 2.47
The Fund(4)............. 1,939,000 26.39 18.74 -- -- 5.58
Directors and Executive
Officers as a group
(16 persons)(2)(5).... 61,180 0.83 0.59 3,047,000 100 70.38
</TABLE>
- -------------------------
(1) Assumes no exercise of the underwriters' over-allotment option.
(2) H. Gregory Chamandy, Chairman and Chief Executive Officer of Gildan, and
Glenn J. Chamandy, President and Chief Operating Officer of Gildan, who
indirectly control Harco, may be deemed to beneficially own shares of Gildan
owned by Harco.
(3) The trustee for each of the Trusts is Royal Bank of Canada Financial
Corporation which has sole voting power and sole investment power over the
Class A Subordinate Voting Shares held by each of the Trusts. The Trusts are
located at Royal Bank of Canada Financial Corporation, Royal Bank House, The
Garrison, St. Michael, P.O. Box 48B, Bridgetown, Barbados, West Indies.
(4) The Fund is located at 8717 rue Berri, Montreal, Quebec, Canada H2M 2T9.
(5) Does not include shares held by the Trusts because, although some officers
and directors are beneficiaries of the Trusts, they do not have voting power
or investment power over the Class A Subordinate Voting Shares held by the
Trusts. These officers and directors expressly disclaim beneficial ownership
of these shares.
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DESCRIPTION OF SHARE CAPITAL
Our authorized share capital currently consists of an unlimited number of
First Preferred Shares, issuable in series, an unlimited number of Second
Preferred Shares, issuable in series (collectively, the "Preferred Shares"), an
unlimited number of Class A Subordinate Voting Shares and an unlimited number of
Class B Multiple Voting Shares, all of which are without par value. As of the
date of this prospectus, only Class A Subordinate Voting Shares and Class B
Multiple Voting Shares are outstanding. The following is a summary of the
material terms of our authorized share capital as set forth in the Articles.
This summary is qualified in its entirety by reference to, and is subject to,
the detailed provisions of the Articles, as amended, and the Trust Agreement, as
defined below. Because this is a summary, it does not contain all the
information that may be important to you. You should read the Articles and the
Trust Agreement before you buy Class A Subordinate Voting Shares.
FIRST PREFERRED SHARES
ISSUANCE IN SERIES
The First Preferred Shares are issuable in series and the board of
directors has the right, from time to time, to fix the number of, and to
determine the designation, rights, privileges, restrictions and conditions
attaching to, the First Preferred Shares of each series, subject to the
limitations, if any, set out in the Articles.
RANK
The First Preferred Shares rank senior to the Second Preferred Shares and
the Equity Shares with respect to the payment of dividends, return of capital
and the distribution of assets in the event of the liquidation, dissolution or
winding-up of Gildan. The First Preferred Shares in each series rank equally
with the First Preferred Shares of any other series.
VOTING RIGHTS
Unless the Articles otherwise provide with respect to any series of the
First Preferred Shares, the holders of the First Preferred Shares are not
entitled to receive any notice of or attend any meeting of the shareholders of
Gildan and are not entitled to vote at any such meeting.
SECOND PREFERRED SHARES
ISSUANCE IN SERIES
The Second Preferred Shares are issuable in series and the board of
directors has the right, from time to time, to fix the number of, and to
determine the designation, rights, privileges, restrictions and conditions
attaching to, the Second Preferred Shares of each series, subject to the
limitations, if any, set out in the Articles.
RANK
The Second Preferred Shares are subject and subordinate to the rights,
privileges, restrictions and conditions attaching to the First Preferred Shares.
The Second Preferred Shares rank senior to the Equity Shares with respect to
payment of dividends, return of capital and distribution of assets in the event
of the liquidation, dissolution or winding-up of Gildan. The Second Preferred
Shares in each series rank equally with the Second Preferred Shares of any other
series.
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VOTING RIGHTS
Unless the Articles otherwise provide with respect to any series of the
Second Preferred Shares, the holders of the Second Preferred Shares are not
entitled to receive any notice of or attend any meeting of the shareholders of
Gildan and are not entitled to vote at any such meeting.
EQUITY SHARES
Except as described herein, the Class A Subordinate Voting Shares and the
Class B Multiple Voting Shares are equal in all respects and will be treated as
if they were shares of one class only.
RANK
The Equity Shares rank junior to the First Preferred Shares and the Second
Preferred Shares with respect to the payment of dividends, return of capital and
distribution of assets in the event of the liquidation, dissolution or
winding-up of Gildan.
DIVIDENDS
The holders of outstanding Equity Shares are entitled to receive dividends
on a share-for-share basis out of assets legally available therefor at such
times and in such amounts as the board of directors may from time to time
determine without preference or distinction among or between the Class A
Subordinate Voting Shares and the Class B Multiple Voting Shares.
VOTING RIGHTS
Except as set forth in the third succeeding paragraph, the Class A
Subordinate Voting Shares carry one vote per share and the Class B Multiple
Voting Shares carry eight votes per share. There is no cumulative voting. The
holders of Class A Subordinate Voting Shares and the holders of Class B Multiple
Voting Shares are entitled to receive notice of any meeting of our shareholders
and to attend and vote at such meeting as a single class on all matters to be
voted on by our shareholders, except for the election and the removal of
directors as described below and as otherwise required by applicable law.
With respect to the election of directors, the Articles provide that the
board of directors will consist of between five and eleven members. The board of
directors currently has eight members. For as long as any Class B Multiple
Voting Shares are outstanding, at all shareholder meetings held after October 4,
1998 at which directors are elected, (a) two of the directors will be elected by
the holders of the Class A Subordinate Voting Shares only, voting as a separate
class and (b) the remaining directors will be elected by the holders of Class A
Subordinate Voting Shares and Class B Multiple Voting Shares, voting together as
a single class, with holders of Class A Subordinate Voting Shares having one
vote per share and holders of Class B Multiple Voting Shares having eight votes
per share. Because of the voting rights attached to the Class B Multiple Voting
Shares, holders of Class B Multiple Voting Shares may be able to elect all of
the directors other than the two Class A Directors even when the number of
outstanding Class B Multiple Voting Shares is a very small proportion of the
number of Equity Shares outstanding. See "Risk Factors--We Are Controlled by
Harco".
Directors may be removed, with or without cause, only by the holders of the
class or classes of Equity Shares that, as of the date such removal is effected,
would be entitled to elect such director at the next annual meeting of
shareholders. Vacancies in a directorship may be filled only by (a) the
remaining directors elected by holders of each class of Equity Shares that (1)
elected such director and (2) as of the date such vacancy is filled, would be
entitled to elect such director at the next annual meeting of
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<PAGE> 63
shareholders or (b) if there are no such remaining directors, then by the vote
of the holders of the class or classes of Equity Shares that, as of the date
such vacancy is filled, would be entitled to elect such director at the next
annual meeting of shareholders, voting as a special class at a meeting, special
or otherwise, of the holders of Equity Shares of such class or classes.
The Articles provide that each Class A Subordinate Voting Share and each
Class B Multiple Voting Share entitles its holder to one vote per share with
respect to (a) shareholder approvals required (1) by section 189(3) of the
Canada Business Corporations Act in respect of a sale, lease or exchange of all
or substantially all of Gildan's property other than in the ordinary course of
business as therein described, except to one of Gildan's wholly-owned
subsidiaries, (2) by section 183 of the Canada Business Corporations Act in
respect of an amalgamation of Gildan with one or more amalgamating companies,
which are not one of Gildan's wholly-owned subsidiaries, (3) in connection with
the liquidation, dissolution or winding-up of Gildan or (4) in connection with
the issuance of Equity Shares as consideration for the acquisition of stock or
assets of another company where such issuance requires shareholder approval in
accordance with the rules of a stock exchange on which the Equity Shares are
listed, and (b) amendments to Gildan's Articles or by-laws which alter, amend or
repeal the provisions described in clause (a) above.
CONVERSION
The Class A Subordinate Voting Shares cannot be converted into any other
class of shares. Each outstanding Class B Multiple Voting Share may at any time,
at the option of the holder, be converted into one Class A Subordinate Voting
Share and must be so converted upon a transfer other than a Permitted Transfer
(as defined below). Each Class B Multiple Voting Share will automatically
convert into one Class A Subordinate Voting Share in any of the following cases
(each a "Triggering Event"):
- upon the death of the later to die of H. Gregory Chamandy or Glenn J.
Chamandy;
- at any time that neither H. Gregory Chamandy nor Glenn J. Chamandy is
Chief Executive Officer or Chief Operating Officer of Gildan;
- in the event that more than 40% of the Class B Multiple Voting Shares in
the aggregate owned by Harco upon the closing of the initial public
offering are converted into Class A Subordinate Voting Shares;
- in the event that more than 40% of the Class B Multiple Voting Shares in
the aggregate owned by Harco upon the closing of the initial public
offering are sold, transferred, charged, pledged, hypothecated,
encumbered or otherwise disposed of (each, a "transfer"), whether
directly or indirectly, otherwise than in a Permitted Transfer;
- in the event (a) of the death of either H. Gregory Chamandy or Glenn J.
Chamandy or (b) that either H. Gregory Chamandy or Glenn J. Chamandy
ceases to be Chief Executive Officer or Chief Operating Officer of
Gildan and that upon and from such event (1) the later to die of H.
Gregory Chamandy or Glenn J. Chamandy or (2) the later to cease to be
Chief Executive Officer or Chief Operating Officer of Gildan of H.
Gregory Chamandy or Glenn J. Chamandy does not exercise, directly or
indirectly, voting control over all of the shares of Holding Entities
(as defined below), if any, and the Class B Multiple Voting Shares
which, on the date of such occurrence, were beneficially owned by the
deceased or retiring brother; or
- in the event that the board of directors in a directors' circular or
otherwise makes a recommendation to accept, or makes a statement to the
effect that the directors are unable to make or are not making a
recommendation, to shareholders of Gildan with respect to a takeover bid
on the Class A Subordinate Voting Shares.
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<PAGE> 64
For purposes hereof, any transfer of shares of Harco or of a Permitted
Transferee (as defined below), to the extent such entity then holds any Class B
Multiple Voting Shares (a "Holding Entity"), shall be considered a transfer of
Class B Multiple Voting Shares, with the necessary modifications.
Notwithstanding the foregoing, Class B Multiple Voting Shares and shares of
Holding Entities, if any, may be transferred in the following circumstances
(each, a "Permitted Transfer"):
(a) in favor of a Permitted Transferee;
(b) upon the death of the first to die of H. Gregory Chamandy or Glenn J.
Chamandy, such shares as are then beneficially owned by the deceased
may be (1) sold to the survivor or (2) be transferred to the spouse or
the living children of the deceased (either outright or by means of a
spousal trust), by will or the law of succession, provided always that
the survivor maintains full and complete voting control, whether
directly or indirectly, over such shares;
(c) upon the first to retire of H. Gregory Chamandy or Glenn J. Chamandy,
such shares as are then beneficially owned by the retiring brother may
be sold to the other brother;
(d) upon the death or retirement of Edwin B. Tisch, such shares as are
then beneficially owned by Edwin B. Tisch may be sold to H. Gregory
Chamandy, Glenn J. Chamandy or, to the extent one or the other or H.
Gregory Chamandy or Glenn J. Chamandy has passed away and transferred
all of the shares of Holding Entities, if any, or of Class B Multiple
Voting Shares to his spouse or living children as contemplated at
(b)(2) of this paragraph, the spouse or living children of such
deceased person, provided always that the purchasers maintain, or, to
the extent one or the other of H. Gregory Chamandy or Glenn J.
Chamandy has passed away, the survivor maintains full and complete
voting control over such shares; and
(e) in the case of a sale contemplated by (b), (c) and (d) above, or in
the case of a transfer to Harco under paragraph (a) of the definition
of Permitted Transferee below, the purchaser may charge, pledge,
hypothecate or otherwise encumber any Class B Multiple Voting Shares
or shares of Holdings Entities, if any, beneficially owned by him
(including the shares acquired by him in such sale) in favor of a
third party to secure any indebtedness incurred for the purpose of
financing, in whole or in part, such sale.
As used in this prospectus, the term "Permitted Transferee" refers only to
the following:
(a) Harco, if at the time of the transfer Harco is still the registered
holder of some Class B Multiple Voting Shares;
(b) in the case of Class B Multiple Voting Shares beneficially owned by H.
Gregory Chamandy, (1) H. Gregory Chamandy, (2) corporations
wholly-owned, directly or indirectly, by H. Gregory Chamandy, (3) any
limited liability or similar company if all the value of the company
is owned by H. Gregory Chamandy and (4) any trust, the sole
beneficiary of which is H. Gregory Chamandy;
(c) in the case of Class B Multiple Voting Shares beneficially owned by
Glenn J. Chamandy, (1) Glenn J. Chamandy, (2) corporations
wholly-owned, directly or indirectly, by Glenn J. Chamandy, (3) any
limited liability or similar company if all the value of the company
is owned by Glenn J. Chamandy and (4) any trust, the sole beneficiary
of which is Glenn J. Chamandy; and
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(d) in the case of Class B Multiple Voting Shares beneficially owned by
Edwin B. Tisch, (1) Edwin B. Tisch, (2) corporations wholly-owned,
directly or indirectly, by Edwin B. Tisch, (3) any limited liability
or similar company if all the value of the company is owned by Edwin
B. Tisch and (4) any trust, the sole beneficiary of which is Edwin B.
Tisch, provided that the current voting arrangements in connection
with the Class B Multiple Voting Shares are maintained.
SUBDIVISION OR CONSOLIDATION
No subdivision or consolidation of the Class A Subordinate Voting Shares or
the Class B Multiple Voting Shares may be carried out unless, at the same time,
the Class A Subordinate Voting Shares or Class B Multiple Voting Shares, as the
case may be, are subdivided or consolidated in the same manner and on the same
basis.
ADDITIONAL ISSUANCE OF CLASS B MULTIPLE VOTING SHARES
Gildan may not issue Class B Multiple Voting Shares without the approval of
the holders of the Class A Subordinate Voting Shares. Approval must be given by
a special resolution of the holders of the Class A Subordinate Voting Shares at
a meeting of shareholders. However, approval is not required in connection with
a subdivision on a pro rata basis as between the Class A Subordinate Voting
Shares and the Class B Multiple Voting Shares, as permitted under the Articles.
LIQUIDATION RIGHTS AND OTHER MATTERS
The Equity Shares are not redeemable. Upon the liquidation, dissolution or
winding-up of Gildan, the holders of Class B Multiple Voting Shares and Class A
Subordinate Voting Shares are entitled to participate equally, share-for-share,
in the remaining property and assets of Gildan available for distribution to the
holders of Equity Shares.
TAKEOVER BID PROTECTION
Under applicable Canadian law, an offer to purchase Class B Multiple Voting
Shares would not necessarily require that an offer be made to purchase Class A
Subordinate Voting Shares. In compliance with the rules of The Montreal Exchange
and The Toronto Stock Exchange, Harco and each of H. Gregory Chamandy, Glenn J.
Chamandy and Edwin B. Tisch (collectively, the "Founders") entered into an
agreement (the "Trust Agreement") with Gildan and the Montreal Trust Company
(the "Trustee"). Pursuant to the Trust Agreement, Harco placed its Class B
Multiple Voting Shares on deposit with the Trustee and each of Harco and the
Founders have undertaken not to sell or dispose of, directly or indirectly, any
Class B Multiple Voting Shares pursuant to any transaction under circumstances
where securities legislation or any other law would require, if the sale or
disposition had been of Class A Subordinate Voting Shares rather than Class B
Multiple Voting Shares, that the same offer be made to all holders of Class A
Subordinate Voting Shares. Under current rules, this would include a sale of
Class B Multiple Voting Shares by Harco or the Founders at a price per share in
excess of 115% of the market price of the Class A Subordinate Voting Shares as
determined under such legislation (generally the 20-day average trading price of
such shares prior to the sale). This undertaking does not apply if the sale is
made pursuant to an offer made to all holders of Class B Multiple Voting Shares
to purchase only part of the Class B Multiple Voting Shares where:
- an offer is made concurrently to all holders of Class A Subordinate
Voting Shares to purchase the same proportionate number of such Class A
Subordinate Voting Shares at a price per share
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at least as high as the highest price per share paid in connection with
the sale or disposition of the Class B Multiple Voting Shares;
- all of the terms of the offer for Class A Subordinate Voting Shares are
at least as favorable as those of the offer for Class B Multiple Voting
Shares; and
- the offer for Class A Subordinate Voting Shares has no condition
attached other than the right not to take up and pay for the Class A
Subordinate Voting Shares tendered if no shares are purchased pursuant
to the offer for Class B Multiple Voting Shares.
This undertaking also does not apply if there is a concurrent unconditional
offer, the terms of which are at least as favorable as the terms of the offer to
purchase Class B Multiple Voting Shares, to purchase all of the Class A
Subordinate Voting Shares at a price per share at least as high as the highest
price per share paid in connection with the sale or disposition of the Class B
Multiple Voting Shares.
The Trust Agreement permits, subject to compliance with applicable law and
the prior consent of the Trustee, certain indirect sales resulting from the
acquisition of shares of a corporation which, directly or indirectly, controls
Gildan, or controls or is controlled by Harco where:
- the transferee is a Permitted Transferee;
- the transfer either (a) results in no change to the beneficial ownership
of the transferred shares other than between spouses or between the
transferor and his or her descendants, or (b) in the case of a transfer
to a Permitted Transferee, such transfer is made in accordance with
applicable law;
- no such transferee is a party to any agreement under which any other
person would participate in the ownership of, control or direction over
more than 10% of the votes or 50% of the equity of such corporation,
Harco or Gildan; and
- in the event that the transferee is a Permitted Transferee, but not a
Founder, such transferee shall become a party to the Trust Agreement.
Under the Trust Agreement, any direct or indirect sale or disposition of
Class B Multiple Voting Shares, including a transfer to a pledgee as security,
by a party to the agreement or any person or company which it controls is
conditional upon the transferee becoming a party to an agreement on
substantially similar terms and conditions as are contained in the Trust
Agreement.
The Trust Agreement provides that if a person or company carries out an
indirect sale or disposition in respect of any Class B Multiple Voting Shares in
breach of the Trust Agreement, no person shall from the time the sale becomes
effective and thereafter, (a) directly or indirectly sell or dispose of any of
such Class B Multiple Voting Shares or convert them into Class A Subordinate
Voting Shares, in either case without the prior written consent of the Trustee
or (b) exercise any voting rights attaching to such Class B Multiple Voting
Shares except in accordance with the written instructions of the Trustee. The
Trustee may attach conditions to any consent the Trustee gives in exercising its
rights and must exercise these rights in the best interest of the holders of the
Class A Subordinate Voting Shares, other than (a) Harco, (b) the Founders and
(c) holders who, in the opinion of the Trustee, participated directly or
indirectly in the transaction that triggered the operation of this provision.
Notwithstanding a sale of shares which constitutes an indirect sale of Class B
Multiple Voting Shares in breach of the Trust Agreement, Harco shall remain
bound by the foregoing restrictions and prohibitions, but shall not have any
liability for damages under the Trust Agreement in respect of such sale,
provided that Harco otherwise complies with all other provisions of the Trust
Agreement, including, without limitation, the foregoing provision.
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The Trust Agreement provides that the prior consent of the Trustee shall be
required in connection with any sale or disposition of Class B Multiple Voting
Shares, whether direct or indirect, by Harco or the Founders. Such consent shall
be given if the Trustee receives evidence satisfactory to it, acting reasonably,
that the sale or disposition is not in breach of the Trust Agreement. The
Trustee also has the right to require from time to time evidence satisfactory to
it, acting reasonably, as to the number of Class B Multiple Voting Shares and
Class A Subordinate Voting Shares held directly or indirectly by Harco, the
Founders and any Permitted Transferee.
The Trust Agreement contains provisions for authorizing action by the
Trustee to enforce the rights under the Trust Agreement on behalf of the holders
of the Class A Subordinate Voting Shares. The obligation of the Trustee to take
such action will be conditional on Gildan or holders of the Class A Subordinate
Voting Shares providing such funds and indemnity as the Trustee may require. No
holder of Class A Subordinate Voting Shares will have the right, other than
through the Trustee, to institute any action or proceeding or to exercise any
other remedy to enforce any rights arising under the Trust Agreement unless the
Trustee fails to act on a request authorized by holders of not less than 10% of
the outstanding Class A Subordinate Voting Shares and reasonable funds and
indemnity have been provided to the Trustee. Gildan has agreed to pay the
reasonable costs of any action that may be taken in good faith by holders of
Class A Subordinate Voting Shares pursuant to the Trust Agreement.
The Trust Agreement provides that it may not be amended, and no provision
thereof may be waived, unless, prior to giving effect to such amendment or
waiver, the following have been obtained, (a) the consent of The Montreal
Exchange, The Toronto Stock Exchange and any other applicable securities
regulatory authority in Canada and (b) the approval of at least two-thirds of
the votes cast by holders of Class A Subordinate Voting Shares excluding Harco,
the Founders, their Permitted Transferees, their respective affiliates and any
persons who have an agreement to purchase Class B Multiple Voting Shares on
terms which would constitute a sale or disposition for purposes of the Trust
Agreement other than as permitted thereby.
No provision of the Trust Agreement limits the rights of any holders of
Class A Subordinate Voting Shares under applicable law.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of the material terms of our currently
outstanding indebtedness.
REVOLVING LOAN AGREEMENT
On March 31, 1999, we entered into a syndicated loan agreement led by
National Bank of Canada. This loan agreement provides for a secured revolving
operating credit facility, under which the maximum allowable borrowings equal
the lesser of (a) $90.0 million and (b) a borrowing base calculated in
accordance with a specified inventory and receivables formula. This facility
expires on March 31, 2002. At March 31, 1999, we had approximately $85.0 million
outstanding under the revolving loan agreement and $5.0 million available, based
on our borrowing base at that time.
On March 31, 1999, the annual interest rate was 7.375% for Canadian dollar
borrowings and 9.125% for U.S. dollar borrowings. The revolving loan agreement
contains covenants that limit, among other things, our ability to:
- merge or consolidate;
- effect or permit a change of control;
- sell or lease assets;
- incur or grant additional indebtedness or capital leases;
- create or allow to exist liens and other encumbrances on our assets;
- pay dividends or other distributions to our shareholders;
- make certain capital expenditures and investments; and
- enter into certain related-party transactions.
Further, we are required to maintain specific financial ratios and levels
including (a) a ratio of senior debt to EBITDA, (b) a fixed charge coverage
ratio comparing EBITDA to specific disbursements and (c) a ratio comparing
senior debt to total capitalization. For fiscal 1999, the required senior debt
to EBITDA ratio is no more than 3.75 to 1.00, the fixed charge coverage ratio
must be no less than 2.00 to 1.00 and the senior debt to total capitalization
ratio must be no more than 0.65 to 1.00.
The revolving loan agreement provides for customary events of default,
including, among others, the occurrence of a change of control as well as the
failure to complete, by June 1, 1999, the proposed restructuring of operations
whereby Gildan Activewear SRL will become responsible for all of our
non-Canadian sales.
THE FUND
In June 1998, we replaced three unsecured and subordinated debentures
totalling $15.0 million with a new $15.0 million unsecured and subordinated
debenture due 2003, which bears interest at an annual rate of 11.0%. In January
1999, we issued another $15.0 million unsecured and subordinated debenture due
2004, which bears interest at an annual rate of 12.0% for the first two years
and 13.0% for the next three years. The debenture due 2004 contains certain
financial ratio requirements. Both debentures provide for customary events of
default, including, among others, the occurrence of a change of control, as
defined in the Canada Business Corporations Act, without the Fund's prior
consent. In the event of a default by Gildan, the Fund may require us to redeem
the debentures.
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CAPITAL D'AMERIQUE CDPQ INC.
In February 1999, we issued a $15.0 million unsecured and subordinated
debenture due 2004, which bears interest at an annual rate of 12.5%, to Capital
d'Amerique CDPQ Inc., a subsidiary of Caisse de depot et placement du Quebec.
The debenture contains certain financial ratio requirements and provides for
customary events of default, including the occurrence of a change of control
without prior consent.
SECURED EQUIPMENT AND MORTGAGE LOANS
We have relationships with several lenders which have provided financing by
way of secured loans, mortgages, conditional sales contracts and capitalized
leases. At March 7, 1999, these financings totalled $29.3 million and bore
interest at annual rates ranging from 5.9% to 13.0%. Each of the loans is
secured by certain of our personal (movable) or real (immovable) property. While
some of these lenders do not impose any covenants on us, others require that we
meet specific financial ratios and comply with certain covenants. These
covenants require us to:
- maintain specific (a) shareholders' equity levels, (b) current ratios,
(c) long-term debt to shareholders' equity ratios, (d) total debt to net
worth ratios, (e) minimum tangible net worth, and (f) debt coverage
ratios;
- not declare any dividends without their prior consent unless specific
debt coverage ratios are met;
- maintain control within the Chamandy family; and
- maintain collateral, property and insurance.
Failure to satisfy or comply with any of the foregoing could result in the
acceleration of amounts due or loss of collateral.
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SHARES ELIGIBLE FOR FUTURE SALE AND ESCROW ARRANGEMENTS
Upon completion of this offering, we will have outstanding 13,394,444
Equity Shares, comprised of 10,347,444 Class A Subordinate Voting Shares, of
which 3,000,000 Class A Subordinate Voting Shares are offered hereby, and
3,047,000 Class B Multiple Voting Shares. The 3,000,000 Class A Subordinate
Voting Shares being offered hereby are not restricted securities and,
consequently, will be freely tradeable under the U.S. Securities Act, unless
purchased by an "affiliate" of Gildan as such term is defined in the U.S.
Securities Act. Any Class A Subordinate Voting Shares purchased by our
affiliates generally may only be sold subject to the requirements of Rule 144
which are described below or pursuant to a registration rights statement or an
exemption therefrom.
The Class B Multiple Voting Shares held by Harco and the Class A
Subordinate Voting Shares held by the Fund and the Trusts, collectively
representing 51.9% of the Equity Shares outstanding immediately after the
closing of this offering, are deemed to be restricted securities under Rule 144
of the U.S. Securities Act. Consequently, Harco, the Fund and each of the Trusts
are entitled to sell within any three-month period only the number of shares
that does not exceed the greater of (a) 1% of the then-outstanding Class A
Subordinate Voting Shares (103,474 Class A Subordinate Voting Shares immediately
after the closing of this offering) or (b) the average weekly trading volume of
the Class A Subordinate Voting Shares during the four calendar weeks preceding
the date on which notice of the sale is filed with the U.S. Commission.
Furthermore, because a holder of restricted securities is not entitled to sell
its shares pursuant to Rule 144 unless it has held such shares for one year, the
Fund may not sell until June 6, 1999 its Class A Subordinate Voting Shares
purchased on June 6, 1998 when it exercised an option to purchase 3% of our
outstanding voting shares on a fully-diluted basis for $500,000.
However, Harco, the Fund and the Trusts may sell their Equity Shares
without regard to the restrictions of Rule 144 upon their registration under the
U.S. Securities Act. Pursuant to a registration rights agreement with us, Harco,
the Fund and the Trusts have the right to require us to register the Class A
Subordinate Voting Shares or the Class B Multiple Voting Shares, upon their
conversion to Class A Subordinate Voting Shares, held by them under the U.S.
Securities Act. See "Certain Relationships and Related
Transactions--Registration Rights Agreement".
However, even if Harco, the Fund and the Trusts were to register shares,
they are restricted in their ability to sell their Equity Shares by lock-up
provisions. Specifically, Harco has agreed not to sell, offer to sell, contract
to sell, announce its intention to sell, pledge, hypothecate, grant any option
for the sale of or otherwise dispose of, directly or indirectly, or file with
the U.S. Commission a registration statement under the U.S. Securities Act, or
file with the applicable Canadian securities commissions a prospectus, relating
to any Class A Subordinate Voting Shares or Class B Multiple Voting Shares or
any securities convertible or exercisable into or exchangeable for any Class A
Subordinate Voting Shares or Class B Multiple Voting Shares until December 17,
1999 without the prior written consent of Bear, Stearns & Co. Inc., as
representative of the underwriters. The Trusts, except with respect to pledging
and hypothecation, Gildan and the Fund have agreed to identical selling
restrictions for a 180-day period following the date of the prospectus.
In accordance with the policies of the relevant Canadian securities
regulatory authorities and The Toronto Stock Exchange concerning the disposition
of shares held by certain persons related to a company engaging in an initial
public offering, Harco, the Fund, the H. Gregory Chamandy Family Trust and the
Glenn Chamandy Family Trust entered into an escrow agreement with Montreal Trust
Company, as escrow agent. Pursuant to the escrow agreement, 2,372,014 Class B
Multiple Voting Shares and 2,842,499 Class A Subordinate Voting Shares were
deposited with the escrow agent by these shareholders. The escrowed shares
deposited with the escrow agent will be released to these shareholders in
tranches of 33 1/3% immediately after each of June 18, 1999, June 18, 2000 and
June 18, 2001, or at any prior time with the consent of the Commission des
valeurs mobilieres du Quebec, the Ontario
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<PAGE> 71
Securities Commission and The Toronto Stock Exchange. During the period of the
escrow, the escrowed shares may be pledged for security to financial
institutions, subject to the prior approval of the Commission des valeurs
mobilieres du Quebec, the Ontario Securities Commission and The Toronto Stock
Exchange.
We cannot predict the effect, if any, that future sales of Class A
Subordinate Voting Shares or the availability of Class A Subordinate Voting
Shares for future sale will have on the market price of the Class A Subordinate
Voting Shares prevailing from time to time. Sales of substantial numbers of
Class A Subordinate Voting Shares in the public market or the perception that
such sales will occur could adversely affect the market price of the Class A
Subordinate Voting Shares and could impair our ability to raise capital through
the offering of our equity securities. See "Risk Factors--Potential Sales of
Class A Subordinate Voting Shares Could Result In a Decline In the Market Price
of the Class A Subordinate Voting Shares".
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<PAGE> 72
TAXATION
Unless otherwise stated, statements of legal conclusion set forth under
"Taxation--U.S. Federal Income Taxation" reflect the opinion of Simpson Thacher
& Bartlett as to the material U.S. federal income tax consequences of the
acquisition, ownership and disposition of Class A Subordinate Voting Shares to
U.S. Holders (as defined below) and do not purport to be a complete analysis or
listing of all possible tax considerations. Unless otherwise stated, statements
of legal conclusion set forth under "Taxation--Canadian Taxation" reflect the
opinion of Ogilvy Renault as to the material Canadian federal income tax
consequences of the acquisition, ownership and disposition of Class A
Subordinate Voting Shares by United States Holders, as defined below, and do not
purport to be a complete analysis or listing of all possible tax consequences
relating to an investment in the Class A Subordinate Voting Shares. As indicated
below, certain conclusions are based on (i) certain factual assumptions or (ii)
the belief of Gildan, and such conclusions (as well as such assumptions and
beliefs) do not represent the opinions of Simpson Thacher & Bartlett or Ogilvy
Renault. The discussion does not deal with all possible tax consequences
relating to an investment in the Class A Subordinate Voting Shares and does not
purport to deal with the tax consequences applicable to all categories of
investors, some of which (such as dealers in securities, insurance companies and
tax-exempt entities) may be subject to special rules. In particular, the
discussion does not address the tax consequences under state, provincial, local
and other national (e.g., non-U.S., non-Canadian) tax laws. Accordingly, each
prospective investor should consult its own tax advisor regarding the particular
tax consequences to it of an investment in the Class A Subordinate Voting
Shares. The following discussion is based upon laws, regulations and relevant
interpretations thereof in effect as of the date of this prospectus, all of
which are subject to change, possibly retroactively.
U.S. FEDERAL INCOME TAXATION
The following is a discussion of the U.S. federal income tax consequences
of the acquisition, ownership and disposition of Class A Subordinate Voting
Shares by U.S. Holders. It does not purport to be a complete analysis or listing
of all possible tax considerations. The discussion deals only with Class A
Subordinate Voting Shares held as capital assets and does not address any
special U.S. tax consequences that may be applicable to U.S. Holders that are
subject to special treatment under the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), such as dealers in securities or currencies, financial
institutions, tax-exempt entities, life insurance companies, persons holding
Class A Subordinate Voting Shares as part of a hedging or conversion
transaction, constructive sale or a straddle, persons owning directly or
indirectly 10% or more of the total combined voting power of all classes of
voting stock of Gildan, or whose functional currency is not the U.S. dollar.
Prospective purchasers who are U.S. Holders are urged to satisfy themselves as
to the overall U.S. federal, state and local tax consequences of their ownership
of the Class A Subordinate Voting Shares by consulting their own tax advisors.
As used herein, a "U.S. Holder" of a Class A Subordinate Voting Share means
a holder that is, for U.S. federal and income tax purposes, a citizen or
resident of the United States, a corporation or partnership created or organized
in or under the laws of the United States or any political subdivision thereof,
an estate the income of which is subject to U.S. federal income taxation
regardless of its source, or a trust (a) which is subject to the supervision of
a court within the United States and the control of a United States person as
described in Section 7701(a)(3) of the Code or (b) that has a valid election in
effect under applicable U.S. Treasury regulations to be treated as a United
States person.
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TAXATION OF DIVIDENDS
The gross amount of dividends paid to U.S. Holders of Class A Subordinate
Voting Shares (including amounts withheld to reflect Canadian withholding taxes,
if any) will be treated as dividend income to such U.S. Holders, to the extent
paid out of current or accumulated earnings and profits, as determined under
U.S. federal income tax principles. Such income will be includable in the gross
income of a U.S. Holder as ordinary income. Such dividends will not be eligible
for the dividends received deduction allowed to corporations under the Code.
The maximum rate of withholding tax on dividends paid to a U.S. Holder
pursuant to the Treaty is 15%. U.S. Holders may be required to properly
demonstrate to Gildan and the Canadian tax authorities their entitlement to the
reduced rate of withholding under the Treaty. Subject to certain significant
conditions and limitations, Canadian withholding taxes will be treated as
foreign taxes eligible for credit against a U.S. Holder's U.S. federal income
tax liability. For purposes of calculating the foreign tax credit, dividends
paid on the Class A Subordinate Voting Shares will be treated as income from
sources outside the United States and will generally constitute "passive income"
or, in the case of certain U.S. Holders, "financial services income". Special
rules apply to certain individuals whose foreign source income during the
taxable year consists entirely of "qualified passive income" and whose
creditable foreign taxes paid or accrued during the taxable year do not exceed
$300 ($600 in the case of a joint return). Further, in certain circumstances, a
U.S. Holder that:
- has held Class A Subordinate Voting Shares for less than a specified
minimum period with respect to each dividend payment during which it is
not protected from risk of loss;
- is obligated to make payments related to the dividends; or
- holds the Class A Subordinate Voting Shares in an arrangement in which
the U.S. Holder's expected economic profit after non-U.S. taxes is
insubstantial
will not be allowed a foreign tax credit for foreign taxes imposed on dividends
paid on Class A Subordinate Voting Shares. Investors are urged to consult their
tax advisors regarding the availability of the foreign tax credit under their
particular circumstances.
To the extent that the amount of any distribution exceeds Gildan's current
and accumulated earnings and profits for a taxable year, the distribution will
first be treated as a tax-free return of capital, causing a reduction in the
adjusted basis of the Class A Subordinate Voting Shares (thereby increasing the
amount of gain, or decreasing the amount of loss, to be recognized by the
investor on a subsequent disposition of the Class A Subordinate Voting Shares),
and the balance in excess of adjusted basis will be taxed as capital gain
recognized on a sale or exchange. Consequently, such distributions in excess of
Gildan's current and accumulated earnings and profits would not give rise to
foreign source income and a U.S. Holder would not be able to use the foreign tax
credit arising from any Canadian withholding tax imposed on such distributions,
unless such credit can be applied (subject to applicable limitations) against
U.S. tax due on other foreign source income in the appropriate category for
foreign tax credit purposes.
FOREIGN PERSONAL HOLDING COMPANY STATUS
A foreign corporation will be classified as a foreign personal holding
company (an "FPHC") if:
- at any time during the corporation's taxable year, five or fewer
individuals, who are U.S. citizens or residents, directly or indirectly
own more than 50% of the corporation's stock (by either voting power or
value) (the "FPHC shareholder test"); and
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<PAGE> 74
- the corporation receives at least 60% of its gross income (regardless of
source), as adjusted, from certain passive sources (the "FPHC income
test"). After its initial year of qualification as an FPHC, a
corporation may remain an FPHC even if only 50% of its gross income is
FPHC income (i.e., passive income such as interest, dividends, etc.).
Gildan believes that it does not satisfy, and expects that it will continue
to fail to satisfy, the FPHC income test. Gildan believes that the FPHC
shareholder test also was not met prior to the offering and will not be met
immediately after the offering. However, due to a number of factors (including
the FPHC stock attribution rules, possible change in residence by current
indirect shareholders, and possible acquisition of Class A Subordinate Voting
Shares by purchase, gift, or bequest by individuals related to or partners of
current indirect shareholders), Gildan cannot assure you that Gildan will not
become an FPHC in the future.
If Gildan were classified as an FPHC, U.S. Holders (including certain
indirect holders) would be required to include in income their pro rata share of
Gildan's undistributed FPHC income if they were holders on the last day of
Gildan's taxable year (or if earlier, the last day on which Gildan satisfies the
shareholder test). Such income would be taxable to such persons as a dividend,
even if no cash dividend were actually paid. In general, a U.S. Holder would be
entitled to increase its tax basis in the Class A Subordinate Voting Shares by
the amount of such deemed FPHC dividend. U.S. Holders who dispose of their Class
A Subordinate Voting Shares prior to the date discussed above would not be
subject to these rules. Moreover, if Gildan became an FPHC, U.S. persons who
acquire Class A Subordinate Voting Shares from decedents would not receive a
"stepped-up" basis in such Class A Subordinate Voting Shares. Instead, such a
holder would have a tax basis equal to the lower of fair market value or the
decedent's basis.
Gildan will notify U.S. Holders in the event that it concludes that it is
classified as FPHC for any taxable year.
PERSONAL HOLDING COMPANY TAX
A corporation will be classified as a personal holding company (a "PHC")
if:
- at any time during the last half of the corporation's taxable year, five
or fewer individuals own more than 50% of the corporation's stock (by
value) directly or indirectly (the "PHC Shareholder test"); and
- the corporation receives at least 60% of its gross income, as adjusted,
from certain passive sources (the "PHC Income test").
However, if a corporation is an FPHC (see above), it cannot be a PHC.
Gildan believes that it satisfies, and will continue to satisfy, the PHC
shareholder test. Gildan believes that the PHC income test will not be met for
the current taxable year and that it consequently will not be classified as a
PHC. However, there can be no assurance that Gildan will not become a PHC in the
future.
A corporation classified as a PHC is subject to a 39.6% tax on its
undistributed personal holding company income. Foreign corporations (such as
Gildan) determine their liability for PHC tax by considering only (i) gross
income derived from U.S. sources and (ii) gross income which is effectively
connected with a U.S. trade or business (collectively, "U.S. Taxable Income").
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PASSIVE FOREIGN INVESTMENT COMPANY STATUS
Gildan does not believe that it is, for U.S. federal tax purposes, a
passive foreign investment company (a "PFIC"), and expects to continue its
operations in such a manner that it will not be a PFIC. If, however, Gildan is
or does become a PFIC, U.S. Holders could be subject to additional U.S. federal
income taxes on certain distributions or gains with respect to Class A
Subordinate Voting Shares, plus an interest charge on certain taxes treated as
having been deferred by the U.S. Holder, under the PFIC rules.
TAXATION OF CAPITAL GAINS
For U.S. federal income tax purposes, a U.S. Holder will recognize taxable
gain or loss on any sale or exchange of a Class A Subordinate Voting Share in an
amount equal to the difference between the amount realized for the Class A
Subordinate Voting Share and the U.S. Holder's basis in the Class A Subordinate
Voting Share. Such gain or loss will be capital gain or loss. Capital gains of
individuals derived with respect to capital assets held for more than one year
are eligible for reduced rates of taxation. The deductibility of capital losses
is subject to limitation. Any gain or loss recognized by a U.S. Holder will
generally be treated as U.S. source gain or loss. Prospective investors should
consult their own tax advisors with respect to the treatment of capital gains
and losses.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to dividends paid
in respect of the Class A Subordinate Voting Shares or the proceeds received on
the sale, exchange, or redemption of the Class A Subordinate Voting Shares
within the United States (and in certain cases, outside the United States) by
non-corporate U.S. Holders, and a 31% backup withholding may apply to such
amounts if the U.S. Holder fails to provide an accurate taxpayer identification
number or to report interest and dividends required to be shown on its federal
income tax returns. Backup withholding will not apply with respect to payments
made to certain exempt recipients, such as corporations and tax-exempt
organizations. The amount of any backup withholding from a payment to a U.S.
Holder will be allowed as a credit against the U.S. Holder's U.S. federal income
tax liability and may entitle such U.S. Holder to a refund, provided that the
required information is furnished to the U.S. Internal Revenue Service.
CANADIAN TAXATION
The following takes into account the current provisions of the Income Tax
Act (Canada) (the "Tax Act"), the regulations thereunder, all specific proposals
to amend the Tax Act publicly announced prior to the date of this Offering, the
Convention between Canada and the United States of America with respect to Taxes
on Income and on Capital (the "Convention") and the current published
administrative practices and policies of Revenue Canada, as understood by Ogilvy
Renault. It assumes that all proposals to amend the Tax Act will be enacted in
their present form and otherwise does not take into account or anticipate
changes in the law, whether by way of judicial decision or legislative action
nor does it take into account provincial, territorial or foreign tax legislation
or considerations. This summary is generally applicable to a person who acquires
the Class A Subordinate Voting Shares pursuant to this offering and who:
- throughout the period during which the purchaser owns the Class A
Subordinate Voting Shares, is not resident in Canada for the purposes of
the Tax Act and is a resident of the United States for the purposes of
the Convention;
- holds the Class A Subordinate Voting Shares as capital property for the
purposes of the Tax Act; and
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- does not use or hold, and is not deemed for the purposes of the Tax Act
to use or hold, such Class A Subordinate Voting Shares in, or in the
course of, carrying on a business in Canada (a "United States Holder").
The Class A Subordinate Voting Shares will generally be considered to be capital
property to a United States Holder unless either the United States Holder holds
those shares in the course of carrying on a business or the United States Holder
has acquired those shares in one or more transactions considered to be an
adventure in the nature of trade.
The following does not purport to be a complete analysis or listing of all
possible tax considerations that may be relevant to purchasers of Class A
Subordinate Voting Shares. Prospective purchasers who are United States Holders
are urged to satisfy themselves as to the overall Canadian federal, provincial
or territorial as well as foreign tax consequences of their ownership of Class A
Subordinate Voting Shares by consulting their own tax advisers with respect to
their particular circumstances.
TAXATION OF DIVIDENDS
Dividends paid or credited (or deemed to be paid or credited) by Gildan to
a United States Holder that beneficially owns such dividends generally are
subject to Canadian withholding tax at the rate of (a) 15% of the gross amount
of such dividends, or (b) where the United States Holder is a company that owns
at least 10% of the voting stock of Gildan, 5% of the gross amount of such
dividends.
A United States Holder, which is a trust company, organization or other
arrangement generally exempt from income taxation in the United States in a
given taxable year and operated exclusively either (a) to administer or provide
pension, retirement or employee benefits or (b) to earn income for the benefit
of an organization referred to in (a) shall not be subject to Canadian
withholding tax on dividends paid or credited (or deemed to be paid or credited)
by Gildan in such year unless such United States Holder is related to Gildan or
receives such dividends in the course of carrying on a trade or business.
TAXATION OF SALE OR OTHER DISPOSITION
A United States Holder will not be subject to tax under the Tax Act on any
gain in respect of the disposition or deemed disposition of Class A Subordinate
Voting Shares unless those Class A Subordinate Voting Shares constitute "taxable
Canadian property", as defined in the Tax Act, to such United States Holder. The
Class A Subordinate Voting Shares generally will not constitute taxable Canadian
property to a United States Holder unless the United States Holder, persons with
whom the United States Holder does not deal at arm's length, or the United
States Holder and such persons collectively own or have at any time within the
five year period immediately prior to the disposition collectively owned, 25% or
more of the issued shares of any class or series of the Company, including
rights to acquire shares. Even if the Class A Subordinate Voting Shares are
taxable Canadian property to a United States Holder, under the Convention, gains
derived by a United States Holder from the disposition of Class A Subordinate
Voting Shares would generally not be taxable in Canada unless the value of the
Class A Subordinate Voting Shares is derived principally from real property
situated in Canada. Gildan believes that the value of its Class A Subordinate
Voting Shares is not currently derived principally from real property situated
in Canada and it does not expect this to change in the foreseeable future.
OTHER CANADIAN TAXES
No other taxes on income or capital are payable by United States Holders in
respect of the Class A Subordinate Voting Shares or the dividends thereon.
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EXCHANGE CONTROLS
There are currently no laws, decrees or regulations in Canada imposing
restrictions on the import or export of capital affecting remittances of
dividends on our Class A Subordinate Voting Shares or on the conduct of our
operations.
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UNDERWRITING
Gildan and the underwriters for this offering named below, for whom Bear,
Stearns & Co. Inc., Nesbitt Burns Inc., The Robinson-Humphrey Company, LLC and
Wasserstein Perella Securities, Inc. are acting as representatives
(collectively, the "Representatives"), have entered into an underwriting
agreement with respect to the Class A Subordinate Voting Shares being offered.
Subject to the terms and conditions of the underwriting agreement, each
underwriter has severally agreed to purchase the number of Class A Subordinate
Voting Shares set forth opposite their respective names below:
<TABLE>
<CAPTION>
NUMBER OF
CLASS A SUBORDINATE
NAME OF UNDERWRITER VOTING SHARES
- ------------------- -------------------
<S> <C>
Bear, Stearns & Co. Inc. .............................
Nesbitt Burns Inc. ...................................
The Robinson-Humphrey Company, LLC....................
Wasserstein Perella Securities, Inc. .................
---------
Total............................................... 3,000,000
=========
</TABLE>
If the underwriters sell more than the total number set forth in the table
above, the underwriters have an option to buy up to an aggregate of 450,000
additional Class A Subordinate Voting Shares from us to cover such sales. They
may exercise that option within 30 days after the date of this prospectus. If
any Class A Subordinate Voting Shares are purchased pursuant to this option, the
underwriters will severally purchase Class A Subordinate Voting Shares in
approximately the same proportion as set forth in the above table.
The following table shows the per Class A Subordinate Voting Share and
total underwriting discounts and commissions to be paid to the underwriters by
us. Such amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional Class A Subordinate Voting Shares.
<TABLE>
<CAPTION>
PAID BY GILDAN
----------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per Class A Subordinate Voting Share........................ US$ US$
Total....................................................... US$ US$
</TABLE>
Class A Subordinate Voting Shares sold by the underwriters to the public
will initially be offered at the public offering price set forth on the cover
page of this prospectus. Any Class A Subordinate Voting Shares sold by the
underwriters to securities dealers may be sold at a discount of up to US$ per
Class A Subordinate Voting Share from the public offering price. Any such
securities dealers may resell any Class A Subordinate Voting Shares purchased
from the underwriters to certain other brokers or dealers at a discount of up to
US$ per Class A Subordinate Voting Share from the public offering price.
This offering is being made concurrently in the United States and in all
the provinces of Canada. Subject to applicable law, the underwriters may offer
the Class A Subordinate Voting Shares outside of the United States and Canada.
Harco has agreed that until December 17, 1999, it will not, without the
prior written consent of Bear, Stearns & Co. Inc., on behalf of the
underwriters, sell, offer to sell, contract to sell, announce its intention to
sell, pledge, hypothecate, grant any option for the sale of or otherwise dispose
of, directly or indirectly, or file with the U.S. Commission a registration
statement under the U.S. Securities Act, or file with the applicable Canadian
securities commissions a prospectus, relating to any Class A Subordinate Voting
Shares or Class B Multiple Voting Shares or any securities convertible or
exercisable into or exchangeable for any Class A Subordinate Voting Shares or
Class B Multiple Voting Shares.
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Gildan, each of the Trusts, except with respect to pledging and hypothecation,
and the Fund have agreed to identical selling limitations for a period of 180
days from the date of the prospectus. All of these undertakings are subject to
limited exceptions.
In connection with the offering, the underwriters may purchase and sell
Class A Subordinate Voting Shares in the open market. These transactions may
include short sales, stabilizing transactions and purchases to cover positions
created by short sales. Short sales involve the sale by the underwriters of a
greater number of Class A Subordinate Voting Shares than they are required to
purchase in the offering. Stabilizing transactions consist of certain bids or
purchases made for the purpose of preventing or slowing a decline in the market
price of the Class A Subordinate Voting Shares while the offering is in
progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the Representatives have repurchased Class A
Subordinate Voting Shares sold by or for the account of such underwriter in
stabilizing or short covering transactions. These activities by the underwriters
may stabilize, maintain or otherwise affect the market price of the Class A
Subordinate Voting Shares. As a result, the price of a Class A Subordinate
Voting Share may be higher than the price that otherwise might exist in the open
market. We make no representation as to the magnitude or effect of any such
stabilization or other transactions. Such transactions may be effected on the
American Stock Exchange, The Montreal Exchange, The Toronto Stock Exchange or
otherwise and, if commenced, may be discontinued at any time.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the U.S. Securities Act and applicable Canadian
securities laws, and, where such indemnification is unavailable, to contribute
to payments that the underwriters may be required to make in respect of such
liabilities.
Some of the underwriters and their affiliates have from time to time
provided, and may continue to provide, investment banking services to us for
which such underwriters or affiliates have received and will receive fees and
commissions.
LEGAL MATTERS
The validity of the Class A Subordinate Voting Shares offered hereby and
certain other matters of Canadian law relating to the offering are being passed
upon for us by Ogilvy Renault, Montreal, Quebec, a general partnership, and
Hart, Saint-Pierre, Montreal, Quebec, a general partnership. Certain legal
matters relating to the offering are being passed upon for us by Simpson Thacher
& Bartlett, New York, New York, with respect to U.S. law, and certain legal
matters relating to the offering are being passed upon for the underwriters by
Weil, Gotshal & Manges LLP, New York, New York, with respect to U.S. law and
Stikeman, Elliott, Montreal, Quebec, with respect to Canadian law. Simpson
Thacher & Bartlett and Weil, Gotshal & Manges LLP will rely upon Ogilvy Renault
with respect to matters of Canadian law.
Mr. Norman M. Steinberg, a director of Gildan, is a partner of Ogilvy
Renault. Mr. Gino Martel, Secretary of Gildan, is a partner of Hart,
Saint-Pierre. Ogilvy Renault has acted as counsel to Gildan since 1997. Hart,
Saint-Pierre has acted as counsel to Gildan since its inception in 1984.
74
<PAGE> 80
EXPERTS
Our consolidated financial statements as of and for ten-month fiscal 1996,
fiscal 1997 and fiscal 1998 have been audited by KPMG LLP, Chartered
Accountants, as stated in their report appearing herein. The consolidated
financial statements referred to above have been so included in reliance upon
such reports given upon the authority of said firms as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form F-1 under the Securities Act, with respect to the Class A
Subordinate Voting Shares offered hereby. This prospectus does not contain all
of the information set forth in the registration statement and the exhibits
thereto. For further information with respect to Gildan and the Class A
Subordinate Voting Shares offered hereby, reference is made to the registration
statement and to the financial statements and exhibits filed as a part thereof.
Statements contained in this prospectus as to the contents of any contract,
agreement or any other document are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the registration statement or otherwise with the Commission, each such statement
being qualified in all respects by such reference and exhibits. The registration
statement, including all exhibits thereto, may be found on the Commission's
website at www.sec.gov or inspected without charge at the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549, as well as the
Commission's regional offices at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10048, and copies of all or any part thereof may be obtained from such offices
after payment of the fees prescribed by the Commission. You may obtain
information regarding the operation of the public reference rooms at
1-800-SEC-0330.
We furnish our shareholders with annual reports containing financial
statements and a reconciliation with U.S. GAAP audited by an independent
chartered accounting firm. We also furnish quarterly reports for the first three
quarters of each fiscal year containing unaudited financial information. Our
annual reports and quarterly reports are prepared in accordance with Canadian
GAAP and in Canadian dollars. We are subject to the reporting requirements of
the U.S. Securities Exchange Act of 1934, as amended, applicable to foreign
private issuers and in accordance therewith we file reports and other
information with the Commission. As a foreign private issuer, we are exempt from
certain provisions of the U.S. Securities Exchange Act prescribing the
furnishing and content of proxy statements and certain periodic reports and from
provisions of the U.S. Securities Exchange Act relating to short swing profits
reporting and liability.
In addition, all of our continuous disclosure documents are available
on-line on SEDAR, the System for Electronic Document Analysis and Retrieval,
used by companies to electronically file information with the Canadian
Securities Administrators. SEDAR is located on the internet at www.sedar.com and
is operated by The Canadian Depository for Securities.
75
<PAGE> 81
GILDAN ACTIVEWEAR INC.
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS
Auditors' Report to the Board of Directors................ F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Income......................... F-4
Consolidated Statements of Retained Earnings.............. F-5
Consolidated Statements of Changes in Financial
Position............................................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 82
AUDITORS' REPORT TO THE BOARD OF DIRECTORS
We have audited the consolidated balance sheets of Gildan Activewear Inc.
as at October 4, 1998 and October 5, 1997 and the consolidated statements of
income, retained earnings and changes in financial position for the years ended
October 4, 1998 and October 5, 1997 and the ten-month period ended September 29,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at October 4,
1998 and October 5, 1997 and the results of its operations and the changes in
its financial position for the years ended October 4, 1998 and October 5, 1997
and for the ten-month period ended September 29, 1996 in accordance with
generally accepted accounting principles in Canada.
Accounting principles generally accepted in Canada vary in certain
significant respects from accounting principles generally accepted in the United
States. Application of accounting principles generally accepted in the United
States would have affected results of operations for the years ended October 4,
1998, October 5, 1997 and the ten-month period ended September 29, 1996 and
shareholders' equity as of October 4, 1998 and October 5, 1997, to the extent
summarized in note 19 to the consolidated financial statements.
/s/ KPMG LLP
Chartered Accountants
Montreal, Canada
November 13, 1998
(Except as to note 18 which is as of April 15, 1999)
F-2
<PAGE> 83
GILDAN ACTIVEWEAR INC.
CONSOLIDATED BALANCE SHEETS
(In Canadian dollars)
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Accounts receivable (note 2)............... $ 57,206,600 $ 55,687,657 $ 31,166,610
Inventories (note 3)....................... 93,360,675 59,981,432 19,758,851
Prepaid expenses and deposits.............. 1,673,654 2,030,080 1,175,777
------------ ------------ ------------
152,240,929 117,699,169 52,101,238
Fixed assets (note 4)........................ 51,948,406 41,873,758 21,378,121
Other assets (note 5)........................ 7,248,229 6,105,008 3,885,276
------------ ------------ ------------
$211,437,564 $165,677,935 $ 77,364,635
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness (note 6)................. $ 61,528,877 $ 32,496,777 $ 15,029,867
Accounts payable and accrued liabilities... 47,937,576 45,309,533 17,833,894
Income taxes payable....................... 3,255,543 3,465,643 1,468,799
Current portion of long-term debt (note
7)...................................... 5,296,023 3,293,280 2,363,087
------------ ------------ ------------
118,018,019 84,565,233 36,695,647
Long-term debt (note 7)...................... 35,832,576 24,754,500 21,958,303
Advances from parent company................. -- -- 382,790
Future income taxes.......................... 3,278,000 3,028,000 2,675,000
Shareholders' equity:
Share capital (note 8)..................... 34,458,145 34,458,145 7,271,994
Contributed surplus (note 8)............... 322,866 322,866 --
Retained earnings.......................... 19,527,958 18,549,191 8,380,901
------------ ------------ ------------
54,308,969 53,330,202 15,652,895
------------ ------------ ------------
Commitments and contingent liabilities (note
9)
$211,437,564 $165,677,935 $ 77,364,635
============ ============ ============
</TABLE>
On behalf of the Board:
<TABLE>
<S> <C>
/s/ H. GREGORY CHAMANDY, Director /s/ NORMAN M. STEINBERG, Director
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 84
GILDAN ACTIVEWEAR INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Canadian dollars)
<TABLE>
<CAPTION>
THREE-MONTH THREE-MONTH TEN-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales.............................. $45,109,313 $31,812,474 $215,427,668 $119,844,406 $70,448,421
Cost of sales...................... 33,078,967 25,969,379 164,849,498 93,059,472 56,367,062
----------- ----------- ------------ ------------ -----------
Gross profit....................... 12,030,346 5,843,095 50,578,170 26,784,934 14,081,359
Expenses:
Selling, general and
administrative................. 7,194,791 3,617,318 20,795,860 12,470,101 8,359,505
Depreciation and amortization.... 1,763,011 746,150 4,062,850 2,337,073 1,633,292
Interest on long-term debt....... 675,255 506,381 2,767,468 1,683,548 1,080,277
Interest, other.................. 868,522 341,591 2,264,571 1,290,787 1,427,115
Loss on settlement of long-term
debt (note 7).................. - - 819,131 - -
----------- ----------- ------------ ------------ -----------
10,501,579 5,211,440 30,709,880 17,781,509 12,500,189
----------- ----------- ------------ ------------ -----------
Income before income taxes......... 1,528,767 631,655 19,868,290 9,003,425 1,581,170
Income taxes (note 11):
Current.......................... 300,000 - 4,771,000 1,787,000 170,000
Future........................... 250,000 331,269 1,929,000 1,551,000 438,000
----------- ----------- ------------ ------------ -----------
550,000 331,269 6,700,000 3,338,000 608,000
----------- ----------- ------------ ------------ -----------
Net income......................... $ 978,767 $ 300,386 $ 13,168,290 $ 5,665,425 $ 973,170
=========== =========== ============ ============ ===========
Net income per share (note 1 (g)):
Basic............................ $ 0.10 $ 1.65
Fully diluted.................... 0.10 1.62
Weighted average number of common
shares outstanding:
Basic............................ 9,950,000 7,998,657
Fully diluted.................... 10,627,076 8,177,303
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 85
GILDAN ACTIVEWEAR INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In Canadian dollars)
<TABLE>
<C> <S> <S>
THREE-MONTH THREE-MONTH TEN-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ -------------
(UNAUDITED)
Retained earnings, beginning of
period........................... $18,549,191 $ 8,380,901 $ 8,380,901 $ 2,715,476 $ 1,742,306
Net income......................... 978,767 300,386 13,168,290 5,665,425 973,170
Dividends.......................... - (500,000) (500,000) -- --
Cost of stock option re-acquired
(note 8 (b))..................... -- -- (2,500,000) -- --
----------- ----------- ------------ ------------ -----------
Retained earnings, end of period... $19,527,958 $ 8,181,287 $ 18,549,191 $ 8,380,901 $ 2,715,476
=========== =========== ============ ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 86
GILDAN ACTIVEWEAR INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(In Canadian dollars)
<TABLE>
<CAPTION>
THREE-MONTH THREE-MONTH TEN-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
------------ ------------- ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash provided by (used in):
Operations:
Net income..................... $ 978,767 $ 300,386 $ 13,168,290 $ 5,665,425 $ 973,170
Add (deduct) items not
affecting cash:
Depreciation and
amortization............... 1,763,011 746,150 4,109,341 2,337,073 1,633,292
Future income taxes.......... 250,000 331,269 1,929,000 1,551,000 438,000
(Gain) loss on disposal of
fixed assets............... -- 201,316 (380,783) 31,464 1,229
Net changes in non-cash working
capital balances (note 12)... (32,123,819) (10,162,320) (36,012,448) (13,781,840) (8,784,038)
------------ ------------ ------------ ------------ ------------
(29,132,041) (8,583,199) (17,186,600) (4,196,878) (5,738,347)
Financing:
Increase in long-term debt..... 13,939,055 1,154,283 14,034,944 10,392,680 9,651,842
Repayment of long-term debt.... (858,236) (629,982) (10,308,554) (2,854,755) (3,562,397)
Issue of common shares, net.... -- -- 25,920,017 10,000 3,000,000
Payment of dividends........... -- (500,000) (500,000) -- --
Redemption of share capital.... -- -- (422,866) -- --
Increase in contributed
surplus...................... -- -- 322,866 -- --
Acquisition of stock option.... -- -- (2,500,000) -- --
------------ ------------ ------------ ------------ ------------
13,080,819 24,301 26,546,407 7,547,925 9,089,445
Investments:
Decrease in advances to
affiliated companies......... -- -- -- -- 20,000
Decrease (increase) in advances
to/from parent company....... 50,967 (119,984) (1,110,412) 5,810 (987,957)
Increase in deferred charges... (430,734) (60,917) (994,300) (996,293) (491,402)
Increase in prepaid equipment
rental....................... (106,520) -- (703,684) -- --
Purchase of fixed assets....... (11,563,406) (6,362,164) (24,587,694) (5,438,648) (6,390,257)
Proceeds on disposal of fixed
assets....................... -- 213,000 1,289,191 90,133 16,350
Decrease (increase) in
deposits..................... (931,185) 355,194 (719,818) (799,712) 98,381
------------ ------------ ------------ ------------ ------------
(12,980,878) (5,974,871) (26,826,717) (7,138,710) (7,734,885)
------------ ------------ ------------ ------------ ------------
Increase in bank indebtedness.... (29,032,100) (14,533,769) (17,466,910) (3,787,663) (4,383,787)
Bank indebtedness, beginning of
period......................... (32,496,777) (15,029,867) (15,029,867) (11,242,204) (6,858,417)
------------ ------------ ------------ ------------ ------------
Bank indebtedness, end of
period......................... $(61,528,877) $(29,563,636) $(32,496,777) $(15,029,867) $(11,242,204)
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 87
GILDAN ACTIVEWEAR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended October 4, 1998, October 5, 1997 and period ended September 29, 1996
(In Canadian dollars)
Gildan Activewear Inc. (the "Company") is incorporated under the Canada
Business Corporations Act. Its principal business activities include the design,
manufacture and distribution of activewear apparel. Effective September 29,
1996, the Company changed its fiscal year-end from the first Friday following
November 29 to the first Sunday following September 28.
The consolidated statements of income, retained earnings and changes in
financial position for the three-month periods ended January 3, 1999 and January
4, 1998, and the balance sheet as at January 3, 1999 are unaudited but include
all adjustments (consisting of normal recurring adjustments) that the Company
considers necessary for a fair presentation. Operating results for the
three-month period ended January 3, 1999 are not necessarily indicative of the
results that may be expected for the year ending October 3, 1999. Financial
disclosures herein relating to matters subsequent to November 13, 1998 are
unaudited, except for matters disclosed in note 18.
1. SIGNIFICANT ACCOUNTING POLICIES:
The consolidated financial statements are expressed in Canadian dollars and
have been prepared in accordance with accounting principles generally
accepted in Canada.
(a) Principles of consolidation:
The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant intercompany
balances and transactions have been eliminated on consolidation.
(b) Inventories:
Inventories are stated at the lower of cost (first in, first out method)
and market value. Market value is defined as replacement cost for raw
materials and net realizable value for work in process and finished
goods.
(c) Fixed assets:
Fixed assets are recorded at cost. Depreciation and amortization are
calculated on a straight-line basis at the following annual rates:
<TABLE>
<CAPTION>
ASSET RATE
----- ----------
<S> <C>
Building and improvements................................... 2 1/2% to
20%
Equipment................................................... 5% to 25%
Equipment under capital leases.............................. 5% to 25%
</TABLE>
(d) Deferred charges:
The costs of obtaining long-term financing are deferred and amortized on
a straight-line basis over the term of the related debt, ranging over a
period of 3 to 5 years. Plant start-up costs and significant plant
renovation costs incurred to improve future production efficiencies are
deferred and amortized over 2 years. The amortization of these charges
is included in depreciation and amortization.
F-7
<PAGE> 88
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(e) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(f) Foreign exchange:
Monetary assets and liabilities denominated in foreign currencies are
translated at the rates of exchange at the balance sheet date. Other
balance sheet items are translated at the rates prevailing at the
respective transaction dates. Income and expenses are translated at
average rates prevailing during the year. Gains or losses on foreign
exchange are recorded in the statements of income.
The foreign subsidiaries are considered to be integrated foreign
operations and their accounts have been translated using the temporal
method with translation gains and losses included in the statements of
income.
(g) Earnings per share:
Earnings per share is calculated using the weighted average number of
equity shares outstanding during the year after giving effect
retroactively at the beginning of fiscal 1998 to the conversion of the
Class A preferred shares and Class A common shares into Class A
subordinate voting shares and Class B multiple voting shares as
discussed in note 8 (d) to the Consolidated Financial Statements. Fully
diluted earnings per share reflects the dilutive effects of the assumed
exercise of stock options outstanding at the end of the period.
Prior to the completion of the initial public offering, the Company, as
a private entity, is not required to present earnings per share.
(h) Revenue recognition:
Sales are recognized at the time of shipment of products. The Company
estimates liabilities for returns and allowances at the time of
shipment. In addition, provisions for customer price discounts and
rebates are recorded at the later of when revenue is recognized or when
a new program is introduced.
(i) Advertising and promotion:
All costs associated with advertising and promoting products are
expensed in the period incurred.
(j) Financial instruments:
The Company uses derivative financial instruments, principally forward
foreign exchange contracts to manage risks from fluctuations in exchange
rates and interest rate swap arrangements to manage risks from
fluctuations in interest rates. Derivative financial instruments are not
used for trading purposes. Gains and losses on forward foreign exchange
contracts are recognized through income and generally offset transaction
losses or gains on the foreign currency cash flows, which they are
intended to hedge. Forward foreign exchange contracts are entered into
with maturities of no longer than six months.
F-8
<PAGE> 89
2. RECEIVABLES:
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Trade receivables........................ $54,249,616 $55,335,629 $30,161,104
Duty drawback............................ 726,675 783,769 425,000
Commodity taxes receivable............... 2,408,495 2,202,153 1,078,946
Other.................................... 1,325,177 1,186,916 431,560
Less allowance for doubtful accounts,
price discounts and rebates............ (1,503,363) (3,820,810) (930,000)
----------- ----------- -----------
$57,206,600 $55,687,657 $31,166,610
=========== =========== ===========
Allowance for doubtful accounts, price
discounts and rebates:
Beginning of period.................... $ 3,820,810 $ 930,000 $ 503,143
Amount provided for during the
period.............................. 1,303,000 3,620,810 465,596
Amount applied against the provision
during the period................... (3,620,447) (730,000) (38,739)
----------- ----------- -----------
Balance, end of period................... $ 1,503,363 $ 3,820,810 $ 930,000
=========== =========== ===========
</TABLE>
3. INVENTORIES:
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials............................ $ 3,568,257 $ 6,012,464 $ 2,255,196
Work in process.......................... 25,750,791 20,471,740 9,071,432
Finished goods........................... 64,041,627 33,497,228 8,432,223
----------- ----------- -----------
$93,360,675 $59,981,432 $19,758,851
=========== =========== ===========
</TABLE>
4. FIXED ASSETS:
<TABLE>
<CAPTION>
JANUARY 3,
ACCUMULATED 1999
DEPRECIATION -----------
AND NET BOOK
COST AMORTIZATION VALUE
----------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Land..................................... $ 1,757,647 $ -- $ 1,757,647
Building and improvements................ 8,997,006 1,455,761 7,541,245
Equipment................................ 34,542,324 8,941,201 25,601,123
Equipment under capital leases........... 19,705,183 2,656,792 17,048,391
----------- ----------- -----------
$65,002,160 $13,053,754 $51,948,406
=========== =========== ===========
</TABLE>
During the three-month period ended January 3, 1999, approximately
$9,000,000 of equipment acquired during fiscal 1998 was refinanced under
capital leases. A reclassification from equipment to equipment under
capital leases has been reflected in the above table.
F-9
<PAGE> 90
4. FIXED ASSETS (CONTINUED):
<TABLE>
<CAPTION>
OCTOBER 4,
ACCUMULATED 1998
DEPRECIATION -----------
AND NET BOOK
COST AMORTIZATION VALUE
----------- -------------- -----------
<S> <C> <C> <C>
Land..................................... $ 755,975 $ -- $ 755,975
Building and improvements................ 6,930,171 1,311,375 5,618,796
Equipment................................ 36,010,956 8,198,399 27,812,557
Equipment under capital leases........... 9,741,650 2,055,220 7,686,430
----------- ----------- -----------
$53,438,752 $11,564,994 $41,873,758
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 5,
ACCUMULATED 1997
DEPRECIATION -----------
AND NET BOOK
COST AMORTIZATION VALUE
----------- -------------- -----------
<S> <C> <C> <C>
Land..................................... $ 29,100 $ -- $ 29,100
Building and improvements................ 4,102,246 863,471 3,238,775
Equipment................................ 20,310,583 6,542,007 13,768,576
Equipment under capital leases........... 5,559,638 1,217,968 4,341,670
----------- ----------- -----------
$30,001,567 $ 8,623,446 $21,378,121
=========== =========== ===========
</TABLE>
Depreciation expense in 1998 was $3,183,649 (1997--$2,082,927;
1996--$1,537,140). The depreciation expense for the three-month periods
ended January 3, 1999 and January 4, 1998 was $1,488,760 and $615,278
respectively (unaudited).
5. OTHER ASSETS:
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Advances to parent company.................. $1,661,802 $1,712,769 $ 985,147
Advances to affiliated companies............ 580,000 580,000 580,000
Deferred charges, net of accumulated
amortization of $1,079,478 (unaudited)
(1998--$1,264,183; 1997--$345,187)........ 1,471,425 1,313,268 1,237,964
Prepaid equipment rental.................... 810,204 703,684 --
Deposits.................................... 2,622,349 1,691,164 971,346
Goodwill, net of accumulated amortization of
$64,661 (unaudited) (1998--$62,987;
1997--$56,291)............................ 102,449 104,123 110,819
---------- ---------- ----------
$7,248,229 $6,105,008 $3,885,276
========== ========== ==========
</TABLE>
The amortization expense in fiscal 1998 for deferred charges and goodwill
was $872,505 (1997--$247,450; 1996--$90,572) and $6,696 (1997--$6,696;
1996--$5,580) respectively. The amortization expense for the three-month
periods ended January 3, 1999 and January 4, 1998 for deferred charges was
$272,577 and $129,200 and for goodwill was $1,674 and $1,674 (unaudited).
F-10
<PAGE> 91
6. BANK INDEBTEDNESS:
The Company has an operating line of credit with its bankers to a maximum
of $50,000,000 (January 3, 1999--$70,000,000 (unaudited)) or the equivalent
amount thereof in US dollars, which bears interest at a floating base rate
and is secured by a first ranking moveable hypothec (a form of security on
personal property) covering all of the Company's and its subsidiaries'
assets, other than a first ranking security on specific machinery and
equipment pledged as security for long-term debt, and the assignment of
property insurance.
The effective interest rate at October 4, 1998 was 9.75% on US dollar
denominated loans and 8.25% on Canadian dollar denominated loans under the
operating credit facility. Effective interest rates at October 5, 1997 were
10% on US dollar denominated loans and 6.50% on Canadian dollar denominated
loans.
The effective interest rate at January 3, 1999 was 9.25% on US dollar
denominated loans and 7.75% on Canadian dollar denominated loans
(unaudited).
Under various financing arrangements with its bankers and long-term
lenders, the Company is required to meet certain covenants. The Company was
in compliance with these covenants as at January 3, 1999, October 4, 1998
and October 5, 1997.
7. LONG-TERM DEBT:
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
UNSECURED:
Debenture payable, bearing interest at 11% per
annum, maturing in June 2003............... $15,000,000 $15,000,000 $ --
Loan payable, non-interest bearing except on
overdue principal repayments, maturing in
November 2001.............................. 394,650 460,425 591,975
Term loan, bearing interest at 6% per annum,
maturing in January 2008................... 500,000 500,000 --
Loans payable, bearing interest at prime plus
1.5%....................................... -- -- 4,569,878
Debentures payable, bearing interest at 10%
per annum.................................. -- -- 9,000,000
----------- ----------- -----------
15,894,650 15,960,425 14,161,853
Current portion of unsecured debt............. 181,550 181,550 131,550
----------- ----------- -----------
$15,713,100 $15,778,875 $14,030,303
=========== =========== ===========
</TABLE>
F-11
<PAGE> 92
7. LONG-TERM DEBT (CONTINUED):
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
SECURED:
Mortgage loans, bearing interest at fixed
rate, maturing in 2007, 2008 and 2013.
(Effective interest rates at January 3,
1999--8.5% to 9.7%; October 4, 1998--8.5%;
October 5, 1997--10.5%.)................... $ 4,488,717 $ 2,338,368 $ 946,896
Term loans, bearing interest at rates from
8.15% to 10.97%, maturing at various dates
through 2003............................... 5,463,127 4,169,721 3,638,205
Note payable, bearing interest at 6%, maturing
in March 2002, (January 3,
1999--US$154,937; October 4,
1998--US$165,653; October 5,
1997--US$206,950).......................... 237,565 253,647 283,980
Term loan, bearing interest at prime plus
1.5%....................................... -- -- 2,079,250
Obligations under capital leases, bearing
interest at rates varying from 5.9% to
12.96% maturing at various dates through
2004....................................... 15,044,540 5,325,619 3,211,206
----------- ----------- -----------
25,233,949 12,087,355 10,159,537
Current portion of secured debt............... 5,114,473 3,111,730 2,231,537
----------- ----------- -----------
$20,119,476 $ 8,975,625 $ 7,928,000
=========== =========== ===========
Total unsecured and secured long-term debt.... $35,832,576 $24,754,500 $21,958,303
=========== =========== ===========
</TABLE>
During 1998, the Company repaid certain secured and unsecured loans. A
prepayment penalty and the write-off of the unamortized deferred financing
costs related to these loans totaling $819,131 have been expensed as a loss
on settlement of long-term debt in the consolidated statements of income.
As at January 3, 1999, certain long-term debt amounting to $2,903,000
(unaudited) (1998--$3,058,000; 1997--$9,200,000) is guaranteed by Harco
Holdings Ltd., the parent company.
Principal payments due on long-term debt, other than obligations under
capital leases, are approximately as follows:
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4,
FISCAL YEAR 1999 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C>
1999........................................................ $ 1,624,000 $ 1,809,000
2000........................................................ 2,025,000 1,558,000
2001........................................................ 2,093,000 1,602,000
2002........................................................ 1,329,000 810,000
2003........................................................ 16,098,000 15,550,000
Thereafter.................................................. 2,915,000 1,393,000
----------- -----------
$26,084,000 $22,722,000
=========== ===========
</TABLE>
F-12
<PAGE> 93
7. LONG-TERM DEBT (CONTINUED):
Future minimum lease payments under capital leases in each of the next five
years are approximately as follows:
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4,
FISCAL YEAR 1999 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C>
1999........................................................ $ 3,237,000 $ 1,900,000
2000........................................................ 4,145,000 1,718,000
2001........................................................ 4,144,000 1,721,000
2002........................................................ 3,215,000 804,000
2003........................................................ 2,536,000 145,000
Thereafter.................................................. 648,000 --
----------- -----------
Total minimum lease payments................................ 17,925,000 6,288,000
Less imputed interest....................................... 2,879,000 962,000
----------- -----------
$15,046,000 $ 5,326,000
=========== ===========
</TABLE>
8. SHARE CAPITAL:
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Authorized without limit as to number and
without par value:
First preferred shares, issuable in series,
non-voting
Second preferred shares, issuable in series,
non-voting
Class A subordinate voting shares,
participating, one vote per share
Class B multiple voting shares,
participating, eight votes per share
Issued and outstanding:
Nil Class A preferred shares
(1997--10,000,000 shares)................. $ -- $ -- $ 7,261,994
Nil Class A common shares (1997--1,000
shares)................................... -- -- 10,000
6,903,000 Class A subordinate voting shares
(1997--nil)............................... 29,374,749 29,374,749 --
3,047,000 Class B multiple voting shares
(1997--nil)............................... 5,083,396 5,083,396 --
----------- ----------- -----------
$34,458,145 $34,458,145 $ 7,271,994
=========== =========== ===========
</TABLE>
F-13
<PAGE> 94
8. SHARE CAPITAL (CONTINUED):
Summary of issued and outstanding share capital:
<TABLE>
<CAPTION>
NUMBER AMOUNT
----------- -----------
<S> <C> <C>
Class A preferred shares:
Balance, September 29, 1996............................... -- $ --
Fiscal 1997:
Conversion of common shares to Class A preferred
shares............................................... 10,000,000 7,261,994
Fiscal 1998:
Redemption of shares................................... (581,500) (422,285)
Issuance of shares for cash............................ 291,294 499,860
Conversion of Class A preferred shares to Class A
subordinate voting shares and Class B multiple voting
shares............................................... (9,709,794) (7,339,569)
----------- -----------
Total Class A preferred shares, October 4, 1998............. -- $ --
=========== ===========
Common shares:
Balance, September 29, 1996................................ 10,000,000 $ 7,261,994
Fiscal 1997:
Conversion of common shares to 10,000,000 Class A
preferred shares and 300 Class A common shares......... (10,000,000) (7,261,994)
----------- -----------
Total common shares, October 5, 1997 and October 4, 1998.... -- $ --
=========== ===========
Class A common shares:
Balance, September 29, 1996................................ -- $ --
Fiscal 1997:
Issuance of shares for cash............................... 700 10,000
Conversion of common shares to Class A common shares...... 300 --
----------- -----------
Balance, October 5, 1997................................... 1,000 10,000
Fiscal 1998:
Redemption of shares...................................... (58.15) (581)
Issuance of shares for cash............................... 29.13 140
Conversion of Class A common shares to Class A subordinate
voting shares.......................................... (970.98) (9,559)
----------- -----------
Total Class A common shares, October 4, 1998................ -- $ --
=========== ===========
</TABLE>
F-14
<PAGE> 95
8. SHARE CAPITAL (CONTINUED):
<TABLE>
<CAPTION>
NUMBER AMOUNT
----------- -----------
<S> <C> <C>
Class A subordinate voting shares:
Balance, October 5, 1997................................... -- $ --
Fiscal 1998:
Conversion of 970.98 Class A common shares to Class A
subordinate voting shares.............................. 2,724,000 9,559
Conversion of 2,709,794 Class A preferred shares to Class
A subordinate voting shares............................ 1,179,000 2,256,173
Issuance of shares for cash............................... 3,000,000 30,870,000
Share issue costs, net of future taxes of $1,689,000...... -- (3,760,983)
----------- -----------
Total Class A subordinate voting shares, October 4, 1998 and
January 3, 1999........................................... 6,903,000 $29,374,749
=========== ===========
Class B multiple voting shares:
Balance, October 5, 1997................................... -- $ --
Fiscal 1998:
Conversion of 7,000,000 Class A preferred shares to Class
B multiple voting shares............................... 3,047,000 5,083,396
----------- -----------
Total Class B multiple voting shares, October 4, 1998 and
January 3, 1999........................................... 3,047,000 $ 5,083,396
=========== ===========
</TABLE>
(a) During fiscal 1997, the Company obtained a Certificate of Amendment
which provided for:
(i) the creation of an unlimited number of Class A common shares and
Class A preferred shares;
(ii) the conversion of 10,000,000 common shares into 10,000,000 Class A
preferred shares and 300 Class A common shares; and
(iii) the cancellation of the authorized and unissued common shares.
The Class A preferred shares were retractable at $43,500,000 and upon
retraction, the Company had the option to settle the shares in cash or
through the issuance of Class A common shares.
During fiscal 1997, the Company issued 700 Class A common shares for a
total cash consideration of $10,000.
(b) During fiscal 1998, a shareholder exercised an option and acquired
291,294 Class A preferred shares and 29.13 Class A common shares for an
aggregate consideration of $500,000. The Company reacquired a second
stock option from this shareholder for $2,500,000 using proceeds from
the initial public offering. The cost of buying back the option was
charged against retained earnings.
(c) Under the terms of a renegotiated redemption agreement and immediately
prior to the initial public offering, the Company redeemed 581,500 Class
A preferred shares and 58.15 Class A common shares for an aggregate
consideration of $100,000 which resulted in an amount of $322,866 being
credited to contributed surplus.
F-15
<PAGE> 96
8. SHARE CAPITAL (CONTINUED):
(d) By Certificate of Amendment dated June 16, 1998, the Articles of the
Company were amended to provide for:
(i) the creation of an unlimited number of:
-- First preferred shares issuable in series;
-- Second preferred shares issuable in series;
-- Class A subordinate voting shares;
-- Class B multiple voting shares.
(ii) the exchange of the 970.98 outstanding Class A common shares for
2,724,000 Class A subordinate voting shares;
(iii) the exchange of 9,709,794 outstanding Class A preferred shares for
1,179,000 Class A subordinate voting shares and 3,047,000 Class B
multiple voting shares;
(iv) the cancellation of the authorized Class A common shares and Class
A preferred shares;
(v) the elimination of all restrictions on the issue and transfer of
the Company's shares to the public.
(e) On June 24, 1998, the Company issued 3,000,000 Class A subordinate
voting shares for a total cash consideration of $30,870,000. Issue
expenses of $5,449,983 less future income taxes of $1,689,000 have been
applied against proceeds from the initial public offering.
(f) Pursuant to the initial public offering, 2,372,014 Class B multiple
voting shares and 2,842,499 Class A subordinate voting shares are held
in escrow and cannot be transferred, mortgaged, pledged or otherwise
disposed of without the consent of the Quebec and Ontario securities
commissions and The Toronto Stock Exchange. The release of these shares
is based solely on the passage of time.
9. STOCK OPTION PLAN:
Effective June 24, 1998, the Company established a stock option plan (the
"Plan"). Under the Plan, the Company may grant options to purchase Class A
subordinate voting shares at the then current market price to officers,
other key employees and directors of the Company. Options vest ratably over
a two to four-year period from the date of grant and expire no more than
ten years after the date of grant. The Plan provides that the number of
Class A subordinate voting shares reserved for issuance will be limited to
995,000, which were reserved for issuance under the Plan.
Changes in outstanding options were as follows:
<TABLE>
<S> <C>
Options outstanding, October 5, 1997........................ --
Granted..................................................... 633,000
-------
Options outstanding, October 4, 1998........................ 633,000
Expired or cancelled........................................ (7,000)
Granted..................................................... 116,000
-------
Options outstanding, January 3, 1999 (unaudited)............ 742,000
=======
</TABLE>
Details of the options outstanding were as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING EXERCISE PRICE PER SHARE EXPIRY DATE
------------------- ------------------------ -----------
<S> <C> <C>
742,000.......................................... $10.29 to $11.50 2008
================ =====
</TABLE>
F-16
<PAGE> 97
10. COMMITMENTS AND CONTINGENT LIABILITIES:
(a) The Company has guaranteed a mortgage owed by the parent company on a
building which serves as the Company's knitting facilities and executive
offices. As at October 4, 1998, the total indebtedness outstanding
amounted to approximately $3,360,000 (1997 -- $2,360,000). As at January
3, 1999, the Company was no longer a guarantor for this indebtedness.
(b) The minimum annual lease payments under operating leases are
approximately as follows:
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4,
FISCAL YEAR 1999 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C>
1999................................................ $ 3,915,000 $ 5,042,000
2000................................................ 3,743,000 3,654,000
2001................................................ 2,729,000 2,515,000
2002................................................ 2,397,000 2,254,000
2003................................................ 1,849,000 1,626,000
Thereafter.......................................... 5,002,000 4,887,000
----------- -----------
$19,635,000 $19,978,000
=========== ===========
</TABLE>
(c) As at January 3, 1999 and October 4, 1998, there were contractual
obligations outstanding of approximately $8,600,000 (unaudited) and
$8,500,000 respectively for the acquisition of fixed assets
(1997--$4,879,000).
(d) The Company has employment agreements with certain of its executives
that provide for lump sum severance and other payments, certain group
insurance benefits and the right to exercise vested options pursuant to
the Company's stock option plan upon termination of employment under
certain circumstances or a change of control, as defined. The minimum
value of such contingent obligations for senior management personnel was
estimated to be $3,800,000 as at October 4, 1998.
11. INCOME TAXES:
A reconciliation of the statutory income tax rate and the effective tax
rate is as follows:
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
---------- ---------- ----------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Combined basic Canadian federal and
provincial income taxes.............. $ 581,000 $240,000 $ 7,550,000 $3,399,000 $597,000
Increase (decrease) in income taxes
resulting from:
Manufacturing and processing
credit............................. (126,000) (35,000) (1,350,000) (629,000) (99,000)
Large corporations tax............... 29,000 10,000 40,000 25,000 58,000
Effect of different tax rates on
earnings of foreign subsidiaries... 52,000 68,000 (73,000) 62,000 (60,000)
Utilization of losses carried forward
by a subsidiary.................... (41,000) (5,000) (129,000) - -
Permanent differences and other...... 55,000 54,000 662,000 481,000 112,000
--------- -------- ----------- ---------- --------
$ 550,000 $332,000 $ 6,700,000 $3,338,000 $608,000
========= ======== =========== ========== ========
</TABLE>
F-17
<PAGE> 98
11. INCOME TAXES (CONTINUED):
In fiscal 1998, the Company adopted the new Canadian Institute of Chartered
Accountants' recommendations for the accounting for income taxes. The new
standard requires the use of the asset and liability method for accounting
for income taxes. Under the asset and liability method, future income taxes
are recognized for the future income tax consequences attributable to
differences between the financial statement carrying values and their
respective income tax basis (temporary differences). Future income tax
assets and liabilities are measured using enacted income tax rates expected
to apply to taxable income in the years in which temporary differences are
expected to be recovered or settled. The effect on future income tax assets
and liabilities of a change in tax rates is included in income in the
period that includes the enactment date. Future income tax assets are
evaluated and if realization is not considered "more likely than not", a
valuation allowance is provided.
Previously, the Company followed the deferral method of accounting for
income taxes which related the provision for income taxes to the accounting
income for the period. Under the deferral method, the amount by which the
income tax provision differed from the amount of income taxes currently
payable was considered to represent the deferring to future periods of
benefits obtained on expenditures incurred in the current period and
accordingly was computed at current income tax rates. The accumulated
income tax allocation debit or credit balance was not adjusted to reflect
subsequent changes in income tax rates. Also, under the deferral method,
tax benefits related to accounting losses could only be recognized in the
period in which the loss was incurred if there was virtual certainty of
realizing the benefits.
The adoption of the new standard does not materially affect the reported
earnings of the Company. The financial impact of adopting the new policy
has been reflected in the current period and has not been applied
retroactively.
Future income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's future tax position as at January
3, 1999 and October 4, 1998 are as follows:
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4,
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
Future tax assets:
Shares issue costs........................................ $ 1,491,000 $ 1,576,000
Deferred financing costs and other........................ 124,000 146,000
----------- -----------
1,615,000 1,722,000
Future tax liabilities:
Tax depreciation in excess of book depreciation........... 4,860,000 4,717,000
Other..................................................... 33,000 33,000
----------- -----------
4,893,000 4,750,000
----------- -----------
Net future tax liability.................................... $ 3,278,000 $ 3,028,000
=========== ===========
</TABLE>
F-18
<PAGE> 99
12. NET CHANGES IN NON-CASH WORKING CAPITAL BALANCES:
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
------------- ------------ ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Accounts receivable.......... $ (1,518,943) $ (7,819,141) $(24,521,047) $(16,542,668) $(6,582,757)
Inventories.................. (33,379,243) (6,332,570) (40,222,581) (2,979,855) (5,638,409)
Prepaid expenses and
deposits................... 356,426 484,375 (854,303) (600,082) (199,812)
Accounts payable and accrued
liabilities................ 2,628,041 5,407,827 27,475,639 4,570,935 3,299,937
Income taxes................. (210,100) (1,902,811) 2,109,844 1,769,830 337,003
------------- ------------ ------------ ------------ -----------
$ (32,123,819) $(10,162,320) $(36,012,448) $(13,781,840) $(8,784,038)
============= ============ ============ ============ ===========
</TABLE>
13. RELATED PARTY TRANSACTIONS:
Advances from parent company, which were repaid during fiscal 1998, bore
interest at an effective rate of 7.8% (1997--6.3%) and were subordinated in
favour of the Company's lenders.
The advances to affiliated companies are non-interest bearing while the
advances to parent company bear interest at an effective rate of 7.2%
commencing June 1998. The advances have no specified terms of repayment.
The Company had the following transactions with the parent or affiliated
companies:
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
------------- ------------ ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Rent expense................. $ 185,484 $ 120,000 $ 545,484 $ 420,000 $ 363,936
Interest expense............. -- 4,950 19,750 24,000 28,000
Interest income.............. 32,616 -- 30,000 -- --
</TABLE>
In management's opinion, the rent expense approximated market rates on
normal terms at the time the lease was entered into.
14. FINANCIAL INSTRUMENTS:
(a) Foreign currency risk management:
A substantial portion of the Company's sales are denominated in US
dollars. The Company uses the revenue stream in US dollars as a natural
hedge to cover expenses denominated in US dollars. During the year, the
Company also used forward foreign exchange contracts to hedge its
foreign exchange exposure on cash flows related to payables and accounts
receivable in US dollars.
The forward exchange contracts represent an obligation to exchange
principal amounts between the Company and counterparties. Credit risk
exists in the event of failure by counterparties to meet their
obligations. The Company reduces this risk by dealing only with highly
rated counterparties, normally major North American financial
institutions.
F-19
<PAGE> 100
14. FINANCIAL INSTRUMENTS (CONTINUED):
(a) Foreign currency risk management (continued):
At January 3, 1999, October 4, 1998 and October 5, 1997, there were no
forward foreign exchange contracts outstanding.
(b) Credit risk:
Approximately 50% of the Company's sales were made to four unrelated
companies for fiscal 1998, 1997 and 1996 and 52% and 72% for the
three-month periods ended January 3, 1999 and January 4, 1998
respectively (unaudited).
Percentages related to individual customers accounting for greater than
10% of total sales are as follows:
<TABLE>
<CAPTION>
THREE-MONTH THREE-MONTH TEN-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
------------ ------------ ---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Company A.............. 26.2% 41.8% 26.6% 19.6% --
Company B.............. -- 21.3% 9.6% 25.9% 40.9%
Company C.............. 11.2% -- -- -- --
Company D.............. 10.4% -- -- -- --
</TABLE>
The Company regularly monitors its credit risk exposure to these and
other customers and takes steps to mitigate the risk of loss, including
obtaining credit insurance.
The Company's extension of credit is based on an evaluation of each
customer's financial condition and the Company's ability to obtain
credit insurance coverage for that customer. Credit losses are provided
for in the financial statements.
(c) Fair value disclosure:
Fair value estimates are made as of a specific point in time, using
available information about the financial instrument. These estimates
are subjective in nature and often cannot be determined with precision.
The Company has determined that the carrying value of its short-term
financial assets and liabilities approximates fair values as at the
balance sheet dates because of the short-term maturity of those
instruments. The fair value of advances to parent and affiliated
companies could not be determined because the advances have no specified
repayment dates.
The fair value and carrying value of other financial instruments are
presented below:
<TABLE>
<CAPTION>
JANUARY 3, 1999 OCTOBER 4, 1998 OCTOBER 5, 1997
------------------------- ------------------------- -------------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE VALUE VALUE
----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Long-term debt....... $41,128,599 $41,345,000 $28,047,780 $28,132,200 $24,321,390 $24,495,500
</TABLE>
The fair value of the Company's long-term debt bearing interest at fixed
rates has been calculated using the present value of future payments of
principal and interest discounted at the current market rates of
interest available to the Company for the same or similar debt
instruments with the same remaining maturities. For long-term debt
bearing interest at
F-20
<PAGE> 101
14. FINANCIAL INSTRUMENTS (CONTINUED):
(c) Fair value disclosure (continued):
variable rates, the fair value is considered to approximate the carrying
value. The fair value of the interest rate swap described in note 14 (d)
is considered to approximate its carrying value of $6,000.
(d) Interest rate risk:
The Company's principal exposure to interest rate fluctuations is with
respect to its short-term and long-term financing which bear interest at
floating rates. To mitigate the effects of interest rate fluctuations,
the Company entered into a swap arrangement on October 1, 1997 with its
bankers to cap the floating interest rate on the first $25,000,000 of
borrowings under its credit facilities to a maximum of 13%. This
arrangement expires on October 1, 1999.
15. SEGMENTED INFORMATION:
The Company operates internationally in one industry segment, the
manufacture and sale of activewear. Export sales amounted to approximately
$185,000,000 in fiscal 1998 (1997--$86,200,000; 1996--$52,000,000) and
$41,600,000 for the three-month period ended January 3, 1999 (January 4,
1998--$28,000,000) unaudited.
16. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE:
The 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the Company,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
17. RECLASSIFICATION:
Certain amounts from the preceding years have been reclassified to be in
conformity with the current year's presentation.
18. SUBSEQUENT EVENTS:
(a) In January 1999, the Company obtained $30,000,000 of subordinated
debenture financing, $15,000,000 of which bears interest at 12% per
annum for the first two years and 13% per annum for the next three years
and $15,000,000 bears interest at 12.5% per annum, both maturing in
2004. In addition, $5,000,000 of equity financing was obtained through
the issuance of 444,444 Class A subordinate voting shares. The funds are
used to finance working capital requirements and the acquisition of new
assets.
(b) In March 1999, the Company entered into a new three-year revolving
credit agreement with a banking syndicate providing for a maximum
borrowing capacity of $90,000,000.
(c) The Company purchased the issued and outstanding shares of one
subcontractor located in Honduras and is currently negotiating the
purchase of the operation of another Honduran
F-21
<PAGE> 102
18 SUBSEQUENT EVENTS (CONTINUED):
subcontractor. The cost of these acquisitions is expected to amount, in
the aggregate, to US$2,700,000.
(d) Subsequent to January 3, 1999, under the Plan the Company cancelled
5,000 options and granted 19,500 options to employees at a price of
$16.50 per share.
(e) In February 1999, the Company entered into capital lease agreements
for machinery and equipment totaling approximately $5,000,000 bearing
interest at 8.15% per annum.
19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES:
The consolidated financial statements of the Company are expressed in
Canadian dollars and are prepared in accordance with Canadian generally
accepted accounting principles ("GAAP"), which conform, in all material
respects, with those generally accepted in the United States except as
described below:
(a) Consolidated statements of income:
<TABLE>
<CAPTION>
THREE-MONTH THREE-MONTH TEN-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
------------ ------------ ------------ ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income in accordance with
Canadian GAAP................ $978,767 $ 300,386 $ 13,168,290 $ 5,665,425 $ 973,170
Start-up costs (a) (i)......... (20,100) 50,000 (397,900) (408,000) --
Plant renovation costs (a) (ii)... 27,000 27,000 108,000 (192,000) --
Interest expense (a) (iii)..... -- (40,000) (640,000) (160,000) --
Loss on settlement of long-term
debt (a) (v)................. -- -- 819,131 -- --
Tax effect of above
adjustments.................. (10,000) 5,000 (76,131) 131,000 --
-------- ------------ ------------ ----------- -----------
Net income before extraordinary
item......................... 975,667 342,386 12,981,390 5,036,425 973,170
Extraordinary item:
Loss on settlement of long-term
debt, net of taxes of
$276,131..................... -- -- 543,000 -- --
-------- ------------ ------------ ----------- -----------
Net income in accordance with
United States GAAP........... 975,667 342,386 12,438,390 5,036,425 973,170
Less accretion to fair value of
temporary equity (c) (ii).... -- (11,250,000) (22,500,000) (14,997,000) (3,371,402)
Plus excess of carrying amount
over fair value on conversion
of temporary equity (c)
(ii)......................... -- -- 21,600,000 -- --
-------- ------------ ------------ ----------- -----------
Net income (loss) available to
common shareholders.......... $975,667 $(10,907,614) $ 11,538,390 $(9,960,575) $(2,398,232)
======== ============ ============ =========== ===========
</TABLE>
The Company has adopted the new Statement of Financial Accounting
Standards ("SFAS") No. 128 for computing and presenting earnings per
share under United States GAAP.
F-22
<PAGE> 103
19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED):
(a) Consolidated statements of income (continued):
<TABLE>
<CAPTION>
THREE-MONTH TEN-MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 3, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1997 1996
------------ ---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Basic net income (loss)
per share:
Net income (loss)
before
extraordinary
item............... $ 0.10 $ 2.75 $ (2.36) $ (0.58)
Extraordinary item:
Loss on settlement of
long-term debt..... -- (0.12) -- --
---------- ---------- ---------- ----------
Basic net income (loss)
per share under United
States GAAP............. $ 0.10 $ 2.63 $ (2.36) $ (0.58)
========== ========== ========== ==========
Weighted average number of
common shares
outstanding under United
States GAAP............. 9,950,000 4,384,399 4,213,255 4,120,185
========== ========== ========== ==========
</TABLE>
Fully diluted earnings per share:
United States GAAP requires the use of the treasury stock method for
common stock equivalents to compute the weighted average number of
common shares outstanding for the period. The use of the treasury stock
method for stock options issued has been considered in the earnings per
share figure.
<TABLE>
<CAPTION>
THREE-MONTH TEN-MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 3, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1997 1996
------------ ---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Fully diluted net income (loss) per
share:
Net income (loss) before
extraordinary item............ $ 0.10 $ 2.74 $ (2.36) $ (0.58)
Extraordinary item:
Loss on settlement of
long-term debt.............. -- (0.12) -- --
---------- --------- --------- ---------
Fully diluted net income (loss) per
share under United States GAAP... $ 0.10 $ 2.62 $ (2.36) $ (0.58)
========== ========= ========= =========
Weighted average number of common
shares outstanding under United
States GAAP...................... 10,011,621 4,397,464 4,213,255 4,120,185
========== ========= ========= =========
</TABLE>
For fiscal 1997 and 1996 the effect of outstanding options was
anti-dilutive.
F-23
<PAGE> 104
19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED):
(a) Consolidated statements of income (continued):
(i) Start-up costs:
Costs incurred during the start-up period for new manufacturing
and distribution facilities are deferred and amortized on a
straight-line basis over two years (see note 1 (d) to the
Consolidated Financial Statements). United States GAAP requires
these costs to be expensed in the year incurred.
(ii) Plant renovation costs:
Plant renovation costs incurred to improve the efficiency of the
plant layout have been included in deferred charges and are being
amortized over 2 years (see note 1 (d) to the Consolidated
Financial Statements). Under United States GAAP, this amount, net
of its related amortization, has been reversed and accounted for
as a period expense.
(iii) Debt discount:
In connection with the issuance of debentures payable, the Company
granted stock options to subscribe for additional shares. Under
United States GAAP, the difference between the estimated fair
market value of the options and the subscription price at the date
the option is granted is accounted for as an adjustment to the
carrying value of the debenture ("debt discount") and is amortized
over the term of the related debt as an increase to interest
expense with the corresponding amount credited to temporary
equity.
The estimated fair value of the options amounted to $800,000 at
the dates the options were granted. During fiscal 1998, the
debentures were refinanced and the related unamortized debt
discount of $640,000 was recorded as additional interest expense
under United States GAAP (1997 -- $160,000; 1996 -- nil).
(iv) Stock-based compensation:
United States GAAP requires the measurement and recognition of
compensation expense related to certain stock-based compensation.
As permitted by the provisions of SFAS No. 123 statement, the
Company has measured compensation cost as the excess of the quoted
market price of the Company's stock at the grant date over the
amount the employee must pay for the stock. Accordingly, no
compensation expense is recognized for stock option awards. There
are no similar requirements under Canadian GAAP.
SFAS No. 123 requires disclosure of pro forma net income and
earnings per share as if the fair value based method had been
applied in measuring compensation cost for options granted in
fiscal 1998 and in the three-month period ended January 3, 1999.
Management believes that the effects of applying SFAS No. 123 on a
pro forma basis are not likely to be representative of the effects
on reported pro forma net income for future years as the estimated
compensation costs reflect only options granted to January 3, 1999
and do not consider awards which may occur in future years, the
terms and conditions of which may vary.
F-24
<PAGE> 105
19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED):
(a) Consolidated statements of income (continued):
(iv) Stock-based compensation (continued):
Reported and pro forma net income and earnings per share amounts
under United States GAAP are set forth below:
<TABLE>
<CAPTION>
THREE-MONTH
PERIOD ENDED YEAR ENDED
JANUARY 3, OCTOBER 4,
1999 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Net income:
As reported..................................... $974,643 $11,538,390
Pro forma....................................... 714,043 11,272,987
Earnings per share:
Basic:
As reported.................................. 0.10 2.63
Pro forma.................................... 0.07 2.57
Fully diluted:
As reported.................................. 0.10 2.62
Pro forma.................................... 0.07 2.56
</TABLE>
The weighted average fair value of options granted in fiscal 1998
and in the three-month period ended January 3, 1999 is $4.43 and
$4.45 (unaudited) respectively. The fair value of the options
granted was estimated on the date of their grant using the
Black-Scholes option-pricing model based on the following weighted
average assumptions:
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4,
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
Risk-free interest rate........................... 5% 5%
Expected life in years............................ 6.1 6.1
Expected volatility............................... 31.4% 29.4%
Expected dividend yield........................... -- --
</TABLE>
Dividend yield was excluded from the calculation since it is the
present policy of the Company to retain all earnings to finance
operations. In addition, option valuation models require the input
of highly subjective assumptions including the expected stock
price volatility. Because the Company's stock options have
characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions
can materially affect their fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.
(v) Loss on settlement of long-term debt:
Under United States GAAP, the debt prepayment penalty incurred on
settlement of long-term debt, which is identified as a separate
expense item in the consolidated statements of income for Canadian
GAAP purposes (see note 7 to the Consolidated Financial
Statements), would have been treated as an extraordinary item and
presented net of taxes as $543,000.
F-25
<PAGE> 106
19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED):
(b) Consolidated statements of changes in financial position:
(i) The Company's consolidated statements of changes in financial
position reconcile the changes in bank indebtedness. Under United
States GAAP, changes in bank indebtedness amounting to
$(17,466,910) in fiscal 1998, ($3,787,663) in fiscal 1997 and
($4,383,787) in fiscal 1996 would have been disclosed as financing
activities. Changes in bank indebtedness amounting to
$(29,032,100) as of January 3, 1999 and $(14,533,769) as of
January 4, 1998 would have been disclosed as financing activities
(unaudited).
<TABLE>
<CAPTION>
THREE-MONTH THREE-MONTH TEN-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
------------ ------------ ------------ ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash and equivalents,
United States GAAP,
beginning of period...... $ -- $ -- $ -- $ -- $ --
Changes due to United
States GAAP:
Operating activities on a
Canadian basis......... (29,132,041) (8,583,199) (17,186,600) (4,196,878) (5,738,347)
Start-up costs........... (20,100) 50,000 (397,900) (408,000) --
Plant renovation costs... 27,000 27,000 108,000 (192,000) --
------------ ----------- ------------ ----------- -----------
Operating activities cash
flow, United States
GAAP................... (29,125,141) (8,506,199) (17,476,500) (4,796,878) (5,738,347)
Investing activities on a
Canadian basis......... (12,980,878) (5,974,871) (26,826,717) (7,138,710) (7,734,885)
Start-up costs........... 20,100 (50,000) 397,900 408,000 --
Plant renovation costs... (27,000) (27,000) (108,000) 192,000 --
------------ ----------- ------------ ----------- -----------
Investing activities cash
flow, United States
GAAP................... (12,987,778) (6,051,871) (26,536,817) (6,538,710) (7,734,885)
Financing activities on a
Canadian basis......... 13,080,819 24,301 26,546,407 7,547,925 9,089,445
Increase in bank
indebtedness........... 29,032,100 14,533,769 17,466,910 3,787,663 4,383,787
------------ ----------- ------------ ----------- -----------
Financing activities cash
flow, United States
GAAP................... 42,112,919 14,558,070 44,013,317 11,335,588 13,473,232
------------ ----------- ------------ ----------- -----------
Cash and equivalents,
United States GAAP, end
of period................ $ -- $ -- $ -- $ -- $ --
============ =========== ============ =========== ===========
</TABLE>
(ii) Investing activities include additions to fixed assets of
$1,553,715 in fiscal 1998 (1997--$534,925; 1996--$2,850,866) and
$960,139 for the three-month period ended January 3, 1999 (January
4, 1998--$1,117,915) (unaudited) which were acquired through
capital leases.
F-26
<PAGE> 107
19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED):
(iii) United States GAAP requires that the amount of interest and income
taxes paid during each fiscal period be disclosed. There is no
requirement to disclose this information under Canadian GAAP. Cash
paid during the years was as follows:
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
---------- ---------- ---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest..................... $1,295,775 $ 700,836 $5,004,894 $2,971,316 $2,481,018
Income taxes................. 320,000 2,037,832 3,369,212 73,972 98,000
</TABLE>
(c) Consolidated balance sheets:
Differences between Canadian and United States GAAP are not material in
the presentation of the assets, liabilities and shareholders' equity,
except for:
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Other assets under Canadian GAAP........ $ 7,248,229 $ 6,105,008 $ 3,885,276
Start-up costs.......................... (826,000) (805,900) (408,000)
Plant renovation costs.................. (57,000) (84,000) (192,000)
------------ ------------ ------------
Other assets under United States GAAP... $ 6,365,229 $ 5,215,108 $ 3,285,276
============ ============ ============
Long-term debt under Canadian GAAP...... $ 37,065,041 $ 24,754,500 $ 21,958,303
Debt discount........................... -- -- (640,000)
------------ ------------ ------------
Long-term debt under United States
GAAP.................................. $ 37,065,041 $ 24,754,500 $ 21,318,303
============ ============ ============
Future income tax liabilities under
Canadian GAAP......................... $ 3,278,000 $ 3,028,000 $ 2,675,000
Future taxes related to debt discount... -- -- 240,000
Future taxes related to GAAP
adjustments........................... (21,000) (31,000) (71,000)
------------ ------------ ------------
Future income tax liabilities under
United States GAAP (c)(i)............. $ 3,257,000 $ 2,997,000 $ 2,844,000
============ ============ ============
Temporary equity under Canadian GAAP.... $ -- $ -- $ --
Stock options treated as temporary
equity (c)(ii)........................ -- 800,000 800,000
Reclass of Class A preferred shares and
Class A common shares (c)(ii)......... -- 43,050,000 20,550,000
Reduction in fair value of temporary
equity (c)(ii)........................ -- (21,600,000) --
Redemption of shares.................... -- (1,950,000) --
Exercise of one option held and purchase
of the second option.................. -- (300,000) --
Reclass of temporary equity to share
capital (c) (ii)...................... -- (20,000,000) --
------------ ------------ ------------
Temporary equity under United States
GAAP.................................. $ -- $ -- $ 21,350,000
============ ============ ============
</TABLE>
F-27
<PAGE> 108
19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED):
(c) Consolidated balance sheets (continued):
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Share capital under Canadian GAAP....... $ 34,458,145 $ 34,458,145 $ 7,271,994
Reclass of Class A preferred shares and
Class A common shares (c) (ii)........ (2,181,598) (2,181,598) (2,181,598)
Redemption of shares.................... 422,866 422,866 --
Reclass of Class A preferred and Class A
common shares issued during fiscal
1998.................................. (500,000) (500,000) --
Reclass of temporary equity to share
capital (c) (ii)...................... 20,000,000 20,000,000 --
------------ ------------ ------------
Share capital under United States
GAAP.................................. $ 52,199,413 $ 52,199,413 $ 5,090,396
============ ============ ============
Contributed surplus under Canadian
GAAP.................................. $ 322,866 $ 322,866 $ --
Reversal of contributed surplus recorded
under Canadian GAAP................... (322,866) (322,866) --
Excess of fair value of temporary equity
shares redeemed over redemption
price................................. 1,850,000 1,850,000 --
Excess of fair value of temporary equity
(c) (ii).............................. 21,600,000 21,600,000 --
------------ ------------ ------------
Contributed surplus under United States
GAAP.................................. $ 23,450,000 $ 23,450,000 $ --
============ ============ ============
Retained earnings under Canadian GAAP... $ 19,527,958 $ 18,549,191 $ 8,380,901
United States GAAP net income
adjustments........................... (1,362,000) (1,358,900) (629,000)
Future income tax on debt discount...... (300,000) (300,000) (300,000)
Excess of fair value over book value of
Class A preferred shares (c) (ii)..... (40,868,402) (40,868,402) (18,368,402)
Re-acquired option included in temporary
equity (c) (ii)....................... 800,000 800,000 --
------------ ------------ ------------
Retained earnings (deficit) under United
States GAAP........................... $(22,202,444) $(23,178,111) $(10,916,501)
============ ============ ============
</TABLE>
(i) Future income taxes:
Effective fiscal 1998, the Company adopted the new Canadian
Institute of Chartered Accountants Handbook income tax
recommendations which more closely align the Canadian and United
States accounting policies. Differences in the calculation of
deferred/future income taxes for fiscal 1997 were not material.
F-28
<PAGE> 109
19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED):
(c) Consolidated balance sheets (continued):
(i) Future income taxes (continued):
As at the following dates, future tax assets and liabilities are
the result of:
<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Fixed assets.......................... $(4,860,000) $(4,717,000) $(2,621,000)
Debt discount......................... -- -- (240,000)
Share issue costs..................... 1,491,000 1,576,000 --
Deferred financing costs.............. 145,000 177,000 17,000
Other................................. (33,000) (33,000) --
----------- ----------- -----------
$(3,257,000) $(2,997,000) $(2,844,000)
=========== =========== ===========
</TABLE>
(ii) Temporary equity:
Under United States GAAP, certain shares would be classified
outside of shareholders' equity and recorded as temporary equity
at an amount equal to their fair market value. As at October 5,
1997, $18,368,402 representing the difference between the fair
market value and the carrying value was charged against retained
earnings.
As at April 5, 1998, the end of the second quarter of fiscal 1998,
the difference between the fair value and the carrying value of
these shares had increased by $22,500,000, which amount had been
reported as an accretion in the value of these shares and shown as
a reduction to net income available to common shareholders for the
six months then ended. Due to a subsequent decline in the stock
market, $21,600,000 of this accretion had reversed by the time the
Company priced its shares in the market. This reduction in the
fair value was removed from temporary equity and credited to
contributed surplus.
Under Canadian GAAP, these shares are recorded as part of share
capital at their book values.
Under United States GAAP, the difference of $800,000 between the
estimated fair market value of the options described in (a) (iii)
and the subscription price at the date the options were granted is
accounted for as an adjustment to temporary equity.
During fiscal 1998, the Company re-acquired a stock option for
$2,500,000 which was charged against retained earnings under
Canadian GAAP (see note 8 (b) to the Consolidated Financial
Statements). Under United States GAAP, since the option had been
valued at $800,000 and accounted for as temporary equity, only
$1,700,000 would be charged to retained earnings on the
re-acquisition. The resulting net difference between Canadian and
United States GAAP of $800,000 has been credited to retained
earnings.
As a result of the initial public offering, the amounts classified
as temporary equity are reclassified as part of share capital.
F-29
<PAGE> 110
19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED):
(d) Supplementary information:
Under United States GAAP, separate disclosure is required of the
following income statement and balance sheet items. There is no similar
requirement under Canadian GAAP.
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
----------- ---------- ----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME:
Rental expenses............. $ 1,382,550 $488,051 $ 2,798,000 $ 1,876,000 $1,208,000
Foreign exchange gains
(losses).................. (262,759) 456,889 902,000 158,000 61,000
Advertising expense......... 502,266 373,779 3,693,000 1,463,000 1,321,000
BALANCE SHEETS:
Accounts payable............ 37,577,774 38,640,000 14,968,000
Accrued liabilities......... 10,359,802 6,670,000 2,366,000
</TABLE>
F-30
<PAGE> 111
- ------------------------------------------------------
- ------------------------------------------------------
PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER GILDAN ACTIVEWEAR INC. NOR ANY UNDERWRITER HAS AUTHORIZED
ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH DIFFERENT OR ADDITIONAL
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER
TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS
PROSPECTUS OR ANY SALE OF THESE SECURITIES.
NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES AND
CANADA TO PERMIT A PUBLIC OFFERING OF THE CLASS A SUBORDINATE VOTING SHARES OR
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY SUCH JURISDICTION. PERSONS
WHO COME INTO POSSESSION OF THIS PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED
STATES AND CANADA ARE REQUIRED TO INFORM THEMSELVES ABOUT AND TO OBSERVE THE
RESTRICTIONS OF THAT JURISDICTION RELATED TO THIS OFFERING AND THE DISTRIBUTION
OF THIS PROSPECTUS.
---------------------
TABLE OF CONTENTS
---------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Presentation of Financial
Information.......................... i
Cautionary Statement Regarding
Forward-looking Statements........... ii
Prospectus Summary..................... 1
Risk Factors........................... 8
Use of Proceeds........................ 16
Dividends.............................. 16
Exchange Rates......................... 17
Capitalization......................... 18
Price Range of Our Shares.............. 19
Selected Consolidated Financial
Information.......................... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 22
Business............................... 29
Management............................. 43
Certain Relationships and Related
Transactions......................... 52
Principal Shareholders................. 55
Description of Share Capital........... 56
Description of Certain Indebtedness.... 63
Shares Eligible for Future Sale and
Escrow Arrangements.................. 65
Taxation............................... 67
Exchange Controls...................... 72
Underwriting........................... 73
Legal Matters.......................... 74
Experts................................ 75
Where You Can Find More Information.... 75
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
LOGO
3,000,000 CLASS A SUBORDINATE VOTING SHARES
---------------------
PROSPECTUS
---------------------
BEAR, STEARNS & CO. INC.
NESBITT BURNS SECURITIES INC.
THE ROBINSON-HUMPHREY COMPANY
WASSERSTEIN PERELLA SECURITIES, INC.
, 1999
------------------------------------------------------
------------------------------------------------------
<PAGE> 112
PART II.
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
The following sets forth the expenses, other than underwriting discounts
and commissions, expected to be incurred by Gildan Activewear Inc. (the
"Company" or "Gildan") in connection with the issuance and distribution of the
securities registered under this Registration Statement. All expenses are
estimated except for the Securities and Exchange Commission's (the "Commission")
registration fee and the National Association of Securities Dealers filing fee.
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
- ----------- ----------
<S> <C>
Securities and Exchange Commission Registration Fee......... US$ 12,109
Filing Fees for Canadian Provinces.......................... 29,000
Blue Sky Fees and Expenses.................................. 10,000
National Association of Securities Dealers Filing Fee....... 4,856
Listing Fees................................................ 40,500
Printing and Engraving Expenses............................. 250,000
Legal Fees and Expenses..................................... 450,000
Accounting Fees and Expenses................................ 100,000
Miscellaneous............................................... 100,000
----------
Total..................................................... US$996,465
==========
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Administrative Resolutions of the Company provide as follows:
Subject to the limitations contained in the Canada Business Corporations
Act (the "CBCA"), as amended, but without limit to the right of the
Corporation to indemnify any person under such Act or otherwise, the
Corporation shall indemnify a Director or Officer, a former Director or
former Officer, or a person who acts or acted at the Corporation's request
as the director or officer of a body corporate of which the Corporation is
or was a shareholder or creditor, and his heirs and legal representatives
against all costs, charges and expenses, including an amount paid to settle
an action or satisfy a judgment, reasonably incurred by and in respect of
any civil, criminal or administrative action or proceeding to which he is
made a party by reason of being or having been a Director or Officer of the
Corporation or of such body corporate, if (a) he acted honestly and in good
faith with a view to the best interest of the Corporation; and (b) in the
case of a criminal or administrative action or proceeding that is enforced
by a monetary penalty, he had reasonable grounds for believing that his
conduct was lawful.
The CBCA provides that directors and officers may be indemnified by the
Company generally, as follows:
"Except in respect of an action by or on behalf of the Corporation to
procure a judgement in its favor, the Corporation shall indemnify any
director or officer, any former director or former officer, and his heirs
and legal representatives, against all costs, charges and expenses,
including any
II-1
<PAGE> 113
amount paid to settle an action or satisfy a judgment reasonably incurred
by him in respect of any civil, criminal or administrative action or
proceeding to which he is made a party by reason of being or having been a
director or officer if:
(a) he acted honestly and in good faith with a view to the best interests
of the Corporation; and
(b) in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, he had reasonable grounds for
believing that his conduct was lawful.
The Corporation shall, with the approval of the court, indemnify any person
referred to in the immediately preceding paragraph in respect of an action
by or on behalf of the Corporation to procure a judgement in its favor, to
which he is made a party by reason of being or having been a director or
officer, against all costs, charges and expenses reasonably incurred by him
in connection with such action, if he fulfills the conditions set out in
sub-paragraphs (a) and (b) above.
Notwithstanding anything herein above contained, the Corporation shall
indemnify any person referred to in the first paragraph of this by-law XXII
who has been substantially successful in the defence of any civil, criminal
or administrative action or proceeding to which he is made a party by
reason of being or having been a director or officer against all costs,
charges and expenses reasonably incurred by him in respect of such action
or proceeding."
Except in the case of an action taken by the Company or of a derivative
action taken by a shareholder on behalf of the Company, the CBCA provides that a
director or officer may be indemnified by the Company against all costs, charges
and expenses, including an amount paid to settle an action or satisfy a judgment
if (a) he acted honestly and in good faith with a view to the best interests of
the Company; and (b) in the case of a criminal or administrative action, he had
reasonable grounds for believing that his conduct was lawful. The right of
indemnification is more limited under the CBCA where directors or officers are
sued by the Company or on its behalf by a shareholder (a derivative action). In
those cases, the Company may, with the approval of a court, indemnify directors
and officers against all costs, charges and expenses but not the amount of the
judgment or settlement of an action, provided he fulfills the conditions of (a)
and (b) above. A director or officer must be indemnified for costs, charges and
expenses if he was substantially successful on the merits of his defense and
fulfills the conditions of (a) and (b) above.
The Company maintains a Directors & Officers Indemnity Insurance Policy,
which indemnifies the Company's directors and officers for wrongful acts. Among
certain restrictions, the Company's policy limits liability coverage to $50.0
million. In addition, Mr. Daniel Laporte is covered by a $5.0 million directors
and officers liability insurance policy maintained by Le Fonds de solidarite des
travailleurs du Quebec (F.T.Q.) (the "Fund").
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1996, the Company issued and sold the following
unregistered securities:
On January 31, 1996, Gildan issued to the Fund an unsecured and
subordinated debenture in an aggregate principal amount of $3.0 million.
On May 9, 1997, Gildan issued to the Fund an unsecured and subordinated
debenture in an aggregate principal amount of $6.0 million.
On August 7, 1997, in exchange for the 10,000,000 common shares of Gildan
held by the Fund and Harco, Gildan issued 3,000,000 Class "A" preferred shares
and 300 Class "A" common shares of Gildan to the Fund and 7,000,000 Class "A"
preferred shares to Harco.
II-2
<PAGE> 114
On the same date, Gildan issued the following shares in exchange for the
retirement of the following loans owed by Gildan:
<TABLE>
<CAPTION>
NUMBER OF
CLASS "A"
COMMON SHARES AMOUNT OF
NAME OF SHAREHOLDER ISSUED LOAN RETIRED
- ------------------- ------------- ------------
<S> <C> <C>
H. Gregory Chamandy Family Trust............................ 305 $4,357.14
Glenn Chamandy Family Trust................................. 305 $4,357.14
Shirley Chamandy Family Trust............................... 20 $ 285.72
Tisch Family Trust.......................................... 70 $1,000.00
</TABLE>
On January 28, 1998, Gildan issued to the Fund an unsecured and
subordinated debenture in an aggregate principal amount of $6.0 million.
On June 17, 1998, in connection with the initial public offering and to
effect the recapitalization of the Company, Gildan issued 3,903,000 Class A
Subordinate Voting Shares and 3,047,000 Class B Multiple Voting Shares.
On June 25, 1998, Gildan issued to the Fund an unsecured and subordinated
debenture due 2003 in an aggregate principal amount of $15.0 million which
replaced Gildan's three then outstanding debentures held by the Fund.
On January 4, 1999, Gildan issued to the Fund an unsecured and subordinated
debenture due 2004 in an aggregate principal amount of $15.0 million.
On February 1, 1999, Gildan issued to Capital d'Amerique CDPQ Inc. an
unsecured and subordinated debenture due 2004 in an aggregate principal amount
of $15.0 million. In connection with this issuance, Capital d'Amerique CDPQ Inc.
purchased 444,444 Class A Subordinate Voting Shares at Cdn$11.25 per share for
an aggregate purchase price of $5.0 million.
Each of the securities listed above was sold to persons who were neither
nationals nor residents of the United States and no facilities or
instrumentalities of U.S. interstate commerce were used in connection with any
offer or sale thereof. No underwriter or underwriting discount or commission was
involved in any of such sales.
II-3
<PAGE> 115
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
The following exhibits are filed pursuant to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
** 1 Form of Underwriting Agreement.
* 3.1 Restated Certificate and Articles of Incorporation, dated
January 8, 1999.
* 3.2 By-Law One.
* 3.3 Administrative Resolutions.
4 Form of certificate of the Company's Class A Subordinate
Voting Shares (incorporated by reference to Exhibit 4 to the
Company's Registration Statement on Form F-1 No. 333-8770).
*** 5 Opinion of Ogilvy Renault.
*** 8.1 Opinion of Simpson Thacher & Bartlett.
*** 8.2 Opinion of Ogilvy Renault.
** 9 Agreement between Harco and the Fund.
10.1 Trust Agreement between the Company, Harco Holdings Ltd., H.
Greg Chamandy, Glenn J. Chamandy, Edwin B. Tisch and
Montreal Trust Company, dated June 16, 1998 (incorporated by
reference to Exhibit 10.1 to the Company's Registration
Statement on Form F-1 No. 333-8770).
10.2 Amended and Restated Loan Agreement with Bank of America
Canada, dated August 6, 1997 (incorporated by reference to
Exhibit 10.2 to the Company's Registration Statement on Form
F-1 No. 333-8770).
10.3 Amendment No. 1 to the Amended and Restated Loan Agreement
with Bank of America Canada (incorporated by reference to
Exhibit 10.3 to the Company's Registration Statement on Form
F-1 No. 333-8770).
10.4 Amendment No. 2 to the Amended and Restated Loan Agreement
with Bank of America Canada (incorporated by reference to
Exhibit 10.4 to the Company's Registration Statement on Form
F-1 No. 333-8770).
10.5 Amendment No. 3 to the Amended and Restated Loan Agreement
with Bank of America Canada (incorporated by reference to
Exhibit 10.5 to the Company's Registration Statement on Form
F-1 No. 333-8770).
10.6 Amendment No. 4 to the Amended and Restated Loan Agreement
with Bank of America Canada (incorporated by reference to
Exhibit 10.6 to the Company's Registration Statement on Form
F-1 No. 333-8770).
10.7 Amendment No. 5 to the Amended and Restated Loan Agreement
with Bank of America Canada (incorporated by reference to
Exhibit 10.7 to the Company's Registration Statement on Form
F-1 No. 333-8770).
**10.8 Amendment No. 6 to the Amended and Restated Loan Agreement
with Bank of America Canada.
**10.9 Amendment No. 7 to the Amended and Restated Loan Agreement
with Bank of America Canada.
</TABLE>
II-4
<PAGE> 116
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
**10.10 Amendment No. 8 to the Amended and Restated Loan Agreement
with Bank of America Canada.
**10.11 Amendment No. 9 to the Amended and Restated Loan Agreement
with Bank of America Canada.
10.12 Employment Agreement with H. Gregory Chamandy (incorporated
by reference to Exhibit 10.8 to the Company's Registration
Statement on Form F-1 No. 333-8770).
10.13 Change of Control Agreement with H. Gregory Chamandy
(incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form F-1 No. 333-8770).
10.14 Employment Agreement with Glenn J. Chamandy (incorporated by
reference to Exhibit 10.10 to the Company's Registration
Statement on Form F-1 No. 333-8770).
10.15 Change of Control Agreement with Glenn J. Chamandy
(incorporated by reference to Exhibit 10.11 to the Company's
Registration Statement on Form F-1 No. 333-8770).
10.16 Employment Agreement with Edwin B. Tisch (incorporated by
reference to Exhibit 10.12 to the Company's Registration
Statement on Form F-1 No. 333-8770).
10.17 Change of Control Agreement with Edwin B. Tisch
(incorporated by reference to Exhibit 10.13 to the Company's
Registration Statement on Form F-1 No. 333-8770).
**10.18 Employment Agreement with Ken Cieply.
**10.19 Change of Control Agreement with Ken Cieply.
**10.20 Employment Agreement with George Sam Yu Sum.
**10.21 Change of Control Agreement with George Sam Yu Sum.
**10.22 Employment Agreement with Francois Vinette.
**10.23 Change of Control Agreement with Francois Vinette.
**10.24 Registration Rights Agreement.
10.25 Escrow Agreement between the Company, Harco Holdings Ltd,
Fonds de solidarite des travailleurs du Quebec (F.T.Q.), H.
Gregory Chamandy Family Trust, Glenn Chamandy Family Trust
and Montreal Trust Company, dated June 16, 1998
(incorporated by reference to Exhibit 10.15 to the Company's
Registration Statement on Form F-1 No. 333-8770).
**10.26 Annual Incentive Plan (SCORES).
**10.27 Gildan Stock Option Plan.
**10.28 Debenture dated as of June 25, 1998 between the Company and
Le Fonds de solidarite des travailleurs du Quebec (F.T.Q.).
**10.29 Debenture dated as of January 15, 1999 between the Company
and Le Fonds de solidarite des travailleurs du Quebec
(F.T.Q.).
**10.30 Share Subscription and Debenture Purchase Agreement dated as
of February 1, 1999 between the Company and Capital
d'Amerique CDPQ Inc.
**10.31 Lease dated as of March 9, 1998 among the Company,
Confecciones el Porvenir and Parque Industrial el Porvenir,
S.A.
**10.32 Lease dated as of May 28, 1998 between the Company and
Fleming Companies Inc.
</TABLE>
II-5
<PAGE> 117
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
**10.33 Credit Agreement between the Company, the Lenders Named
Therein as Lenders and National Bank of Canada (as agent),
dated as of March 31, 1999.
**21 Subsidiaries of the Company.
***23.1 Consent of Simpson Thacher & Bartlett (included in Exhibit
8.1).
***23.2 Consent of Ogilvy Renault (included in part in Exhibits 5
and 8.2).
**23.3 Consent of KPMG LLP, Chartered Accountants.
*24 Power of Attorney.
</TABLE>
- -------------------------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
(b) Attached hereto are the following statement schedules:
None.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the
underwriters, at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the U.S.
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the U.S. Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer of controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the U.S. Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the U.S. Securities
Act, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the U.S. Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the U.S. Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 118
SIGNATURES
Pursuant to the requirements of the U.S. Securities Act of 1933, as amended
(the "U.S. Securities Act"), the Registrant certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on Form F-1
and has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in Montreal, Quebec, Canada, April
15, 1999.
GILDAN ACTIVEWEAR INC./LES VETEMENTS
DE SPORTS GILDAN INC.
By: /s/ KEN CIEPLY
------------------------------------
Ken Cieply, Vice President Finance
and Administration (principal
financial and accounting officer)
Pursuant to the requirements of the U.S. Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ * Chairman of the Board and Chief
- --------------------------------------------- Executive Officer (principal
H. Gregory Chamandy executive officer)
/s/ * Director
- ---------------------------------------------
Glenn J. Chamandy
/s/ * Director
- ---------------------------------------------
Edwin B. Tisch
/s/ * Director
- ---------------------------------------------
William H. Houston III
/s/ * Director
- ---------------------------------------------
Daniel Laporte
</TABLE>
<TABLE>
/s/ * Director
- ---------------------------------------------
Norman M. Steinberg
<S> <C> <C>
/s/ * Director
- ---------------------------------------------
Robert M. Baylis
/s/ * Director
- ---------------------------------------------
Richard P. Strubel
</TABLE>
II-7
<PAGE> 119
<TABLE>
/s/ Ken Cieply April 15, 1999
- --------------------------------------------- Vice President--Finance and
Ken Cieply Administration (principal financial and
accounting officer)
<S> <C> <C>
</TABLE>
Authorized Representative in the United
States: Puglisi & Associates
<TABLE>
<S> <C> <C>
By: *
- ----------------------------------------
Gregory F. Lavelle
Vice President
</TABLE>
* By Ken Cieply as attorney-in-fact.
II-8
<PAGE> 120
EXHIBIT INDEX
Exhibits identified in parentheses below are on file with the Securities
and Exchange Commission and are incorporated herein by reference to such
previous filings.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
**1 Form of Underwriting Agreement.
*3.1 Restated Certificate and Articles of Incorporation, dated
January 8, 1999. (incorporated by reference to Exhibit 3.1
to the Company's Registration Statement on Form F-1 No.
333-8770).
*3.2 By-Law One.
*3.3 Form of Administrative Resolutions.
4 Form of certificate of the Company's Class A Subordinate
Voting Shares (incorporated by reference to Exhibit 4 to the
Company's Registration Statement on Form F-1 No. 333-8770).
***5 Opinion of Ogilvy Renault.
***8.1 Opinion of Simpson Thacher & Bartlett.
***8.2 Opinion of Ogilvy Renault.
**9 Agreement between Harco and the Fund.
10.1 Trust Agreement between the Company, Harco Holdings Ltd., H.
Greg Chamandy, Glenn J. Chamandy, Edwin B. Tisch and
Montreal Trust Company, dated June 16, 1998 (incorporated by
reference to Exhibit 10.1 to the Company's Registration
Statement on Form F-1 No. 333-8770).
10.2 Amended and Restated Loan Agreement with Bank of America
Canada, dated August 6, 1997 (incorporated by reference to
Exhibit 10.2 to the Company's Registration Statement on Form
F-1 No. 333-8770).
10.3 Amendment No. 1 to the Amended and Restated Loan Agreement
with Bank of America Canada (incorporated by reference to
Exhibit 10.3 to the Company's Registration Statement on Form
F-1 No. 333-8770).
10.4 Amendment No. 2 to the Amended and Restated Loan Agreement
with Bank of America Canada (incorporated by reference to
Exhibit 10.4 to the Company's Registration Statement on Form
F-1 No. 333-8770).
10.5 Amendment No. 3 to the Amended and Restated Loan Agreement
with Bank of America Canada (incorporated by reference to
Exhibit 10.5 to the Company's Registration Statement on Form
F-1 No. 333-8770).
10.6 Amendment No. 4 to the Amended and Restated Loan Agreement
with Bank of America Canada (incorporated by reference to
Exhibit 10.6 to the Company's Registration Statement on Form
F-1 No. 333-8770).
10.7 Amendment No. 5 to the Amended and Restated Loan Agreement
with Bank of America Canada (incorporated by reference to
Exhibit 10.7 to the Company's Registration Statement on Form
F-1 No. 333-8770).
**10.8 Amendment No. 6 to the Amended and Restated Loan Agreement
with Bank of America Canada.
**10.9 Amendment No. 7 to the Amended and Restated Loan Agreement
with Bank of America Canada.
</TABLE>
II-9
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
**10.10 Amendment No. 8 to the Amended and Restated Loan Agreement
with Bank of America Canada.
**10.11 Amendment No. 9 to the Amended and Restated Loan Agreement
with Bank of America Canada.
10.12 Employment Agreement with H. Gregory Chamandy (incorporated
by reference to Exhibit 10.8 to the Company's Registration
Statement on Form F-1 No. 333-8770).
10.13 Change of Control Agreement with H. Gregory Chamandy
(incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form F-1 No. 333-8770).
10.14 Employment Agreement with Glenn J. Chamandy (incorporated by
reference to Exhibit 10.10 to the Company's Registration
Statement on Form F-1 No. 333-8770).
10.15 Change of Control Agreement with Glenn J. Chamandy
(incorporated by reference to Exhibit 10.11 to the Company's
Registration Statement on Form F-1 No. 333-8770).
10.16 Employment Agreement with Edwin B. Tisch (incorporated by
reference to Exhibit 10.12 to the Company's Registration
Statement on Form F-1 No. 333-8770).
10.17 Change of Control Agreement with Edwin B. Tisch
(incorporated by reference to Exhibit 10.13 to the Company's
Registration Statement on Form F-1 No. 333-8770).
**10.18 Employment Agreement with Ken Cieply.
**10.19 Change of Control Agreement with Ken Cieply.
**10.20 Employment Agreement with George Sam Yu Sum.
**10.21 Change of Control Agreement with George Sam Yu Sum.
**10.22 Employment Agreement with Francois Vinette.
**10.23 Change of Control Agreement with Francois Vinette.
**10.24 Registration Rights Agreement.
10.25 Escrow Agreement between the Company, Harco Holdings Ltd,
Fonds de solidarite des travailleurs du Quebec (F.T.Q.), H.
Gregory Chamandy Family Trust, Glenn Chamandy Family Trust
and Montreal Trust Company, dated June 16, 1998
(incorporated by reference to Exhibit 10.15 to the Company's
Registration Statement on Form F-1 No. 333-8770).
**10.26 Annual Incentive Plan (SCORES).
**10.27 Gildan Stock Option Plan.
**10.28 Debenture dated as of June 25, 1998 between the Company and
Le Fonds de solidarite des travailleurs du Quebec (F.T.Q.).
**10.29 Debenture dated as of January 15, 1999 between the Company
and Le Fonds de solidarite des travailleurs du Quebec
(F.T.Q.).
**10.30 Share Subscription and Debenture Purchase Agreement dated as
of February 1, 1999 between the Company and Capital
d'Amerique CDPQ Inc.
</TABLE>
II-10
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
**10.31 Lease dated as of March 9, 1998 among the Company,
Confecciones el Porvenir and Parque Industrial el Porvenir,
S.A.
**10.32 Lease dated as of May 28, 1998 between the Company and
Fleming Companies Inc.
**10.33 Credit Agreement between the Company, the Lenders Named
Therein as Lenders and National Bank of Canada (as agent),
dated as of March 31, 1999.
**21 Subsidiaries of the Company.
***23.1 Consent of Simpson Thacher & Bartlett (included in Exhibit
8.1).
***23.2 Consent of Ogilvy Renault (included in part in Exhibits 5
and 8.2).
**23.3 Consent of KPMG LLP, Chartered Accountants.
*24 Power of Attorney.
</TABLE>
- -------------------------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
II-11
<PAGE> 1
Exhibit 1
3,000,000 CLASS A SUBORDINATE VOTING SHARES
GILDAN ACTIVEWEAR INC.
UNDERWRITING AGREEMENT
________, 1999
Bear, Stearns & Co. Inc.
Nesbitt Burns Inc.
The Robinson-Humphrey Company, LLC
Wasserstein Perella Securities, Inc.
as Representatives of the
several Underwriters named
in Schedule I annexed hereto
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, N.Y. 10167
Ladies and Gentlemen:
Gildan Activewear Inc., a corporation incorporated under the laws of Canada
(the "Company"), hereby confirms its agreements with you as follows:
1. UNDERWRITERS. The term "Underwriters", as used herein, refers
collectively to you and the other underwriters named in Schedule I hereto, for
whom you are acting as representatives. Except as may be expressly set forth
below, any reference to you in this Agreement shall be solely in your capacity
as representatives of the Underwriters, and the Company shall be entitled to act
and rely upon any statement, request, notice, consent, waiver or agreement
purportedly on behalf of any Underwriter made or given by Bear, Stearns & Co.
Inc. ("Bear, Stearns").
2. DESCRIPTION OF SHARES. The Company proposes, subject to the terms and
conditions stated herein, to issue and sell to the several Underwriters an
aggregate of 3,000,000 of the Company's Class A Subordinate Voting Shares (the
"Class A Shares"). The 3,000,000 Class A Shares to be issued and sold by the
Company are referred to herein as the "Firm Shares". The Company also proposes,
subject to the terms and conditions stated herein, to grant to the Underwriters
the option to purchase from the Company, for the sole purpose of covering
over-allotments, if any, in connection with the sale of the Firm Shares, an
aggregate of up to an additional 450,000 Class A Shares (the "Additional
Shares"). The Firm Shares and the Additional Shares are hereinafter referred to
collectively as the "Shares". The Shares are more fully described in the
Registration Statement referred to below. The issuance and sale by the Company
of the Shares to the Underwriters pursuant hereto is herein referred to as the
"Offering".
- 2 -
<PAGE> 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with, each of the Underwriters that:
(a) The Company meets the requirements for the use of a registration
statement on Form F-1 under the United States Securities Act of 1933, as
amended (the "Act"), and has prepared and filed with the United States
Securities and Exchange Commission (the "Commission"), pursuant to the Act
and the rules and regulations promulgated by the Commission thereunder (the
"Regulations"), a registration statement on Form F-1 (File No. 333-74609)
relating to the Shares and may have filed one or more amendments thereto,
including, in each case, a preliminary prospectus relating to the offering
of the Shares. The Company next proposes to file with the Commission a
further amendment to the registration statement, including therein a final
prospectus, necessary to permit the registration statement to become
effective or, if no amendment is required for that purpose, then promptly
following the effectiveness of the registration statement, the Company
proposes to file with the Commission, in accordance with Rules 430A and
424(b)(1) or Rule 424(b)(4) of the Regulations, a final prospectus with
respect to the offerings of the Shares, the final prospectus so filed in
either case to include all Rule 430A Information (as hereinafter defined)
and to conform, in content and form, to the last printer's proof thereof
furnished to and approved by you immediately prior to such filing, which
approval shall not be unreasonably withheld. As used in this Agreement,
(i) "Effective Date" means the date that the registration statement
hereinabove referred to, or the most recent post-effective amendment
thereto, if any, is declared effective by the Commission, (ii)
"Registration Statement" means such registration statement as last amended
prior to the time the same was declared effective by the Commission,
including all exhibits and schedules thereto and all Rule 430A Information
deemed to be included therein at the Effective Date pursuant to Rule 430A
of the Regulations, (iii) "Rule 430A Information" means information with
respect to the Shares and the public offerings thereof permitted, pursuant
to the provisions of paragraph (a) of Rule 430A of the Regulations, to be
omitted from the form of prospectus included in the Registration Statement
at the time it is declared effective by the Commission, (iv) "U.S.
Prospectus" means the form of final prospectus relating to the Shares first
filed with the Commission pursuant to Rule 424(b) of the Regulations or, if
no filing pursuant to Rule 424(b) is required, the form of final prospectus
for public offering of the Shares in the United States included in the
Registration Statement at the Effective Date, and (v) "U.S. Preliminary
Prospectus" means any preliminary prospectus for public offering of the
Shares in the United States (as described in Rule 430 of the Regulations)
with respect to the Shares that omits Rule 430A Information.
(b) The Registration Statement conforms and on the Effective Date
will conform, and the U.S. Prospectus on the date thereof and on the date
first filed with the Commission pursuant to Rule 424(b) of the Regulations
(if required) will conform, in all material respects with the applicable
requirements of the Act and the Regulations. On the Effective Date, the
date the U.S. Prospectus is first filed with the Commission pursuant to
Rule 424(b) of the Regulations (if required), at all times subsequent
thereto to and including the Closing Date (as defined in Section 5(a)(ii)
hereof) and, if later, the Additional Closing Date (as defined in Section
5(b)(ii) hereof), when any post-effective
- 3 -
<PAGE> 3
amendment to the Registration Statement becomes effective or any
supplement to the U.S. Prospectus is filed with the Commission, and during
such longer period as the U.S. Prospectus may be required to be delivered
under the Act in connection with sales of Shares by the Underwriters or a
dealer, the Registration Statement and the U.S. Prospectus (as amended or
supplemented if the Company shall have filed with the Commission an
amendment or supplement thereto) did not and will not contain an untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements made therein
(in the case of the U.S. Prospectus, in light of the circumstances under
which they were made) not misleading. No order preventing or suspending
the use of any U.S. Preliminary Prospectus has been issued by the
Commission, and when any U.S. Preliminary Prospectus was first filed with
the Commission (whether filed as part of the Registration Statement or an
amendment thereof or pursuant to Rule 424(a) of the Regulations) and when
any amendment thereof or supplement thereto was first filed with the
Commission, such U.S. Preliminary Prospectus and any amendments thereof and
supplements thereto conformed in all material respects with the applicable
requirements of the Act and the Regulations thereunder and did not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. No representation and warranty, however, is made in this
subsection 3(b) by the Company with respect to written information
contained in or omitted from the Registration Statement, the U.S.
Prospectus, any U.S. Preliminary Prospectus, or any amendment or supplement
in reliance upon and in conformity with written information with respect to
the Underwriters and the plan of distribution of the Shares furnished to
the Company on behalf of any Underwriter by Bear, Stearns expressly for use
in connection with the preparation thereof.
(c) The Canadian preliminary prospectus of the Company dated March
17, 1999 in its English and French language versions relating to the Shares
has been filed with the appropriate securities commission or similar
regulatory authority (each, a "Securities Regulator") in each of the
provinces of Canada (the "Qualifying Provinces") and a Canadian amended
preliminary prospectus of the Company dated [____], 1999 in its English and
French language versions relating to the Shares has been filed with the
Securities Regulators in each of the Qualifying Provinces. The Canadian
preliminary prospectus and the Canadian amended preliminary prospectus are
collectively referred to as the "Canadian Preliminary Prospectus". The
Company has elected to file the Canadian Preliminary Prospectus with the
Quebec Securities Commission as the principal regulator (the "Principal
Regulator"), in accordance with the proposed mutual reliance review system
set forth in the Proposed National Policy 43-201--Mutual Reliance Review
System for Prospectus and Initial AIFs which was published for comment on
June 19, 1998 and as principal jurisdiction pursuant to National Policy
Statement Number 1 of the Canadian Securities Administrators. The Company
has also elected to rely upon the rules and procedures established pursuant
to National Policy Statement Number 44 of the Canadian Securities
Administrators for the pricing of securities in certain prospectus
offerings after a final receipt has been obtained for the prospectus (the
"PREP Procedures"). The Company has also prepared and filed with the
Securities Regulators in each of the Qualifying Provinces the Canadian
final prospectus of the Company dated [_____, 1999], in its English and
French language versions relating to the Shares (the "Canadian
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<PAGE> 4
Prospectus"), omitting the PREP Information (as hereinafter defined). The
Company will prepare and file, as soon as possible and in any event within
two full business days (as defined in Section 20 hereof) after the
execution and delivery of this Agreement, with the Securities Regulators in
each of the Qualifying Provinces, as hereinafter provided, in accordance
with the PREP Procedures, a supplemented prospectus, in its English and
French language versions, setting forth the PREP Information (the "PREP
Prospectus Supplement") and will obtain an acceptance therefor as soon as
possible thereafter. The information, if any, included in the PREP
Prospectus Supplement that is omitted from the Canadian Prospectus for
which a final mutual reliance review system decision document has been
issued by the Principal Regulator but that is deemed under the PREP
Procedures to be incorporated by reference into the prospectus as of the
date of the PREP Prospectus Supplement is referred to herein as the "PREP
Information". After the filing of the PREP Prospectus Supplement, the term
"Canadian Prospectus" shall include such PREP Prospectus Supplement.
(d) No order preventing or suspending the use of the Canadian
Preliminary Prospectus has been issued by a Securities Regulator and none
of the Securities Regulators has instituted or threatened to institute any
proceedings with respect to such an order. The Canadian Preliminary
Prospectus, at the time of filing thereof, (i) conformed in all material
respects to the requirements of applicable securities laws in each of the
Qualifying Provinces and the respective regulations thereunder and the
published policy statements of the Securities Regulator in each of the
Qualifying Provinces (collectively, the "Canadian Securities Laws"), (ii)
did not contain a misrepresentation, (iii) constituted full, true and plain
disclosure of all material facts relating to the Company and each of its
Subsidiaries (as hereinafter defined), taken as a whole, and to the Shares
and (iv) did not omit to state a fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made. This representation and warranty
shall not apply to any statement or information furnished in writing by an
Underwriter to the Company relating solely to the Underwriters for
exclusive use in the Canadian Preliminary Prospectus or the Canadian
Prospectus. As used in this Agreement, the terms "misrepresentation,"
"material fact" and "material change," with respect to the Canadian
Preliminary Prospectus and the Canadian Prospectus, shall have the meanings
ascribed thereto in the applicable Canadian Securities Laws.
(e) The Canadian Prospectus and any subsequent amendment to the
Canadian Prospectus and any other document required to be filed in order to
qualify the Shares for distribution in the Qualifying Provinces in their
English and French language versions (collectively, the "Supplementary
Material") do and will, as of the applicable filing date, conform in all
material respects to the applicable requirements of the Canadian Securities
Laws. The Canadian Prospectus and any Supplementary Material, at the time
of filing thereof, do not, and will not, contain a misrepresentation, do
and will constitute full, true and plain disclosure of all material facts
relating to the Company and each of its Subsidiaries, taken as a whole, and
to the Shares and do not, and will not, omit to state a fact required to be
stated therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made. This representation
and warranty shall not apply to any statement or information furnished in
writing by an Underwriter to the Company relating solely to the
Underwriters and expressly for use in
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<PAGE> 5
any amendment to the Canadian Prospectus or any other document required to
be filed in order to qualify the Shares for distribution in the Qualifying
Provinces.
(f) Each contract, agreement, instrument, lease, license or other
item required to be described in the Registration Statement, the U.S.
Prospectus or the Canadian Prospectus or filed as an exhibit to the
Registration Statement or with the appropriate Securities Regulator has
been so described or filed, as the case may be.
(g) KPMG LLP, Chartered Accountants ("KPMG"), whose separate reports
appear in the U.S. Prospectus and the Canadian Prospectus and Richter,
Usher and Vineberg, Chartered Accountants ("Richter, Usher") who audited
the Company's consolidated financial statements for fiscal 1995 are
independent certified public accounting firms with respect to the Company,
and in each case as required by and within the meaning of the Act, the
Regulations, the CANADA BUSINESS CORPORATIONS ACT (the "CBCA") and the
Canadian Securities Laws. The consolidated financial statements and
schedules (including the related notes) of the Company and its Subsidiaries
(the "Company Financials") included in the Registration Statement or any
U.S. Preliminary Prospectus or Canadian Preliminary Prospectus, the
Canadian Prospectus or to be included in the U.S. Prospectus or the PREP
Prospectus Supplement (collectively, the "Offering Documents") present
fairly in all material respects the consolidated financial position,
results of operations, retained earnings and cash flows of the Company, its
Subsidiaries and their predecessors and the other information purported to
be shown therein at the respective dates and for the respective periods to
which they apply. The Company Financials have been prepared in accordance
with generally accepted accounting principles as in effect in Canada
("Canadian GAAP") consistently applied throughout the periods involved, and
are, in all material respects, in accordance with the books and records of
the Company, its Subsidiaries and their predecessors, as the case may be.
The Company Financials have been reconciled as required under Item 18 of
Form 20-F and Regulation S-X under the Act to United States generally
accepted accounting principles ("U.S. GAAP") consistently applied
throughout the periods involved. The "pro forma" financial information
included, or to be included in the Offering Documents, presents fairly in
all material respects the information purported to be shown therein at the
respective dates thereof and for the respective periods covered thereby and
all adjustments have been properly applied. The assumptions in such pro
forma financial information are reasonable. No other financial statements
are required by Form F-1, Canadian Securities Laws or otherwise to be
included in the Offering Documents other than those included therein and
those whose omission in the Offering Documents has been authorized by
Canadian Securities Regulators. The selected consolidated financial
information and statistical data set forth under the captions "Summary
Consolidated Financial Data" and "Selected Consolidated Financial Data" in
the Offering Documents have been prepared on a basis consistent with the
Company Financials.
(h) Subsequent to the respective dates as of which information is
given in the Registration Statement, except as set forth in the
Registration Statement or as may be set forth in the U.S. Prospectus and
the Canadian Prospectus and any Supplementary Material, there has not been
any material adverse change in the business, properties, operations,
condition (financial or other) or results of operations of the Company and
its
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<PAGE> 6
Subsidiaries taken as a whole, whether or not arising from transactions in
the ordinary course of business, and since the date of the latest balance
sheet of the Company included in the Registration Statement, and except as
described in the Registration Statement or as may be described in the U.S.
Prospectus and the Canadian Prospectus and any Supplementary Material, (i)
neither the Company nor any of its Subsidiaries (A) has incurred or
undertaken any liabilities or obligations, direct or contingent, that are,
individually or in the aggregate, material to the Company and its
Subsidiaries taken as a whole, or (B) entered into any transaction not in
the ordinary course of business that is material to the Company and its
Subsidiaries taken as a whole; and (ii) the Company has not declared or
paid any dividend on or made any distribution of or with respect to any
shares of its share capital or redeemed, purchased or otherwise acquired or
agreed to redeem, purchase or otherwise acquire any shares of its or its
Subsidiaries' share capital. As used in this Agreement, the term
"subsidiary" means any corporation, partnership, joint venture,
association, company, business trust or other entity in which the Company
directly or indirectly (i) beneficially owns or controls a majority of the
outstanding voting securities having by the terms thereof ordinary voting
power to elect a majority of the board of directors (or other body
fulfilling a substantially similar function) of such entity (irrespective
of whether or not at the time any class or classes of such voting
securities shall have or might have voting power by reason of the happening
of any contingency) or (ii) has the authority or ability to control the
policies of such entity (including, but without limitation thereto, any
partnership of which the Company or a Subsidiary is a general partner or
owns or has the right to obtain a majority of limited partnership interests
and any joint venture in which the Company or a Subsidiary has liability
similar to the liability of a general partner of a partnership or owns or
has the right to obtain a majority of the joint venture interests).
(i) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
issue, sell and deliver the Shares in accordance with the terms and
conditions hereof. The Agreement has been duly and validly authorized by
all necessary corporate action, executed and delivered by the Company and
is a legal and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity), and except insofar as rights to indemnification and contribution
contained therein may be limited by federal, provincial or state securities
laws or related public policy.
(j) The Company's execution and delivery of, and its performance of
its obligations under, this Agreement and the consummation of the
transactions contemplated hereby and the compliance by the Company with the
terms hereof do not and will not (i) result in a breach of any of the terms
and provisions of, or constitute a default under (or an event that with
notice or lapse of time, or both, would constitute a default under) or
require approval or consent under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company or any of its Subsidiaries pursuant to the terms of (A) any
agreement, contract, indenture, mortgage,
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<PAGE> 7
lease, license, arrangement or understanding to which the Company or any of
its Subsidiaries is a party, or to which any of their respective properties
is subject, that is material to the Company and the Subsidiaries taken as a
whole (hereafter, collectively, "Material Contracts") (except for those
breaches or defaults for which consent or approval has been obtained by the
Company prior to the date hereof or (B) any governmental franchise, license
or permit heretofore issued to the Company or any of its Subsidiaries that
is material to the Company and its Subsidiaries taken as a whole
(hereafter, collectively, "Material Permits"), (ii) violate any provision
of the certificate of incorporation, certificates of amendment, by-laws or
similar governing instruments of the Company or any of its Subsidiaries
listed on Schedule II hereto (the "Subsidiaries") or (iii) violate any
judgment, decree, order, statute, rule or regulation of any court or any
public, governmental or regulatory agency or body having jurisdiction over
the Company or any Subsidiary or any of its respective properties or
assets, except for those violations, that, individually or in the
aggregate, would not be reasonably likely to have a material adverse effect
on the business, properties, operations, assets, liabilities, net worth,
condition (financial or other), results of operations or prospects of the
Company and its Subsidiaries taken as a whole (hereafter, a "Material
Adverse Effect").
(k) Assuming compliance by the Underwriters with their undertakings
under Section 4 hereof, no consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any court
or any public, governmental or regulatory agency or body, domestic or
foreign, having jurisdiction over the Company or any of its Subsidiaries or
any of their respective properties or assets is required for the Company's
execution and delivery of, and its performance of its obligations under,
this Agreement, and the consummation of the transactions contemplated
hereby, except the registration or qualification of the Shares under the
Act, the United States Securities Exchange Act of 1934, as amended (the
"Exchange Act") and Canadian Securities Laws, the authorization of the
Shares for listing on the American Stock Exchange (the "AMEX"), The
Montreal Exchange (the "ME") and The Toronto Stock Exchange (the "TSE") and
such filings and registrations as may be required under state securities or
"Blue Sky" laws in connection with the purchase and distribution of the
Shares by the Underwriters. No consent of any party to any Material
Contract to which the Company or any of its Subsidiaries is a party, or to
which any of their respective properties or assets is subject, is required
for the Company's execution and delivery of, and its performance of its
obligations under, this Agreement as contemplated hereby (except for those
consents already obtained or which shall be obtained prior to the Closing).
(l) Assuming all of the transactions contemplated by the Offering
have occurred (i) all of the outstanding shares of the share capital of the
Company, and all of the outstanding shares of the share capital (or similar
interests) of each of its Subsidiaries, have been duly and validly
authorized and issued, are fully paid and non-assessable and were not
issued in violation of or subject to any pre-emptive rights, (ii) the
outstanding Class A Shares and the Company's outstanding Class B Multiple
Voting Shares (the "Class B Shares") have been duly authorized and validly
issued by the Company and are fully paid and non-assessable, (iii) the
Class A Shares of the Company to be outstanding on the Closing Date (as
hereinafter defined), including the Shares, have been duly authorized and,
when issued (and, in the case of the Shares, delivered and sold in
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<PAGE> 8
accordance with the terms of this Agreement) will be validly issued, fully
paid and non-assessable, and will not have been issued in violation of or
be subject to any pre-emptive rights, (iv) upon delivery of and payment for
the Shares in accordance with this Agreement, the Underwriters will receive
good and valid title to those of the Class A Shares to be purchased by them
from the Company, free and clear of all liens, encumbrances, security
interests, hypothecs, claims, community property rights, restrictions on
transfer or other defects in title or any other adverse claims, (v) the
Company has, as of the date hereof, and will have, as of the Closing Date
and the Additional Closing Date (as hereinafter defined), if any, an
authorized and outstanding capitalization as set forth in the Registration
Statement and as shall be set forth in the U.S. Prospectus and the PREP
Prospectus Supplement, both on an historical basis and as adjusted to give
effect to the offering of the Class A Shares and (vi) the Company's share
capital conforms to the description thereof set forth in the Registration
Statement and as shall be set forth in the U.S. Prospectus and the PREP
Prospectus Supplement. The Company owns directly or indirectly such
percentage of the outstanding share capital (or similar interests) of each
of its Subsidiaries as is set forth opposite the name of such Subsidiary in
Schedule II hereto, free and clear of all claims, liens, security
interests, hypothecs, pledges, charges, encumbrances, shareholders'
agreements and voting trusts, except as otherwise described in said
Schedule II.
(m) There is no commitment, plan or arrangement to issue, and no
outstanding option, warrant or other right calling for the issuance of,
any shares of share capital (or similar interests) of the Company or of
any of its Subsidiaries or any security or other instrument that by its
terms is convertible into, exchangeable for or evidencing the right to
purchase share capital (or similar interests) of the Company or such
Subsidiary, except as described in the Registration Statement and as
shall be described in the U.S. Prospectus and the PREP Prospectus
Supplement.
(n) The Company has no Subsidiaries other than those listed in
Schedule II hereto. Each of the Company and its Subsidiaries has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation. Each of
the Company and the Subsidiaries is duly qualified and in good standing
as a foreign corporation in each jurisdiction in which the character or
location of its properties (owned, leased or licensed) or the nature or
conduct of its business makes such qualification necessary, except for
those failures to be so qualified or in good standing that will not in
the aggregate be reasonably likely to have a Material Adverse Effect.
Each of the Company and the Subsidiaries has all requisite corporate
power and authority, and all necessary consents, approvals,
authorizations, orders, registrations, filings, qualifications, licenses
and permits of and from all public, regulatory or governmental agencies
and bodies, domestic or foreign, to own, lease and operate its properties
and conduct its business as now being conducted and as described in the
Registration Statement and the Canadian Prospectus and as shall be
described in the U.S. Prospectus (except for those the absence of which,
individually or in the aggregate, would not be reasonably likely to have
a Material Adverse Effect), and no such consent, approval, authorization,
order, registration, qualification, license or permit contains a
materially burdensome restriction that is not adequately disclosed in the
Offering Documents. Neither the Company nor any Subsidiary has received
any written notice of
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<PAGE> 9
proceedings relating to revocation or modification of any such consents,
approvals, authorizations, orders, registrations, filings, qualifications,
licenses or permits (except for those the revocation or modification of
which would not be reasonably likely to have a Material Adverse Effect).
(o) Neither the Company nor any of its Subsidiaries, nor to the
knowledge of the Company, any other party, is in violation or breach of,
or in default under (nor has an event occurred that with notice, lapse of
time or both, would constitute a default under), any Material Contract,
and each Material Contract is in full force and effect, and is the legal,
valid and binding obligation of the Company or such Subsidiary, as the
case may be, and (subject to applicable bankruptcy, insolvency, and other
laws affecting the enforceability of creditors' rights generally) is
enforceable as to the Company or such Subsidiary, as the case may be, in
accordance with its terms. Neither the Company nor any Subsidiary is in
violation of its certificate of incorporation, certificates of amendment,
by-laws or similar governing instrument.
(p) There is no litigation, arbitration, claim, governmental or
other proceeding or investigation pending or, to the best knowledge of
the Company, threatened with respect to the Company or any of its
Subsidiaries, or any of their respective operations, businesses,
properties or assets, except as described in the Registration Statement
and as shall be described in the U.S. Prospectus and the Canadian
Prospectus, that, individually or in the aggregate, would be reasonably
likely to have a Material Adverse Effect. To the best knowledge of the
Company, neither the Company nor any Subsidiary is, or, with the giving
of notice or lapse of time or both would be, in violation of or in
non-compliance with the requirements of any Material Permit or the
provisions of any law, rule, regulation, order, judgment or decree,
including, without limitation, all applicable federal, provincial, state
and local laws and regulations relating to (i) zoning or land use and
(ii) employee or occupational safety, discrimination in hiring, promotion
or pay of employees, employee hours and wages or employee benefits,
except for such violations or failures of compliance that, individually
or in the aggregate, would not be reasonably likely to have a Material
Adverse Effect.
(q) Except as generally described in the Registration Statement and
as shall be described in the U.S. Prospectus and the Canadian Prospectus,
the Company and each of its Subsidiaries have (i) good and marketable
title to all real (immovable) and personal (movable) properties owned by
them, free and clear of all liens, security interests, hypothecs,
pledges, charges, encumbrances and mortgages, and (ii) valid, subsisting
and enforceable leases for all real (immovable) and personal (movable)
properties leased by them, in each case, subject to such exceptions as,
individually or in the aggregate, do not have and are not reasonably
likely to have a Material Adverse Effect. No real (immovable) property
owned, leased, licensed or used by the Company or by a Subsidiary lies in
an area that is, or to the best knowledge of the Company will be, subject
to zoning, use or building code restrictions that would prohibit, and no
state of facts relating to the actions or inaction of another person or
entity or his, her or its ownership, leasing, licensing or use of any
real (immovable) or personal (movable) property exists that would
prevent, the continued effective ownership, leasing, licensing or use of
such real (immovable) property in the business of the Company or such
Subsidiary as presently
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<PAGE> 10
conducted or as the U.S. Prospectus and the Canadian Prospectus indicate
are contemplated to be conducted, subject to such exceptions as,
individually or in the aggregate, do not have and are not reasonably likely
to have a Material Adverse Effect.
(r) The Company, directly or through one or more of its Subsidiaries,
owns or has the right under license to use all patents, patent rights,
licenses, inventions, copyrights, trademarks, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), service marks and trade
names (collectively, "Intellectual Property") necessary to conduct its
business as now conducted and proposed to be conducted as disclosed in the
Registration Statement and as shall be disclosed in the U.S. Prospectus and
the Canadian Prospectus. Neither the Company nor any of its Subsidiaries
has received any written notice of infringement of or conflict with (and
none of them knows of any such infringement of or conflict with) the
asserted rights of others with respect to any Intellectual Property. To
the best knowledge of the Company, there is no infringement by others of
any Intellectual Property of the Company or any of its Subsidiaries that
has had or may in the future be reasonably likely to have a Material
Adverse Effect.
(s) To the Company's best knowledge, neither the Company or any of
its Subsidiaries, nor any director, officer or employee of the Company or
any such Subsidiary has, directly or indirectly, used any corporate funds
for unlawful contributions, gifts, entertainment, or other unlawful
expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds; violated any
provision of the United States Foreign Corrupt Practices Act of 1977, as
amended or any provision of the Corruption of Foreign Public Officials Act
(Canada); or made any bribe, rebate, payoff, influence payment, kickback,
or other unlawful payment.
(t) Except as set forth in the Offering Documents, no person or
entity has the right, by contract or otherwise, to require registration
under the Act or qualification for sale under the Canadian Securities Laws
of shares of the share capital or other securities of the Company or any of
its Subsidiaries solely because of the filing or effectiveness of the
Registration Statement, of the filing of the Canadian Prospectus with, or
issuance of receipts by, the Securities Regulators in connection with the
Canadian Prospectus and the consummation of the transactions contemplated
by this Agreement.
(u) Neither the Company nor any of its officers, directors or
affiliates (as defined in the Regulations or the Canadian Securities Laws)
will take, directly or indirectly, prior to the completion or termination
of the offerings of the Shares contemplated by this Agreement, any action
designed to stabilize or manipulate the price of the Class A Shares, or
that might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Class A Shares.
(v) Neither the Company nor any of its Subsidiaries is, or intends to
conduct its business in such a manner that it would become, and after
giving effect to the offering and sale of the Shares and the application of
the proceeds thereof as described in the U.S. Prospectus and the Canadian
Prospectus, neither the Company nor any Subsidiary will be,
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<PAGE> 11
an "investment company" or a company "controlled" by an "investment
company" as such terms are defined in the United States Investment Company
Act of 1940, as amended (the "Investment Company Act").
(w) Except as may be set forth in the U.S. Prospectus and the Canadian
Prospectus, the Company has not incurred any liability for a fee,
commission or other compensation on account of the employment of a broker
or finder in connection with the transactions contemplated by this
Agreement. In the event any person, firm or corporation acting or
purporting to be acting for the Company establishes a claim for any
commission or brokerage or finder's fee from the Underwriters, the Company
covenants to indemnify and hold harmless the Underwriters with respect
thereto and with respect to all costs reasonably incurred in the defense
thereof.
(x) The Company and each of its Subsidiaries maintain systems of
internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with Canadian GAAP
and to maintain accountability for assets; (iii) the access to the
respective assets of the Company and each such Subsidiary, as the case may
be, is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(y) No labor dispute with the employees of the Company or any of its
Subsidiaries exists or, to the best knowledge of the Company, is imminent
that, individually or in the aggregate, is or is reasonably likely to have
a Material Adverse Effect, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its principal
suppliers or contractors that reasonably can be expected to have a Material
Adverse Effect.
(z) Each of the Company and the Subsidiaries has (A) filed all
necessary federal, provincial, state and local income tax returns, (B)
filed all other necessary foreign or other income or franchise tax returns
except insofar as the failure to file such returns which, individually or
in the aggregate, would not (1) be reasonably likely to have or could not
result in a Material Adverse Effect, (2) materially impair the Company's
ability to perform the obligations contemplated in this Agreement or (3)
materially affect the consummation of the transactions contemplated in this
Agreement and the Offering Documents; and the Company has no knowledge of
any necessary foreign or other income or franchise tax returns that the
Company has not filed, (C) otherwise paid all taxes due and governmental
charges, penalties, interest and fines due and payable by it and which are
due and owing or are claimed by any governmental authority to be due and
owing subject to the exception of (B) hereof and (D) made adequate
provision for taxes payable for any completed fiscal period for which tax
returns are not yet required. There are no agreements, waivers or other
arrangements providing for an extension of time with respect to the filing
of any tax return or payment of any tax, governmental charge or deficiency
by the Company or the Subsidiaries and there are no actions, suits,
proceedings, investigations or claims pending, or to the best of the
Company's knowledge, threatened
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<PAGE> 12
against the Company or the Subsidiaries in respect of taxes, governmental
charges or assessments or any matters under discussion with any
governmental authority relating to taxes, governmental charges or
assessments asserted by any such authority which would be reasonably likely
to have a Material Adverse Effect.
(aa) The Shares do not constitute "foreign property" under the
INCOME TAX ACT (Canada).
(bb) No Subsidiary of the Company is currently prohibited, directly
or indirectly, from paying any dividends to the Company, from making any
other distribution on such Subsidiary's share capital, from repaying to the
Company any loans or advances to such Subsidiary from the Company or from
transferring any of such Subsidiary's property or assets to the Company or
any other Subsidiary of the Company, except as described in or contemplated
by the Offering Documents.
(cc) Montreal Trust Company at its principal offices in Montreal,
Qu#bec and Toronto, Ontario (the "Transfer Agent") has been duly appointed
transfer agent and registrar for the Class A Shares of the Company in
Canada and Bank of Nova Scotia Trust Company of New York at its principal
office in New York, New York (the "U.S. Transfer Agent") has been duly
appointed co-transfer agent and co-registrar for the Class A Shares of the
Company in the United States.
(dd) Neither the Company nor any Subsidiary nor any of their
properties or assets has any immunity from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid
of execution, execution or otherwise) under the laws of Canada or any
province thereof, subject to the FOREIGN EXTRATERRITORIAL MEASURES ACT
(Canada).
(ee) Each of the Company and its Subsidiaries is insured against
such losses and risks and in such amounts as are customary in the
businesses in which the Company and its Subsidiaries are engaged. Neither
the Company nor any of its Subsidiaries has any reason to believe that it
will not be able to renew its existing insurance coverage from similar
insurers as may be necessary to continue its business.
(ff) Except as disclosed in the Registration Statement and the
Canadian Prospectus and as shall be disclosed in the U.S. Prospectus, there
are no business relationships or related party transactions of the nature
described in Item 404 of Regulation S-K of the Commission involving the
Company or any other persons referred to in such Item 404, except for such
transactions that would be considered immaterial under such Item 404.
(gg) Except as would not, singly or in the aggregate, be reasonably
likely to result in a Material Adverse Effect, (A) neither the Company nor
any of its Subsidiaries is in violation of any federal, provincial, state,
local or foreign statute, law, rule, regulation, ordinance, code, policy or
rule of common law or any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface
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<PAGE> 13
strata) or wildlife, including, without limitation, laws and regulations
relating to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or
petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company and its Subsidiaries have all permits,
authorizations and approvals required under any applicable Environmental
Laws and are each in compliance with their requirements, (C) to the best
knowledge of the Company there are no pending or threatened administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or any of its
Subsidiaries and (D) to the best knowledge of the Company there are no
events or circumstances that might reasonably be expected to form the basis
of an order for clean-up or remediation, or an action, suit or proceeding
by any private party or governmental body or agency, against or affecting
the Company or any of its Subsidiaries relating to Hazardous Materials or
any Environmental Laws.
(hh) The statistical and market-related data included in the
Offering Documents are based on or derived from sources which the Company
believes to be reliable in all material respects or represent the Company's
good faith estimates that are made on the basis of data derived from such
sources.
(ii) The Class A Shares currently outstanding are listed on the ME,
the TSE and the AMEX. The Shares to be sold hereunder have been
conditionally approved for listing on the ME, the TSE and the AMEX, subject
to compliance only with customary listing conditions. The definitive form
of certificates for the Class A Shares are in due and proper form under the
laws governing the Company and in compliance with the requirements of the
ME, the TSE and the AMEX.
4. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS.
The Underwriters represent and warrant to, and agree with, the Company
that:
(a) During the course of the distribution of the Shares to the
public by or through the Underwriters, the Underwriters will offer the
Shares for sale to the public and will sell the Shares only in those
jurisdictions where they may be lawfully offered for sale or sold. Each
agreement of the Underwriters establishing a banking or selling or other
group in respect of the distribution of the Shares in the Qualifying
Provinces shall contain a similar covenant by each selling firm. The
members of any such group are sometimes hereinafter collectively referred
to as the "Selling Firms".
(b) The Underwriters will distribute the Shares in a manner which
complies in all material respects with the Act, the Regulations and the
Canadian Securities Laws.
(c) The Underwriters will not solicit offers to purchase and sell
the Shares so as to require registration thereof or filing of a prospectus
or similar document with respect thereto under the laws of any jurisdiction
(the "Other Jurisdictions") other than the United
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<PAGE> 14
States or the Qualifying Provinces.
(d) The Underwriters shall offer the Shares directly in Canada and
in the United States, only as permitted by the Act, the Regulations and the
Canadian Securities Laws, upon the terms and conditions set forth in the
Offering Documents or any amendment to the Offering Documents and this
Agreement and will require any other Selling Firm engaged by them in
connection with the distribution of the Shares to agree to so distribute.
(e) Offers may be made or accepted by the Underwriters in the Other
Jurisdictions outside Canada and the United States in compliance with the
Act, the Regulations and the Canadian Securities Laws and with all
applicable securities laws of such Other Jurisdictions, only under
circumstances that will not require any filings by the Company or approvals
from any regulatory authorities.
(f) The Underwriters shall:
(i) use all commercially reasonable efforts to complete the
distribution of the Shares in the Qualifying Provinces and the United
States on, or as soon as possible after, the Closing Date or the
Additional Closing Date, as the case may be, and in any event not
later than 5 business days after, and
(ii) notify the Company when, in their opinion, the
Underwriters have ceased distribution of the Shares and provide a
breakdown of the number of Shares distributed in each of the
Qualifying Provinces where such breakdown is required for the purpose
of calculating fees payable to securities regulatory authorities or
otherwise and a statement as to the distribution of the Shares for the
purpose of assisting in the listing of the Shares on the AMEX, the ME
and the TSE.
(g) For purposes of this Section 4, the Underwriters shall be
entitled to assume that the Shares are qualified or registered for
distribution by duly registered investment dealers and brokers: (a) in any
of the Qualifying Provinces where (i) a receipt or similar document for the
Canadian Prospectus shall have been obtained from the Principal Regulator
for and on behalf of the Securities Regulators following the filing of the
Canadian Prospectus and (ii) following the filing of the PREP Prospectus
Supplement in such Qualifying Province, only after issuance by such
Qualifying Province of a notice of acceptance or receipt therefor, and (b)
in the United States following the Effective Time, subject to applicable
state securities or blue sky laws.
(h) Bear, Stearns, on behalf of the Underwriters, will advise the
Company by written notice of the date of termination of the period of
distribution of the Shares forthwith after termination and of the amount of
Shares sold (i) in the Qualifying Provinces in which a filing fee for a
prospectus is based on the proceeds realized in the Qualifying Provinces,
and (ii) in Quebec.
5. PURCHASE, SALE AND DELIVERY OF THE SHARES.
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<PAGE> 15
(a)(i) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to issue and sell to each of the Underwriters
an aggregate of 3,000,000 Class A Shares, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I
hereto, plus any additional number of Shares which such Underwriter may
become obligated to purchase pursuant to the provisions of Section 13
hereof, all at a purchase price of US [$____] per Share or Cdn [$____] per
Share (the "Purchase Price"). Subject to Section 13, the aggregate number
of Firm Shares to be purchased from the Company by each Underwriter (as
adjusted by Bear, Stearns to eliminate fractions) shall be determined by
multiplying the aggregate number of Firm Shares to be sold by the Company,
as set forth above by a fraction (A) the numerator of which is the total
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto and (B) the denominator of which is the total number of
Firm Shares.
(ii) Delivery of the Firm Shares and payment of the Purchase Price
therefor shall be made at the offices of Bear, Stearns at 245 Park
Avenue, New York, New York 10167, or such other location in the New
York City metropolitan area as Bear, Stearns shall determine and
advise the Company upon at least two full business days' notice in
writing. Such delivery and payment shall be made at 10:00 A.M., New
York City time, on the fifth full business day following the
determination of the Purchase Price, or at such other time as may be
agreed upon by Bear, Stearns and the Company. The time and date of
such delivery and payment are herein called the "Closing Date".
Delivery of the Firm Shares shall be made to or upon the order of
Bear, Stearns, for the respective accounts of the Underwriters,
against payment to the Company of the aggregate Purchase Price for the
Firm Shares sold by the Company, by wire transfer of same day funds,
in U.S. Dollars with respect to Shares sold in the United States and
in Canadian dollars with respect to Shares sold in Canada, to the
account of the Company designated in writing to Bear, Stearns at least
two full business days prior to the Closing Date.
(iii) Certificates for the Firm Shares shall be registered in such
name or names and in such authorized denominations as Bear, Stearns
may request in writing at least two full business days prior to the
Closing Date, provided that, if so specified by Bear, Stearns, the
Firm Shares may be represented by a global certificate registered in
the name of Cede & Co. ("Cede"), as nominee of the Depositary Trust
Company. Bear, Stearns shall be permitted to examine and package such
certificates for delivery at least one full business day prior to the
Closing Date, unless the Firm Shares are to be represented by a global
certificate.
(b)(i) The Company hereby grants to the Underwriters an option (the
"Option") to purchase from the Company the Additional Shares at the
Purchase Price, for the sole purpose of covering over-allotments, if any,
in the offering of the Firm Shares by the Underwriters. The Option shall
be exercisable by the
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<PAGE> 16
Underwriters in whole or in part at any time or from time to time, but
in no event after the expiration of 30 days from the date of the U.S.
Prospectus, for the purchase of all or part of the Additional Shares,
such exercise to be made by notice, given by Bear, Stearns to the
Company in the manner specified in Section 16 hereof, which notice
shall set forth the aggregate number of Additional Shares with respect
to which the Option is being exercised, the denominations and the name
or names in which certificates evidencing the Additional Shares so
purchased are to be registered, and the date and time of delivery of
such Additional Shares, which date may be at or subsequent to the
Closing Date and shall not be less than two nor more than ten days
after such notice. Subject to Section 13, the aggregate number of
Additional Shares so purchased from the Company by each Underwriter
(as adjusted by Bear, Stearns to eliminate fractions) shall be
determined by multiplying the aggregate number of such Additional
Shares to be sold by the Company by a fraction (A) the numerator of
which is the total number of Firm Shares set forth opposite the name
of such Underwriter in Schedule I hereto and (B) the denominator of
which is the total number of Firm Shares.
(ii) Delivery of the Additional Shares so purchased and payment
of the Purchase Price therefor shall be made at the offices of Bear,
Stearns at 245 Park Avenue, New York, New York 10167, or such other
location in the New York City metropolitan area as Bear, Stearns shall
determine and advise the Company upon at least two full business days'
notice in writing. Such delivery and payment shall be made at 10:00
A.M., New York City time, on the date designated in such notice or at
such other time and date as may be agreed upon by Bear, Stearns and
the Company. The time and date of such delivery and payment are
herein called the "Additional Closing Date". Delivery of the
Additional Shares shall be made to or upon the order of Bear, Stearns,
for the respective accounts of the Underwriters, against payment to
the Company of the aggregate Purchase Price for the Additional Shares
sold by the Company by wire transfer of same day funds, in U.S.
Dollars with respect to Shares sold in the United States and in
Canadian dollars with respect to Shares sold in Canada, to the account
of the Company designated in writing to Bear, Stearns at least two
full business days prior to the Additional Closing Date.
(iii) Certificates for the Additional Shares purchased by the
Underwriters, when so delivered, shall be registered in such name or
names and in such authorized denominations as Bear, Stearns shall have
requested in the notice of exercise of the Option, provided that, if
so specified therein, such Additional Shares may be represented by a
global certificate registered in the name of Cede, as nominee for the
Depository Trust Company. Bear, Stearns shall be permitted to examine
and package such certificates for delivery at least one full business
day prior to the Additional Closing Date, unless the Additional Shares
are to be represented by a global certificate.
(c) The Underwriters shall not be obligated to purchase any Firm
Shares from the Company except upon tender to the Underwriters by the
Company of all of the Firm Shares and the Underwriters shall not be
obligated to purchase any Additional Shares from
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<PAGE> 17
the Company except upon tender to the Underwriters by the Company of all of
the Additional Shares specified in the notice of exercise of the Option.
The Company shall not be obligated to sell or deliver any Firm Shares or
any Additional Shares, as the case may be, except upon tender of payment by
the Underwriters for all the Firm Shares or all the Additional Shares
specified in the notice of exercise of the Option, as the case may be,
agreed to be purchased by the Underwriters hereunder.
6. OFFERING. The Company has been advised by you that the Underwriters
propose to make a public offering of their respective portions of the Shares in
Canada, the United States and the Other Jurisdictions, if any, as soon after the
Registration Statement and this Agreement have become effective and, with
respect to the Offering in the Qualifying Provinces, after receipt of a mutual
reliance review system decision document for the Canadian Prospectus by the
Principal Regulator, for and on behalf of the Securities Regulators in each of
the Qualifying Provinces, and as in your judgment is advisable. The Company has
been further advised by you that the Shares are to be offered to the public
initially at a price of US [$____] per share or Cdn [$____] per share and to
certain dealers selected by you at a price that represents a concession not in
excess of US [$____] per share or Cdn [$____] per share, and that any
Underwriter may allow, and such dealers may reallow, a further concession, not
in excess of US [$____] per share or Cdn [$____] per share, to any Underwriter
or to certain other dealers, and that with respect to sales in the United States
after the initial offering of the Shares, the public offering price and such
concessions may be changed by you.
7. COVENANTS OF THE COMPANY. The Company covenants and agrees with each
Underwriter that:
(a) The Company shall use its best efforts to cause the
Registration Statement to become effective as promptly as possible and to
maintain it in effect for the duration of the distribution period as
contemplated herein. If the Registration Statement has become or becomes
effective pursuant to Rule 430A of the Regulations, or filing of the U.S.
Prospectus with the Commission is otherwise required under Rule 424(b) of
the Regulations, the Company shall file the U.S. Prospectus, properly
completed, with the Commission pursuant to Rule 424(b) of the Regulations
within the time period therein prescribed and shall provide evidence
satisfactory to you of such timely filing. The Company shall promptly
advise you (and, if requested, confirm such advice in writing), (i) when
the Registration Statement or any post-effective amendment thereto has
become effective, (ii) when the Principal Regulator, for and on behalf of
the Securities Regulators shall have issued acceptances, receipts or other
clearances for the Canadian Prospectus, (iii) of the initiation or
threatening of any proceedings for, or receipt by the Company of any notice
with respect to, the suspension of the qualification of the Shares for sale
in any jurisdiction or the issuance by the Commission of any order
suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto, (iv) of receipt by the Company or any
representative of or attorney for the Company of any other communications
from the Commission relating to the Company, the Registration Statement,
any U.S. Preliminary Prospectus, the U.S. Prospectus or the transactions
contemplated by this Agreement and (v) of the issuance by any Securities
Regulators of an order preventing or suspending the use of the Canadian
Prospectus, any amendment thereto or the transactions contemplated by this
Agreement or threat of any investigation
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<PAGE> 18
or proceeding for such purpose. The Company shall make every reasonable
effort to prevent the issuance of any such order and, if any such order is
issued, to obtain its lifting as soon as possible. The Company shall not
file any amendment to the Registration Statement or any amendment of or
supplement to the U.S. Prospectus or the Canadian Prospectus (other than
the PREP Prospectus Supplement) before or after the Effective Date to which
you shall reasonably object after being timely furnished in advance a copy
thereof unless the Company shall conclude, upon the advice of counsel, that
any such amendment must be filed at a time prior to obtaining such consent.
(b) The Company shall, (a) as soon as practicable and no later
than the second business day after the date hereof: cause the PREP
Prospectus Supplement, in its English and French language versions, and any
documentation supplemental thereto required to be filed under the Canadian
Securities Laws, in each case in form and substance satisfactory to the
Underwriters and their counsel, acting reasonably, and with such signatures
as may be required by the Canadian Securities Laws; and (b) as soon as
practicable following receipt of acceptances or other clearances from the
Securities Regulators in each of the Qualifying Provinces for the PREP
Prospectus Supplement, and in any event no later than the business day
following such receipt cause commercial copies of the PREP Prospectus
Supplement (in its English and French language versions) to be delivered to
the Underwriters, without charge, in such numbers and in such cities as the
Underwriters may reasonably request by instructions given by you to the
printer of the PREP Prospectus Supplement. The Company shall also cause to
be delivered in a similar fashion commercial copies of any Supplementary
Material (in their English and French language versions) referred to in
Section 7(c) required under Canadian Securities Laws to be delivered, on
request or otherwise, to purchasers of the Shares in the Qualifying
Provinces. Such delivery and the prior delivery of copies of the Canadian
Prospectus shall constitute or did constitute, as the case may be, the
consent of the Company to the use by the Underwriters and any member of any
banking or selling group established in connection with the distribution of
the Shares of the Canadian Prospectus and any Supplementary Material, as
the case may be, in accordance with the Canadian Securities Laws.
(c) The Company shall prepare and file any Supplementary Material
required to be filed by the Company under the Canadian Securities Laws or
the rules of the ME, the TSE or the AMEX, and any amendment to the Canadian
Prospectus comprised in such Supplementary Material shall be in form and
substance satisfactory to the Underwriters and their counsel, acting
reasonably, and a copy thereof (signed if required) shall be promptly
delivered by the Company to the Underwriters, and the Company shall deliver
to the Underwriters, concurrently with the delivery of any Supplementary
Material, with respect to such Supplementary Material, opinions and
certificates similar to those referred to in Sections 9(i) and 9(j), if a
French language version of such Supplementary Materials is required to be
filed, and a letter similar to that referred to in Section 9(h), if any
financial or accounting data is contained in such Supplementary Material.
(d) Within the time during which the U.S. Prospectus or Canadian
Prospectus is required to be delivered under the Act, the Company shall
comply with all requirements imposed upon it by the Act, as now or
hereafter amended, by the Regulations, as from
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<PAGE> 19
time to time in force and by Canadian Securities Laws, so far as necessary
to permit the continuance of sales of or dealings in the Shares as
contemplated by the provisions hereof and by the U.S Prospectus and the
Canadian Prospectus. If, during such period, any event shall occur as a
result of which the U.S. Prospectus or Canadian Prospectus as then amended
or supplemented includes any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements made therein, in the light of the circumstances under
which they were made, not misleading, or if it shall be necessary at any
time to amend the Registration Statement or supplement the U.S. Prospectus
or Canadian Prospectus to comply with the Act, the Regulations and the
Canadian Securities Laws, the Company shall notify you promptly and prepare
and file with the Commission or the Securities Regulators an appropriate
post-effective amendment to the Registration Statement or supplement to the
U.S. Prospectus or Canadian Prospectus (in form and substance reasonably
satisfactory to you) that will correct such statement or omission and shall
use its best efforts to have any such post-effective amendment or
supplement to the Registration Statement or the Canadian Prospectus
declared effective as soon as possible.
(e) The Company shall promptly deliver to you two manually-signed
copies of the Registration Statement, including exhibits and all amendments
thereto, the Canadian Preliminary Prospectus and the Canadian Prospectus,
and to those persons (including your counsel) whom you identify to the
Company, such number of conformed copies of the Registration Statement,
with exhibits, each U.S. Preliminary Prospectus, each Canadian Preliminary
Prospectus, the U.S. Prospectus, the Canadian Prospectus and all amendments
of and supplements to such documents, if any, as you may reasonably
request. The delivery of the Registration Statement, including exhibits and
all amendments thereto, the U.S. Preliminary Prospectus, the U.S.
Prospectus, the Canadian Preliminary Prospectus and the Canadian Prospectus
and any Supplementary Material shall constitute the Company's consent to
the use by the Underwriters and any member of any banking or selling or
other group established in connection with the distribution of the Shares
of such documents in connection with the distribution of the Shares in the
United States or in Canada in compliance with the provisions of this
Agreement.
(f) The Company shall cooperate with the Underwriters, Weil,
Gotshal & Manges LLP ("Weil, Gotshal") and Stikeman, Elliott ("Stikeman")
(collectively, "Underwriters' Counsel") in connection with their efforts to
qualify or register the Shares for sale under the state securities (or
"Blue Sky") laws as you shall reasonably request, shall execute such
applications and documents and furnish such information as reasonably may
be required for such purpose and shall comply with such laws so as to
continue such registrations and qualifications in effect for so long as may
be required to complete the distribution of the Shares as contemplated
herein; provided, however, that in connection therewith the Company shall
not be required to (i) qualify as a foreign corporation in any jurisdiction
in which it is not so qualified as of the date hereof, (ii) file a consent
to service of process in any jurisdiction in any action other than one
arising out of the offering or sale of the Shares in such jurisdiction or
(iii) become subject to service of process in suits or taxation in any
jurisdiction in which it is not now so subject.
(g) As soon as possible and in any event by the times and dates
specified in this
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<PAGE> 20
Subsection 7(g), the Company shall fulfill, to the satisfaction of counsel
to the Underwriters, all requirements which, under the Canadian Securities
Laws, must be fulfilled in order to qualify the Shares for distribution in
each of the Qualifying Provinces by the Underwriters and other investment
dealers or brokers registered in such Qualifying Provinces. Such
requirements shall be fulfilled by 5:00 p.m. (Montreal time) on the day
which is 10 days after the filing of the Canadian Prospectus, or by such
other time and/or on such later date or dates as regards any of the
Qualifying Provinces as the Company and the Underwriters may agree in
writing. Such qualification shall be maintained until the completion of
the distribution of the Shares as contemplated herein or in the event that
the Shares have, for any reason, ceased to so qualify, such qualification
shall be re-obtained.
(h) As soon as practicable, but in any event not later than
60 days after the end of the 12-month period beginning on the day after
the end of the fiscal quarter of the Company during which the effective
date of the Registration Statement occurs (120 days in the event that the
end of the such fiscal quarter is the end of the Company's fiscal year),
the Company will make generally available to its shareholders, in the
manner specified in Rule 158(b) of the Rules and Regulations, and to the
Representatives, an earnings statement which will be in the detail
required by, and will otherwise comply with, the provisions of
Section 11(a) of the Act and Rule 158(a) of the Rules and Regulations,
which statement need not be audited unless required by the Act or the
Rules and Regulations, covering a period of at least 12 consecutive
months after the effective date of the Registration Statement.
(i) For a period of three years following the date hereof, the
Company will furnish to its shareholders, as soon as practicable, annual
reports (including financial statements audited by independent certified
public accounting firms and prepared in accordance with Canadian GAAP and
reconciled as required under Item 18 of Form 20-F and Regulation S-X under
the Act to U.S. GAAP, if necessary) and unaudited quarterly reports of
earnings, and will deliver to the Representatives:
(A) concurrently with furnishing such quarterly reports to
its shareholders, statements of income of the Company for each
quarter in the form furnished to the Company's shareholders and
certified by the Company's principal financial or accounting officer;
(B) concurrently with furnishing such annual reports to its
shareholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
shareholders' equity, and changes in financial position of the Company
for such fiscal year, accompanied by a copy of the report thereon of
independent certified public accounting firms and prepared in
accordance with Canadian GAAP and reconciled as required under Item 18
of Form 20-F and Regulation S-X under the Act to United States GAAP,
if necessary;
(C) as soon as they are available, copies of all information
(financial or other) mailed to all shareholders; and
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<PAGE> 21
(D) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the Commission,
including, without limitation, all reports on Form 20-F and 6-K, or
such other similar forms as may be designated by the Commission, the
National Association of Securities Dealers, Inc. ("NASD") or any
securities exchange.
During such three-year period, if the Company has active Subsidiaries,
the foregoing financial statements will be on a consolidated basis to the
extent that the accounts of the Company and its Subsidiaries are
consolidated, and will be accompanied by similar financial statements for
any significant Subsidiary which is not so consolidated.
(j) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which
may be the same entity as the transfer agent) for its Class A Shares.
(k) During a period of 180 days from the date of this Agreement,
the Company shall not, without the prior written consent of Bear, Stearns,
issue, sell, offer or agree to sell, contract to sell, announce its
intention to sell, pledge, hypothecate, grant any option for the sale of or
otherwise dispose of, directly or indirectly, or otherwise enter into a
swap or other derivative transaction with respect to, any shares of its
share capital (or any securities convertible into, exercisable for or
exchangeable for shares of its share capital) other than the Company's
issuance and sale of Shares in accordance with the Agreement and the
issuance of up to such number of Class A Shares (or options exercisable for
up to such number of shares) reserved for issuance pursuant to the
Company's Stock Option Plan as specified in the Offering Documents. In
addition, the Company has obtained and delivered to you a written
undertaking from (x) Harco Holdings Ltd. ("Harco") that, during the period
of 180 days from the date of the U.S. Prospectus, without the prior written
consent of Bear, Stearns, such entity will not sell, offer to sell,
contract to sell, announce its intention to sell, pledge, hypothecate,
grant any option for the sale of or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under the
Act, or file with any one of the Securities Regulators a prospectus
relating to, or otherwise enter into a swap or other derivative transaction
with respect to, any Class A Shares or Class B Shares (or any securities
convertible into, exercisable for or exchangeable for Class A Shares or
Class B Shares) of the Company, (y) Le Fonds de solidarite des travailleurs
du Quebec (F.T.Q.) (the "Fund") that, during the period of 180 days from
the date of the U.S. Prospectus, without the prior written consent of Bear
Stearns, such entity will not sell, offer to sell, contract to sell,
announce its intention to sell, pledge, hypothecate, grant any option for
the sale or otherwise dispose of, directly or indirectly, or file with the
Commission a registration statement under the Act, or file with any one of
the Securities Regulators a prospectus, relating to, or otherwise enter
into a swap or other derivative transaction with respect to, any Class A
Shares or Class B Shares (or any securities convertible or exercisable into
or exchangeable for any Class A Shares or Class B Shares) of the Company
and (z) during the period of 180 days from the date of the U.S. Prospectus,
the H. Gregory Chamandy Family Trust, the Glenn Chamandy Family Trust, the
Shirley Chamandy Family Trust and the Tisch Family Trust (the "Trusts")
will not, without the prior written consent of Bear, Stearns, sell, offer
to sell, contract to sell, announce its intention to sell, grant any option
for the sale of, or
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<PAGE> 22
otherwise dispose of, directly or indirectly, or file with the Commission a
registration statement under the Act, or file with any one of the
Securities Regulators a prospectus, relating to, or otherwise enter into a
swap or other derivative transaction with respect to, any shares of any
class of share capital of the Company (or any securities convertible into,
exercisable for or exchangeable for shares of any class of share capital of
the Company), it being understood and agreed, however, that the Trusts will
be entitled at all times to pledge, hypothecate, grant security interests
in or otherwise encumber any such shares.
(l) The Company shall apply the proceeds from the sale of the
Shares to be sold by it under this Agreement in the manner set forth under
"Use of Proceeds" in the U.S. Prospectus and Canadian Prospectus. The
Company shall take such steps as shall be necessary to ensure that neither
the Company nor any Subsidiary shall become an "investment company" or a
company "controlled" by an "investment company" within the meaning of such
terms under the Investment Company Act.
(m) The Class A Shares currently outstanding are listed on the
AMEX, the ME and the TSE and the Shares have been duly authorized for
listing on the AMEX, the ME and the TSE, subject only to official notice of
issuance. The Company shall use its best efforts promptly to cause the
Shares to be sold by the Company to be listed on the AMEX, the ME and the
TSE and shall take all actions necessary to comply with the rules and
regulations of the AMEX, the ME and the TSE in order to maintain the
listing of the Class A Shares on the AMEX, the ME and the TSE.
(n) The Company shall comply with all registration, filing and
reporting requirements of the Exchange Act and the rules and regulations
thereunder and the Canadian Securities Laws, which may from time to time be
applicable to the Company.
(o) The Company shall comply with all provisions of all
undertakings contained in Part II of the Registration Statement.
(p) Prior to the Closing Date and, if the Option is exercised,
until the Additional Closing Date, the Company shall issue no press release
or other communication or hold any press conference with respect to the
offerings of the Shares, or the financial condition, results of operations,
operations, business properties, assets, liabilities, or prospects of the
Company, without your prior consent, which shall not be unreasonably
withheld.
(q) The Company has obtained an advance income tax ruling dated
[____], 1999 for the ministere du Revenu du Quebec confirming the
eligibility of the Shares for inclusion in a stock savings plan under the
TAXATION ACT (Quebec) as set forth under the heading "Quebec Stock Savings
Plan" in the Canadian Prospectus.
8. PAYMENT OF EXPENSES. Whether or not the transactions contemplated by
this Agreement are consummated or this Agreement is terminated, and subject to
your compliance with the provisions hereof and subject to Section 14(d) hereof,
the Company agrees to pay all costs and expenses incident to the performance of
the obligations of the Company under this Agreement, including, without
limitation, those in connection with (i) preparing, printing,
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<PAGE> 23
duplicating, filing and distributing the Registration Statement (including all
amendments thereof and exhibits thereto), any U.S. Preliminary Prospectus, any
Canadian Preliminary Prospectus, the U.S. Prospectus, the Canadian Prospectus
and any supplements thereto, this Agreement and all related agreements, and all
other documents relating to the public offering of the Shares, (ii) the
issuance, transfer and delivery of the Shares to the Underwriters, including any
transfer or other taxes payable thereon, (iii) the registration and
qualification if any, of the Shares under the "Blue Sky" or state securities
laws and the preparation of a memorandum with respect thereto, or where
applicable the obtaining of exemptions therefrom, including the reasonable fees
and disbursements of Underwriters' Counsel and local counsel in connection
therewith, (iv) the listing of the Shares on the AMEX, the ME and the TSE, (v)
the review of the terms of the public offering of the Shares by the NASD and the
reasonable fees and disbursements of Underwriters' Counsel in connection
therewith, (vi) the printing of certificates representing the Shares, (vii) the
cost and charges of any transfer agent and registrar for the Shares, (viii) the
filing fees of the Commission, the Securities Regulators and the NASD relating
to the Shares and (ix) costs and expenses incident to any meetings with
perspective investors in the Shares (other than those incurred by the
Underwriters).
9. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares, as provided herein,
shall be subject to (i) the accuracy of the representations and warranties of
the Company herein contained, as of the date hereof, as of the Closing Date and,
with respect to the Additional Shares, the accuracy of the representations and
warranties of the Company as of the Additional Closing Date, (ii) the absence
from any certificates furnished pursuant to this Section 9 to you or to
Underwriters' Counsel of any qualification or limitation not previously approved
in writing by you, acting reasonably, (iii) the performance by the Company of
its obligations hereunder and (iv) the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 1:00 P.M., New York City time, on the day immediately following
the date of this Agreement or at such later time and date as shall have
been consented to in writing by Bear, Stearns. All post-effective
amendments to the Registration Statement shall have become effective. If
the Company shall have relied upon Rule 430A of the Regulations, the U.S.
Prospectus shall have been filed with the Commission in a timely fashion in
accordance with Section 7(a) hereof. All filings required by Rule 424 of
the Regulations shall have been made and no such filings shall have been
made without your consent, which shall not be unreasonably withheld. The
Canadian Prospectus shall have been filed with the Securities Regulators
and receipts obtained therefor no later than [___________, 1999] by the
Quebec and Ontario Securities Commissions and not later than [___________,
1999] for the Securities Regulators in the other Qualifying Provinces. The
Company shall have obtained from the Principal Regulator, for and on behalf
of the Securities Regulators, a mutual reliance system review decision
document for the Canadian Prospectus no later than 10 days after the filing
thereof. No stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof shall have been issued by
the Commission or any state securities commission and no proceedings
therefor shall have been initiated or threatened by the Commission or any
state securities commission. No order having the effect of ceasing or
suspending the distribution of Shares or any other securities of the
Company shall have been issued by any of the Securities Regulators, and
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<PAGE> 24
no proceeding for that purpose shall have been instituted or threatened or,
to the knowledge of the Company, shall have been contemplated by any of the
Securities Regulators.
(b) At the Closing Date (and, with respect to the Additional
Shares, the Additional Closing Date), you shall have received the written
opinion of Simpson Thacher & Bartlett, United States counsel for the
Company, dated the date of its delivery, addressed to the Underwriters, to
the effect that:
(i) Gildan Activewear Malone, Inc. has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the State of New York.
(ii) Assuming the Shares being sold by the Company are
delivered and paid for in the State of New York, upon delivery of and
payment for the Shares to each Underwriter in accordance with this
Agreement, each Underwriter will acquire all of the rights of the
Company in the Shares and, assuming the Underwriters do not have
notice of any adverse claim to the Shares, will also acquire its
interest in such Shares free of any adverse claim.
(iii) No consent, approval, authorization, order,
registration, filing or qualification of or with any Federal or New
York governmental agency or body is required for the Company's
execution and delivery of, and its performance of its obligations
under, this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, of the issuance,
sale and delivery of the Shares, except for (A) such as may be
required under state securities or Blue Sky laws and the securities
laws of foreign jurisdictions in connection with the purchase and
distribution of the Shares by the Underwriters (as to which such
counsel need express no opinion) and (B) such as have been made or
obtained under the Act, the Exchange Act or the rules of the AMEX, the
ME or the TSE.
(iv) The Company's execution and delivery of, and its
performance of its obligations under, this Agreement and the
consummation of the transactions contemplated hereby, do not and will
not violate any Federal or New York statute or any rule or regulation
issued pursuant to any New York or Federal statute or any order known
to us issued by any Federal or New York court or governmental agency
or body, except for those violations or conflicts that, individually
or in the aggregate, would not be reasonably likely to have a Material
Adverse Effect.
(v) The statements in the U.S. Prospectus under the caption
"Shares Eligible for Future Sale", insofar as they purport to
constitute summaries of the terms of federal statutes and regulations
thereunder, constitute accurate summaries of the terms of such
statutes, rules and regulations in all material respects.
(vi) The statements made in the U.S. Prospectus under the
caption "Taxation--United States Federal Income Taxation", insofar
as they purport to
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<PAGE> 25
constitute summaries of United States federal tax law and regulations
or legal conclusions with respect thereto, constitute accurate
summaries of the matters described therein in all material respects.
(vii) Based on oral advice of the Commission, the
Registration Statement has become effective under the Act, and such
counsel is not aware of any stop order suspending the effectiveness of
the Registration Statement and to such counsel's knowledge no
proceedings therefor have been initiated or threatened by the
Commission, and any filings on the part of the Company required by
Rule 424(b) of the Regulations have been made.
(viii) The Company is not an "investment company" required to
be registered under the Investment Company Act, as amended.
(ix) The Class A Shares currently outstanding are listed on
the AMEX and the Shares to be issued and sold by the Company hereunder
have been duly authorized for listing on the AMEX, subject only to
official notice of issuance.
In addition, such counsel shall state that they have not independently
verified the accuracy, completeness or fairness of the statements made or
included in the Registration Statement or the U.S. Prospectus and take no
responsibility therefor, except as and to the extent set forth in
paragraphs (v) and (vi) above. Such counsel shall further state that in
the course of the preparation by the Company of the Registration Statement
and the U.S. Prospectus, they participated in conferences with certain
officers and employees of the Company, with representatives of KPMG, and
with other counsel to the Company. Based upon their examination of the
Registration Statement and the U.S. Prospectus, their investigations made
in connection with the preparation of the Registration Statement and the
U.S. Prospectus and their participation in the conferences referred to
above, such counsel shall state that (i) they are of the opinion that the
Registration Statement, as of its effective date, and the U.S. Prospectus,
as of the date hereof, complied as to form in all material respects with
the requirements of the Act and the applicable rules and regulations of the
Commission thereunder, except that in each case such counsel need express
no opinion with respect to the financial statements or other financial data
contained in the Registration Statement or the U.S. Prospectus and (ii)
they have no reason to believe that the Registration Statement, as of its
effective date, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading or that
the U.S. Prospectus contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that in each case such counsel need express no opinion
with respect to the financial statements or other financial data, Canadian
federal or provincial law matters and trade regulatory matters contained in
the Registration Statement or the U.S. Prospectus.
In rendering such opinion, such counsel may limit its opinions to the
laws of the State of New York and the federal laws of the United States of
America.
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<PAGE> 26
(c) At the Closing Date (and, with respect to the Additional
Shares, the Additional Closing Date), you shall have received the written
opinion of Ogilvy Renault, Canadian counsel for the Company, dated the date
of its delivery, in the form of Schedule III hereto. In rendering such
opinion, Ogilvy Renault may rely as to matters involving the application of
laws other than the federal laws of Canada and the laws of the
jurisdictions in which they are admitted, to the extent they deem proper
and to the extent specified in such opinion, if at all, upon an opinion or
opinions (in form and substance reasonably satisfactory to Underwriters'
counsel) of other counsel reasonably acceptable to Underwriters' counsel,
familiar with the applicable laws.
(d) At the Closing Date (and, with respect to the Additional
Shares, the Additional Closing Date), you shall have received the written
opinion of Hart, Saint-Pierre, Canadian counsel for the Company, dated the
date of its delivery, addressed to the Underwriters, and in form and scope
satisfactory to Underwriters' Counsel and subject to reasonable
qualifications, reservations and limitations, to the effect that:
(i) The Company has been duly incorporated under the CBCA
and is a valid and subsisting company.
(ii) The Company has all requisite corporate power and
authority to carry on business in the Province of Quebec and to own,
lease or operate the assets now owned, leased or operated by the
Company and as described in the Offering Documents.
(iii) The Company is in good standing under the CBCA and has
filed with the Inspector General of Financial Institutions for the
Province of Quebec all necessary corporate reports and declarations.
(iv) The Company is duly qualified and in good standing as a
foreign corporation in each jurisdiction in which the character or
location of its properties (owned, leased or licensed) or the nature
or conduct of its business makes such qualification necessary, except
for those failures to be so qualified or in good standing that will
not in the aggregate be reasonably likely to have a Material Adverse
Effect.
(v) To the best of such counsel's knowledge, there is no
outstanding option, warrant or other right calling for the issuance of
any share of the share capital (or similar interests) of the Company
or of any of its Subsidiaries or any security or other instrument that
by its terms is convertible into, exercisable for or exchangeable for
shares of the share capital (or similar interests) of the Company or
any Subsidiary, except as described in the Offering Documents.
(vi) The authorized share capital of the Company is as set
forth in the U.S. Prospectus and the Canadian Prospectus under the
caption "Capitalization." All of the outstanding shares of such share
capital have been duly and validly authorized and issued, are
outstanding as fully paid and non-assessable and, to the best of such
counsel's knowledge, were not issued in violation of or subject to any
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<PAGE> 27
pre-emptive rights. Subject to and conditional upon the due filing of
all requisite documents and due compliance with all regulatory
requirements of any and all securities commissions, exchanges and
other regulatory bodies having jurisdiction with respect to the
offering and sale of Shares contemplated under the Offering Documents
(the "Regulatory Proviso"), the Class A Shares to be outstanding on
the Closing Date, including the Shares, have been duly authorized and
when issued (and, in the case of the Shares, delivered and sold in
accordance with the terms of this Agreement) will be validly issued,
and, upon the Company receiving consideration therefor, will be
outstanding as fully paid and non-assessable. The share capital of
the Company conforms in all material respects to the description
thereof contained in the Registration Statement, the U.S. Prospectus
and the Canadian Prospectus.
(vii) The Company's execution and delivery of, and its
performance of its obligations under, this Agreement, and the
consummation of the transactions contemplated hereby, do not and will
not (A) to the best of such counsel's knowledge conflict with or
result in a breach of any of the terms and provisions of, or
constitute a default under (or an event that with notice or lapse of
time, or both, would constitute a default under) or require approval
or consent under, or result in the creation or imposition of any
hypothec, prior claim, charge or encumbrance upon any property or
assets of the Company pursuant to the terms of any Material Contract
or any Material Permit, except for those conflicts, breaches or
defaults for which consent or approval has been obtained by the
Company prior to the date hereof, (B) violate or conflict with any
provision of its articles, by-laws or resolutions of its directors or
shareholders, or (C) to the best of such counsel's knowledge and
subject to the Regulatory Proviso, violate or conflict with any
judgment, decree, order, statute, rule or regulation of any court or
any public, governmental or regulatory agency or body having
jurisdiction over the Company or any of its properties or assets,
except, with respect to clauses (A) and (C) of this subparagraph
(vii), for those violations or conflicts that, individually or in the
aggregate, would not be reasonably likely to have a Material Adverse
Effect.
(viii) To the best of such counsel's knowledge, except as set
forth in the Offering Documents, no person or entity has the right, by
contract or otherwise, to require registration under the Act of shares
of share capital or other securities of the Company or any of its
Subsidiaries solely because of the filing or effectiveness of the
Registration Statement and the consummation of the transactions
contemplated by this Agreement.
(ix) To the best of such counsel's knowledge, there is no
litigation, arbitration or governmental or other action, suit,
proceeding or investigation before any court or before or by any
public, regulatory or governmental agency or body pending or
threatened against, or involving the properties or business of, the
Company or any of its Subsidiaries, that, if resolved against the
Company or such Subsidiary, individually or, to the extent involving
related claims or issues, in the aggregate, is of a character required
to be disclosed in the Offering Documents that has not been properly
disclosed therein; and to the best of such counsel's
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<PAGE> 28
knowledge, there is no contract or document concerning the Company or
any of its Subsidiaries of a character required to be described in the
Offering Documents or to be filed as an exhibit to the Registration
Statement, that is not so described or filed.
(e) At the Closing Date (and, with respect to the Additional
Shares, the Additional Closing Date), you shall have received the written
opinion of Sandler & Travis Trade Advisory Services, regulatory and trade
counsel to the Company, dated the date of its delivery, addressed to the
Underwriters, and in form and scope satisfactory to Underwriters' Counsel,
to the effect that insofar as statements in the U.S. Prospectus and the
Canadian Prospectus purport to summarize the nature and status of or the
provisions of laws, rules, regulations, orders, judgments or decrees, or
the terms of the descriptions provided under the captions "Risk
Factors--The Effect of Changing International Trade Regulation on Our
Results of Operations is Uncertain," and "Business--Trade Regulatory
Environment," such statements are correct in all material respects and are
fair summaries of the matters referred to therein.
(f) At the Closing Date (and, with respect to the Additional
Shares, the Additional Closing Date), you shall have received the written
opinion of Barbados counsel for the Company, dated the date of its
delivery, addressed to the Underwriters, and in form and scope satisfactory
to Underwriters' Counsel, and subject to reasonable qualifications,
reservations and limitations to the effect that:
(i) Each of Gildan Activewear (Barbados) Inc. and Gildan
Activewear SRL has been duly incorporated under the laws of Barbados
and is a valid and subsisting company.
(ii) Each of Gildan Activewear (Barbados) Inc. and Gildan
Activewear SRL has all requisite corporate power and authority to
carry on business in Barbados and to own, lease or operate the assets
now owned, leased or operated by it.
(iii) Each of Gildan Activewear (Barbados) Inc. and Gildan
Activewear SRL is in good standing under the laws of Barbados.
(g) At the Closing Date (and, with respect to the Additional
Shares, the Additional Closing Date), you shall have received the written
opinion of Honduras counsel for the Company, dated the date of its
delivery, addressed to the Underwriters, and in form and scope satisfactory
to Underwriters' Counsel, and subject to reasonable qualifications,
reservations and limitations to the effect that:
(i) Each of Gildan Activewear El Progresso, S.A. and Gildan
Activewear San Jose, S.A. has been duly incorporated under the laws of
Honduras and is a valid and subsisting company.
(ii) Each of Gildan Activewear El Progresso, S.A. and Gildan
Activewear San Jose, S.A. has all requisite corporate power and
authority to carry on business in Honduras and to own, lease or
operate the assets now owned, leased or
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<PAGE> 29
operated by it.
(iii) Each of Gildan Activewear El Progresso, S.A. and Gildan
Activewear San Jose, S.A. is in good standing under the laws of
Honduras.
(h) At the Closing Date (and, with respect to the Additional
Shares, the Additional Closing Date), you shall have received the written
opinion of British Virgin Islands counsel for the Company, dated the date
of its delivery, addressed to the Underwriters, and in form and scope
satisfactory to Underwriters' Counsel, and subject to reasonable
qualifications, reservations and limitations to the effect that:
(i) Gildan Activewear (BVI) Inc. has been duly incorporated
under the laws of the British Virgin Islands and is a valid and
subsisting company.
(ii) Gildan Activewear (BVI) Inc. has all requisite
corporate power and authority to carry on business in the British
Virgin Islands and to own, lease or operate the assets now owned,
leased or operated by it.
(iii) Gildan Activewear (BVI) Inc. is in good standing under
the laws of the British Virgin Islands.
(i) At the Closing Date (and, with respect to the
Additional Shares, the Additional Closing Date), you shall have
received the written opinion of Florida counsel for the Company, dated
the date of its delivery, addressed to the Underwriters, and in form
and scope satisfactory to Underwriters' Counsel, and subject to
reasonable qualifications, reservations and limitations to the effect
that:
(i) Gildan Activewear Miami, Inc. has been duly
incorporated under the laws of the State of Florida and is a valid and
subsisting company.
(ii) Gildan Activewear Miami, Inc. has all requisite
corporate power and authority to carry on business in the State of
Florida and to own, lease or operate the assets now owned, leased or
operated by it.
(iii) Gildan Activewear Miami, Inc. is in good standing under
the laws of the State of Florida.
(j) At the Closing Date (and, with respect to the Additional
Shares, the Additional Closing Date), you shall have received a certificate
of the Company executed by each of the Chief Executive Officer and the
Chief Financial Officer of the Company, dated the date of its delivery, to
the effect that each such person has carefully examined the Offering
Documents and any amendments or supplements thereto and this Agreement and
that the conditions set forth in subsection (a) of this Section 9 have been
satisfied, that the representations and warranties of the Company set forth
in Section 3 hereof are true and correct as of such Closing Date or
Additional Closing Date, as the case may be, and the obligations of the
Company to be performed hereunder on or prior thereto have been duly
performed.
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<PAGE> 30
(k) At the time this Agreement is executed and at the Closing Date
(and, with respect to the Additional Shares, the Additional Closing Date),
you shall have received a letter, from KPMG, dated the date of its
delivery, addressed to the Underwriters and in form and substance
reasonably satisfactory to you, to the effect that: (i) they are
independent certified public accountants with respect to the Company within
the meaning of the Act and the Regulations; (ii) in their opinion, the
Company Financials included in the Offering Documents comply as to form in
all material respects with the applicable accounting requirements of the
Act and the applicable published rules and regulations thereunder and
Canadian Securities Laws; (iii) on the basis of procedures (but not an
audit made in accordance with generally accepted auditing standards)
consisting of a reading of the latest available unaudited interim
consolidated financial statements of the Company and its Subsidiaries, a
reading of the minutes of meetings and consents of the shareholders and
boards of directors of the Company and the Subsidiaries and the committees
of such boards subsequent to [January 3, 1999], inquiries of certain
officials of the Company and its Subsidiaries who have responsibility for
financial and accounting matters of such companies with respect to
transactions and events subsequent to [January 3, 1999], and other
specified procedures and inquiries to a date not more than five days prior
to the date of such letter, nothing has come to their attention that would
cause them to believe that: (A) the unaudited historical consolidated
financial statements of the Company, its Subsidiaries and their
predecessors included in the Offering Documents do not comply as to form in
all material respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or that any material
modification should be made to such unaudited consolidated financial
statements for them to be in conformity with Canadian GAAP; (B) with
respect to the period subsequent to [January 3, 1999] there were, as of the
date of the most recent available monthly consolidated financial data of
the Company and the Subsidiaries, if any, and as of a specified date not
more than five days prior to the date of such letter, any changes in the
share capital or increases in long-term indebtedness of the Company or any
decrease in shareholders' equity of the Company, in each case as compared
with the amounts shown in the most recent balance sheet included in the
Offering Documents, except for changes or decreases that the Offering
Documents disclose have occurred or may occur; or (C) that during the
period from [January 3, 1999] to the date of the most recent available
monthly consolidated financial data of the Company and its Subsidiaries, if
any, and to a specified date not more than five days prior to the date of
such letter, there was any decrease, as compared with the corresponding
period in the prior fiscal year, in total revenues, or total or per share
net income, except for decreases that the U.S. Prospectus and the Canadian
Prospectus disclose have occurred or may occur; and (iv) stating that they
have compared specific Canadian and U.S. dollar amounts, numbers of shares,
percentages of revenues and earnings and other financial information
pertaining to the Company and its Subsidiaries set forth in the U.S.
Prospectus and the Canadian Prospectus, which have been specified by you
prior to the date of this Agreement, to the extent that such dollar
amounts, numbers, percentages and information may be derived from the
general accounting and financial records that are subject to the internal
control structure policies and procedures of the Company's and its
Subsidiaries' accounting systems or that have been derived directly from
such accounting records by analysis or computation, and excluding any
questions requiring an interpretation by legal counsel, with the results
obtained from the application of specified
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<PAGE> 31
readings, inquiries, and other appropriate procedures specified by you
(which procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in such letter, and found
them to be in agreement.
(l) On the Closing Date you shall have received an opinion of
KPMG, addressed to the Underwriters to the effect that the French language
version of the Capitalization, Selected Financial Data, Management's
Discussion and Analysis of Financial Condition and Results of Operations,
Auditor's Report, Consolidated Balance Sheets, Consolidated Statements of
Earnings (Loss) and Retained Earnings (Deficit), Consolidated Statements of
Changes in Financial Position and Notes to Combined Financial Statements in
the Canadian Prospectus (the "Financial Information") is in all material
respects a complete and proper translation of the English language version
thereof.
(m) On the Closing Date, you shall have received the written
opinion of Ogilvy Renault, Canadian counsel for the Company, addressed to
the Underwriters to the effect that the French language version of the
Canadian Prospectus (exclusive of the Financial Information, as to which
such counsel express no opinion) is in all material respects a complete and
proper translation of the English language version thereof, and such
version is not susceptible to any materially different interpretation with
respect to any material matter contained therein.
(n) All proceedings taken in connection with the sale of the
Shares as contemplated by this Agreement shall be reasonably satisfactory
in form and substance to you and to Underwriters' Counsel, and you shall
have received from each of Weil, Gotshal and Stikeman a written opinion,
dated as of the Closing Date and addressed to the Underwriters, with
respect to the sale of the Firm Shares, and dated as of the Additional
Closing Date with respect to the sale of the Additional Shares, and with
respect to such other matters as you reasonably may require, and the
Company shall have furnished to Underwriters' Counsel such documents as
Underwriters' Counsel may request for the purpose of enabling Underwriters'
Counsel to pass upon such matters.
(o) The NASD, upon review of the terms of the underwriting
arrangements for the public offering of the Shares, shall have raised no
objections thereto.
(p) The Shares shall have been listed on the AMEX, the ME and the
TSE, subject to official notice of issuance.
(q) At the time this Agreement is executed, the Company shall have
furnished to you the written undertakings referred to in the last sentence
of Section 7(k) hereof, in form and substance satisfactory to Underwriters'
Counsel.
(r) Prior to the Closing Date, and with respect to the Additional
Shares, the Additional Closing Date, the Company shall have furnished to
you such further information, certificates and documents as you may
reasonably request.
If any of the conditions specified in this Section 9 shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written
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<PAGE> 32
statements, or letters furnished to you or to Underwriters' Counsel pursuant to
this Section 9 shall not be in all material respects reasonably satisfactory in
form and substance to you and to Underwriters' Counsel, all obligations of the
Underwriters hereunder not theretofore discharged may be canceled by you at, or
at any time prior to, the Closing Date and with respect to the Additional
Shares, the Additional Closing Date. Notice of such cancellation shall be given
to the Company in writing, or by telephone or telephonic facsimile, confirmed in
writing.
10. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each Underwriter,
and each of their respective directors, officers, employees and agents and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, against any and all losses
(excluding loss of profits), liabilities, claims, damages and expenses
whatsoever (including but not limited to attorneys' fees and any and all
expenses reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation, provided that such
settlement was effected with the Company's written consent in accordance with
Section 10(c) hereof), joint or several, to which they or any of them may become
subject under the Act, the Exchange Act, Canadian Securities Laws or otherwise,
insofar as such losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the U.S. Preliminary Prospectus, the U.S. Prospectus, the Canadian Preliminary
Prospectus or the Canadian Prospectus or in any supplement thereto or amendment
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of the U.S. Prospectus, in light of the
circumstances under which they were made) not misleading; provided, however,
that notwithstanding the provisions of this paragraph (a), the Company shall not
be liable under this subsection 10(a) to any Underwriter in any such case (i) to
the extent but only to the extent that any such loss, liability, claim, damage
or expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
Statement, U.S. Prospectus or Canadian Prospectus in reliance upon and in
conformity with written information furnished to the Company by or on your
behalf expressly for use therein and (ii) provided that the foregoing indemnity
agreement with respect to any of the Preliminary Prospectuses shall not inure to
the benefit of any Underwriter from whom the person asserting any such losses,
claims, costs, damages or liabilities purchased Shares, or any person
controlling such Underwriter or if a copy of any of the Prospectuses (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, cost, damage or liability. This indemnity will be in
addition to any liability that the Company may otherwise have to any Underwriter
or to any controlling person of such Underwriter, including under this
Agreement.
(b) Each Underwriter, severally and not jointly, agrees to indemnify and
hold harmless the Company, each of the directors of the Company, each of the
officers of the Company who shall have signed the Registration Statement or the
Canadian Prospectus, and each
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<PAGE> 33
other person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any losses,
liabilities, claims, damages and expenses whatsoever (including but not limited
to attorneys' fees and any and all expenses reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation, provided that such settlement was effected with such
Underwriter's written consent in accordance with Section 10(c) hereof), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or the U.S. Prospectus, any U.S. Preliminary Prospectus,
the Canadian Prospectus or the Canadian Preliminary Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of the
U.S. Prospectus, in light of the circumstances under which they were made) not
misleading, in each case to the extent, but only to the extent, that any such
loss, liability, claim, damage or expense arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written information
furnished to the Company by you or on your behalf with respect to such
Underwriter expressly for use therein; provided, however, that in no case shall
such Underwriter be liable or responsible for any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
hereunder. This indemnity will be in addition to any liability that the
Underwriter may otherwise have, including under this Agreement. The Company
acknowledges that the statements set forth in the last paragraph of the cover
page of the U.S. Prospectus and the Canadian Prospectus and the first, fourth,
seventh and eighth paragraphs set forth under the caption "Underwriting" in the
U.S. Prospectus and the Canadian Prospectus constitute the only information
furnished in writing by or on behalf of any Underwriter expressly for use in the
Registration Statement, any related U.S. Preliminary Prospectus, the U.S.
Prospectus, the Canadian Preliminary Prospectus and the Canadian Prospectus.
(c) Promptly after receipt by an indemnified party under subsection 10(a)
or (b) above of notice of the assertion of any claim, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability that it may
have under this Section 10 except to the extent that it has been prejudiced in
any material respect by such failure or from any liability that it may have
otherwise). In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement thereof, the
indemnifying parties shall be entitled (but not required) to participate
therein, and to the extent they may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume severally with the other indemnifying parties the
defense thereof with counsel reasonably acceptable to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action, (ii) the indemnifying parties shall not have employed counsel to take
charge of the defense
- 34 -
<PAGE> 34
of such action within a reasonable time after notice of commencement of the
action, or (iii) the named parties to such suit include both indemnified and
indemnifying parties and such indemnified party or parties shall have been
advised in writing by counsel that there may be defenses available to it or them
that are different from or additional to those available to one or all of the
indemnifying parties and in conflict therewith (in which case the indemnifying
parties shall not have the right to direct the defense of such action on behalf
of the indemnified party or parties with respect to such different defenses), in
any of which events such fees and expenses shall be borne by the indemnifying
parties. The indemnifying party under subsection 10(a) or (b) above shall only
be liable for the legal expenses of one counsel for all indemnified parties in
each jurisdiction in which any claim or action is brought; provided, however,
that the indemnifying party shall be liable for separate counsel for any
indemnified party in a jurisdiction, if counsel to the indemnified parties shall
have reasonably concluded and advised the indemnifying party in writing that
there may be defenses available to such indemnified party that are different
from or additional to those available to one or more of the other indemnified
parties and in conflict therewith and that separate counsel for such indemnified
party is prudent under the circumstances. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement compromise or consent to entry of any judgement of any claim or
action effected without its written consent; provided, however, that such
written consent was not unreasonably withheld.
11. CONTRIBUTION. In order to provide for contribution in circumstances in
which the indemnification provided for in Section 10(a) hereof is for any reason
held to be unavailable or is insufficient to hold harmless a party indemnified
thereunder, the Company, on the one hand, and the Underwriters, on the other
hand, shall contribute to the aggregate losses, claims, damages, liabilities and
expenses of the nature contemplated by such indemnification provisions
(including any investigation, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting in the case of losses,
claims, damages, liabilities and expenses suffered by the Company, any
contribution received by the Company from persons, other than one or more of the
Underwriters, who may also be liable for contribution, including persons who
control the Company within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act, officers of the Company who signed the Registration
Statement and directors of the Company) to which the Company, on the one hand,
and one or more of the Underwriters, on the other hand, may be subject, in such
proportions as are appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Underwriters, on the other hand, from the
offering of the Shares or, if such allocation is not permitted by applicable law
or indemnification is not available as a result of the indemnifying party not
having received notice as provided in Section 10 hereof, in such proportion as
is appropriate to reflect not only the relative benefits referred to above but
also the relative fault of the Company, on the one hand, and the Underwriters,
on the other hand, in connection with the statements or omissions that resulted
in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and the Underwriters, on the other hand, shall be
deemed to be in the same proportion as (x) the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Company and (y) the underwriting discounts received by the
Underwriters, respectively, in each case as set forth in the table on the cover
page of the U.S. Prospectus and the Canadian Prospectus. The relative fault of
the Company, on the one hand, and of the Underwriters, on the other hand, shall
- 35 -
<PAGE> 35
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, on the one hand,
or the Underwriters, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 11 were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to above. The
Underwriters' obligations in this Section 11 to contribute are several and not
joint. Notwithstanding the provisions of this Section 11, (i) in no case shall
any Underwriter be required to contribute any amount in excess of the amount by
which the underwriting discount applicable to the Shares underwritten by it and
distributed to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or such omission or alleged omission, and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 11,
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as such Underwriter and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) of
this Section 11. Any party entitled to contribution shall, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties under this Section 11, notify such party or parties from whom
contribution may be sought, but the omission to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 11 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its written consent; provided, however, that such written consent was
not unreasonably withheld.
12. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations and
warranties, covenants and agreements of the Underwriters and the Company
contained in this Agreement, including without limitation the agreements
contained in Sections 6, 7, and 8 hereof, the indemnity agreements contained in
Section 10 hereof and the contribution agreements contained in Section 11
hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriters or any controlling person
of any Underwriter or by or on behalf of the Company, any of its officers and
directors, and shall survive delivery of the Shares to and payment for the
Shares by the Underwriters. The representations contained in Section 3 hereof
and the agreements contained in this Section 12 and Sections 6, 7, 8, 10, 11 and
14(d) hereof shall survive the termination of this Agreement including pursuant
to Section 13 or 14 hereof; provided, however, that if this Agreement is
terminated pursuant to Section 13 or 14 hereof or if for any reason the purchase
of the Shares by the Underwriters as contemplated hereunder is not consummated,
the agreements contained in Sections 6 and 7 hereof shall not survive.
13. DEFAULT BY AN UNDERWRITER.
- 36 -
<PAGE> 36
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Shares or Additional Shares hereunder, and if the
Firm Shares or Additional Shares with respect to which such default relates do
not (after giving effect to arrangements, if any, made pursuant to subsection
13(b) below) exceed in the aggregate 10% of the number of shares of Firm Shares
or Additional Shares, as the case may be, that all Underwriters have agreed to
purchase hereunder, then such Firm Shares or Additional Shares to which the
default relates shall be purchased by the non-defaulting Underwriters in
proportion to the respective proportions that the numbers of Firm Shares set
forth opposite their respective names in Schedule I hereto bear to the aggregate
number of Firm Shares set forth opposite the names of the non-defaulting
Underwriters.
(b) If such default relates to more than 10% of the Firm Shares or
Additional Shares, as the case may be, you may, in your discretion, arrange for
another party or parties (including any non-defaulting Underwriter or
Underwriters who so agree) to purchase such Firm Shares or Additional Shares, as
the case may be, to which such default relates on the terms contained herein.
If within five (5) calendar days after such a default you do not arrange for the
purchase of the Firm Shares or Additional Shares, as the case may be, to which
such default relates as provided in this Section 13, this Agreement (or, in the
case of a default with respect to the Additional Shares, the obligations of the
Underwriters to purchase and of the Company to sell the Additional Shares) shall
thereupon terminate, without liability on the part of the Company with respect
thereto (except in each case as provided in Sections 8, 10(a) and 11 hereof) or
the several non-defaulting Underwriters (except as provided in Sections 10(b)
and 11 hereof), but nothing in this Agreement shall relieve a defaulting
Underwriter or Underwriters of its or their liability, if any, to the other
several Underwriters and the Company for damages occasioned by its or their
default hereunder.
(c) If the Firm Shares or Additional Shares to which the default relates
are to be purchased by the non-defaulting Underwriters, or are to be purchased
by another party or parties as aforesaid, you or the Company shall have the
right to postpone the Closing Date or Additional Closing Date, as the case may
be, for a period not exceeding seven (7) business days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement,
the U.S. Prospectus or the Canadian Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment or
supplement to the Registration Statement, the U.S. Prospectus or the Canadian
Prospectus that, in the opinion of Underwriters' Counsel, may thereby be made
necessary or advisable. The term "Underwriter" as used in this Agreement shall
include any party substituted under this Section 13 with like effect as if it
had originally been a party to this Agreement with respect to such Firm Shares
and Additional Shares.
14. EFFECTIVE DATE OF THIS AGREEMENT; TERMINATION.
(a) This Agreement shall become effective upon the later of (i) when you
and the Company shall have received notification of the effectiveness of the
Registration Statement, (ii) you and the Company shall have received clearance
from each of the Qualifying Province Authorities for the Amended Final
Prospectus, or (iii) the execution and delivery of this Agreement by the parties
hereto. Until this Agreement becomes effective as aforesaid, this Agreement may
be terminated by the Company by notifying you or by you by notifying the Company
without any liability of any party to any party hereunder. Notwithstanding the
- 37 -
<PAGE> 37
foregoing, the provisions of this Section 14 and of Sections 10, 11 and 12
hereof shall at all times be in full force and effect.
(b) This Agreement and the obligations of the Underwriters hereunder may
be terminated by you by written notice to the Company at any time at or prior to
the Closing Date (and, with respect to the Additional Shares, the Additional
Closing Date), without liability (other than with respect to Sections 10 and 11)
on the part of any Underwriter to the Company if, on or prior to such date, (i)
the Company shall have failed, refused or been unable to perform in any material
respect any agreement on its part to be performed hereunder, (ii) any other
condition to the obligations of the Underwriters set forth in Section 9 hereof
is not fulfilled when and as required in any material respect, (iii) trading in
the Class A Shares or in securities generally on the New York Stock Exchange,
the AMEX, the ME or the TSE shall have been suspended or materially limited, or
minimum prices shall have been established on any such exchange or such market
by the Commission, or the Qualifying Province Authorities, or by any such
exchange or other regulatory body or governmental authority having jurisdiction,
(iv) a general banking moratorium shall have been declared by New York State,
United States or Canadian authorities, (v) there shall have occurred any
outbreak or escalation of armed hostilities involving the United States or
Canada on or after the date hereof, or if there has been a declaration by the
United States or Canada of a national emergency or war, the effect of which
shall be, in your reasonable judgment, to make it inadvisable or impracticable
to proceed with the sale and delivery of the Shares on the terms and in the
manner contemplated in the U.S. Prospectus and the Canadian Prospectus, (vi) any
domestic or international event or act or occurrence has materially disrupted or
in your opinion in the immediate future will materially disrupt the market for
the Company's Shares or for securities in general, (vii) in your reasonable
opinion any material adverse change shall have occurred since the respective
dates as of which information is given in the Registration Statement, the U.S.
Prospectus or the Canadian Prospectus affecting the business, prospects,
condition (financial or other) or results of operations of the Company and its
Subsidiaries taken as a whole, whether or not arising in the ordinary course of
business, other than as set forth in the U.S. Prospectus and the Canadian
Prospectus or contemplated thereby, or (viii) there shall have been such a
change in political, economic or financial conditions in the United States or
Canada such as, in your judgment, makes it inadvisable or impracticable to
proceed with the offering, sale and delivery of the Shares on the terms and in
the manner contemplated in the U.S. Prospectus and the Canadian Prospectus.
Your right to terminate this Agreement will not be waived or otherwise
relinquished by failure to give notice of termination prior to the time that the
event giving rise to the right to terminate shall have ceased to exist, provided
that notice is given prior to the Closing Date (and, with respect to the
Additional Shares, the Additional Closing Date).
(c) Any notice of termination pursuant to this Section 14 shall be in
writing.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to notification by you as provided in
subsection 14(a) or 14(b) hereof), or if the sale of the Shares provided for
herein is not consummated because any condition to the obligations of the
Underwriters set forth herein is not satisfied or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or to comply with any provision hereof (other than by reason of a default of the
Underwriters), the Company agrees, subject to demand by you, to reimburse the
Underwriters for all reasonable out-of-pocket expenses (including the reasonable
fees and expenses of Underwriters' Counsel), incurred by the
- 38 -
<PAGE> 38
Underwriters in connection herewith.
15. JURISDICTION. The Company and the Underwriters agree that any legal
suit, action, or proceeding against the Company brought by the Underwriters, or
by each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, arising out of or
based upon this Agreement or the transactions contemplated hereby may be
instituted in any court of the State of New York or federal court sitting in the
State of New York ("New York Court"), and the Company waives any objection which
it may now or hereafter have to the laying of venue of any such proceeding and
irrevocably submits to the non-exclusive jurisdiction of such Specified Courts
in any such suit, action, or proceeding. The Company has appointed, or prior to
the Closing Date will appoint, CT Corporation System, New York as its authorized
agent (the "Authorized Agent") upon whom process may be served in any legal
suit, action, or proceeding arising out of or based upon this Agreement or the
transactions contemplated hereby which may be instituted in any New York Court
by the Underwriters or any controlling person of the Underwriters and expressly
accept the non-exclusive jurisdiction of any such New York Court in respect of
any such action. Such appointment shall be irrevocable. If for any reason, CT
Corporation System (or successor agent for this purpose) shall cease to act as
agent for service of process as provided above, the Company will promptly
appoint a successor agent for this purpose reasonably acceptable to you. The
Company represents and warrants that the Authorized Agent has agreed to act as
said agent for service of process, and the Company agrees to take any and all
action, including the filing of any and all documents and instruments, that may
be necessary to continue such appointment in full force and effect as aforesaid.
Service of process upon the Authorized Agent and written notice of such service
to the Company shall be deemed, in every respect, effective service of process
upon the Company. Nothing contained herein shall limit the right of the
Underwriters or any controlling person of the Underwriters to serve process in
any other manner permitted by law or bring an action based on this Agreement in
any competent court in Canada. A final non-appealable judgment in any suit or
proceeding based on this Agreement shall be conclusive and, to the extent
permitted under applicable laws, may be enforced in other jurisdictions by suit
on the judgment or in any other lawful manner. If the Company has or may
hereafter acquire immunity from jurisdiction or legal process with respect to
itself or its property, it hereby irrevocably waives to the fullest extent
permitted under applicable law such immunity in respect of its obligations
hereunder in any action which may be instituted in any New York Court or in any
competent court in Canada by the Underwriters or any controlling person of the
Underwriters.
In respect of any judgment or order given or made for any amount due
hereunder that is expressed and paid in a currency (the "judgment currency")
other than United States dollars, the Company will indemnify each Underwriter
against any loss incurred by such Underwriter as a result of any variation as
between (i) the rate of exchange at which the United States dollar amount is
converted into the judgment currency for the purpose of such judgment or order
and (ii) the rate of exchange at which an Underwriter is able to purchase United
States dollars with the amount of judgment currency actually received by such
Underwriter. The foregoing indemnity shall constitute a separate and
independent obligation of the Company and shall continue in full force and
effect notwithstanding any such judgment or order as aforesaid. The term "rate
of exchange" shall include any premiums and costs of exchange payable in
connection with the purchase of or conversion into United States dollars.
- 39 -
<PAGE> 39
16. NOTICES. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to any one or
more of the Underwriters, shall be hand delivered or faxed to each such
Underwriter in care of Bear, Stearns, 245 Park Avenue, New York, New York 10167,
Attention: Corporate Finance Department (Fax No. 212-272-3092) with a copy to
Weil, Gotshal, Attention: Stephen Besen; and if sent to the Company, shall be
hand delivered or faxed, to the Company, 725 Montee de Liesse, Ville
Saint-Laurent, Quebec, Canada, H4T 1P5, Attention: Chief Executive Officer (Fax
No. 514-738-2269) with a copy to Ogilvy Renault, Attention: Norman Steinberg.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
18. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, each of the Underwriters and the Company, and the
controlling persons, directors, officers, employees and agents referred to in
Sections 10 and 11 hereof, and their respective successors and assigns, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained. The term "successors and assigns" shall not include
a purchaser, in its capacity as such, of Shares from the Underwriters.
19. CONSTRUCTION. This Agreement shall be construed in accordance with
the laws of the State of New York.
20. DEFINITION OF BUSINESS DAY. For the purposes of this Agreement,
"business day" means any day on which the AMEX the ME and the TSE are all open
for trading.
21. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement (including
the schedules) represents the entire understanding and agreement between the
parties hereto with respect to the subject matter hereof and can be amended,
supplemented or changed, and any provision hereof can be waived, only by written
instrument making specific reference to this Agreement signed by the party
against whom enforcement of any such amendment, supplement, modification or
waiver is sought. No action taken pursuant to this Agreement, including without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representation, warranty, covenant or agreement contained herein. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of any other or subsequent breach. No failure on the part of any party
to exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
such right, power or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law.
22. SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement shall be determined to be invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Agreement shall not be in any way impaired.
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<PAGE> 40
[remainder of page intentionally left blank]
- 41 -
<PAGE> 41
If the foregoing correctly sets forth the complete agreement among the
Underwriters and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
among us.
Very truly yours,
GILDAN ACTIVEWEAR INC.
By:
_______________________________
Name:
Title:
Accepted as of the date first
above written.
BEAR, STEARNS & CO. INC.
NESBITT BURNS INC.
THE ROBINSON-HUMPHREY COMPANY, LLC
WASSERSTEIN PERELLA SECURITIES, INC.
as Representatives of the several
Underwriters named in Schedule I
annexed hereto.
By: BEAR, STEARNS & CO. INC.
By:
_______________________________
Name:
Title:
- 42 -
<PAGE> 42
SCHEDULE I -- UNDERWRITERS
<TABLE>
<CAPTION>
Number of Firm Shares
to be Purchased
Name of Underwriter from the Company
---------------------
<S> <C>
Bear Stearns & Co. Inc.
Nesbitt Burns Inc.
The Robinson-Humphrey Company, LLC
Wasserstein Perella Securities, Inc.
Total: 3,000,000
=========
</TABLE>
<PAGE> 43
SCHEDULE II -- SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION 100% OWNED BY SECURITY INTERESTS
----- ----------------- --------------- ------------------
<S> <C> <C> <C>
Gildan Activewear
(Barbados) Inc. Barbados Company
Gildan Activewear
(BVI) Inc. British Virgin Islands Company
Gildan Activewear El Gildan Activewear
Progresso, S.A. Honduras (Barbados) Inc.
Gildan Activewear
Malone, Inc. New York Company
Gildan Activewear
Miami, Inc. Florida Company
Gildan
Gildan Activewear Activewear
San Jos#, S.A. Honduras (Barbados) Inc.
Gildan Activewear SRL Barbados Company
</TABLE>
<PAGE> 44
SCHEDULE III -- FORM OF OPINION OF OGILVY RENAULT
[insert Form of Opinion of Ogilvy Renault]
<PAGE> 1
Exhibit 9
AGREEMENT entered into at Montreal, Province of Quebec as of the 5th day of June
1998.
BETWEEN: HARCO HOLDINGS LTD., a corporation
duly incorporated under the laws of Quebec;
("Harco")
AND: FONDS DE SOLIDARITE DES TRAVAILLEURS DU QUEBEC
(F.T.Q.), a company duly incorporated under the
laws of the Province of Quebec;
("FSTQ")
WHEREAS Gildan Activewear Inc. (the "Corporation") is a corporation duly
constituted under the Canada Business Corporations Act by a Certificate of
Incorporation dated May 8, 1984, as amended to the date hereof;
WHEREAS the parties hereto are currently the holders of the following
shares in the share capital of the Corporation as follows:
Harco: 7,000,000 Class "A" preferred shares
FSTQ: 2 709 794 Class "A" preferred shares
270.98 Class "A" common shares
WHEREAS, in connection with a proposed initial public offering by the
Corporation (the "Offering"), it is contemplated that the Corporation shall
effect a reorganization of its share capital (the "Recapitalization"), following
the implementation of which the authorized capital of the Corporation shall
consist of an unlimited number of Class A Subordinate Voting Shares (the "SV
Shares") and of Class B Multiple Voting Shares (the "MV Shares" and, together
with the SV Shares, the "Equity Shares");
WHEREAS following the Recapitalization, FSTQ will hold SV Shares and Harco
will hold MV Shares, in such numbers as shall be determined;
<PAGE> 2
- 2 -
WHEREAS the parties have agreed that they shall, upon completion of the
Offering and thereafter, vote the Equity Shares of the Corporation held by them
in accordance with the provisions of this Agreement;
NOW, THEREFORE, this Agreement witnesseth that in consideration of the
respective covenants and agreements herein contained and other good and valuable
consideration, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 For the purposes hereof, the following capitalized terms shall have the
meanings set forth below:
1.1.1 "Affiliate" has the meaning ascribed to that term in the Canada
Business Corporations Act, as such may be amended from time to time;
1.1.2 "Articles" has the meaning ascribed to that term in the Canada
Business Corporations Act, as such may be amended from time to time;
1.1.3 "Associate" has the meaning ascribed to that term in the Canada
Business Corporations Act, as such may be amended from time to time;
1.1.4 "Beneficial Owner" includes ownership through a trustee, legal
representative, agent or other intermediary;
1.1.5 "Equity Shares" means the MV Shares and the SV Shares, including any
replacement securities or certificates if and when such are issued
or allotted;
1.1.6 "FSTQ Shares" means all SV Shares of the Corporation beneficially
owned by the FSTQ following the Recapitalization, including any
replacement securities or certificates if and when such are issued
or allotted;
1.1.7 "MV Shares" means the Class B Multiple Voting Shares of the
Corporation;
<PAGE> 3
- 3 -
1.1.8 "Harco Shares" means all MV Shares of the Corporation beneficially
owned by Harco following the Recapitalization, including any
replacement securities or certificates if and when such are issued
or allotted;
1.1.9 "Shareholders' Resolution" means any resolution to be put before the
holders of the Equity Shares voting together as a single class,
whether the meeting called for the purpose of considering the
resolution is a general or special meeting;
1.1.10 "Third Party" means any person or entity other than FSTQ and Harco
and their respective Affiliates and Associates.
ARTICLE 2
FSTQ'S VOTING OBLIGATIONS
2.1 Subject to Articles 3 and 4 hereof, FSTQ shall vote the FSTQ Shares on any
Shareholders' Resolution relating to the election of directors in
accordance with the written instructions given by Harco and received by
FSTQ at least ten business days prior to such meeting.
2.2 All obligations of FSTQ under this Article 2 shall automatically
terminate:
(i) upon FSTQ ceasing to hold at least 5% of the number of Equity Shares
issued and outstanding; and
(ii) with respect to any FSTQ Shares transferred to a Third Party.
ARTICLE 3
HARCO'S VOTING OBLIGATIONS
3.1 For as long as the FSTQ holds at least 15% of the number of the Equity
Shares issued and outstanding, Harco shall vote the Harco Shares on any
Shareholder Resolution relating to the election of directors in favour of
the election of two persons to the Board of directors of the Corporation
as shall
<PAGE> 4
- 4 -
have been designated by the FSTQ as their representatives, provided that
the second of these persons shall be acceptable to Harco acting
reasonably.
3.2 In the event that the FSTQ holds less than 15%, but at least 5% of the
number of Equity Shares issued and outstanding, Harco shall vote the Harco
Shares on any Shareholder Resolution relating to the election of directors
in favour of the election of one person to the Board of Directors of the
Corporation as shall have been designated by the FSTQ as its
representative.
3.3 All obligations of Harco under this Article 3 shall automatically
terminate:
(i) upon FSTQ ceasing to hold at least 5% of the number of Equity Shares
issued and outstanding; and
(ii) with respect to any Harco Shares transferred to a Third Party.
ARTICLE 4
UNDERTAKING NOT TO VOTE FSTQ SHARES
4.1 For as long as FSTQ is able to designate at least one person on the Board
of directors of the Corporation as provided at Article 3 hereinabove FSTQ
shall abstain from voting on any shareholder resolution relating to the
election of directors in respect of which only holders of SV Shares are
entitled to vote.
4.2 All obligations of FSTQ under this Article 4 shall automatically
terminate:
(i) upon FSTQ ceasing to hold at least 5% of the number of Equity Shares
issued and outstanding; and
(ii) with respect to any FSTQ Shares transferred to a Third Party.
<PAGE> 5
- 5 -
ARTICLE 5
TERMINATION
5.1 This Agreement shall remain in force until terminated by the mutual
consent of the parties hereto or until the earlier of
5.1.1 the date on which all of the MV Shares become SV Shares pursuant to
the Articles of the Corporation;
5.1.2 the date on which FSTQ ceases to hold at least 5% of the number of
Equity Shares issued and outstanding.
ARTICLE 6
MISCELLANEOUS
6.1 This Agreement shall be governed by and construed in accordance with the
laws of the Province of Quebec.
6.2 All notices, consents and demands required or permitted to be given under
this Agreement shall be in writing and may be delivered personally, sent
by telecopier or forwarded by first class prepaid registered mail. Any
notice delivered personally or sent by telecopier shall be deemed to have
been given and received on the business day next following the date of
sending. Any notice mailed as aforesaid shall be deemed to have been
received five business days after the post-marked date thereof. Such
notices, consents and demands shall be addressed as follows:
6.2.1 if to Harco: HARCO HOLDINGS LTD.
725 Montee de Liesse
Ville Saint-Laurent, Quebec H4T 1P5
Attention: President
Telecopier: (514) 738-2269
<PAGE> 6
- 6 -
6.2.2 if to FSTQ: LE FONDS DE SOLIDARITE DES
TRAVAILLEURS DE QUEBEC (FTQ)
8717 rue Berri
Montreal, Quebec H2M 2T9
Attention: Vice-President Investments
Telecopier: (514) 383-2505
with a copy to: Vice-President Legal Affairs
Telecopier: (514) 383-2500
or at such other address as the party to whom such writing is to be given
shall have last notified to the party giving the same in the manner
provided in this section.
6.3 This Agreement supersedes all prior agreements and understandings
pertaining to the subject matter of this Agreement.
6.4 The parties hereto hereby acknowledge that they have requested and are
satisfied that this Agreement be drawn up in both the English and the
French language. Les parties aux presentes reconaissent qu'elles ont exige
que la presente convention soit redigee tant en anglais qu'en francais et
s'en declarent satisfaites.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and at the place first hereinabove written.
HARCO HOLDINGS LTD.
Per: /s/ H. Greg Chamandy
----------------------------------
FONDS DE SOLIDARITE DES
TRAVAILLEURS DU QUEBEC (F.T.Q.)
Per: /s/ Daniel Laporte
----------------------------------
<PAGE> 1
Exhibit 10.8
November 2, 1998
Gildan Activewear Inc./Les Vetements de Sports Gildan Inc.
725 Montee de Liesse
Montreal, Quebec
H4T 1P5
Attention: Mr. H. Greg Chamandy
Chief Executive Officer and Chairman
Gentlemen:
Re: Amendment No. 6
Reference is hereby made to the Amended and Restated Loan Agreement
(as amended by Amendment No. 1 dated October 28, 1997, Amendment No. 2 dated
January 8, 1998, Amendment No. 3 dated February 18, 1998, Amendment No. 4 dated
March 19, 1998 and Amendment No. 5 dated June 15, 1998, the "Loan Agreement"),
dated as of August 6, 1997, between Gildan Activewear Inc./Les Vetements de
Sports Gildan Inc. (the "Borrower") and Bank of America Canada (the "Lender").
Capitalized terms used herein and not otherwise defined shall have the meanings
specified in the Loan Agreement.
In consideration of the mutual covenants and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Lender and the Borrower have agreed as follows:
1. The Lender hereby consents, for the purposes of Section 9.10, to the
Borrower's entering into, as original tenant thereunder or as a
guarantor thereof, the Florida Lease, provided, however, that the
monthly base rental amounts so incurred or guaranteed will not
exceed U.S. $85,000 and the foregoing shall not be construed as any
consent to any payments under or pursuant to the Florida Lease or
any guarantee in respect thereof except as are made in compliance
with all terms of the Loan Agreement, including in particular
Section 9.13.
2. The Lender hereby consents for the purposes of Section 9.7 of the
Loan Agreement to (a) the Borrower's and/or Malone Subsidiary's
transfer of Equipment having a book value not in excess of U.S.
$300,000 to the Florida Subsidiary or transfer without limit from
the Malone Subsidiary to the Borrower and (b) the sale and leaseback
of Equipment having a book value not in excess of $12,000,000 to
give effect to the financing referred to in paragraph (f) of the
definition of "Permitted Liens" in Section 1.1 of the Loan
Agreement.
<PAGE> 2
-2-
3. Section 1.1 of the Loan Agreement is amended by adding the following
definitions (in the correct alphabetical order):
""Consolidated FST Debenture" means the 11% Interest Unsecured
Debenture No. A-4 in the capital amount of $15,000,000, issued
by the Borrower to the FST on June 25, 1998 in respect of the
consolidation of all Debt owing to the FST.
"Florida Subsidiary" means Gildan Activewear Miami, Inc.,
formerly called Miami Activewear Distribution Inc., a
corporation incorporated pursuant to the laws of Florida and
carrying on business at 3400B N.W. 74th Avenue, Miami, Florida
33122.
"Florida Lease" means an Industrial Gross Lease dated as of
May 28, 1998 between the Borrower and Fleming Companies, Inc.,
which lease was assigned by the Borrower to the Florida
Subsidiary on August 25, 1998, relating to approximately
211,000 square feet of warehouse space at 3400B N.W. 74th
Avenue, Miami, Florida.
"Florida Cashflow Recapture" means an amount equal to the
Florida Subsidiary's net earnings before interest,
depreciation and amortization expenses but after the payment
of its local taxes less increases in working capital plus
decreases in working capital.
"Florida Debt" means, in respect of the Florida Subsidiary,
all indebtedness and obligations, present and future, direct
and indirect, of the Florida Subsidiary to the Borrower
including, without limitation, the face amount of any
liabilities of the Borrower under or in connection with any
guarantees, indemnities, sureties or like obligations
undertaken by the Borrower in respect of the Florida
Subsidiary.
"Malone Subsidiary" means Gildan Activewear Malone, Inc.,
formerly called Malone Manufacturing, Inc., a corporation
incorporated pursuant to the laws of New York and carrying on
business at Route 11, Bangor Road, Malone, New York.
"Pluma Accounts" means any Account due from Pluma, The
Stardust Corporation or F.L. Robinson (or an affiliate
thereof)."
4. The definition of "Availability" in Section 1.1 of the Loan
Agreement is amended by deleting the reference to "$17,500,000" and
substituting $25,000,000" therefor.
5. The definition of "Permitted Liens" in Section 1.1 of the Loan
Agreement is deleted and the following is substituted therefor:
<PAGE> 3
-3-
""Permitted Liens" means: (a) Liens for taxes not yet payable
or Liens for taxes being contested in good faith and by proper
proceedings diligently pursued, provided that a reserve or
other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor on the applicable Financial
Statements and that a stay of enforcement of any such Lien is
in effect; (b) Liens in favour of the Lender; (c) Liens on
Equipment and Liens on Accounts and Inventory in favour of GE
Capital Quebec Equipment Financing Inc. but subject to the
execution and delivery of the GE Priority Agreement on terms
satisfactory to the Lender in its discretion; (d) Lien(s) in a
principal amount not exceeding $1,200,000 secured on the
Valleyfield Facility (the "Valleyfield Mortgage"); (e) PMSIs
expressly permitted to be outstanding in accordance with
Section 9.11 (f) Liens on Equipment to secure up to
$12,000,000 of Equipment financing to be completed by the
Borrower on terms satisfactory to the Lender and subject to
the execution and delivery to the Lender of an intercreditor
agreement among the Borrower, the Lender and the provider of
such financing, in form and substance satisfactory to the
Lender in its sole discretion; (g) Liens on Equipment in
favour of Bombardier securing the Approved Bombardier
Transaction in an amount not in excess of $2,000,000 (plus the
customary additional hypothec); (h) approved prior
encumbrances; (i) Liens as described in Exhibit A hereto; (j)
Liens on Equipment located at the Valleyfield Facility in
favour of Laurentian Bank of Canada, provided that (A) such
Liens rank subordinate in priority to the Liens in favour of
the Lender and (B) the Borrower, the Lender and Laurentian
Bank of Canada have entered into a subordination agreement on
terms (including as to standstill arrangements) satisfactory
to the Lender in its sole discretion; (k) a first hypothec on
the lands and buildings at 313 and 211, rue de Louvain,
Montreal, Quebec, being the Comdye lands, in an amount not in
excess of $2,000,000, in favour of the Business Development
Bank of Canada to secure its mortgage loan in the maximum
principal amount of Cdn. $1,500,000 upon the terms of its term
sheet dated January 19, 1998; and (1) a first hypothec on the
lands and buildings to be acquired by the Borrower in 1998 and
located at 6465 Trans Canada Highway, St. Laurent, Quebec
(comprising approximately 16,974.9 square metres of lands and
the building thereon), to secure a mortgage loan in a
principal amount not in excess of $2,200,000, in favour of
Business Development Bank of Canada and substantially upon the
terms of and its term sheet dated September 23, 1998."
6. The definition of "Eligible Accounts" is Section 1.1 of the Loan
Agreement is amended by deleting paragraphs (a) and (b) thereof and
substituting the following:
"(a) other than Dated Accounts or Pluma Accounts with respect
to which more than ninety (90) days have elapsed since
the date of the original invoice therefor;
(b) any Dated Account or Pluma Accounts which do not have
credit insurance (in amounts, on terms and with insurers
satisfactory to the Lender in its discretion) with a
loss payable endorsement in favour of
<PAGE> 4
-4-
the Lender, which is in excess of any approved (in the
Lender's discretion) credit limit for the applicable
Account Debtor or which is (x) in the case of Dated
Accounts, (A) payable more than 150 days from invoice
date (except for Accounts due from Broder Brothers which
may be payable 180 days from invoice date) or (B) more
than thirty (30) days past due or (y) in the case of
Pluma Accounts, (A) outstanding more than sixty (60)
days past invoice date, or (B) not subject to a reserve
against Availability in the amount of any liquidated
damages or other offsets, the amount of which has been
conclusively determined to the satisfaction of the
Lender in its discretion and confirmed by an agreement
with Pluma modifying the existing Settlement Agreement
to the Lender's satisfaction in its discretion, or (C)
not verified by a certification given by the Borrower to
the Lender in form satisfactory to the Lender as of the
end of the previous month by the fifteenth day of the
following month to certify that the Borrower is in
compliance with all terms of all of its agreements
relating to such Accounts, has no knowledge or notice of
any default under any such agreements and that the
Borrower intends to continue to comply with all such
agreements (and further provided that the maximum
Revolving Loans and Letters of Credit based on Dated
Accounts will be limited to $20,000,000);"
7. Section 6.8(d) is deleted and the following is substituted therefor:
"(d) (A) during October, November, December, January,
February and March of each year, bi-monthly by the 20th
calendar day and 5th calendar day for the period ended
on the 15th day of the month or the last day of the
month, respectively, and, (B) at all other times,
monthly by the fifteenth calendar day following the end
of each month, perpetual inventory reports at cost, by
category and location, and reconciled to the general
ledger as of month end by the last day of the following
month, and listing ineligibles;"
8. Section 9.7 of the Loan Agreement is amended by deleting the phrase
"non-Honduras assets not exceeding a value of $50,000" and
substituting therefor:
"assets other than shares in the capital stock of the Honduras
Subsidiary not having a value in excess of $500,000"
9. Section 9.7 of the Loan Agreement is amended by adding the following
immediately after the phrase "Honduras Subsidiary to carry on sewing
operations" in the second line thereof:
",the establishment of the Florida Subsidiary to act as a
distribution centre (in replacement of the Champlain, New York
facility)"
10. Section 9.11 of the Loan Agreement is deleted and the following
substituted therefor:
<PAGE> 5
-5-
"9.11 Neither of the Borrower or any of its Subsidiaries shall
incur or maintain any Debt other than: (a) the Obligations;
(b) in the case of the Borrower, trade payables, and
contractual obligations to suppliers and customers incurred in
the ordinary course of business; (c) other Debt existing on
the Closing Date, and included in the Financial Statements
attached as Exhibit G-1; (d) Permitted Rentals as permitted by
Section 9.21; (e) Debt pursuant to unsecured Guarantees as
described in Exhibit C; (f) Debt secured by purchase money
security interests ("PMSIs") in Equipment acquired by the
Borrower and/or its Subsidiaries in compliance with Section
9.20 hereof (provided the principal amount of such Debt does
not exceed the purchase price of such Equipment) and, to the
extent not included in Debt as above provided in this
paragraph (f), all obligations under unsecured Guarantees in
connection with acquisitions by the Borrower of Equipment, not
in the aggregate in excess of $500,000 outstanding at any time
in the Fiscal Year ending in 1997 and $1,000,000 in the Fiscal
Year ending in 1998 and thereafter; (g) the intercorporate
loan to the Malone Subsidiary referred to in paragraph (e) of
Section 9.13; (h) the Additional FST Investment and the FSTQ
Third Debenture Debt as defined in Section 11.1(q) (which, on
June 25, 1998 was consolidated into the Consolidated FST
Debenture); (i)(A) in the case of Los Angeles de San Jose,
S.A., up to $3,500,000 (inclusive of all moneys received by
the Borrower and its Subsidiaries from CIDA in respect of
Honduras Operations) less, if a positive number, the
cumulative Honduras Cashflow Recapture applicable to Los
Angeles de San Jose, S.A., (B) in the case of Nicole El
Progreso, S.A., up to $2,000,000 less, if a positive number,
the cumulative Honduras Cashflow Recapture applicable to
Nicole El Progreso, S.A., (C) in the case of the Florida
Subsidiary, $1,500,000 less, if a positive number, the
cumulative Florida Cashflow Recapture, and (D) in the case of
the Barbados Subsidiary, up to $500,000 of loans by the
Borrower to the Barbados Subsidiary; (j) Debt secured by
Permitted Liens; and (k) an amount not exceeding $1,000,000 to
refinance and replace the existing Valleyfield Mortgage.
Notwithstanding the foregoing or any other term hereof
(including Section 9.13(b)), the Debt to FST shall only be
permitted if no principal payments are required to be made
prior to June, 2003 and no interest in excess of 11% per annum
is payable thereon and FST, the Lender and the Borrower shall
have entered into the Subordination Agreement in form and
substance satisfactory to the Lender in its discretion,
relating to the Consolidated FST Debenture."
11. Section 9.13 of the Loan Agreement is deleted and the following is
substituted therefor:
"9.13 Transactions with Affiliates. Except (a) for
Distributions permitted under Section 9.8; (b) for a loan of
not more than $2,000,000 made to its parent, Harco Holdings
Ltd.; (c) for payments to the Malone Subsidiary, the Florida
Subsidiary or the Honduras Subsidiary for services actually
<PAGE> 6
-6-
rendered not in excess of commercially reasonable amounts and
on pricing terms not exceeding those prevailing between arm's
length parties; (d) for rent paid to Harco Holdings Ltd.
pursuant to the Borrower's leases of its Premises; (e) for
loans made to the Malone Subsidiary not in excess of
$1,500,000 in the aggregate; (f) for trade credit and loans
made to each Honduras Subsidiary and/or to the Florida
Subsidiary, provided, however, that the aggregate amount of
Honduras Debt owed by each Honduras Subsidiary, the aggregate
amount of the Florida Debt and the aggregate amount of any
loans to the Barbados Subsidiary shall not exceed the limits
applicable thereto specified in Section 9.11(i); (g) for
payments of principal and interest made to FST in compliance
with the Borrower's agreements with FST and subject to the
terms of the Subordination Agreement among the Borrower, the
Lender and FST, and (h) for an initial equity investment in
the amount of U.S. $200,000 in the Florida Subsidiary, neither
the Borrower nor any of its Subsidiaries shall: sell,
transfer, distribute, or pay any money or Property to any
Affiliate, or lend or advance money or Property to any
Affiliate or related Person (within the meaning of the Income
Tax Act of Canada), or invest in (by capital contribution or
otherwise) or purchase or repurchase any equity or
indebtedness, or any Property, of any Affiliate or related
Person (within the meaning of the Income Tax Act of Canada),
or become liable on any Guarantee of the indebtedness,
dividends, or other obligations of any Affiliate or related
Person (within the meaning of the Income Tax Act of Canada).
12. Section 9.15(a) of the Loan Agreement is amended by adding the
following phrase immediately after the phrase "Honduras Subsidiary
to carry on sewing operations":
", the establishment of the Florida Subsidiary to act as a
distribution center (to replace the Champlain, New York
facility)"
13. Section 9.15(b) of the Loan Agreement is amended by deleting the
reference to "3,000,000" and substituting "7,000,000" therefor.
14. Section 9.15(c) of the Loan Agreement is amended by deleting the
word "and" at the end thereof.
15. Section 9.15(d) of the Loan Agreement is amended by deleting the
period at the end thereof and replacing it with a semicolon.
16. Section 9.15 in the Loan Agreement is amended by adding the
following after paragraph (d) thereof:
"(e) The Borrower shall annually, within one hundred and
twenty (120) days after each fiscal year end, for the
immediately preceding fiscal year, provide evidence to the
Lender that the amount of the Florida Debt has been reduced by
an amount equal to the Florida Cashflow Recapture, which
amounts will be applied first to permanently repay in full the
Florida Debt and thereafter
<PAGE> 7
-7-
shall be in the form of dividends or non interest bearing
loans subordinated to the Obligations in terms satisfactory to
the Lender in its sole discretion; and
(f) The Borrower will not permit the profits of the Florida
Subsidiary to exceed ten percent (10%) of such Subsidiary's
direct operating expenses."
17. Section 9.18 of the Loan Agreement is amended by deleting the word
"and" before paragraph (c) thereof and replacing it with a comma and
by adding the following at the end (before the period):
"and (d) the Florida Subsidiary to act as a distribution
center"
18. Section 9.20 of the Loan Agreement is amended, retroactive to March
31, 1998, by deleting the references to "$11,500,000" and
"$1,300,000" and replacing such references with "$25,000,000" and
"$8,000,000", respectively.
19. Section 9.22 of the Loan Agreement is amended, retroactively to
March 31, 1998, by deleting the references to "1.15 to 1" and "1.20
to 1" in paragraphs (g) and (h), respectively, and replacing such
references with "1.08 to 1" in paragraph (g) and "1.11 to 1" in
paragraph (h).
20. The amendments, consents and waivers set forth herein are strictly
limited to the matters and times specifically described above and
shall not be deemed to constitute an amendment, consent or waiver
with respect to any other term, covenant, matter, time or occasion.
21. The Borrower agrees to pay to the Lender an amendment fee in the
amount of $25,000 upon its acceptance of the terms hereof and
authorizes and directs the Lender to debit its account in order to
pay such fee. All reasonable expenses of the Lender incurred in
connection with this letter agreement and any and all matters
incidental thereto including, without limitation, legal fees, the
allocated costs of in-house counsel and out-of-pocket expenses of
Lender's counsel are for the account of the Borrower and shall be
payable upon demand and may be paid by direct debit to the
Borrower's accounts.
22. This letter agreement supersedes and replaces any prior agreements
or understandings with respect to any of the matters provided for
herein.
23. This letter agreement shall be deemed to have been made in the
Province of Ontario and shall be governed by and interpreted in
accordance with the laws of such Province and the laws of Canada
applicable therein, except that no doctrine of choice of law shall
be used to apply the laws of any other jurisdiction.
Except to the extent waived or modified herein, the Loan Agreement
remains in full force and effect and is hereby ratified and confirmed. Please
evidence your agreement with the terms of this letter agreement by signing in
the space below. Notwithstanding the date of execution of this letter agreement,
this letter agreement shall be deemed effective as of the 30th day of September,
<PAGE> 8
-8-
1998. The Borrower shall do, or cause to be done or occur, as the case may be,
each of the following to the entire satisfaction of the Lender by December 15,
1998, failing which an Event of Default shall be deemed to have occurred:
(a) FSTQ and the Borrower shall execute and deliver a
Subordination Agreement reflecting the consolidation into the
Consolidated FST Debenture of all Debt to FST (including the
Additional FST Investment and the FSTQ Third Debenture Debt)
and to replace the intercreditor agreement dated August 6,
1997, in form and substance satisfactory to the Lender;
(b) the Borrower shall deliver a complete copy of the Florida
Lease and the assignment thereof to the Florida Subsidiary;
(c) the Florida Subsidiary and the Borrower, as applicable, shall
execute and deliver each of the following documents, each in
form satisfactory to the Lender:
(i) a guarantee by the Florida Subsidiary of the
obligations of the Borrower to the Lender;
(ii) a security agreement of the Florida Subsidiary in
favour of the Lender, securing all obligations under
the guarantee;
(iii) a demand promissory note of the Florida Subsidiary
evidencing all the advances by the Borrower to the
Florida Subsidiary;
(iv) a security agreement of the Florida Subsidiary in
favour of the Borrower to secure, inter alia, the note;
(v) an assignment by the Borrower of the note and security
agreement of the Florida Subsidiary;
(vi) UCC financing statements to perfect all of the security
interests created by the foregoing documents
(including, if requested, fixture filings);
(vii) a landlord's waiver of the landlord under the Florida
Lease;
(viii) certified resolutions of the directors of the Borrower
and the Florida Subsidiary authorizing each of the
foregoing documents signed by it and this Amendment No.
6;
(ix) an opinion of legal counsel to the Florida Subsidiary
in respect of each of the foregoing documents signed by
it;
(x) an opinion of legal counsel to the Borrower in respect
of this Amendment No. 6; and
(d) all filings necessary or required to be made by or on behalf
of the Lender in consequence of the changes of names of the
Malone Subsidiary and the Florida Subsidiary to protect or
preserve the Lender's Liens and the priority thereof shall
have been made and the Lender shall have received, forthwith
upon the issuance thereof, certified articles of amendment
confirming the name changes and, by the date above specified,
reports of local legal counsel
<PAGE> 9
-9-
confirming the making of all necessary UCC and other filings
to the Lender's satisfaction.
The parties acknowledge that they have required that this agreement
and all related documents be prepared in English.
Les parties reconnaissent avoir exige que la presente convention et
tous les documents connexes soient rediges en anglais.
Sincerely,
BANK OF AMERICA CANADA
By: /s/ Robert Kizell
---------------------
Name: Robert Kizell
Title: Vice-President
AGREED AS OF THE DATE FIRST-ABOVE PROVIDED:
GILDAN ACTIVEWEAR INC./LES VETEMENTS DE SPORTS GILDAN INC.
By: /s/ H. Greg Chamandy
---------------------
Name:
Title:
By:
---------------------
Name:
Title:
<PAGE> 10
-10-
The undersigned Gildan Activewear Malone, Inc. (the "Guarantor") (i) consents to
and approves the execution and delivery of this letter agreement by the parties
hereto, (ii) agrees that this letter agreement does not and shall not limit or
diminish in any manner the obligations of the Guarantor under that certain
Guaranty dated as of August 29, 1996 (the "Guaranty"), executed by the Guarantor
and delivered to the Lender, and that such obligations would not be limited or
diminished in any manner even if the Guarantor had not executed this letter
agreement, (iii) agrees that this letter agreement shall not be construed as
requiring the consent of the Guarantor in any other circumstance, (iv) reaffirms
its obligations under the Guaranty, and (v) agrees that the Guaranty remains in
full force and effect and is hereby ratified and confirmed.
GILDAN ACTIVEWEAR MALONE, INC.
By: /s/ H. Greg Chamandy
---------------------
Name:
Title:
<PAGE> 1
Exhibit 10.9
December 2, 1998
Gildan Activewear Inc./Les Vetements de Sports Gildan Inc.
725 Montee de Liesse
Montreal, Quebec
H4T 1P5
Attention: Mr. H. Greg Charmandy
Chief Executive Officer and Chairman
Gentlemen:
Re: Amendment No. 7
Reference is hereby made to the Amended and Restated Loan Agreement
(as amended by Amendment No. 1 dated October 28, 1997, Amendment No. 2 dated
January 8, 1998, Amendment No. 3 dated February 18, 1998, Amendment No. 4 dated
March 19, 1998, Amendment No. 5 dated June 15, 1998 and Amendment No. 6 dated
November 2, 1998, the "Loan Agreement"), dated as of August 6, 1997, between
Gildan Activewear Inc./Les Vetements de Sports Gildan Inc. (the "Borrower") and
Bank of America Canada (to "Lender"). Capitalized terms used herein and not
otherwise defined shall have the meanings specified in the Loan Agreement.
In consideration of the mutual covenants and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Lender end the Borrower have agreed as follow:
1. The Lender hereby waives any default which may have occurred under
such 9.22 as at September 30, 1998, provided the Borrower complied
with section 9.22 as amended hereby as at such date.
2. The definition of "Availability" in Section 1.1 of the Loan
Agreement is amended by deleting the reference to "$25,000,000" and
substituting "$35,000,000" therefor.
3. The definition of "Maximum Revolving Credit Line" in Section 1.1 of
the Loan Agreement is amended by deleting the reference to
"$50,000,000" and substituting "$60,000,000" therefor.
4. Section 2.1 of the Loan Agreement is amended by deleting the
reference to "$50,000,000" and substituting "$60,000,000" therefor.
5. Section 9.22 of the Loan Agreement is amended, retroactively to
September 30, 1998, by deleting the references to "1.25 to 1" in
paragraph (i) and replacing such reference with "1.00 to 1".
<PAGE> 2
-2-
6. The amendments, consents and waivers set forth herein are strictly
limited to the matters and times specifically described above and
shall not be deemed to constitute an amendment, consent or waiver
with respect to any other term, covenant, matter, time or occasion.
7. The Borrower agrees to pay to the Lender an amendment fee in the
amount of $25,000 upon its acceptance of the terms hereof and
authorizes and directs the Lender to debit its account in order to
pay such fee. All reasonable expenses of the Lender incurred in
connection with this letter agreement and any and all matters
incidental thereto including, without limitation, legal fees, the
allocated costs of in-house counsel and out-of-pocket expenses of
Lender's counsel are for the account of the Borrower and shall be
payable upon demand and may be paid by direct debit to the
Borrower's accounts.
8. This letter agreement supersedes and replaces any prior agreements
or understandings with respect to any of the matters provided for
herein.
9. This letter agreement shall be deemed to have been made in the
Province of Ontario and shall be governed by and interpreted in
accordance with the laws of such Province and the laws of Canada
applicable therein, except that no doctrine of choice of law shall
be used to apply the laws of any other jurisdiction.
Except to the extent waived or modified herein, the Loan Agreement
remains in full force and effect and is hereby ratified and confirmed. Please
evidence your agreement with the terms of this letter agreement by signing in
the space below. Notwithstanding the date of execution of this letter agreement,
this letter agreement shall be deemed effective as of the 30th day of September,
1998.
The parties acknowledge that they have required that this agreement
and all related documents be prepared in English.
Les parties reconnaissent avoir exige que la presente convention et
tous les documents connexes soient rediges en anglais.
Sincerely,
BANK OF AMERICA CANADA
By: /s/ Robert Kizell
------------------
Name: Robert Kizell
Title: Vice-President
<PAGE> 3
-3-
AGREED AS OF THE DATE FIRST-ABOVE PROVIDED:
GILDAN ACTIVEWEAR INC./LES VETEMENTS DE SPORTS GILDAN INC.
By: /s/ Ken Cieply
------------------
Name: Ken Cieply
Title: VP Finance
By:
------------------
Name:
Title:
Each of the undersigned Gildan Activewear Malone, Inc. and Gildan Activewear
Miami, Inc. (the "Guarantors") (i) consents to and approves the execution and
delivery of this letter agreement by the parties hereto, (ii) agrees that this
letter agreement does not and shall not limit or diminish in any manner the
obligations of the Guarantors under those certain Guarantee dated as of August
29, 1996 and dated as of September 1, 1998 (collectively, the "Guaranty"), and
any other guarantee or like instrument, executed by the Guarantors and delivered
to the Lender, and that such obligations would not be limited or diminished in
any manner even if the Guarantors had not executed this letter agreement, (iii)
agrees that this letter agreement shall not be construed as requiring the
consent of the Guarantors in any other circumstances, (iv) reaffirms its
obligations under the Guaranty and any other guarantee or like instrument, and
(v) agrees that the Guaranty and any other guarantee or like instrument remains
in full force and effect and is hereby ratified and confirmed.
GILDAN ACTIVEWEAR MALONE, INC.
By: /s/ Ken Cieply
------------------
Name: Ken Cieply
Title: VP Finance
GILDAN ACTIVEWEAR MIAMI, INC.
By: /s/ Ken Cieply
------------------
Name: Ken Cieply
Title: VP Finance
<PAGE> 1
Exhibit 10.10
[LOGO]
Bank of America Canada
December 29, 1998
Gildan Activewear Inc./Les Vetements de Sports Gildan Inc.
725 Montee de Liesse
Montreal, Quebec
H4T 1P5
Attention: Mr. H. Greg Charmandy
Chief Executive Officer and Chairman
Gentlemen:
Re: Amendment No. 8
Reference is hereby made to the Amended and Restated Loan Agreement
(as amended by Amendment No. 1 dated October 28, 1997, Amendment No. 2 dated
January 8, 1998, Amendment No. 3 dated February 18, 1998, Amendment No. 4 dated
March 19, 1998, Amendment No. 5 dated June 15, 1998 and Amendment No. 6 dated
November 2, 1998, Amendment No. 7 dated December 2, 1998, the "Loan Agreement"),
dated as of August 6, 1997, between Gildan Activewear Inc./Les Vetements de
Sports Gildan Inc. (the "Borrower") and Bank of America Canada (the "Lender").
Capitalized terms used herein and not otherwise defined shall have the meanings
specified in the Loan Agreement.
WHEREAS, the Borrower and the Lender desire to amend the Loan
Agreement to make certain amendments as set forth below;
NOW THEREFORE in consideration of the mutual covenants and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Lender and the Borrower have agreed as follows:
Section 1. AMENDMENTS TO THE LOAN AGREEMENT
1. For the period from the Eighth Amendment Effective Date to January
15, 1999, the definition of "Maximum Revolving Credit Line" in
Section 1.1 of the Loan Agreement is amended by deleting the
reference to "$60,000,000" and substituting "$70,000,000" therefor.
2. For the period from the Eighth Amendment Effective Date to January
15, 1999, Section 2.1 of the Loan Agreement is amended by deleting
the reference to "$60,000,000" and substituting "$70,000,000"
therefor.
<PAGE> 2
-2-
3. The amendments, consents and waivers set forth herein are strictly
limited to the matters and times specifically described above and
shall not be deemed to constitute an amendment, consent or waiver
with respect to any other term, covenant, matter, time or occasion.
4. The Borrower agrees to pay to the Lender a non-refundable amendment
fee in the amount of Cdn.$50,000 per week during each week that the
outstanding balance of the Obligations at any time exceeds
$60,000,000, as fully earned and payable, provided that if the
Borrower enters into new amendments or other financing arrangements
with the Lender, upon mutually acceptable terms, within 90 days of
the Eighth Amendment Effective Date such amendment fee shall be
applied against any future amendment fee, Closing Fee or other
arrangement fees which may be payable to the Lender that may be
agreed upon. Upon its acceptance of the terms hereof the Borrower
hereby authorizes and directs the Lender to debit its account in
order to pay such amendment fee. All reasonable expenses of the
Lender incurred in connection with this letter agreement and any and
all matters incidental thereto including, without limitation, legal
fees, the allocated costs of in-house counsel and out-of-pocket
expenses of Lender's counsel are for the account of the Borrower and
shall be payable upon demand and may be paid by direct debit to the
Borrower's accounts.
Section 2 CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective only upon the satisfaction of
all of the following conditions precedent (the date of satisfaction of such
conditions being referred to herein as the "Eighth Amendment Effective Date"):
On or before the Eighth Amendment Effective Date, the Borrower shall
deliver to the Lender the following, each, unless otherwise noted, dated the
Eighth Amendment Effective Date:
1. Certified copies of its Articles (as construed for the purposes of
the Canada Business Corporations Act), together with a good standing
certificate from the jurisdiction of its incorporation, each dated a
recent date prior to the Eighth Amendment Effective Date;
2. Copies of its By-laws, certified as of the Eighth Amendment
Effective Date by its corporate secretary or an assistant secretary;
3. Resolutions of its Board of Directors approving and authorizing the
execution, delivery and performance of the transactions contemplated
by this Amendment, certified as of the Eighth Amendment Effective
Date by its corporate secretary or an assistant secretary as being
in full force and effect without modification or amendment;
4. Signature and incumbency certificates of its officer executing this
Amendment;
<PAGE> 3
-3-
5. Opinion of Quebec counsel to the Borrower in form satisfactory to
the Lender and its counsel; and
6. Executed copies of this Amendment.
Section 3. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Amendment and to
amend the Loan Agreement in the manner provided herein, the Borrower represents
and warrants to the Lender that the following statements are true, correct and
complete:
1. Authorization, Validity, and Enforceability of this Amendment. The
Borrower has the corporate power and authority to execute and
deliver this Amendment and to perform the Loan Agreement as amended
by this Amendment (the "Amended Agreement"). The Borrower and each
Guarantor of the Obligations (each a "Guarantor") has taken all
necessary corporate action (including, without limitation, obtaining
approval of its stockholders if necessary) to authorize its
execution and delivery of this Amendment and the performance of the
Amended Agreement. This Amendment has been duly executed and
delivered by the Borrower and each Guarantor, and this Amendment and
the Amended Agreement constitute the legal, valid and binding
obligations of the Borrower and each Guarantor, enforceable against
it and then in accordance with their respective terms without
defence, setoff or counterclaim. The Borrower's and each Guarantor's
execution and delivery of this Amendment and the performance by the
Borrower of the Amended Agreement do not and will not conflict with,
or constitute a violation or breach of, or constitute a default
under, or result in the creation or imposition of any Lien upon the
property of the Borrower, any Guarantor, or any of its Subsidiaries
by reason of the terms of (a) any contract, mortgage, Lien, lease,
agreement, indenture, or instrument to which the Borrower is a party
or which is binding on it, (b) any law applicable to the Borrower,
any Guarantor or any of its Subsidiaries, or (c) the certificate or
articles of incorporation or amalgamation or bylaws of the Borrower,
any Guarantor or any of its Subsidiaries.
2. Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or other person is necessary or required in
connection with the execution, delivery or performance by, or
enforcement against, the Borrower, any of its Subsidiaries, or any
Guarantor, of this Amendment or the Amended Agreement except for
such as have been obtained or made and filings required in order to
perfect the Lender's security Interests.
3. Incorporation of Representations and Warranties From Loan Agreement.
The representations and warranties contained in Section 8 of the
Loan Agreement are and will be true, correct and complete in all
material respects on and as of the Eighth Amendment Effective Date
to the same extent as though made on and as
<PAGE> 4
-4-
of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case
they were true, correct and complete in all material respects on and
as of such earlier date.
(i) Absence of Default. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event or an Event of Default.
Section 4. MISCELLANEOUS
1. This letter agreement supersedes and replaces any prior agreements
or understandings with respect to any of the matters provided for
herein.
2. This letter agreement shall be deemed to have been made in the
Province of Ontario and shall be governed by and interpreted in
accordance with the laws of such Province and the laws of Canada
applicable therein, except that no doctrine of choice of law shall
be used to apply the laws of any other jurisdiction.
Except to the extent waived or modified herein, the Loan Agreement
remains in full force and effect and is hereby ratified and confirmed. Please
evidence your agreement with the terms of this letter agreement by signing in
the space below. Notwithstanding the date of execution of this letter agreement,
this letter agreement shall be deemed effective the Eighth Amendment Effective
Date.
The parties acknowledge that they have required that this agreement
and all related documents be prepared in English.
Les parties reconnaissent avoir exige que la presente convention et
tous les documents connexes soient rediges en anglais.
Sincerely,
BANK OF AMERICA CANADA
By: /s/ Robert Kizell
---------------------
Name: Robert Kizell
Title: Vice-President
<PAGE> 5
-5-
AGREED AS OF THE DATE FIRST-ABOVE PROVIDED:
GILDAN ACTIVEWEAR INC./LES VETEMENTS DE SPORTS GILDAN INC.
By: /s/ Ken Cieply
------------------
Name: Ken Cieply
Title: Vice-President, Finance & Administration
Each of the undersigned Gildan Activewear Malone, Inc. and Gildan Activewear
Miami, Inc. (the "Guarantors") (i) consents to and approves the execution and
delivery of this letter agreement by the parties hereto, (ii) agrees that this
letter agreement does not and shall not limit or diminish in any manner the
obligations of the Guarantors under those certain Guarantee dated as of August
29, 1996 and dated as of September 1, 1998 (collectively, the "Guaranty"), and
any other guarantee or like instrument, executed by the Guarantors and delivered
to the Lender, and that such obligations would not be limited or diminished in
any manner even if the Guarantors had not executed this letter agreement, (iii)
agrees that this letter agreement shall not be construed as requiring the
consent of the Guarantors in any other circumstances, (iv) reaffirms its
obligations under the Guaranty and any other guarantee or like instrument, and
(v) agrees that the Guaranty and any other guarantee or like instrument remains
in full force and effect and is hereby ratified and confirmed.
GILDAN ACTIVEWEAR MALONE, INC.
By: /s/ Ken Cieply
------------------
Name: Ken Cieply
Title: VP Finance
GILDAN ACTIVEWEAR MIAMI, INC.
By: /s/ Ken Cieply
------------------
Name: Ken Cieply
Title: VP Finance
<PAGE> 1
Exhibit 10.11
January 15, 1999
Gildan Activewear Inc./Les Vetements de Sports Gildan Inc.
725 Montee de Liesse
Montreal, Quebec
H4T 1P5
Attention: Mr. H. Greg Chamandy
Chief Executive Officer and Chairman
- -------------------------------------------------
Gentlemen:
Re: Amendment No. 9
Reference is hereby made to the Amended and Restated Loan Agreement
(as amended by Amendment No. 1 dated October 28, 1997, Amendment No. 2 dated
January 8, 1998, Amendment No. 3 dated February 18, 1998, Amendment No. 4 dated
March 19, 1998, Amendment No. 5 dated June 15, 1998, Amendment No. 6 dated
November 2, 1998, Amendment No. 7 dated December 2, 1998, and Amendment No. 8
dated December 29, 1998, the "Loan Agreement"), dated as of August 6, 1997,
between Gildan Activewear Inc./Les Vetements de Sports Gildan Inc. (the
"Borrower") and Bank of America Canada (the "Lender"). Capitalized terms used
herein and not otherwise defined shall have the meanings specified in the Loan
Agreement.
WHEREAS, the Borrower and the Lender desire to amend the Loan
Agreement to make certain amendments as set forth below;
NOW THEREFORE in consideration of the mutual covenants and for other
good and valuable consideration, the receipt and sufficient of which is hereby
acknowledged, the Lender and the Borrower have agreed as follows:
Section I AMENDMENTS TO THE LOAN AGREEMENT
1.1 Section 1.1 of the Loan Agreement is amended by adding the following
definitions (in the correct alphabetical order):
""Barbados Debt" means, in respect of the Barbados Subsidiary, all
indebtedness and obligations, present and future, direct and indirect, of
the Barbados Subsidiary (or any of them) to the Borrower including,
without limitation, the face amount of any liabilities of the Borrower
under or in connection with any guarantees, indemnities, sureties or like
obligations undertaken by the Borrower in respect of the Barbados
Subsidiary (or any of them)."
<PAGE> 2
-2-
""Over-Formula Amount" has the meaning specified in the definition of
"Availability."
""1999 FST Investment" has the meaning specified in Section 9.11."
""Non-Core Inventory" shall be determined by the Lender in its discretion
and includes finished goods inventory comprised of either small or medium
sizes in colours other than white, ash, navy, sports grey and black."
1.2 The definition of "Availability" in Section 1.1 of the Loan Agreement
is amended by deleting the reference to "$20,000,000" and substituting
"$30,000,000" therefor, by deleting the reference to "$35,000,000" and
substituting "$55,000,000" therefor and by adding the following immediately
after the phrase ""Capex Subline" in the sixth line:
"plus (D) a temporary over-formula sublimit (the "Over-Formula Amount") of
$10,000,000 until the earlier of any date when the proceeds of the 1999
FST Investment are received and February 26, 1999 (it being agreed that
all Obligations in excess of the Availability determined without including
the Over-Formula Amount shall be available solely as and shall be deemed
to be, if denominated in Canadian Dollars, Prime Rate Loans or, if
denominated in U.S. Dollars, Base Rate Loans)".
1.3 The definition of "BA Rate Margin" in Section 1.1 of the Loan
Agreement is deleted and the following is substituted therefor:
""BA Rate Margin" means three and one half percent (3 1/2%) per annum."
1.4 The definition of "Barbados Subsidiary" in Section 1.1 of the Loan
Agreement is deleted and the following is substituted therefor:
""Barbados Subsidiary" means, collectively, Gildan Activewear B.V.I. Inc.,
a British Virgin Islands Corporation (to be incorporated to own real
estate in Barbados) and Gildan Activewear S.R.L. and Gildan Activewear
Barbados Inc. (the latter corporation formerly known as Arista Sourcing
Corporation), corporations incorporated or to be incorporated under the
laws of Barbados, all of which are or will be wholly-owned Subsidiaries of
the Borrower."
1.5 The definition of "Base Rate Margin" in Section 1.1 of the Loan
Agreement is deleted and the following substituted therefor:
""Base Rate Margin" means (a) four percent (4%) per annum in the case of
all Obligations denominated in U.S. Dollars in excess of the Availability
as determined without including the Over-Formula Amount and (b) in the
case of all other Base Rate Loans, one and three quarters percent (1 3/4%)
per annum."
1.6 The definition of "Eligible Accounts" in Section 1.1 of the Loan
Agreement is amended by adding the phrase "(whether or not a Dated Account)"
after the phrase "Pluma
<PAGE> 3
-3-
Accounts" in paragraph (b) by deleting the reference in paragraph (b) to
"$20,000,000" and substituting "$30,000,000" therefor, by changing the period at
the end of clause (v) to "; or" and adding the following immediately thereafter:
"(w) any Dated Account to the extent of any excess thereof over credit insurance
thereon (in amounts, on terms and with insurers satisfactory to the Lender in
its discretion) with a loss payable endorsement in favour of the Lender.".
1.7 The definition of "Eligible Inventory" in Section 1.1 of the Loan
Agreement is amended by deleting the phrase "or in the case of premises leased
by Malone Manufacturing, Inc. licenced (on terms satisfactory to the Lender) to
the Borrower" and substituting therefor:
", the Florida Subsidiary or the Malone Subsidiary",
by adding the phrase "or established reserves against Availability satisfactory
to the Lender in its sole discretion" after the phrase "satisfactory to the
Lender" in each of the tenth line and twelfth line, by changing the reference to
paragraph "(h)" to "(i)" and by inserting the following phrase after paragraph
(g):
"; and (h) Non-Core Inventory in excess of $15,000,000".
1.8 The definition of "Honduras Subsidiary" in Section 1.1 of the Loan
Agreement is deleted and the following is substituted therefor:
""Honduras Subsidiary" means, collectively, Gildan Activewear San Jose,
S.A. and Gildan Activewear El Progresso, S.A. (formerly known as Los
Angelos de San Jose, S.A. and Nicole El Progresso, S.A., respectively),
each being corporations incorporated under the laws of Honduras as a
wholly-owned Subsidiary of Gildan Activewear Barbados, Inc. (formerly
known as Arista Sourcing Corporation) and carrying on sewing operations in
Honduras."
1.9 The definition of "Libor Rate Margin" is deleted and the following
substituted therefor:
""Libor Rate Margin" means three and one half percent (3 1/2%) per annum."
1.10 The definition of "Maturity Date" in Section 1.1 of the Loan
Agreement is deleted and the following is substituted therefor:
""Maturity Rate" means September 30, 2001."
1.11 The definition of "Maximum Revolving Credit Line" in Section 1.1 of
the Loan Agreement is amended by deleting the reference to "$60,000,000" and
substituting "$100,000,000" therefor.
1.12 The definition of "Prime Rate Margin" is deleted and the following
substituted therefor:
<PAGE> 4
-4-
""Prime Rate Margin" means (a) four percent (4%) per annum in the case of
all Obligations denominated in Canadian Dollars in excess of the
Availability as determined without including the Over-Formula Amount and
(b) in the case of all other Prime Rate Loans, one and three quarters
percent (1 3/4%) per annum."
1.13 Section 2.1 of the Loan Agreement is amended by deleting the
reference to "$60,000,000" and substituting "$100,000,000" therefor.
1.14 Section 2.2 of the Loan Agreement is deleted and the following
substituted therefor:
"2.2 Revolving Loans. Subject to the terms and conditions of this
Agreement and relying upon each of the representations and warranties of
the Borrower set forth in each of the Loan Documents, the Lender agrees to
make Loans to the Borrower, at any time and from time to time on and after
the Closing Date and until the Maturity Date (or, after any renewal of
this Agreement as herein provided, the expiry date of any Renewal Term),
provided that (a) the aggregate principal amount of all Loans outstanding
at any time plus the L/C Reserve shall not exceed (after giving effect to
all Loans made or repaid) the Borrowing Base in effect at such time, and
(b) the aggregate principal amount of all Loans outstanding plus the face
amount of all Letters of Credit shall not exceed the Maximum Revolving
Credit Line, consisting of revolving loans and Letters of Credit as
described in Sections 2.2 and 2.3 hereof, respectively (the "Revolving
Credit Facility").
The Lender shall, upon the Borrower's request for a Drawdown
from time to time, which request may be made orally by telephone, but
shall be promptly confirmed in writing by facsimile and, only if requested
by the Lender, by mail by delivery of a notice in the form attached hereto
as Exhibit G-5 (the "Notice of Borrowing"), or in writing by giving the
Notice of Borrowing, by 10:00 a.m. (Toronto time) on the requested
Drawdown Date, in the case of Base Rate Loans and Prime Rate Loans, and by
10:00 a.m. three (3) Business Days prior to the Drawdown Date for BA
Equivalent Loans and Libor Equivalent Loans, make revolving loans (the
"Revolving Loans") to the Borrower up to the limits of the Availability by
way of Prime Rate Loans, Base Rate Loans, BA Equivalent Loans or Libor
Equivalent Loans as designated in the Notice of Borrowing. The Lender, in
its discretion, may elect to exceed the limits of the Availability on one
or more occasions, but if it does so, the Lender shall not be deemed
thereby to have changed the limits of the Availability or to be obligated
to exceed the limits of the Availability on any other occasion. If, at any
time, the unpaid balance of the Revolving Loans plus the L/C Reserve
exceeds the Borrowing Base, or the unpaid balance of the Revolving Loans
plus the face amount of all Letters of Credit outstanding exceeds the
Maximum Revolving Credit Line, then the Lender may refuse to make or
otherwise restrict Revolving Loans and/or Letters of Credit, on such terms
as the Lender determines until such excess has been eliminated and the
Borrower shall immediately repay to the Lender an amount equal to such
excess. For the purposes of determining the Borrower's compliance with the
foregoing and without limitation to Section 4.6 hereof, the Lender will
determine the Equivalent Amount in Cdn. $ of all Eligible Accounts,
Eligible Inventory, Revolving Loans and Letters of Credit denominated in
U.S. $, and
<PAGE> 5
-5-
will re-evaluate the F/X Reserve, the Swap Reserve and all other reserves
based upon the rate of exchange for Cdn. $ and U.S. $ then being offered
by the Lender, weekly and more frequently in its sole discretion. Each
oral request for a Revolving Loan shall be conclusively presumed to be
made by a person authorized by the Borrower to do so and the crediting of
a Revolving Loan to the Borrower's deposit account, or transmittal to such
Person as the Borrower shall direct, shall conclusively establish the
obligation of the Borrower to repay such Revolving Loan as provided
herein. The Lender will charge all Revolving Loans and other Obligations
to a loan account of the Borrower maintained with the Lender. All fees,
commissions, costs, expenses, and other charges under or pursuant to the
Loan Documents, and all payments made and out-of-pocket expenses incurred
by the Lender pursuant to the Loan Documents, will be charged as Revolving
Loans to the Borrower's loan account as of the date due from the Borrower
or the date paid or incurred by the Lender, as the case may be.
Notwithstanding any terms or conditions to the contrary
herein, the Borrower acknowledges and agrees that: (A) the Lender is
granting a 50% participation interest in the Revolving Credit Facility to
a Participating Lender; (B) in respect of any Drawdown in respect of a
Loan, the Lender shall be entitled to assume that the Participating Lender
has made or will make the amount of its participation in the Loan
available to the Lender on such Drawdown if the Lender requests settlement
with the Participating Lender; (C) if the Lender, in its sole discretion,
based upon such assumption, makes available to the Borrower a Loan and the
Participating Lender fails to settle with the Lender and make available to
the Lender its participation in the Loan (the "Participation Amount") when
requested, such Participating Lender and the Borrower severally agree to
repay to the Lender forthwith, on demand, such Participation Amount,
together with interest thereon for each day during the period commencing
on the date such amount is made available to the Borrower and ending on
the date such amount is repaid to the Lender, at the interest rate
applicable from time to time to such borrowing and if such Participating
Lender repays to the Lender such Participation Amount, such amount so
repaid shall continue as regards the Borrower to constitute a Loan, and if
both the Participating Lender and the Borrower shall have repaid such
amount, the Lender shall promptly return to the Borrower such amount in
such day funds; and (D) notwithstanding that the Participating Lender is
not a direct lender to or creditor of the Borrower and that the
Participating Lender's and Lender's rights and obligations as regards the
other of them shall be determined by a participation agreement between
them, the Lender shall not in any circumstances be required (but may in
its sole unfettered discretion elect to do so on one or more occasions
without obliging itself to do so on any other occasion) to advance to the
Borrower (by way of Loan or Letter of Credit, or otherwise) an amount in
excess of 50% of (i) any Loan, (ii) the Availability, or (iii) the Maximum
Revolving Credit Line, unless, if requested, the Participating Lender has
first made funds available to the Lender in any amount requested by the
Lender for settlement."
1.15 Section 2.3(a) of the Loan Agreement is amended by deleting the
reference to "$3,000,000" and substituting "$5,000,000" therefor.
<PAGE> 6
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1.16 Section 3.7 of the Loan Agreement is deleted and the following
substituted therefor:
"3.7 Amendment No. 9 Fee. The Borrower shall upon entering into
Amendment No. 9 be liable to pay to the Lender a fee in the amount
of $1,000,000, payable as follows:
(a) $500,000 shall be earned as payable forthwith and shall be
financed as a Revolving Loan;
(b) $500,000 shall be immediately earned but payable on April
1, 1999, provided, however, that if the Borrower terminates
this Agreement and repays in full the Obligations with the
proceeds of a financing by a lender who will finance the
contemplated Barbados operations of the Borrower and its
Subsidiaries, as such contemplated operations have been
described to the Lender (the same to be determined by the
Lender in its sole discretion) (a "Barbados Financing") on or
prior to 2:00 p.m. (Toronto time) on such date, this $500,000
of the fee will be waived,
provided, further, that the portion of the fee provided for in
paragraph (a) may be satisfied in part by any fees paid under
paragraph 4 of Section 1 of Amendment No. 8."
1.17 The following is added immediately after Section 3.8 of the Loan
Agreement:
"3.9 Agent Fee. The Borrower shall pay to the Lender an agent fee in
the amount of $50,000 per annum, payable quarterly in advance with the
first such payment (for the fiscal quarter ending March 31, 1999) due upon
January 15, 1999 (which fee the Lender is authorized to collect as a
Revolving Loan)."
1.18 Section 4.1 of the Loan Agreement is amended by deleting the phrase
"upon the" and substituting "and all other Obligations upon the earlier to occur
of the Maturity Date or the date of" therefor and by adding the phrase "or the
amount by which the unpaid balance of all Loans plus the face amount of all
Letters of Credit exceeds the Maximum Revolving Credit Line immediately after
the phrase "exceeds the Borrowing Base".
1.19 Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.12, 6.13 and 7.1 are
deleted and the following Sections are substituted therefor:
"6.1 Grant of Security Interest.
(a) Without limitation to any other provision hereof or the Loan
Documents, as security for all Obligations the Borrower shall, prior to
the Closing Date, grant to the Lender and on the date of making each
subsequent Loan or issuing any Letter of Credit on behalf of the Borrower,
the Lender shall hold, a continuing first-ranking (subject only to
Permitted Liens) and perfected and duly registered security interest in,
lien on,
<PAGE> 7
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hypothec of and assignment of all movable and personal Property of the
Borrower, now owned or hereafter acquired, tangible or intangible,
including without limitation: (i) all Receivables Collateral, Inventory,
Equipment, Proprietary Rights Collateral and Proceeds, wherever located
and whether now existing or hereafter arising or acquired; (ii) all
moneys, securities and other property and the Proceeds thereof, now or
hereafter held or received by, or in transit to, the Lender or any of its
affiliates from or for the Borrower, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, including, without
limitation, all of the Borrower's deposit accounts, credits, and balances
with the Lender or any of its affiliates and all claims of the Borrower
against the Lender or any of its affiliates at any time existing; (iii)
all books, records and other Property relating to or referring to any of
the foregoing, including, without limitation, all books, records, ledger
cards, data processing records, computer software and other property and
general intangibles at any time evidencing or relating to the Receivables
Collateral, Inventory, Equipment, Proprietary Rights Collateral, Proceeds,
and other property referred to above; (iv) all shares in the capital stock
of any Subsidiary of the Borrower now owned or hereafter acquired by the
Borrower (all of the foregoing, together with any other Property in which
the Lender may at any time be granted a Lien, being herein collectively
referred to as the "Collateral"). The Lender shall have all of the rights
of a secured party with respect to the Collateral under the PPSA, Civil
Code of Quebec and the other laws of Ontario and Quebec and of any other
applicable jurisdiction.
(b) As security for all Obligations, on or prior to the date of
making each Loan or issuing any Letter of Credit on behalf of the
Borrower, the Lender shall hold a continuing first ranking (subject to
Permitted Liens) and perfected security interest in, lien on, hypothec of
and assignment of all personal property of the Malone Subsidiary and the
Florida Subsidiary, now owned or hereafter acquired, tangible or
intangible.
(c) All Obligations shall constitute a single loan secured by the
Collateral. The Lender may, in its sole discretion, exchange, waive or
release any of the Collateral and, upon the occurrence of an Event of
Default (i) apply Collateral and direct the order or manner of sale
thereof as the Lender may determine, and (ii) settle, compromise, collect
or otherwise liquidate any Collateral in any manner, all without affecting
the Obligations or the Lender's right to take any other action with
respect to any other Collateral.
6.2 Perfection and Protection of Security Interest. The Borrower
shall, and shall cause each of its Subsidiaries, at the Borrower's
expense, perform, do, execute and deliver all steps, acts, things and
documents as may be requested by the Lender at any time to register, file,
signify, publish, perfect, maintain, protect and enforce the Security
Interest including, without limitation: (a) executing, registering and
recording of the Loan Documents and executing and filing financing or
continuation statements or applications for registration, and amendments
thereof, in form and substance satisfactory to the Lender; (b) if
requested, delivering to the Lender the original certificates of title for
motor vehicles with the Security Interest properly endorsed thereon if
available; (c) delivering to the Lender the originals of all instruments,
documents, chattel paper and all
<PAGE> 8
-8-
other Collateral of which the Lender determines it should have physical
possession in order to perfect and protect the Security Interest therein,
duly endorsed or assigned to the Lender without restriction; (d)
delivering to the Lender warehouse receipts covering any portion of the
Collateral located in warehouses and for which warehouse receipts are
issued; (e) after an Event of Default, transferring Inventory to
warehouses designated by the Lender; (f) placing notations on the
Borrower's and its Subsidiaries' books of account to disclose the Security
Interest; (g) executing and delivering to the Lender a hypothecation or
security agreement relating to the Reversions in form and substance
satisfactory to the Lender; (h) delivering to the Lender all letters of
credit on which the Borrower or any of its Subsidiaries is named
beneficiary; and (i) taking such other steps as are deemed necessary by
the Lender to maintain the Security Interest and the priority thereof. To
the extent permitted by applicable law, the Lender may file, without the
Borrower's signature, one or more financing statements disclosing the
Security Interest. The Borrower agrees that a carbon, photographic,
photostatic or other reproduction of any Loan Document or of a financing
statement is sufficient as a financing statement. If any Collateral is at
any time in the possession or control of any warehouseman, bailee or any
of the Borrower's or any of its Subsidiaries' agents or processors, then
the Borrower shall and cause its Subsidiaries to notify the Lender thereof
and shall notify such Person of the Security Interest in such Collateral
and, upon the Lender's request, instruct such Person to hold all such
Collateral for the Lender's account subject to the Lender's instructions.
If at any time any Collateral is located on any Premises that are not
owned by the Borrower, then the Borrower shall obtain written waivers, in
form and substance satisfactory to the Lender, of all present and future
Liens to which the owner or lessor or any mortgagee of such premises may
be entitled to assert against the Collateral. From time to time, the
Borrower shall, and shall cause its Subsidiaries to, upon Lender's
request, execute and deliver confirmatory written instruments pledging or
hypothecating to the Lender the Collateral, but the Borrower's failure to
do so shall not affect or limit the Security Interest or the Lender's
other rights in and to the Collateral. So long as this Agreement is in
effect and until all Obligations have been fully satisfied, the Security
Interest shall continue in full force and effect in all Collateral
(whether or not deemed eligible for the purpose of calculating the
Availability or as the basis for any advance, loan, extension of credit,
or other financial accommodation).
6.3 Location of Collateral. The Borrower represents and warrants to
the Lender that: (a) Exhibit D hereto is a correct and complete list of
the Borrower's and each of its Subsidiaries' chief executive office, the
location of its books and records, the locations of the Collateral and the
purpose for which the Collateral is at such location and the locations of
all of its other places of business; and (b) Exhibit D correctly
identifies any of such facilities and locations that are not beneficially
owned by and registered in the name of the Borrower or its Subsidiaries
and sets forth the names of the owners and lessors or sub-lessors of, and,
to the best of the Borrower's knowledge, the holders of any mortgages on,
such facilities and locations. The Borrower covenants and agrees that it
will not, and will not permit its Subsidiaries to, maintain any Collateral
at any location other than those listed on Exhibit D, and it will not
otherwise change or add to any of such locations, or change the location
or its head office and chief place of business unless it gives the Lender
at least thirty (30) days' prior written notice thereof and executes,
<PAGE> 9
-9-
delivers, registers, signifies and publishes any and all financing
statements and other documents that the Lender requests in connection
therewith.
6.4 Title to, Liens on and Sale and Use of Collateral. The Borrower
represents and warrants to the Lender and agrees with the Lender that: (a)
all its and its Subsidiaries Property (including the Collateral) is and
will continue to be owned by the Borrower or its Subsidiaries, as
applicable, free and clear of all Liens whatsoever, except for the
Security Interest and other Permitted Liens; (b) the Security Interest
will not be subject to any prior Lien except for Permitted Liens, if any;
(c) the Borrower will and will cause each of its Subsidiaries to use,
store, and maintain its Property (including the Collateral) with all
reasonable care and will use its Property or its Subsidiaries (including
the Collateral) for lawful purposes only; and (d) the Borrower will not,
without the Lender's prior written approval, sell or dispose of or permit
the sale or disposition of any of its or its Subsidiaries' Property
(including the Collateral), except for sales of Inventory in the ordinary
course of business and sales of Equipment as expressly permitted under
Section 9.7. The inclusion of Proceeds in the Collateral shall not be
deemed the Lender's consent to any sale or other disposition of its
Property (including the Collateral) except as expressly permitted herein.
6.5 Appraisals. Whenever an Event of Default exists, the Borrower
shall and shall cause each of its Subsidiaries to, at its expense and upon
the Lender's request, provide the Lender with appraisals or updates
thereof of any or all of the Collateral from an appraiser, and prepared on
a basis, satisfactory to the Lender.
6.6 Access and Examination. The Borrower shall and shall cause each
of its Subsidiaries to provide access and the right at all reasonable
times and upon not less than one (1) Business Day's notice to the Borrower
(and at any time without the need for any prior notice when an Event of
Default exists) to examine, audit, make extracts from and inspect the
Borrower's and its Subsidiaries' records, files, and books of account and
the Borrower's and its Subsidiaries' Property and to discuss the
Borrower's and its Subsidiaries' affairs with the Borrower's and its
Subsidiaries' officers and management. The Borrower will and will cause
each of its Subsidiaries to deliver to the lender any instrument necessary
for the Lender to obtain records from any service bureau maintaining
records for the Borrower and its Subsidiaries. The Lender may, at any time
when an Event of Default exists, and at the Borrower's expense, make
copies of all of the Borrower's and its Subsidiaries' books and records,
or require the Borrower and its Subsidiaries to deliver such copies to the
Lender. The Lender may, without expense to the Lender, use such of the
Borrower's and its Subsidiaries' personnel, supplies and premises as may
be reasonably necessary for maintaining or enforcing the Security
Interest.
6.7 Insurance. The Borrower shall and shall cause each of its
Subsidiaries to insure all its Property (including the Collateral) against
loss or damage by fire with extended coverage, theft, burglary, pilferage,
loss in transit, and such other hazards as the Lender shall specify, in
amounts, under policies and by insurers acceptable to the Lender. The
Borrower shall cause the Lender to be named in each such policy and each
policy
<PAGE> 10
-10-
of insurance in respect of Accounts (including policies issued by American
Credit Indemnity) as secured party or mortgagee and loss payee or
additional insured, in a manner acceptable to the Lender. Each policy of
insurance shall contain a clause or endorsement requiring the insurer to
give not less than thirty (30) days prior written notice to the Lender in
the event of cancellation of the policy for any reason whatsoever and a
clause or endorsement stating that the interest of the Lender shall not be
impaired or invalidated by any act or neglect of the Borrower or any of
its Subsidiaries or the owner of any premises where Collateral is located
nor by the occupation of such premises for purposes more hazardous than
are permitted by such policy. All premiums for such insurance shall be
paid by the Borrower or its Subsidiaries, as applicable, when due and
certificates of insurance and, if requested, photocopies of the policies
shall be delivered to the Lender. If the Borrower fails to procure or
cause to be procured such insurance or to pay the premiums therefor, when
due, the Lender may (but shall not be required to) do so and charge the
costs thereof to the Borrower's loan account as a Loan. The Borrower shall
promptly notify the Lender of any loss, damage, or destruction to any of
its or any of its Subsidiaries' Property or arising from its use, whether
or not covered by insurance. The Lender is hereby authorized to collect
all insurance proceeds of Collateral directly. After deducting from such
proceeds the reasonable expenses, if any, incurred by Lender in the
collection or handling thereof, the Lender may apply such proceeds to the
reduction of the Obligations, in such order as Lender determines, or at
the Lender's option may permit or may, in any case, require the Borrower
or its Subsidiaries, as applicable, to use such money, or any part
thereof, to replace, repair, restore or rebuild the Collateral in a
diligent and expeditious manner with materials and workmanship of
substantially the same quality as existed before the loss, damage or
destruction.
6.12 Equipment. The Borrower represents and warrants to the Lender
and agrees with the Lender that all of the Equipment is and will be used
or held for use in the Borrower's and its Subsidiaries' business, is and
will be fit for such purposes and will at all times be subject to a
first-ranking, subject to Permitted Liens, duly registered and perfected
Lien in favour of the Lender. The Borrower shall keep and maintain and
shall cause its Subsidiaries to keep and maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted) and shall
make all necessary replacements thereof.
6.13 Assigned Contracts. The Borrower shall and shall cause each of
its Subsidiaries to fully perform all of its and their obligations under
each of the Assigned Contracts, and shall enforce all of its and their
rights and remedies thereunder as it deems appropriate in its business
judgment, provided, however, that neither Borrower nor any of its
Subsidiaries shall take any action or fail to take any action with respect
to the Assigned Contracts that would result in a waiver or other loss of
any material right or remedy of the Borrower or any of its Subsidiaries
thereunder. Without limiting the generality of the foregoing, the Borrower
shall and shall cause each of its Subsidiaries to take all action
necessary or appropriate to permit and shall not take any action which
would have any adverse effect upon, the full enforcement of all
indemnification rights under the Assigned Contracts. The Borrower shall
not and shall not permit its
<PAGE> 11
-11-
Subsidiaries to, without the Lender's prior written consent, modify,
amend, supplement, compromise, satisfy, release, or discharge any of the
Assigned Contracts except in the ordinary course of business and provided
same will not give rise to any Material Adverse Effect, any collateral
securing the same, any Person liable directly or indirectly with respect
thereto, or any agreement relating to any of the Assigned Contracts or the
collateral therefor. The Borrower shall and shall cause its Subsidiaries
to notify the Lender in writing, promptly after it becomes aware thereof,
of any event or fact which could give rise to a claim by it for
indemnification under any of the Assigned Contracts, and shall diligently
pursue or cause its Subsidiaries to diligently pursue such right and
report to the Lender on all further developments with respect thereto. The
Borrower shall and shall cause its Subsidiaries to remit directly to the
Lender, for application to the Obligations in such order as the Lender
determines, all amounts received it as indemnification or otherwise
pursuant to the Assigned Contracts. If the Borrower shall fail after the
Lender's demand to diligently pursue cause its Subsidiaries to diligently
pursue any right under the Assigned Contracts, or if an Event of Default
exists, then the Lender may directly enforce such right in its own or the
Borrower's name and may enter into such settlements or other agreements
with respect thereto as the Lender determines. All amounts thereby
recovered by the Lender, after deducting the Lender's reasonable costs and
expenses in connection therewith, shall be applied to the Obligations in
such order as the Lender determines. In any suit, proceeding or action
brought by the Lender under any Assigned Contract for any sum owing
thereunder or to enforce any provision thereof, the Borrower shall
indemnify and hold the Lender harmless from and against all expense, loss
or damage suffered by reason of any defence, setoff, counterclaim,
recoupment, or reduction of liability whatsoever of the obligor thereunder
arising out of a breach by the Borrower or any of its Subsidiaries of any
obligation thereunder or arising out of any other agreement, indebtedness
or liability at any time owing from the Borrower or any of its
Subsidiaries to or in favour of such obligor or its successors. All such
obligations of the Borrower shall or any of its Subsidiaries be and remain
enforceable only against the Borrower or any of its Subsidiaries and shall
not be enforceable against the Lender. Notwithstanding any provision
hereof to the contrary, the Borrower and its Subsidiaries shall at all
times remain liable to observe and perform all of its duties and
obligations under the Assigned Contracts, and the Lender's exercise of any
of its rights with respect to the Collateral shall not release the
Borrower and its Subsidiaries from any of such duties and obligations. The
Lender shall not be obligated to perform or fulfil any of the Borrower's
or any of its Subsidiaries' duties or obligations under the Assigned
Contracts or to make any payment thereunder, or to make any inquiry as to
the nature or sufficiency of any payment or Property received by it
thereunder or the sufficiency of performance by any party thereunder, or
to present or file any claim, or to take any action to collect or enforce
any performance, any payment of any amounts, or any delivery of any
Property.
7.1 Books and Records. The Borrower shall and shall cause each of
its Subsidiaries to maintain at all times, correct and complete books,
records and accounts in which complete, correct and timely entries are
made of its transactions in accordance
<PAGE> 12
-12-
with GAAP consistent with those applied in the preparation of the
Financial Statements. The Borrower shall and shall cause each of its
Subsidiaries to, by means of appropriate entries, reflect in such accounts
and in all Financial Statements proper liabilities and reserves for all
taxes and proper provision for depreciation and amortization of Property
and bad debts, all in accordance with GAAP. The Borrower shall and shall
cause each of its Subsidiaries to maintain at all times books and records
pertaining to the Collateral in such detail, form and scope as the Lender
shall reasonably require, including, without limitation, records of: (a)
all payments received and all credits and extensions granted with respect
to the Accounts; (b) the return, rejections repossession, stoppage in
transit, loss, damage, or destruction of any Inventory; and (c) all other
dealings affecting the Collateral. The Borrower shall on or prior to the
Closing Date establish, and shall thereafter maintain, a system for aging
accounts by due date and providing consolidated financial statements and
consolidating schedules for quarterly results and the Borrower shall, on
or prior to the Closing Date, have eliminated its pre-billing practice or
shall have adequate accounting systems in place to reclassify prebilled
accounts from Accounts to Inventory."
1.20 Section 7.3(e) or the Loan Agreement is amended by adding the phrase
"and its Subsidiaries other than the Honduras Subsidiary, taken as a whole,"
after the word "Borrower's".
1.21 Section 7.3(h) of the Loan Agreement is amended by adding the phrase
"or any of its Subsidiaries'" after the word "Borrower's".
1.22 Section 7.3(i) of the Loan Agreement is amended by adding the phrase
"or any of its Subsidiaries'" after the word "Borrower's" wherever it appears
and by adding the phrase "or any of its Subsidiaries" after the word "Borrower"
wherever it appears.
1.23 Section 8.9 of the Loan Agreement is amended by deleting the word
"and" before paragraph (d), and adding the following at the end thereof:
"and (e) Debt created after the Closing Date and permitted to exist in
accordance with the terms hereof."
1.24 The following is inserted immediately after Section 8.29 of the Loan
Agreement:
"8.30 Year 2000 Problem. On the basis of a review and assessment
undertaken by the Borrower of its and its Subsidiaries computer
applications, the Borrower reasonably believes that the "Year 2000
problem" (that is, the risk that principal computer applications used in
connection with its business may be unable to recognize and perform
properly date sensitive functions involving certain dates prior to and any
date after December 31, 1999) could not reasonably be expected to give
rise to a Material Adverse Effect."
<PAGE> 13
-13-
1.25 Section 9.7 of the Loan Agreement is deleted and the following is
substituted therefor:
"9.7 Mergers, Consolidations, Acquisitions or Sales. Except for the
establishment of the Honduras Subsidiary to carry on sewing operations,
the establishment of the Florida Subsidiary to act as a distribution
centre (in replacement of the Champlain, New York facility), and the
establishment of the Barbados Subsidiary provided that the aggregate value
of the assets of the Barbados Subsidiary, exclusive or shares in the
capital stock of the Honduras Subsidiary, does not exceed $4,000,000, none
of the Borrower or any of its Subsidiaries shall, in one or a series of
transactions, carry on business with or through any other Person, enter
into any partnership, joint venture, co-venture or other combination,
enter into any transaction of amalgamation, merger, reorganization, or
consolidation, or, subject to Section 6.4 hereof and sales of obsolete or
unusable Equipment having a book value not in excess of $250,000 in the
aggregate in any Fiscal Year and provided no Event of Default has occurred
(and provided that the proceeds of such sales of absolute or unsaleable
Equipment shall be paid to the Lender and/or the holder of Permitted Liens
in accordance with the respective priorities of the Liens thereon and to
the extent of indebtedness secured thereby), transfer, sell, assign, lease
or otherwise dispose of all or any part of its or its Subsidiaries'
Property, or wind up, liquidate or dissolve, or cease to carry on business
or agree to do any of the foregoing.
1.26 Section 9.8 of the Loan Agreement is amended by adding the phrase
", the Florida Subsidiary or Barbados Subsidiary" after the reference to "Malone
Manufacturing, Inc." in the second line thereof.
1.27 Section 9.11 of the Loan Agreement is deleting and the following
substituted therefor:
"9.11 Neither of the Borrower nor any of its Subsidiaries shall
incur or maintain any Debt other than: (a) the Obligations; (b) in the
case of the Borrower, trade payables, and contractual obligations to
suppliers and customers incurred in the ordinary course of business; (c)
other Debt existing on the Closing Date, and included in the Financial
Statements attached as Exhibit G-1; (d) Permitted Rentals as permitted by
Section 9.21; (e) Debt pursuant to unsecured Guarantees as described in
Exhibit C; (f) Debt secured by purchase money security interests ("PMSIs")
in Equipment acquired by the Borrower and/or its Subsidiaries in
compliance with Section 9.20 hereof (provided the principal amount of such
Debt does not exceed the purchase price of such Equipment) and, to the
extent not included in Debt as above provided in this paragraph (f), all
obligations under unsecured Guarantees in connection with acquisitions by
the Borrower of Equipment, not in the aggregate in excess of $500,000
outstanding at any time in the Fiscal Year ending in 1997 and $1,000,000
in the Fiscal Year ending in 1998 and thereafter; (g) the intercorporate
loan to the Malone Subsidiary referred to in paragraph (e) of Section
9.13; (h) Debt pursuant to the Consolidated FST Debenture and up to
$15,000,000 of additional indebtedness to FST to be advanced on or before
February 15, 1999 (the "1999
<PAGE> 14
-14-
FST Investment"), all unsecured, providing for no principal repayments
until after the Maturity Date, bearing interest at a rate not in excess of
11 % per annum in the case of the Consolidated FST Debenture and 12.9%
(weighted average rate) per annum in the case of the 1999 FST Investment
and all subject to the terms of the Subordination Agreement between, inter
alia, FST and the Lender; (i)(A) in the case of Gildan Activewear, San
Jose, S.A., (formerly known as Los Angeles de San Jose, S.A), up to
$3,500,000 of loans by the Borrower to it (inclusive of all moneys
received by to Borrower and its Subsidiaries from CIDA in respect of
Honduras Operations) less, if a positive number, the cumulative Honduras
Cashflow Recapture applicable to Los Angeles de San Jose, S.A., (B) in the
ease of Gildan Activewear El Progresso, S.A. (formerly known as Nicole El
Progreso, S.A.), up to $2,000,000 until the receipt of the 1999 FST
Investment and thereafter, $3,000,000, of loans by the Borrower to it
less, if a positive number, the cumulative Honduras Cashflow Recapture
applicable to Nicole El Progreso, S.A., (C) in the case of the Florida
Subsidiary, $1,500,000 of loans by the Borrower to it less, if a positive
number, the cumulative Florida Cashflow Recapture, and (D) in the case of
the Barbados Subsidiary, up to $500,000 until receipt of the 1999 EST
Investment and thereafter, $2,500,000 (provided same is utilized as
follows (X) up to$500,000 to permit Gildan Activewear B.V.I. Inc. to
purchase real estate having a value of approximately $2,000,000 in
Barbardos and (Y) up to $1,500,000 to facilitate the incorporation and
establishment of Gildan Activewear S.R.L. as an active operating entity)
of loans by the Borrower to the Barbados Subsidiary plus Debt in a
principal amount not exceeding $1,500,000 in favour of a mortgage financer
of real estate in Barbados; (j) Debt secured by Permitted Liens; and (k)
an amount not exceeding $1,000,000 to refinance and replace the existing
Valleyfield Mortgage. Notwithstanding the foregoing or any other twin
hereof (including Section 9.13(b)), the Debt to FST shall only be
permitted if no principal payments are required to be made prior to June,
2003 and no interest in excess of 11% (on the Consolidated FST Debenture)
and 12.9% (weighted average rate) (on the 1999 FST Investment) per annum
is payable thereon and FST, the Lender and the Borrower shall have entered
into the Subordination Agreement in form and substance satisfactory to the
Lender in its discretion, relating to the Consolidated FST Debenture and
the 1999 FST Investment."
1.28 Section 9.12 of the Loan Agreement is amended by adding at the end
thereof:
", by the Florida Subsidiary of the Florida Debt and by the Barbados
Subsidiary of the Barbados Debt."
1.29 Section 9.15 of the Loan Agreement is amended by deleting the phrase
"solely as a holding corporation" in paragraph (a) thereof and by adding the
phrase "and the Barbados Subsidiary, in the aggregate" at paragraph (b).
1.30 Section 9.16 of the Loan Agreement is amended by adding the phrase
"and a mortgage in a principal amount not exceeding $1,500,000 secured solely on
real estate in the Barbados to be acquired by Gildan Activewear B.V.I., Inc." at
the end thereof (prior to the period).
<PAGE> 15
-15-
1.31 Section 9.18 of the Loan Agreement is amended by deleting the phrase
"as a holding corporation" in paragraph (c) thereof.
1.32 Section 9.20 of the Loan Agreement is amended by deleting the
reference to "Cdn$8,000,000" in paragraph (d) thereof and substituting "Cdn
$20,000,000" therefor.
1.33 Section 9.21 of Loan Agreement is amended by deleting the reference
to "$2,800,000" and substituting "$5,000,000" therefor.
1.34 The following Sections are inserted immediately after Section 9.25 of
the Loan Agreement:
"9.26 Year 2000 Problem. The Borrower will, on a timely basis, take
all commercially reasonable steps to address the "Year 2000 problem"
referred to in Section 8.30 such that there does not occur any Material
Adverse Effect as a consequence thereof.
9.27 Minimum Availability. The Borrower shall maintain Availability
of not less than the following amounts as tested during the following
periods:
(a) as at its fiscal quarter ending March 31, 1999 (and throughout
the period from and including 5 days prior to and including 5 days
following such date): $7,500,000;
(b) as at its fiscal quarter ending June 30, 1999 (and throughout
the period from and including 5 days prior to and including 5 days
following such date): $20,000,000; and
(c) as at each fiscal quarter or Fiscal Year end thereafter (and
throughout the period from and including 5 days prior to and including 5
days following each such date): $20,000,000.
9.28 Foreign Subsidiaries. No Property of the Borrower, the Florida
Subsidiary or the Malone Subsidiary will be assigned, conveyed or
otherwise transferred to the Barbados Subsidiary and the Borrower shall
ensure that no Property of the Honduras Subsidiary or Barbados Subsidiary
are included in "Eligible Accounts" or "Eligible Inventory" reported as
such to the Lender.
9.29 1999 FST Investment. The Borrower shall receive on or prior to
February 26, 1999 the 1999 FST Investment on terms satisfactory to the
Lender in its sole discretion and the Subordination Agreement among the
Lender and GST shall be amended or replaced on terms satisfactory to the
Lender in its sole discretion (it being hereby agreed that the failure to
receive such additional amount and a satisfactory Subordination Agreement
on or before February 26, 1999 shall constitute an immediate
<PAGE> 16
-16-
Event of Default without further notice or observance of any other
formality by the Lender).
9.30 Additional Security. If this Agreement is not terminated and
all Obligations fully and finally paid and satisfied on or before April 1,
1999, the Borrower shall, within 30 days of such date, deliver to the
Lender the unqualified guarantee by each Barbados Subsidiary of all
Obligations, a security agreement creating a Lien in all of the Property
of each Barbados Subsidiary, evidence of the due recording and perfection
of such Lien in each jurisdiction where it is necessary or appropriate to
do so and evidences of corporate authority and supporting opinions of
legal counsel to the Barbados Subsidiary, all in form and substance
satisfactory to the Lender in its sole discretion."
1.35 Section 11.1(f) and (g) of the Loan Agreement are amended by adding
the phrase "the Bankruptcy Act of Barbados, the Federal Bankruptcy Code of the
United States" after the phrase "Companies' Creditors Arrangement Act of
Canada".
1.36 Section 11.1 (p) of the Loan Agreement is amended by adding the
phrase "or any Subsidiary's" after the word "Borrower's".
1.37 Section 12 of the Loan Agreement is deleted and the following is
substituted therefor:
"12. Term and Termination of Revolving Loan. Subject to any earlier
demand for payment of the Revolving Credit Facility upon the occurrence of
an Event of Default, the initial term of this Agreement shall be the
period from the Closing Date to end on the Maturity Date (the "Term"). If,
but only if agreed by the Lender in its sole discretion and upon terms and
conditions satisfactory to the Lender in its sole discretion, this
Agreement may be renewed for successive one (1) year periods after the
Maturity Date (each such renewal period referred to as a "Renewal Term").
The Borrower may terminate the Revolving Credit Facility at any time
during the Term or any Renewal Term if: (a) it gives the Lender ninety
(90) days prior written notice of termination by registered or certified
mail; (b) it pays and performs all Obligations (including in respect of
any F/X Transaction or Swap) on or prior to the effective date of
termination; and (c) (A) if the effective date of such termination is on
or prior to September 30,2000, it pays the Lender, on or prior to the
effective date of termination, an early termination fee equal to $750,000,
and (B) if the effective date of such termination is after September
30, 2000 and before September 30, 2001, it pays to the Lender, on or
before the effective date of termination, an early termination fee equal
to $500,000, and (C), subject to any other agreement between the parties
in connection with the renewal of this Agreement, if the effective date of
such termination is after the Maturity Date and during any Renewal Term
(except for a termination effective as of the expiry date of such Renewal
Term) it pays to the Lender, on or prior to the effective date of
termination, an early termination fee equal to one half of one percent
1/2%) of the Maximum Revolving Credit Line.
<PAGE> 17
-17-
Notwithstanding the foregoing, in the event that the Borrower terminates
this Agreement and repays in full the Obligations on or before 2:00 p.m.
(Toronto time) April 1, 1999 with the proceeds of a Barbados Financing,
the foregoing termination fee will be waived. The Lender may terminate
this Agreement without notice upon an Event of Default whereupon the
foregoing fee shall be payable as if the Borrower had given a notice of
termination effective as of the date of termination by the Lender. Upon
the effective date of termination of this Agreement for any reason
whatsoever, all Obligations (including, without limitation, all exposure
of the Lender under or in connection with Letters of Credit, F/X
Transactions and any Swaps outstanding) shall become immediately due and
payable without the need for any demand or observance of any other
formality by the Lender. Notwithstanding the termination of this
Agreement, until all Obligations are paid and performed in full, the
Lender shall retain all its rights and remedies hereunder and under the
Loan Documents (including, without limitation, in all then existing and
after-arising Collateral). Partial termination of the Revolving Credit
Facility is not permitted."
1.38 Section 13.9 is amended by deleting the reference to "U.S. $500" per
day and substituting "U.S. $600" per day therefor and by deleting the phrase
"provided that the maximum Audit Fee in any year in which no Event has occurred
shall not exceed U.S. $40,000".
1.39 Exhibit D should be deemed to include such docks in Florida as have
been reported to the Lender in the Borrower's regular inventory reports as
locations of Inventory provided that the account debts to such docks have been
included in the reports and that reserves satisfactory to the Lender in its
discretion have been established.
1.40 The amendments, consents and waivers set forth herein are strictly
limited to the matters and times specifically described above and shall not be
deemed to constitute an amendment, consent or waiver with respect to any other
term, covenant, matter, time or occasion.
Section II CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective only upon the satisfaction of
all of the following conditions precedent (the date of satisfaction of such
conditions being referred to herein as the "Ninth Amendment Effective Date"):
On or before the Ninth Amendment Effective Date, (a) the Borrower
shall deliver to the Lender the following, each, unless otherwise noted, dated
the Ninth Amendment Effective Date:
(i) Certified copies of its Articles (as construed for the purposes of
the Canada Business Corporations Act), together with a good standing
certificate from the jurisdiction of its incorporation, each dated a
recent date prior to the Ninth Amendment Effective Date;
<PAGE> 18
-18-
(ii) Copies of its By-laws, certified as of the Ninth Amendment Effective
Date by its corporate secretary or an assistant secretary;
(iii) Resolutions of its Board of Directors approving and authorizing the
execution, delivery and performance of the transactions contemplated
by this Amendment, certified as of the Ninth Amendment Effective
Date by its corporate secretary or an assistant secretary as being
in full force and effect without modification or amendment;
(iv) Signature and incumbency certificates of its officer executing this
Amendment;
(v) Opinion of Quebec counsel to the Borrower in form satisfactory to
the Lender and its counsel; and
(vi) Executed copies of this Amendment, and
(b) the Lender shall have participated not less than 50% of the Revolving
Credit Facility to a Participating Lender, on terms satisfactory to the Lender
in its sole discretion, and
(c) the Lender shall have received evidence satisfactory to it that FST
intends to fund the 1999 FST Investment in an amount not less than $15,000,000.
Section III BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Amendment and to
amend the Loan Agreement in the manner provided herein, the Borrower represents
and warrants to the Lender that the following statements are true, correct and
complete:
3.1 Authorization, Validity, and Enforceability of this Amendment. The
Borrower has the corporate power and authority to execute and deliver this
Amendment and to perform the Loan Agreement as amended by this Amendment (the
"Amended Agreement"). The Borrower and each Guarantor of the Obligations (each a
"Guarantor") has taken all necessary corporate action (including, without
limitation, obtaining approval of its stockholders if necessary) to authorize
its execution and delivery of this Amendment and the performance of the Amended
Agreement. This Amendment has been duly executed and delivered by the Borrower
and each Guarantor, and this Amendment and the Amended Agreement constitute the
legal, valid and binding obligations of the Borrower and each Guarantor,
enforceable against it and then in accordance with their respective terms
without defence, setoff or counterclaim. The Borrower's and each Guarantor's
execution and delivery of this Amendment and the performance by the Borrower of
the Amended Agreement do not and will not conflict with, or constitute a
violation or breach of, or constitute a default under, or result in the creation
or imposition of any Lien upon the property of the Borrower, any Guarantor, or
any of its Subsidiaries by reason of the terms of (a) any contract, mortgage,
Lien, lease, agreement, indenture, or instrument to which the Borrower is a
party or which is binding on it, (b) any law
<PAGE> 19
-19-
applicable to the Borrower, any Guarantor or any of its Subsidiaries, or (c) the
certificate or articles of incorporation or amalgamation or bylaws of the
Borrower, any Guarantor or any of its Subsidiaries.
3.2 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or other person is necessary or required in connection
with the execution, delivery or performance by, or enforcement against, the
Borrower, any of its Subsidiaries, or any Guarantor, of this Amendment or the
Amended Agreement except for such as have been obtained or made and filings
required in order to perfect the Lender's security interests.
3.3 Incorporation of Representations and Warranties From Loan Agreement.
The representations and warranties contained in Section 8 of the Loan Agreement
are and will be true, correct and complete in all material respects on and as of
the Ninth Amendment Effective Date to the same extent as though made on and as
of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
3.4 Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event or an Event of Default.
Section IV MISCELLANEOUS
4.1 This letter agreement supersedes and replaces any prior agreements or
understandings with respect to any of the matters provided for herein.
4.2 This letter agreement shall be deemed to have been made in the
Province of Ontario and shall be governed by and interpreted in accordance with
the laws of such Province and the laws of Canada applicable therein, except that
no doctrine of choice of law shall be used to apply the laws of any other
jurisdiction.
Except to the extent waived or modified herein, the Loan Agreement
remains in full force and effect and is hereby ratified and confirmed. Please
evidence your agreement with the terms of this letter agreement by signing in
the space below. Notwithstanding the date of execution of this letter agreement,
this letter agreement shall be deemed effective the Ninth Amendment Effective
Date.
<PAGE> 20
-20-
The parties acknowledge that they have required that this agreement
and all related documents be prepared in English.
Les parties reconnaissent avoir exige que la presente convention et
tous les documents connexes soient rediges en anglais.
Sincerely,
BANK OF AMERICA CANADA
By:/s/ Robert Kizell
------------------
Vice-President
<PAGE> 21
-21-
AGREED AS OF THE DATE FIRST-ABOVE PROVIDED:
GILDAN ACTIVEWEAR INC./LES VETEMENTS DE SPORTS GILDAN INC.
By: /s/ Ken Cieply
------------------
Name: Ken Cieply
Title: Vice-President, Finance & Administration
Each of the undersigned Gildan Activewear Malone, Inc. and Gildan Activewear
Miami, Inc. (the "Guarantors") (i) consents to and approves the execution and
delivery of this letter agreement by the parties hereto, (ii) agrees that this
letter agreement does not and shall not limit or diminish in any manner the
obligations of the Guarantors under those certain Guarantee dated as of August
29, 1996 and dated as of September 1, 1998 (collectively, the "Guaranty"), and
any other guarantee or like instrument, executed by the Guarantors and delivered
to the Lender, and that such obligations would not be limited or diminished in
any manner even if the Guarantors had not executed this letter agreement, (iii)
agrees that this letter agreement shall not be construed as requiring the
consent of the Guarantors in any other circumstances, (iv) reaffirms its
obligations under the Guaranty and any other guarantee or like instrument, and
(v) agrees that the Guaranty and any other guarantee or like instrument remains
in full force and effect and is hereby ratified and confirmed.
GILDAN ACTIVEWEAR MALONE, INC.
By: /s/ Ken Cieply
------------------
Name: Ken Cieply
Title: VP Finance
GILDAN ACTIVEWEAR MIAMI, INC.
By: /s/ Ken Cieply
------------------
Name: Ken Cieply
Title: VP Finance
<PAGE> 1
EXHIBIT 10.18
EMPLOYMENT AGREEMENT ENTERED INTO at Montreal
--------------------------------------
on December 4, 1998.
--------------------------------------
BETWEEN: GILDAN ACTIVEWEAR INC., a corporation duly incorporated,
having its principal office at 725, Montee de Liesse,
Montreal (Quebec) H4T 1P5 (hereinafter the "Company")
AND: KEN CIEPLY
domiciled at: 231 Harrow Crescent
-------------------------------------
Hampstead, QC
-------------------------------------
(hereinafter the "Employee")
SECTION 1 - PURPOSE
1.0 The Employee has been employed by the Company since 1994 and in his
current capacity as Vice-President, Finance and Administration is
responsible for the financial and administrative services of the
Company and particularly for the Treasury, Accounting, Information
Technology, Corporate Administration, Risk Management, Payroll and
Personnel functions. In addition, he shall have any powers and carry
out mandates that may be entrusted to him by the Board of Directors
from time to time.
SECTION 2 - DUTIES
2.0 The Employee agrees to work full time at the Company and to make
every reasonable effort necessary to perform adequately the duties
that are assigned to him. The Employee agrees to comply with all the
orders, instructions, policies and/or rules that are established
verbally or in writing by the Board of Directors of the Company.
The Employee agrees during the term of this agreement and
thereafter, not to disclose the private affairs of the Company to
any other person, firm or company, other than in the normal
1
<PAGE> 2
performance of his employment hereunder, unless required by law, and
the Employee shall not use for his own purpose or for any purposes
other than those of the Company, any information, or knowledge
acquired with or relating to the affairs of the Company;
After termination of his employment with the Company the Employee
agrees:
i) not to disclose the private affairs of the Company to any
other person, firm, or company unless required by law, and
shall not use for his own purpose any confidential information
or knowledge pertaining to or otherwise relating to the
affairs of the Company;
ii) not to directly or indirectly solicit any of the Company's
customers for the purpose or intent of selling them any
products which are similar or otherwise competing with the
products of the Company for a period of twelve (12) months
after termination of employment;
iii) not to induce, entice, or otherwise attempt to directly or
indirectly hire or engage any of the Company's employees for a
period of twelve (12) months after termination of employment;
2
<PAGE> 3
SECTION 3 - COMPENSATION
3.0 The Company shall pay the Employee, for the duration of this
contract of employment, a base annual compensation (the "Base
Salary"), payable in consecutive bi-weekly installments. Such Base
Salary shall be reviewed annually, in accordance with Company
policies. The Employee shall also participate in the Company's
Annual Incentive Plan. Confirmation of the Employee's Base Salary
and targeted award under the Annual Incentive Plan will be provided
annually by the Company to the Employee in a separate letter.
SECTION 4 - EMPLOYMENT BENEFITS
4.0 The Employee shall be entitled to the employment benefits offered
from time to time to senior executives of the Company.
SECTION 5 - DURATION AND TERMINATION
5.0 This contract is for an indefinite period. It may, however, be
terminated by the Company, upon simple notice in writing transmitted
to the Employee, without the Company being bound to pay any
indemnity whatsoever, in the following cases:
a) Upon the death of the Employee;
b) If the Employee becomes physically or mentally disabled to
such an extent as to make him unable to perform his duties
normally and adequately as certified by an independent
physician. In such a case, the Employee may continue to
benefit under short-term and long-term disability insurance
plans, subject to the terms of such plans, provided that the
indemnities and benefits are not less than those in force at
the time of signing this Agreement;
c) If the Employee breaches the terms of this contract;
3
<PAGE> 4
d) For cause which means termination upon i) the Employee having
engaged in fraud, theft or embezzlement of Company funds or
(ii) the Employee having been convicted of felony or criminal
offense or (iii) the Employee having willfully engaged in
conduct that is demonstrably and materially injurious or
result in significant damage to the Company, monetarily or
otherwise.
5.1 If the Employee wishes to terminate his employment, he must advise
the Company in writing at least one month in advance. In such case
of voluntary termination of employment by the Employee, the Company
is not bound to pay any indemnity whatever.
5.2 Should the Company terminate the employment of the Employee for
reasons other than those provided for in Section 5.0 or should the
Company take any one of the actions listed in Appendix "A" or any
other action which could be construed as constructive dismissal, the
Employee shall be entitled to the following benefits:
i) an amount equivalent to 12 months of the Employee's Base
Salary in effect at the time of termination or dismissal, such
12 month period being hereinafter referred to as the
"termination period". Payment of this amount shall be made in
a lump sum or, if so elected by the Employee, as salary
continuance for the duration of the termination period;
ii) continuation of employment (group insurance) benefits in
effect at the time of termination or dismissal (except short
and long term disability) for the duration of the termination
period, ceasing upon new employment, if earlier;
4
<PAGE> 5
iii) any earned bonus (means bonus earned with respect to a
previous fiscal year) that would otherwise have been paid or
become payable to the Employee during the termination period
(based on the Employee's entitlement at the time of
termination or dismissal) pursuant to the terms of the
Company's Annual Incentive Plan in effect at the time of
termination or dismissal;
iv) the right to exercise vested options pursuant to any Company's
Stock Option Plan, in effect at the time of termination or
dismissal provided that such exercise shall take place within
a period of 90 days following the date of termination of
employment;
v) the payment of any earned but unused vacation days determined
in accordance with the Company's vacation policy for senior
executives plus the payment by or the reimbursement to the
Company of any amounts owed (due) under the Employee's
business expense account plus the payment of any balance or
prorata thereof owed the Employee under the Employee's
authorized personal spending account, if any, at time of
termination;
The indemnity provided for in sub-sections iii) and v) above shall
only be payable to the Employee in a lump sum.
Notwithstanding any dispositions of the present Employment
Agreement, none of the benefits, including the different types of
compensation, listed at sub-section 5.2 hereinabove shall be payable
to the Employee if his termination of employment were to occur
following a Change of Control in the Company for which the Employee
is covered pursuant to the Change of Control Agreement entered into
between the Company and the Employee on December 4, 1998, provided
said agreement remained in full force at time of termination of
employment.
5
<PAGE> 6
SECTION 6 - TERMINATION OF PRIOR CONTRACTS
6.0 The terms of this contract of employment revoke and cancel any prior
agreement, verbal or written, with respect to the Employee's
employment with the Company, each of the parties granting the other
full and final release and discharge from any action, cause of
action, claim or demand of any nature based on the provisions of any
such agreement.
SECTION 7 - SUCCESSORS
7.0 This contract shall be binding on the successors and assigns of both
parties.
SECTION 8 - INTERPRETATION
8.0 This contract of employment shall be governed by and interpreted in
accordance with the laws of Canada.
8.1 In the event that any clause, phrase, paragraph or part of this
contract is ruled invalid for any reason by any court having
jurisdiction, the remainder of this contract shall not be affected
or nullified by such judgement, whose application shall be
restricted to the clause, phrase, paragraph or part thus ruled
invalid.
SECTION 9 - LANGUAGE
The parties have expressly requested that this Agreement be drafted
in the English language.
Les parties ont expressement requis que cette entente soit redigee
en anglais.
6
<PAGE> 7
In witness whereof the parties hereto have duly signed this contract of
employment in duplicate at the date and place hereinabove mentioned.
GILDAN ACTIVEWEAR INC. EMPLOYEE
By: /s/ H. Greg Chamandy /s/ K. Cieply
-------------------------------- ----------------------------------------
7
<PAGE> 8
APPENDIX A
(i) Inconsistent Duties. A meaningful and detrimental alteration in the
position or reporting relationship or in the nature or status of the
responsibilities of the Employee from those in effect immediately prior to
the alleged constructive dismissal.
(ii) Reduced Salary. A reduction by the Company in the Base Salary as in effect
immediately prior to the alleged constructive dismissal;
(iii) Incentive Compensation Plans The failure by the Company to continue in
effect any incentive compensation plan in which the Employee participates,
including but not limited to, any Company Stock Option Plan and the Annual
Incentive Plan, or any other similar plans in effect immediately prior to
the alleged constructive dismissal, unless the Employee is eligible to
participate in, and is entitled to the opportunity to receive a comparable
level of benefits under, an ongoing substitute or alternative plan (it
being understood that the manner or method of payment and the form of
consideration need not be the same as existed in the original plans); or
the failure by the Company to continue the Employee's participation
therein on at least as favorable a basis, both in terms of the amount of
benefits available to the Employee and the level of participation relative
to other participants, as existed immediately prior to the alleged
constructive dismissal.
(iv) Employment Benefit (Group Insurance) Plans and Perquisites. The failure by
the Company to continue to provide the Employee with benefits at least as
favorable under any of the Corporation's group life insurance, medical,
health and accident, or disability plans in which the Employee
participated immediately prior to the alleged constructive dismissal; the
taking of any action by the Company that would directly or indirectly
materially reduce any of such benefits or deprive the Employee of any
material perquisite enjoyed
8
<PAGE> 9
immediately prior to the alleged constructive dismissal, including without
limitation and to the extent applicable, the use of secretarial services,
office space, telephones, computer facilities, expense reimbursement, and
other applicable privileges, if any, such as car, etc.; or the failure by
the Company to provide the Employee with the number of paid vacation days
in accordance with the Corporation's normal vacation policy for senior
executives in effect immediately prior to the alleged constructive
dismissal.
(v) Relocation. The Company requiring the Employee to be relocated in a
foreign country or more than sixty (60) miles away from the location where
the Employee is based immediately prior to the alleged constructive
dismissal;
(vi) No Assumption by Successor. The failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree to perform
this contract as contemplated in Section 7, or, if the business or
undertaking in connection with which the Employee's services are
principally performed is sold and the Employee's employment is transferred
as a result, the purchaser of such business shall fail to agree to provide
the Employee with the same comparable position, duties, compensation and
benefits as provided to the Employee by the Company immediately prior to
the alleged constructive dismissal.
9
<PAGE> 1
Exhibit 10.19
CHANGE OF CONTROL AGREEMENT ENTERED INTO at: Montreal
on: December 4, 1998
BETWEEN: GILDAN ACTIVEWEAR INC., a Company duly incorporated, having
its principal office at 725, Montee de Liesse, Montreal
(Quebec) H4T 1P5 (hereinafter the "Company")
AND KEN CIEPLY
domiciled at: 231 Harrow Crescent,
Hampstead, QC.
(hereinafter the "Employee" or "he or "him")
1.0 Term of Agreement. The term of this Agreement (the "Term") shall commence
on the date hereof and shall continue in effect through the end of the two
(2) year period commencing on the date the Change in Control occurs;
provided, however, that, if payment of compensation and benefits has begun
under this Agreement, the payment of such compensation and benefits shall
continue beyond the end of the Term in accordance with the applicable
section of this Agreement.
2.0 Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control as set forth below. For purposes of
this Agreement, a "Change in Control" shall mean a change in control of
the Company of a nature that would be required to be reported, whether or
not the Company is then subject to such reporting requirement; provided
that, without limitation, a Change in Control shall be deemed to have
occurred if:
(a) any individual, partnership, firm, Company, association, trust,
unincorporated organization or other entity, or any syndicate or
group deemed to be a person, becomes the "beneficial owner",
directly or indirectly, of securities of
1
<PAGE> 2
the Company representing 50.1% or more of the combined voting power
of the Company's then outstanding securities entitled to vote in the
election of directors of the Company (the "Company Voting
Securities"); provided, however, that any acquisition of Company
Voting Securities by the Company or any of its subsidiaries, or any
employee benefit plan (or related trust) of the Company or its
subsidiaries, or any Company with respect to which, following such
acquisition, substantially all of the combined voting power of the
then outstanding voting securities of such Company entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by the individuals and entities who were the
beneficial owners of Company Voting Securities immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, shall not
constitute a Change in Control;
(b) individuals who at the beginning of the Term constituted the Board
and any new directors whose appointment by the Board or whose
nomination for election by the Company's shareholders was approved
by a vote of at least three-quarters (3/4) of the directors then
still in office who either were directors at the beginning of the
Term or whose appointment or nomination for election was previously
so approved cease for any reason to constitute a majority of the
members of the Board;
(c) assets of the Company representing fifty (50) percent or more of the
net book value of the assets of the Company determined as of the
date of the audited financial statements of the Company then most
recently published, are sold, liquidated or distributed; or
(d) ten (10) percent or more of the value of the assets of the Company
or the voting securities of the Company are about to be transferred
or have been transferred because of any taking.
2
<PAGE> 3
seizure, or defeasance as a results of, or in connection with (i)
nationalization, expropriation, confiscation, coercion, force or
duress or other similar action or (ii) the imposition of a
confiscatory tax, assessment or other governmental charge or levy.
The value of the assets of the Company shall be determined as of the
date of the audited financial statements of the Company most
recently published prior to the date of the transfer
A Change in Control shall also be deemed to occur as of the date the
Company executes an agreement which, if carried out, would result in the
occurrence of a Change in Control as described above, but only with
respect to a termination of employment occurring after the execution of
such agreement and prior to the expiration or termination of such
agreement.
3.0 Potential Change in Control. Notwithstanding his right to terminate
employment at any time with proper notice, the Employee agrees, subject to
the terms and conditions of this Agreement, to remain in the employ of the
Company in the event of a Potential Change in Control until the earliest
of (a) a date which is three hundred and sixty five (365) days from the
occurrence of such Potential Change in Control, (b) the termination of his
employment by reason of death or Disability as defined in Section 4(a) of
this Agreement, or (c) the date on which he first becomes entitled under
this Agreement to receive the benefits provided in Section 5(c) of this
Agreement. For purposes of this Agreement, a Potential Change in Control
shall be deemed to have occurred if:
(a) the Company enters into an agreement which, if carried out, would
result in the occurrence of a Change in Control;
(b) any person publicly announces an intention to take or to consider
taking actions which if carried out would constitute a Change in
Control;
3
<PAGE> 4
(c) the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.
4.0 Termination Following Change in Control. If any of the events described in
Section 2 hereof constituting a Change in Control shall have occurred, the
Employee shall be entitled to the benefits provided in Section 5 hereof
upon the subsequent termination of his employment during the Term, unless
such termination is because of death, Cause or Disability, or by the
Employee for other than Good Reason.
(a) Disability. If, as a result of the Employee's incapacity due to a
physical or mental illness which is determined to cause permanent
impairment in the ability to perform the Employee's duties, the
Employee shall have been absent from the full-time performance of
his duties with the Company for one hundred eighty (180) consecutive
days following the earlier of the Change in Control or the
commencement of the absence, and within thirty (30) days after
written Notice of Termination is given, the Employee shall not have
returned to the full-time performance of your duties, the Company
may terminate the Employee's employment for "Disability".
(b) Cause. Termination by the Company of the Employee's employment for
"Cause" shall mean termination upon (i) the Employee having engaged
in fraud, theft or embezzlement of Company funds or (ii) the
Employee having been convicted of felony or criminal offense or
(iii) the Employee having willfully engaged in conduct that is
demonstrably and materially injurious or result in significant
damage to the Company, monetarily or otherwise.
(c) Good Reason. The Employee shall be entitled to terminate his
employment for Good Reason. For purposes of this Agreement,
4
<PAGE> 5
"Good Reason" shall mean the occurrence, without the Employee's
written consent, of any of the following:
(i) Inconsistent Duties. A meaningful and detrimental alteration
in the Employee's position or reporting relationship or in the
nature or status of his responsibilities from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction by the Company in the Employee's
annual base salary as in effect on the date hereof.
(iii) Relocation. The relocation of the office of the Company where
the Employee is employed at the time of the Change in Control
to a location that is more than sixty (60) miles away.
(iv) Incentive Compensation Plans. The failure by the Company to
continue in effect any incentive compensation plan in which
the Employee participates, or any other similar plans adopted
prior to the Change in Control, unless the Employee is
eligible to participate in, and are entitled to the
opportunity to receive a comparable level of benefits under,
an ongoing substitute or alternative plan (it being understood
that the manner or method of payment and the form of
consideration need not to be the same as existed in the
original plans); or the failure by the Company to continue the
Employee's participation therein on at least as favorable a
basis, both in terms of the amount of benefits available to
him and the level of the Employee's participation relative to
other participants, as existed at the time of the Change in
Control;
5
<PAGE> 6
(v) Employment Benefits (Group Insurance and Perquisites). The
failure by the Company to continue to provide the Employee
with benefits at least as favorable as those enjoyed under any
of the Company's life insurance, accidental death, medical and
disability plans in which he was participating at the time of
the Change of Control; the taking of any action by the Company
that would directly or indirectly materially reduce any of
such benefits or deprive the Employee of any material
perquisite enjoyed by him at the time of the Change in
Control, including, without limitation and to the extent
applicable, the use of secretarial services, office space,
telephones, computer facilities and expense reimbursement.
(vi) No Assumption by successor. The failure of the Company to
obtain a satisfactory agreement from any successor to assume
and agree to perform this Agreement, as contemplated in
Section 6 hereof, or, if the business or undertaking in
connection with which the Employee's services are principally
performed is sold at any time after a Change in Control and
his employment is transferred as a result, the purchaser of
such business shall fail to agree to provide the Employee with
the same or a comparable position, duties, compensation and
benefits (as described in clauses (iv) and (v) above) as
provided to him by the Company immediately prior to the Change
in Control; or
(d) Notice of Termination. Any purported termination of the Employee's
employment by the Company or by the Employee shall be communicated
by written Notice of Termination to the other party hereto in
accordance with Section 8 hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the
specific termination
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provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the
provision so indicated. The Employee's failure to set forth in the
Notice of Termination any fact or circumstance which contributes to
a showing of "Good Reason" shall not waive his rights hereunder or
preclude him from asserting such fact or circumstance in enforcing
his rights hereunder.
(e) Date of Termination and Interim Compensation. "Date of Termination
shall mean (i) if the Employee's employment is terminated for
Disability, thirty (30) days after a Notice of Termination is given
(provided that be shall not have returned to the full-time
performance of his duties during such thirty (30) day period), (ii)
if the Employee's employment is terminated pursuant to Section 4
(b), the date specified in the Notice of Termination, and (iii) if
the Employee's employment is terminated for any other reason, the
date specified in the Notice of Termination (which, in case of a
termination pursuant to Section 4(c) above, shall not be less than
thirty (30) nor more than sixty (60) days from the date such Notice
of Termination is given); provided that, except in the case of a
termination pursuant to Section 4(b) above, if within thirty (30)
days after any Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination
shall be the date on which the dispute is finally determined by
mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or the time for
appeal therefrom has expired and no appeal has been perfected);
provided further, that the Date of Termination shall be extended by
a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the
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<PAGE> 8
solution of such dispute, the Company will continue to pay the
Employee his full compensation in effect when the notice giving rise
to the dispute was given, and continue the Employee as a participant
in all compensation, benefit plans and perquisites in which he was
participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved in accordance with this
Section 4(e). Amounts paid under this Section 4(e) are in addition
to all other amounts due under this agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
5.0 Compensation During Disability or Upon Termination. Following a Change of
Control, upon termination of the Employee's employment or Disability
occurring during the Term, the Company shall cause the Employee to be
provided with the following benefits:
(a) Disability. During any period that the Employee fails to perform his
full-time duties with the Company as a result of his Disability, he
shall continue to receive his base salary at the rate in effect at
the commencement of any such period, inclusive of all compensation
payable to him under the Company's disability insurance coverage or
other plans during such period, until his employment is terminated
pursuant to Section 4(a) hereof. Thereafter, his benefits shall be
determined in accordance with the Company's insurance programs and
other benefit plans then in effect.
(b) Termination by death, for Cause or Other Than for Good Reason. If
the Employee's employment is terminated on account of death, by the
Company for Cause or by him for other than for Goad Reason, the
Company shall pay him his full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination
is given and any amounts to be paid to him pursuant to the Company's
benefit plans then in effect
8
<PAGE> 9
and the Company shall have no further obligations to him under this
Agreement.
(c) By the Company Without Cause; By the Employee for Good Reason. If
the Employee's employment is terminated by the Company without Cause
and other than for Disability or death, or by him for Good Reason,
then he shall be entitled to the benefits provided below:
(i) Accrued Compensation. The Company shall pay him his full base
salary through the Date of Termination at the rate in effect
at the time the Notice of Termination is given;
(ii) Severance Payment. In lieu of any further salary payments to
him for periods subsequent to the Date of Termination, the
Company shall pay him, as severance pay, not later than the
thirtieth (30th) business day following the Date of
Termination (the "Payment Date"), a lump sum severance payment
(the "Severance Payment") equal to the amount of base salary
he would have earned had he continued to be employed until the
end of the twenty-four (24) month period following the Date of
Termination (the "Severance period") assuming that his rate of
monthly base salary during the Severance Period would be equal
to the highest monthly rate of base salary which was payable
to him by the Company (or any Company affiliated with the
Company) during the twenty-four (24) month period immediately
preceding the Date of Termination (the "Severance Salary
Rate");
(iii) Incentive Compensation Plans. The Company shall pay him any
amounts required to be paid to him under the terms of any
Company Stock Option Plan or any successor plan(s) in which he
participates. The Company shall pay
9
<PAGE> 10
him, in cash, in a lump sum, no later than the Payment Date,
an amount in lieu of his participation in the Company's Annual
Incentive Plan during the Severance Period which shall be
equal to his target annual bonus, i.e. the set percentage of
base salary pursuant to the Company's Annual Incentive Plan
times his "Severance Salary Rate", for the year during which
the Date of Termination occurs multiplied by the number of
months during the Severance Period.
(iv) Employment Benefits. The Company shall continue to provide him
and his dependants with the same level of life, accidental
death, disability, medical insurance benefits which he and his
dependants were receiving or entitled to receive immediately
prior to the Date of Termination until the end of the
Severance Period or, if earlier, the date on which he and his
dependants are provided coverage under similar plans of a
subsequent employer. Contributions by the Employee required
under such programs shall be payable to the Company or to the
insurer, as applicable, on the same basis as if he continued
to be employed during the Severance Period.
(v) Vacation. The Company shall pay him, in cash, in a lump sum,
no later than the Payment Date, an amount equal to all accrued
but unused vacation determined as of the Date of Termination.
The amount of such payment shall be determined based upon his
Severance Salary Rate. In no event shall the amount of
vacation time to which the Employee is entitled be less than
the amount to which he would have been entitled under the
vacation policy in effect as of the Change in Control.
(vi) Loans. The Employee shall make repayments of any loan issued
by the Company in accordance with the repayment
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<PAGE> 11
schedule under the loan as though he had not terminated
employment; except that full repayment of the loan shall be
due on the earlier of the end of the Severance Period or the
date repayment of the loan is due.
(d) Tax Withholding. Unless expressly provided otherwise in an
applicable provision of this Agreement, all payments to be made
under this Section shall be subject to required statutory deductions
at source.
(e) No Mitigation. The Employee shall not be required to mitigate the
amount of any payment provided for in this Section by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section be reduced by any compensation
earned by him as the result of employment whether by another
employer or self-employment, after the Date of Termination, or
otherwise, except as specifically provided in this Section.
6.0 Successors; Binding Agreement.
(a) Assumption by Successor. The Company will require any successor
company (whether direct or indirect, and whether by purchase,
merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and
agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it had no such
succession taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the
Employee to compensation from the Company in the same amount and on
the same terms as that to which he would be entitled hereunder if he
had terminated his employment for Good Reason following a Change in
Control, except that for purposes of implementing
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<PAGE> 12
the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this
Agreement, "the Company" shall include any successor to the
Company's business and/or assets as aforesaid that assumes and
agrees to perform this Agreement by operation of law, otherwise.
(b) Enforceability by Beneficiaries. This Agreement shall inure to the
benefit of and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee should die
while any amount would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement
to his devisee, legatee or other designee or, if there is no such
designee, to his estate.
7.0 Confidential Information. The Employee shall hold in a fiduciary capacity
for the benefit of the Company all secret or confidential information,
knowledge or date relating to the Company or any of its affiliated
companies, and their respective business, that shall have been obtained by
him during his employment by the Company or any of its affiliated
companies and that shall not be or become public knowledge unless required
by law (other than by acts of him or his representatives in violation of
this Agreement). After termination of the Employee's employment with the
Company, he shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or date to anyone
other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section constitute a basis
for deferring or withholding any amounts otherwise payable to the Employee
under this Agreement.
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<PAGE> 13
8.0 Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing,
addressed to GILDAN ACTIVEWEAR INC., 725, Montee de Liesse, Montreal
(Quebec) H4T 1P5, Attention: Chief Executive Officer or to the Employee at
the address set forth on the first page of this Agreement or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
9.0 Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in
writing. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.
10.0 Final Agreement. It is the intention of the Company and the Employee that
the compensation and benefits to be provided to him under this Agreement
shall be the only compensation and benefits to be provided to him by the
Company in the event of his termination of employment following a Change
in Control. No Agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by
either party that are not expressly set forth in this Agreement and this
Agreement shall supersede all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or
written, with respect to the subject matter hereof.
11.0 Governing Law. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of Canada.
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<PAGE> 14
12.0 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13.0 Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
14.0 No Contract of Employment. Nothing in this Agreement shall be construed as
giving the Employee any right to be retained in the employ of the Company.
15.0 Headings. The headings contained in this Agreement are intended solely for
convenience and shall not affect the rights of the parties to this
Agreement.
16.0 English Language. The parties hereto declare that they require that this
Agreement and any related documents be drawn up and executed in English.
Les parties declarent qu'elles requierent que cette convention ainsi que
tous documents relatifs a cette convention soient rediges et executes en
anglais.
GILDAN ACTIVEWEAR INC. EMPLOYEE
(the Company)
/s/ H. Greg Chamandy /s/ Ken Cieply
--------------------------- ---------------------------
14
<PAGE> 1
Exhibit 10.20
EMPLOYMENT AGREEMENT ENTERED INTO at: Montreal
___________________________
on: Oct. 1, 1998
_______________________
BETWEEN: GILDAN ACTIVEWEAR INC., a corporation duly
incorporated, having its principal office at
725, Montee de Liesse, Montreal (Quebec) H4T
1P5 (hereinafter the "Company")
AND: GEORGE SAM YU SUM
domiciled at: 30 Fallbrook
_______________________________
HAMPSTEAD, QUE.
____________________________________________
(hereinafter the "Employee")
SECTION 1 - PURPOSE
1.0 The Employee has been employed by the Company since Oct. 1995 and in
his current capacity as Vice-President, Operations is responsible
for the Operations Planning, Product Development, Purchasing,
Warehousing and Distribution (Logistics) functions of the Company.
In addition, he shall have any powers and carry out mandates that
may be entrusted to him by the Board of Directors from time to time.
SECTION 2 - DUTIES
2.0 The Employee agrees to work full time at the Company and to make
every reasonable effort necessary to perform adequately the duties
that are assigned to him. The Employee agrees to comply with all the
orders, instructions, policies and/or rules that are established
verbally or in writing by the Board of Directors of the Company.
The Employee agrees during the term of this agreement and
thereafter, not to disclose the private affairs of the Company to
any other person, firm or company, other than in the normal
performance of his employment hereunder, unless required by law, and
the Employee shall not use for his own purpose or for
1
<PAGE> 2
any purposes other than those of the Company, any information, or
knowledge acquired with or relating to the affairs of the Company;
After termination of his employment with the Company the Employee
agrees:
i) not to disclose the private affairs of the Company to any
other person, firm, or company unless required by law, and
shall not use for his own purpose any confidential information
or knowledge pertaining to or otherwise relating to the
affairs of the Company;
ii) not to directly or indirectly solicit any of the Company's
customers for the purpose or intent of selling them any
products which are similar or otherwise competing with the
products of the Company for a period of twelve (12) months
after termination of employment;
iii) not to induce, entice, or otherwise attempt to directly or
indirectly hire or engage any of the Company's employees for a
period of twelve (12) months after termination of employment;
2
<PAGE> 3
SECTION 3 - COMPENSATION
3.0 The Company shall pay the Employee, for the duration of this
contract of employment, a base annual compensation (the "Base
Salary"), payable in consecutive bi-weekly installments. Such Base
Salary shall be reviewed annually, in accordance with Company
policies. The Employee shall also participate in the Company's
Annual Incentive Plan. Confirmation of the Employee's Base Salary
and targeted award under the Annual Incentive Plan will be provided
annually by the Company to the Employee in a separate letter.
SECTION 4 - EMPLOYMENT BENEFITS
4.0 The Employee shall be entitled to the employment benefits offered
from time to time to senior executives of the Company.
SECTION 5 - DURATION AND TERMINATION
5.0 This contract is for an indefinite period. It may, however, be
terminated by the Company, upon simple notice in writing transmitted
to the Employee, without the Company being bound to pay any
indemnity whatsoever, in the following cases:
a) Upon the death of the Employee;
b) If the Employee becomes physically or mentally disabled to
such an extent as to make him unable to perform his duties
normally and adequately as certified by an independent
physician. In such a case, the Employee may continue to
benefit under short-term and long-term disability insurance
plans, subject to the terms of such plans, provided that the
indemnities and benefits are not less than those in force at
the time of signing this Agreement;
c) If the Employee breaches the terms of this contract;
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<PAGE> 4
d) For cause which means termination upon i) the Employee having
engaged in fraud, theft or embezzlement of Company funds or
(ii) the Employee having been convicted of felony or criminal
offense or (iii) the Employee having willfully engaged in
conduct that is demonstrably and materially injurious or
result in significant damage to the Company, monetarily or
otherwise.
5.1 If the Employee wishes to terminate his employment, he must advise
the Company in writing at least two months in advance. In such case
of voluntary termination of employment by the Employee, the Company
is not bound to pay any indemnity whatever.
5.2 Should the Company terminate the employment of the Employee for
reasons other than those provided for in Section 5.0 or should the
Company take any one of the actions listed in Appendix "A" or any
other action which could be construed as constructive dismissal, the
Employee shall be entitled to the following benefits:
i) an amount equivalent to 12 months of the Employee's Base
Salary in effect at the time of termination or dismissal, such
12 month period being hereinafter referred to as the
"termination period". Payment of this amount shall be made in
a lump sum or, if so elected by the Employee, as salary
continuance for the duration of the termination period;
ii) continuation of employment (group insurance) benefits in
effect at the time of termination or dismissal (except short
and long term disability) for the duration of the termination
period, ceasing upon new employment, if earlier;
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<PAGE> 5
iii) any earned bonus (means bonus earned with respect to a
previous fiscal year) that would otherwise have been paid or
become payable to the Employee during the termination period
(based on the Employee's entitlement at the time of
termination or dismissal) pursuant to the terms of the
Company's Annual Incentive Plan in effect at the time of
termination or dismissal;
iv) the right to exercise vested options pursuant to any Company's
Stock Option Plan, in effect at the time of termination or
dismissal provided that such exercise shall take place within
a period of 90 days following the date of termination of
employment;
v) the payment of any earned but unused vacation days determined
in accordance with the Company's vacation policy for senior
executives plus the payment by or the reimbursement to the
Company of any amounts owed (due) under the Employee's
business expense account plus the payment of any balance or
prorata thereof owed the Employee under the Employee's
authorized personal spending account, if any, at time of
termination;
The indemnity provided for in sub-sections iii) and v) above shall
only be payable to the Employee in a lump sum.
Notwithstanding any dispositions of the present Employment
Agreement, none of the benefits, including the different types of
compensation, listed at sub-section 5.2 hereinabove shall be payable
to the Employee if his termination of employment were to occur
following a Change of Control in the Company for which the Employee
is covered pursuant to the Change of Control Agreement entered into
between the Company and the Employee on May 28, 1998, provided said
agreement remained in full force at time of termination of
employment.
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<PAGE> 6
SECTION 6 - TERMINATION OF PRIOR CONTRACTS
6.0 The terms of this contract of employment revoke and cancel any prior
agreement, verbal or written, with respect to the Employee's
employment with the Company, each of the parties granting the other
full and final release and discharge from any action, cause of
action, claim or demand of any nature based on the provisions of any
such agreement.
SECTION 7 - SUCCESSORS
7.0 This contract shall be binding on the successors and assigns of both
parties.
SECTION 8 - INTERPRETATION
8.0 This contract of employment shall be governed by and interpreted in
accordance with the laws of Canada.
8.1 In the event that any clause, phrase, paragraph or part of this
contract is ruled invalid for any reason by any court having
jurisdiction, the remainder of this contract shall not be affected
or nullified by such judgement, whose application shall be
restricted to the clause, phrase, paragraph or part thus ruled
invalid.
SECTION 9 - LANGUAGE
The parties have expressly requested that this Agreement be drafted
in the English language.
Les parties ont expressement requis que cette entente soit redigee
en anglais.
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<PAGE> 7
In witness whereof the parties hereto have duly signed this contract of
employment in duplicate at the date and place hereinabove mentioned.
GILDAN ACTIVEWEAR INC. EMPLOYEE
By: /s/ H. Greg Chamandy /s/ George Sam Yu Sum
_____________________________ _______________________________
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<PAGE> 8
APPENDIX A
(i) Inconsistent Duties. A meaningful and detrimental alteration in the
position or reporting relationship or in the nature or status of the
responsibilities of the Employee from those in effect immediately prior to
the alleged constructive dismissal.
(ii) Reduced Salary. A reduction by the Company in the Base Salary as in effect
immediately prior to the alleged constructive dismissal;
(iii) Incentive Compensation Plans The failure by the Company to continue in
effect any incentive compensation plan in which the Employee participates,
including but not limited to, any Company Stock Option Plan and the Annual
Incentive Plan, or any other similar plans in effect immediately prior to
the alleged constructive dismissal, unless the Employee is eligible to
participate in, and is entitled to the opportunity to receive a comparable
level of benefits under, an ongoing substitute or alternative plan (it
being understood that the manner or method of payment and the form of
consideration need not be the same as existed in the original plans); or
the failure by the Company to continue the Employee's participation
therein on at least as favorable a basis, both in terms of the amount of
benefits available to the Employee and the level of participation relative
to other participants, as existed immediately prior to the alleged
constructive dismissal.
(iv) Employment Benefit (Group Insurance) Plans and Perquisites. The failure by
the Company to continue to provide the Employee with benefits at least as
favorable under any of the Corporation's group life insurance, medical,
health and accident, or disability plans in which the Employee
participated immediately prior to the alleged constructive dismissal; the
taking of any action by the Company that would directly or indirectly
materially reduce any of such benefits or deprive the Employee of any
material perquisite enjoyed
8
<PAGE> 9
immediately prior to the alleged constructive dismissal, including without
limitation and to the extent applicable, the use of secretarial services,
office space, telephones, computer facilities, expense reimbursement, and
other applicable privileges, if any, such as car, etc.; or the failure by
the Company to provide the Employee with the number of paid vacation days
in accordance with the Corporation's normal vacation policy for senior
executives in effect immediately prior to the alleged constructive
dismissal.
(v) Relocation. The Company requiring the Employee to be relocated in a
foreign country or more than sixty (60) miles away from the location where
the Employee is based immediately prior to the alleged constructive
dismissal;
(vi) No Assumption by Successor. The failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree to perform
this contract as contemplated in Section 7, or, if the business or
undertaking in connection with which the Employee's services are
principally performed is sold and the Employee's employment is transferred
as a result, the purchaser of such business shall fail to agree to provide
the Employee with the same comparable position, duties, compensation and
benefits as provided to the Employee by the Company immediately prior to
the alleged constructive dismissal.
9
<PAGE> 1
Exhibit 10.21
CHANGE OF CONTROL AGREEMENT ENTERED INTO at: Montreal
___________________________
on: Oct. 1, 1998
_______________________
BETWEEN: GILDAN ACTIVEWEAR INC., a Company duly
incorporated, having its principal office at
725, Montee de Liesse, Montreal (Quebec) H4T 1P5
(hereinafter the "Company")
AND GEORGE SAM YU SUM
domiciled at: 30 Fallbrook
HAMPSTEAD, Quebec
(hereinafter the "Employee" or "he or "him")
1.0 Term of Agreement. The term of this Agreement (the "Term") shall commence
on the date hereof and shall continue in effect through the end of the two
(2) year period commencing on the date the Change in Control occurs;
provided, however, that, if payment of compensation and benefits has begun
under this Agreement, the payment of such compensation and benefits shall
continue beyond the end of the Term in accordance with the applicable
section of this Agreement.
2.0 Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control as set forth below. For purposes of
this Agreement, a "Change in Control" shall mean a change in control of
the Company of a nature that would be required to be reported, whether or
not the Company is then subject to such reporting requirement; provided
that, without limitation, a Change in Control shall be deemed to have
occurred if:
(a) any individual, partnership, firm, Company, association, trust,
unincorporated organization or other entity, or any syndicate or
group deemed to be a person, becomes the "beneficial owner",
directly or indirectly, of securities of
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<PAGE> 2
the Company representing 50.1% or more of the combined voting power
of the Company's then outstanding securities entitled to vote in the
election of directors of the Company (the "Company Voting
Securities"); provided, however, that any acquisition of Company
Voting Securities by the Company or any of its subsidiaries, or any
employee benefit plan (or related trust) of the Company or its
subsidiaries, or any Company with respect to which, following such
acquisition, substantially all of the combined voting power of the
then outstanding voting securities of such Company entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by the individuals and entities who were the
beneficial owners of Company Voting Securities immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, shall not
constitute a Change in Control;
(b) individuals who at the beginning of the Term constituted the Board
and any new directors whose appointment by the Board or whose
nomination for election by the Company's shareholders was approved
by a vote of at least three-quarters (3/4) of the directors then
still in office who either were directors at the beginning of the
Term or whose appointment or nomination for election was previously
so approved cease for any reason to constitute a majority of the
members of the Board;
(c) assets of the Company representing fifty (50) percent or more of the
net book value of the assets of the Company determined as of the
date of the audited financial statements of the Company then most
recently published, are sold, liquidated or distributed; or
(d) ten (10) percent or more of the value of the assets of the Company
or the voting securities of the Company are about to be transferred
or have been transferred because of any taking,
2
<PAGE> 3
seizure, or defeasance as a results of, or in connection with (i)
nationalization, expropriation, confiscation, coercion, force or
duress or other similar action or (ii) the imposition of a
confiscatory tax, assessment or other governmental charge or levy.
The value of the assets of the Company shall be determined as of the
date of the audited financial statements of the Company most
recently published prior to the date of the transfer
A Change in Control shall also be deemed to occur as of the date the
Company executes an agreement which, if carried out, would result in the
occurrence of a Change in Control as described above, but only with
respect to a termination of employment occurring after the execution of
such agreement and prior to the expiration or termination of such
agreement.
3.0 Potential Change in Control. Notwithstanding his right to terminate
employment at any time with proper notice, the Employee agrees, subject to
the terms and conditions of this Agreement, to remain in the employ of the
Company in the event of a Potential Change in Control until the earliest
of (a) a date which is three hundred and sixty five (365) days from the
occurrence of such Potential Change in Control, (b) the termination of his
employment by reason of death or Disability as defined in Section 4(a) of
this Agreement, or (c) the date on which he first becomes entitled under
this Agreement to receive the benefits provided in Section 5(c) of this
Agreement. For purposes of this Agreement, a Potential Change in Control
shall be deemed to have occurred if:
(a) the Company enters into an agreement which, if carried out, would
result in the occurrence of a Change in Control;
(b) any person publicly announces an intention to take or to consider
taking actions which if carried out would constitute a Change in
Control;
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<PAGE> 4
(c) the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.
4.0 Termination Following Change in Control. If any of the events described in
Section 2 hereof constituting a Change in Control shall have occurred, the
Employee shall be entitled to the benefits provided in Section 5 hereof
upon the subsequent termination of his employment during the Term, unless
such termination is because of death, Cause or Disability, or by the
Employee for other than Good Reason.
(a) Disability. If, as a result of the Employee's incapacity due to a
physical or mental illness which is determined to cause permanent
impairment in the ability to perform the Employee's duties, the
Employee shall have been absent from the full-time performance of
his duties with the Company for one hundred eighty (180) consecutive
days following the earlier of the Change in Control or the
commencement of the absence, and within thirty (30) days after
written Notice of Termination is given, the Employee shall not have
returned to the full-time performance of your duties, the Company
may terminate the Employee's employment for "Disability".
(b) Cause. Termination by the Company of the Employee's employment for
"Cause" shall mean termination upon (i) the Employee having engaged
in fraud, theft or embezzlement of Company funds or (ii) the
Employee having been convicted of felony or criminal offense or
(iii) the Employee having willfully engaged in conduct that is
demonstrably and materially injurious or result in significant
damage to the Company, monetarily or otherwise.
(c) Good Reason. The Employee shall be entitled to terminate his
employment for Good Reason. For purposes of this Agreement,
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<PAGE> 5
"Good Reason" shall mean the occurrence, without the Employee's
written consent, of any of the following:
(i) Inconsistent Duties. A meaningful and detrimental alteration
in the Employee's position or reporting relationship or in the
nature or status of his responsibilities from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction by the Company in the Employee's
annual base salary as in effect on the date hereof.
(iii) Relocation. The relocation of the office of the Company where
the Employee is employed at the time of the Change in Control
to a location that is more than one sixty (60) miles away.
(iv) Incentive Compensation Plans. The failure by the Company to
continue in effect any incentive compensation plan in which
the Employee participates, or any other similar plans adopted
prior to the Change in Control, unless the Employee is
eligible to participate in, and are entitled to the
opportunity to receive a comparable level of benefits under,
an ongoing substitute or alternative plan (it being understood
that the manner or method of payment and the form of
consideration need not to be the same as existed in the
original plans); or the failure by the Company to continue the
Employee's participation therein on at least as favorable a
basis, both in terms of the amount of benefits available to
him and the level of the Employee's participation relative to
other participants, as existed at the time of the Change in
Control;
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<PAGE> 6
(v) Employment Benefits (Group Insurance and Perquisites). The
failure by the Company to continue to provide the Employee
with benefits at least as favorable as those enjoyed under any
of the Company's life insurance, accidental death, medical and
disability plans in which he was participating at the time of
the Change of Control; the taking of any action by the Company
that would directly or indirectly materially reduce any of
such benefits or deprive the Employee of any material
perquisite enjoyed by him at the time of the Change in
Control, including, without limitation and to the extent
applicable, the use of secretarial services, office space,
telephones, computer facilities and expense reimbursement.
(vi) No Assumption by successor. The failure of the Company to
obtain a satisfactory agreement from any successor to assume
and agree to perform this Agreement, as contemplated in
Section 6 hereof, or, if the business or undertaking in
connection with which the Employee's services are principally
performed is sold at any time after a Change in Control and
his employment is transferred as a result, the purchaser of
such business shall fail to agree to provide the Employee with
the same or a comparable position, duties, compensation and
benefits (as described in clauses (iv) and (v) above) as
provided to him by the Company immediately prior to the Change
in Control; or
(d) Notice of Termination. Any purported termination of the Employee's
employment by the Company or by the Employee shall be communicated
by written Notice of Termination to the other party hereto in
accordance with Section 8 hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the
specific termination
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<PAGE> 7
provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the
provision so indicated. The Employee's failure to set forth in the
Notice of Termination any fact or circumstance which contributes to
a showing of "Good Reason" shall not waive his rights hereunder or
preclude him from asserting such fact or circumstance in enforcing
his rights hereunder.
(e) Date of Termination and Interim Compensation. "Date of Termination
shall mean (i) if the Employee's employment is terminated for
Disability, thirty (30) days after a Notice of Termination is given
(provided that he shall not have returned to the full-time
performance of his duties during such thirty (30) day period), (ii)
if the Employee's employment is terminated pursuant to Section 4(b),
the date specified in the Notice of Termination, and (iii) if the
Employee's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in case of a
termination pursuant to Section 4(c) above, shall not be less than
thirty (30) nor more than sixty (60) days from the date such Notice
of Termination is given); provided that, except in the case of a
termination pursuant to Section 4(b) above, if within thirty (30)
days after any Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination
shall be the date on which the dispute is finally determined by
mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or the time for
appeal therefrom has expired and no appeal has been perfected);
provided further, that the Date of Termination shall be extended by
a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the
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<PAGE> 8
solution of such dispute, the Company will continue to pay the
Employee his full compensation in effect when the notice giving rise
to the dispute was given, and continue the Employee as a participant
in all compensation, benefit plans and perquisites in which he was
participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved in accordance with this
Section 4(e). Amounts paid under this Section 4(e) are in addition
to all other amounts due under this agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
5.0 Compensation During Disability or Upon Termination. Following a Change of
Control, upon termination of the Employee's employment or Disability
occurring during the Term, the Company shall cause the Employee to be
provided with the following benefits:
(a) Disability. During any period that the Employee fails to perform his
full-time duties with the Company as a result of his Disability, he
shall continue to receive his base salary at the rate in effect at
the commencement of any such period, inclusive of all compensation
payable to him under the Company's disability insurance coverage or
other plans during such period, until his employment is terminated
pursuant to Section 4(a) hereof. Thereafter, his benefits shall be
determined in accordance with the Company's insurance programs and
other benefit plans then in effect.
(b) Termination by death, for Cause or Other Than for Good Reason. If
the Employee's employment is terminated on account of death, by the
Company for Cause or by him for other than for Good Reason, the
Company shall pay him his full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination
is given and any amounts to be paid to him pursuant to the Company's
benefit plans then in effect
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<PAGE> 9
and the Company shall have no further obligations to him under this
Agreement.
(c) By the Company Without Cause; By the Employee for Good Reason. If
the Employee's employment is terminated by the Company without Cause
and other than for Disability or death, or by him for Good Reason,
then he shall be entitled to the benefits provided below:
(i) Accrued Compensation. The Company shall pay him his full base
salary through the Date of Termination at the rate in effect
at the time the Notice of Termination is given;
(ii) Severance Payment. In lieu of any further salary payments to
him for periods subsequent to the Date of Termination, the
Company shall pay him, as severance pay, not later than the
thirtieth (30th) business day following the Date of
Termination (the "Payment Date"), a lump sum severance payment
(the "Severance Payment") equal to the amount of base salary
he would have earned had he continued to be employed until the
end of the twenty-four (24) month period following the Date of
Termination (the "Severance period") assuming that his rate of
monthly base salary during the Severance Period would be equal
to the highest monthly rate of base salary which was payable
to him by the Company (or any Company affiliated with the
Company) during the twenty-four (24) month period immediately
preceding the Date of Termination (the "Severance Salary
Rate");
(iii) Incentive Compensation Plans. The Company shall pay him any
amounts required to be paid to him under the terms of any
Company Stock Option Plan or any successor plan(s) in which he
participates. The Company shall pay
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<PAGE> 10
him, in cash, in a lump sum no later than the Payment Date, an
amount in lieu of his participation in the Company's Annual
Incentive Plan during the Severance Period which shall be
equal to his target annual bonus, i.e. the set percentage of
base salary pursuant to the Company's Annual Incentive Plan
times his "Severance Salary Rate", for the year during which
the Date of Termination occurs multiplied by the number of
months during the Severance Period.
(iv) Employment Benefits. The Company shall continue to provide him
and his dependants with the same level of life, accidental
death, disability, medical insurance benefits which he and his
dependants were receiving or entitled to receive immediately
prior to the Date of Termination until the end of the
Severance Period or, if earlier, the date on which he and his
dependants are provided coverage under similar plans of a
subsequent employer. Contributions by the Employee required
under such programs shall be payable to the Company or to the
insurer, as applicable, on the same basis as if he continued
to be employed during the Severance Period.
(v) Vacation. The Company shall pay him, in cash, in a lump sum,
no later than the Payment Date an amount equal to all accrued
but unused vacation determined as of the Date of Termination.
The amount of such payment shall be determined based upon his
Severance Salary Rate. In no event shall the amount of
vacation time to which the Employee is entitled be less than
the amount to which he would have been entitled under the
vacation policy in effect as of the Change in Control.
(vi) Loans. The Employee shall make repayments of any loan issued
by the Company in accordance with the repayment
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<PAGE> 11
schedule under the loan as though he had not terminated
employment; except that full repayment of the loan shall be
due on the earlier of the end of the Severance Period or the
date repayment of the loan is due.
(d) Tax Withholding. Unless expressly provided otherwise in an
applicable provision of this Agreement, all payments to be made
under this Section shall be subject to required statutory deductions
at source.
(e) No Mitigation. The Employee shall not be required to mitigate the
amount of any payment provided for in this Section by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section be reduced by any compensation
earned by him as the result of employment whether by another
employer or self-employment, after the Date of Termination, or
otherwise, except as specifically provided in this Section.
6.0 Successors; Binding Agreement.
(a) Assumption by Successor. The Company will require any successor
company (whether direct or indirect, and whether by purchase,
merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and
agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it had no such
succession taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the
Employee to compensation from the Company in the same amount and on
the same terms as that to which he would be entitled hereunder if he
had terminated his employment for Good Reason following a Change in
Control, except that for purposes of implementing
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<PAGE> 12
the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this
Agreement, "the Company" shall include any successor to the
Company's business and/or assets as aforesaid that assumes and
agrees to perform this Agreement by operation of law, otherwise.
(b) Enforceability by Beneficiaries. This Agreement shall inure to the
benefit of and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee should die
while any amount would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement
to his devisee, legatee or other designee or, if there is no such
designee, to his estate.
7.0 Confidential Information. The Employee shall hold in a fiduciary capacity
for the benefit of the Company all secret or confidential information,
knowledge or date relating to the Company or any of its affiliated
companies, and their respective business, that shall have been obtained by
him during his employment by the Company or any of its affiliated
companies and that shall not be or become public knowledge unless required
by law (other than by acts of him or his representatives in violation of
this Agreement). After termination of the Employee's employment with the
Company, he shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or date to anyone
other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section constitute a basis
for deferring or withholding any amounts otherwise payable to the Employee
under this Agreement.
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8.0 Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing,
addressed to GILDAN ACTIVEWEAR INC., 725, Montee de Liesse, Montreal
(Quebec) H4T 1P5, Attention: Chief Executive Officer or to the Employee at
the address set forth on the first page of this Agreement or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
9.0 Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in
writing. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.
10.0 Final Agreement. It is the intention of the Company and the Employee that
the compensation and benefits to be provided to him under this Agreement
shall be the only compensation and benefits to be provided to him by the
Company in the event of his termination of employment following a Change
in Control. No Agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by
either party that are not expressly set forth in this Agreement and this
Agreement shall supersede all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or
written, with respect to the subject matter hereof.
11.0 Governing Law. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of Canada.
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<PAGE> 14
12.0 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13.0 Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
14.0 No Contract of Employment. Nothing in this Agreement shall be construed as
giving the Employee any right to be retained in the employ of the Company.
15.0 Headings. The headings contained in this Agreement are intended solely for
convenience and shall not affect the rights of the parties to this
Agreement.
16.0 English Language. The parties hereto declare that they require that this
Agreement and any related documents be drawn up and executed in English.
Les parties declarent qu'elles requierent que cette convention ainsi que
tous documents relatifs a cette convention soient rediges et executes en
anglais.
GILDAN ACTIVEWEAR INC. EMPLOYEE
(the Company)
/s/ H. Greg Chamandy /s/ George Sam Yu Sum
____________________________ ________________________
<PAGE> 1
Exhibit 10.22
EMPLOYMENT AGREEMENT ENTERED INTO at: Montreal
___________________________
on: Aug. 31, 1998
_______________________
BETWEEN: GILDAN ACTIVEWEAR INC., a corporation duly incorporated,
having its principal office at 725, Montee de Liesse, Montreal
(Quebec) H4T 1P5 (hereinafter the "Company")
AND: FRANCOIS VINETTE
27, Harbridge
Dollard-des-Ormeaux (Quebec)
H9G 1B0
(hereinafter the "Employee")
SECTION 1 - PURPOSE
1.0 The Employee has been employed by the Company since Aug. 3, 1998 and in
his current capacity as Vice-President, Information Technology is
responsible for the development, maintenance and operation of information
technology and system of the Company. In addition, he shall have any
powers and carry out mandates that may be entrusted to him by the Board of
Directors from time to time.
SECTION 2 - DUTIES
2.0 The Employee agrees to work full time at the Company and to make every
reasonable effort necessary to perform adequately the duties that are
assigned to him. The Employee agrees to comply with all the orders,
instructions, policies and/or rules that are established verbally or in
writing by the Board of Directors of the Company.
The Employee agrees during the term of this agreement and thereafter, not
to disclose the private affairs of the Company to any other person, firm
or company, other than in the normal
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performance of his employment hereunder, unless required by law, and the
Employee shall not use for his own purpose or for any purposes other than
those of the Company, any information, or knowledge acquired with or
relating to the affairs of the Company;
After termination of his employment with the Company the Employee agrees:
i) not to disclose the private affairs of the Company to any other
person, firm, or company unless required by law, and shall not use
for his own purpose any confidential information or knowledge
pertaining to or otherwise relating to the affairs of the Company;
ii) not to directly or indirectly solicit any of the Company's customers
for the purpose or intent of selling them any products which are
similar or otherwise competing with the products of the Company for
a period of twelve (12) months after termination of employment;
iii) not to induce, entice, or otherwise attempt to directly or
indirectly hire or engage any of the Company's employees for a
period of twelve (12) months after termination of employment;
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<PAGE> 3
SECTION 3 - COMPENSATION
3.0 The Company shall pay the Employee, for the duration of this contract of
employment, a base annual compensation (the "Base Salary"), payable in
consecutive bi-weekly installments. Such Base Salary shall be reviewed
annually, in accordance with Company policies. The Employee shall also
participate in the Company's Annual Incentive Plan. Confirmation of the
Employee's Base Salary and targeted award under the Annual Incentive Plan
will be provided annually by the Company to the Employee in a separate
letter.
SECTION 4 - EMPLOYMENT BENEFITS
4.0 The Employee shall be entitled to the employment benefits offered from
time to time to senior executives of the Company.
SECTION 5- DURATION AND TERMINATION
5.0 This contract is for an indefinite period. It may, however, be terminated
by the Company, upon simple notice in writing transmitted to the Employee,
without the Company being bound to pay any indemnity whatsoever, in the
following cases:
a) Upon the death of the Employee;
b) If the Employee becomes physically or mentally disabled to such an
extent as to make him unable to perform his duties normally and
adequately as certified by an independent physician. In such a case,
the Employee may continue to benefit under short-term and long-term
disability insurance plans, subject to the terms of such plans,
provided that the indemnities and benefits are not less than those
in force at the time of signing this Agreement;
c) If the Employee breaches the terms of this contract;
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<PAGE> 4
d) For cause which means termination upon i) the Employee having
engaged in fraud, theft or embezzlement of Company funds or (ii) the
Employee having been convicted of felony or criminal offense or
(iii) the Employee having willfully engaged in conduct that is
demonstrably and materially injurious or result in significant
damage to the Company, monetarily or otherwise.
5.1 If the Employee wishes to terminate his employment, he must advise the
Company in writing at least two months in advance. In such case of
voluntary termination of employment by the Employee, the Company is not
bound to pay any indemnity whatever.
5.2 Should the Company terminate the employment of the Employee for reasons
other than those provided for in Section 5.0 or should the Company take
any one of the actions listed in Appendix "A" or any other action which
could be construed as constructive dismissal, the Employee shall be
entitled to the following benefits:
i) an amount equivalent to 12 months of the Employee's Base Salary in
effect at the time of termination or dismissal, such 12 month period
being hereinafter referred to as the "termination period". Payment
of this amount shall be made in a lump sum or, if so elected by the
Employee, as salary continuance for the duration of the termination
period;
ii) continuation of employment (group insurance) benefits in effect at
the time of termination or dismissal (except short and long term
disability) for the duration of the termination period, ceasing upon
new employment, if earlier;
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<PAGE> 5
iii) any earned bonus (means bonus earned with respect to a previous
fiscal year) that would otherwise have been paid or become payable
to the Employee during the termination period (based on the
Employee's entitlement at the time of termination or dismissal)
pursuant to the terms of the Company's Annual Incentive Plan in
effect at the time of termination or dismissal;
iv) the right to exercise vested options pursuant to any Company's Stock
Option Plan, in effect at the time of termination or dismissal
provided that such exercise shall take place within a period of 90
days following the date of termination of employment;
v) the payment of any earned but unused vacation days determined in
accordance with the Company's vacation policy for senior executives
plus the payment by or the reimbursement to the Company of any
amounts owed (due) under the Employee's business expense account
plus the payment of any balance or pro rata thereof owed the
Employee under the Employee's authorized personal spending account,
if any, at time of termination;
The indemnity provided for in sub-sections iii) and v) above shall only be
payable to the Employee in a lump sum.
Notwithstanding any dispositions of the present Employment Agreement, none
of the benefits, including the different types of compensation, listed at
sub-section 5.2 hereinabove shall be payable to the Employee if his
termination of employment were to occur following a Change of Control in
the Company for which the Employee is covered pursuant to the Change of
Control Agreement entered into between the Company and the Employee on
August 31, 1998, provided said agreement remained in full force at time of
termination of employment.
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SECTION 6 - TERMINATION 0F PRIOR CONTRACTS
6.0 The terms of this contract of employment revoke and cancel any prior
agreement, verbal or written, with respect to the Employee's employment
with the Company, each of the parties granting the other full and final
release and discharge from any action, cause of action, claim or demand of
any nature based on the provisions of any such agreement.
SECTION 7 - SUCCESSORS
7.0 This contract shall be binding on the successors and assigns of both
parties.
SECTION 8 - INTERPRETATION
8.0 This contract of employment shall be governed by and interpreted in
accordance with the laws of Canada.
8.1 In the event that any clause, phrase, paragraph or part of this contract
be ruled invalid for any reason by any court having jurisdiction, the
remainder of this contract shall not be affected or nullified by such
judgement, whose application shall be restricted to the clause, phrase,
paragraph or part thus ruled invalid.
SECTION 9 - LANGUAGE
The parties have expressly requested that this Agreement be drafted in the
English language.
Les parties ont expressement requis que cette entente soit redigee en
anglais.
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<PAGE> 7
In witness whereof the parties hereto have duly signed this contract of
employment in duplicate at the date and place hereinabove mentioned.
GILDAN ACTIVEWEAR INC. EMPLOYEE
By: /s/ H. Greg Chamandy /s/ Francois Vinette
---------------------------- ----------------------------
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<PAGE> 8
APPENDIX A
(i) Inconsistent Duties. A meaningful and detrimental alteration in the
position or reporting relationship or in the nature or status of the
responsibilities of the Employee from those in effect immediately prior to
the alleged constructive dismissal.
(ii) Reduced Salary. A reduction by the Company in the Base Salary as in effect
immediately prior to the alleged constructive dismissal;
(iii) Incentive Compensation Plans. The failure by the Company to continue in
effect any incentive compensation plan in which the Employee participates,
including but not limited to, any Company Stock Option Plan and the Annual
Incentive Plan, or any ether similar plans in effect immediately prior to
the alleged constructive dismissal, unless the Employee is eligible to
participate in, and is entitled to the opportunity to receive a comparable
level of benefits under, an ongoing substitute or alternative plan (it
being understood that the manner or method of payment and the form of
consideration need not be the same as existed in the original plans); or
the failure by the Company to continue the Employee's participation
therein on at least as favorable a basis, both in terms of the amount of
benefits available to the Employee and the level of participation relative
to other participants, as existed immediately prior to the alleged
constructive dismissal.
(iv) Employment Benefit (Group Insurance) Plans and Perquisites. The failure by
the Company to continue to provide the Employee with benefits at least as
favorable under any of the Corporation's group life insurance, medical,
health and accident, or disability plans in which the Employee
participated immediately prior to the alleged constructive dismissal; the
taking of any action by the Company that would directly or indirectly
materially reduce any of such benefits or deprive the Employee of any
material perquisite enjoyed
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<PAGE> 9
immediately prior to the alleged constructive dismissal, including without
limitation and to the extent applicable, the use of secretarial services,
office space, telephones, computer facilities, expense reimbursement, and
other applicable privileges, if any, such as car, etc.; or the failure by
the Company to provide the Employee with the number of paid vacation days
in accordance with the Corporation's normal vacation policy for senior
executives in effect immediately prior to the alleged constructive
dismissal.
(v) Relocation. The Company requiring the Employee to be relocated in a
foreign country or more than sixty (60) miles away from the location where
the Employee is based immediately prior to the alleged constructive
dismissal;
(vi) The Assumption by Successor. The failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree to perform
this contract as contemplated in Section 7, or, if the business or
undertaking in connection with which the Employee's services are
principally performed is sold and the Employee's employment is transferred
as a result, the purchaser of such business shall fail to agree to provide
the Employee with the same comparable position, duties, compensation and
benefits as provided to the Employee by the Company immediately prior to
the alleged constructive dismissal.
9
<PAGE> 1
Exhibit 10.23
CHANGE OF CONTROL AGREEMENT ENTERED INTO at: Montreal
------------------
on: Aug. 3, 1998
------------------
BETWEEN: GILDAN ACTIVEWEAR INC., a Company duly
incorporated, having its principal office at
725, Montee de Liesse, Montreal (Quebec) H4T 1P5
(hereinafter the "Company")
AND FRANCOIS VINETTE
27, Harbridge
Dollar-des-Ormeaux (Quebec)
H9G 1B0
(hereinafter the "Employee" or "he or "him")
1.0 Term of Agreement. The term of this Agreement (the "Term") shall commence
on the date hereof and shall continue in effect through the end of the two
(2) year period commencing on the date the Change in Control occurs;
provided, however, that, if payment of compensation and benefits has begun
under this Agreement, the payment of such compensation and benefits shall
continue beyond the end of the Term in accordance with the applicable
section of this Agreement.
2.0 Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control as set forth below. For purposes of
this Agreement, a "Change in Control" shall mean a change in control of
the Company of a nature that would be required to be reported, whether or
not the Company is then subject to such reporting requirement; provided
that, without limitation, a Change in Control shall be deemed to have
occurred if:
(a) any individual, partnership, firm, Company, association, trust,
unincorporated organization or other entity, or any syndicate or
group deemed to be a person, becomes the "beneficial owner",
directly or indirectly, of securities of
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<PAGE> 2
the Company representing 50.1% or more of the combined voting power
of the Company's then outstanding securities entitled to vote in the
election of directors of the Company (the "Company Voting
Securities"); provided, however, that any acquisition of Company
Voting Securities by the Company or any of its subsidiaries, or any
employee benefit plan (or related trust) of the Company or its
subsidiaries, or any Company with respect to which, following such
acquisition, substantially all of the combined voting power of the
then outstanding voting securities of such Company entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by the individuals and entities who were the
beneficial owners of Company Voting Securities immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, shall not
constitute a Change in Control;
(b) individuals who at the beginning of the Term constituted the Board
and any new directors whose appointment by the Board or whose
nomination for election by the Company's shareholders was approved
by a vote of at least three-quarters (3/4) of the directors then
still in office who either were directors at the beginning of the
Term or whose appointment or nomination for election was previously
so approved cease for any reason to constitute a majority of the
members of the Board;
(c) assets of the Company representing fifty (50) percent or more of the
net book value of the assets of the Company determined as of the
date of the audited financial statements of the Company then most
recently published, are sold, liquidated or distributed; or
(d) ten (10) percent or more of the value of the assets of the Company
or the voting securities of the Company are about to be transferred
or have been transferred because of any taking,
2
<PAGE> 3
seizure, or defeasance as a results of, or in connection with (i)
nationalization, expropriation, confiscation, coercion, force or
duress or other similar action or (ii) the imposition of a
confiscatory tax, assessment or other governmental charge or levy.
The value of the assets of the Company shall be determined as of the
date of the audited financial statements of the Company most
recently published prior to the date of the transfer
A Change in Control shall also be deemed to occur as of the date the
Company executes an agreement which, if carried out, would result in the
occurrence of a Change in Control as described above, but only with
respect to a termination of employment occurring after the execution of
such agreement and prior to the expiration or termination of such
agreement.
3.0 Potential Change in Control. Notwithstanding his right to terminate
employment at any time with proper notice, the Employee agrees, subject to
the terms and conditions of this Agreement, to remain in the employ of the
Company in the event of a Potential Change in Control until the earliest
of (a) a date which is three hundred and sixty five (365) days from the
occurrence of such Potential Change in Control, (b) the termination of his
employment by reason of death or Disability as defined in Section 4(a) of
this Agreement, or (c) the date on which he first becomes entitled under
this Agreement to receive the benefits provided in Section 5(c) of this
Agreement. For purposes of this Agreement, a Potential Change in Control
shall be deemed to have occurred if:
(a) the Company enters into an agreement which, if carried out, would
result in the occurrence of a Change in Control;
(b) any person publicly announces an intention to take or to consider
taking actions which if carried out would constitute a Change in
Control;
3
<PAGE> 4
(c) the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.
4.0 Termination Following Change in Control. If any of the events described in
Section 2 hereof constituting a Change in Control shall have occurred, the
Employee shall be entitled to the benefits provided in Section 5 hereof
upon the subsequent termination of his employment during the Term, unless
such termination is because of death, Cause or Disability, or by the
Employee for other than Good Reason.
(a) Disability. If, as a result of the Employee's incapacity due to a
physical or mental illness which is determined to cause permanent
impairment in the ability to perform the Employee's duties, the
Employee shall have been absent from the full-time performance of
his duties with the Company for one hundred eighty (180) consecutive
days following the earlier of the Change in Control or the
commencement of the absence, and within thirty (30) days after
written Notice of Termination is given, the Employee shall not have
returned to the full-time performance of your duties, the Company
may terminate the Employee's employment for "Disability".
(b) Cause. Termination by the Company of the Employee's employment for
"Cause" shall mean termination upon (i) the Employee having engaged
in fraud, theft or embezzlement of Company funds or (ii) the
Employee having been convicted of felony or criminal offense or
(iii) the Employee having willfully engaged in conduct that is
demonstrably and materially injurious or result in significant
damage to the Company, monetarily or otherwise.
(c) Good Reason. The Employee shall be entitled to terminate his
employment for Good Reason. For purposes of this Agreement,
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<PAGE> 5
"Good Reason" shall mean the occurrence, without the Employee's
written consent, of any of the following:
(i) Inconsistent Duties. A meaningful and detrimental alteration
in the Employee's position or reporting relationship or in the
nature or status of his responsibilities from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction by the Company in the Employee's
annual base salary as in effect on the date hereof.
(iii) Relocation. The relocation of the office of the Company where
the Employee is employed at the time of the Change in Control
to a location that is more than one sixty (60) miles away.
(iv) Incentive Compensation Plans. The failure by the Company to
continue in effect any incentive compensation plan in which
the Employee participates, or any other similar plans adopted
prior to the Change in Control, unless the Employee is
eligible to participate in, and are entitled to the
opportunity to receive a comparable level of benefits under,
an ongoing substitute or alternative plan (it being understood
that the manner or method of payment and the form of
consideration need not to be the same as existed in the
original plans); or the failure by the Company to continue the
Employee's participation therein on at least as favorable a
basis, both in terms of the amount of benefits available to
him and the level of the Employee's participation relative to
other participants, as existed at the time of the Change in
Control;
5
<PAGE> 6
(v) Employment Benefits (Group Insurance and Perquisites). The
failure by the Company to continue to provide the Employee
with benefits at least as favorable as those enjoyed under any
of the Company's life insurance, accidental death, medical and
disability plans in which he was participating at the time of
the Change of Control; the taking of any action by the Company
that would directly or indirectly materially reduce any of
such benefits or deprive the Employee of any material
perquisite enjoyed by him at the time of the Change in
Control, including, without limitation and to the extent
applicable, the use of secretarial services, office space,
telephones, computer facilities and expense reimbursement.
(vi) No Assumption by successor. The failure of the Company to
obtain a satisfactory agreement from any successor to assume
and agree to perform this Agreement, as contemplated in
Section 6 hereof, or, if the business or undertaking in
connection with which the Employee's services are principally
performed is sold at any time after a Change in Control and
his employment is transferred as a result, the purchaser of
such business shall fail to agree to provide the Employee with
the same or a comparable position, duties, compensation and
benefits (as described in clauses (iv) and (v) above) as
provided to him by the Company immediately prior to the Change
in Control; or
(d) Notice of Termination. Any purported termination of the Employee's
employment by the Company or by the Employee shall be communicated
by written Notice of Termination to the other party hereto in
accordance with Section 8 hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the
specific termination
6
<PAGE> 7
provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the
provision so indicated. The Employee's failure to set forth in the
Notice of Termination any fact or circumstance which contributes to
a showing of "Good Reason" shall not waive his rights hereunder or
preclude him from asserting such fact or circumstance in enforcing
his rights hereunder.
(e) Date of Termination and Interim Compensation. "Date of Termination
shall mean (i) if the Employee's employment is terminated for
Disability, thirty (30) days after a Notice of Termination is given
(provided that he shall not have returned to the full-time
performance of his duties during such thirty (30) day period), (ii)
if the Employee's employment is terminated pursuant to Section 4
(b), the date specified in the Notice of Termination, and (iii) if
the Employee's employment is terminated for any other reason, the
date specified in the Notice of Termination (which, in case of a
termination pursuant to Section 4(c) above, shall not be less than
thirty (30) nor more than sixty (60) days from the date such Notice
of Termination is given); provided that, except in the case of a
termination pursuant to Section 4(b) above, if within thirty (30)
days after any Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination
shall be the date on which the dispute is finally determined by
mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or the time for
appeal therefrom has expired and no appeal has been perfected);
provided further, that the Date of Termination shall be extended by
a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the
7
<PAGE> 8
solution of such dispute, the Company will continue to pay the
Employee his full compensation in effect when the notice giving rise
to the dispute was given, and continue the Employee as a participant
in all compensation, benefit plans and perquisites in which he was
participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved in accordance with this
Section 4(e). Amounts paid under this Section 4(e) are in addition
to all other amounts due under this agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
5.0 Compensation During Disability or Upon Termination. Following a Change of
Control, upon termination of the Employee's employment or Disability
occurring during the Term, the Company shall cause the Employee to be
provided with the following benefits:
(a) Disability. During any period that the Employee fails to perform his
full-time duties with the Company as a result of his Disability, he
shall continue to receive his base salary at the rate in effect at
the commencement of any such period, inclusive of all compensation
payable to him under the Company's disability insurance coverage or
other plans during such period, until his employment is terminated
pursuant to Section 4(a) hereof. Thereafter, his benefits shall be
determined in accordance with the Company's insurance programs and
other benefit plans then in effect.
(b) Termination by death, for Cause or Other Than for Good Reason. If
the Employee's employment is terminated on account of death, by the
Company for Cause or by him for other than for Good Reason, the
Company shall pay him his full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination
is given and any amounts to be paid to him pursuant to the Company's
benefit plans then in effect
8
<PAGE> 9
and the Company shall have no further obligations to him under this
Agreement.
(c) By the Company Without Cause; By the Employee for Good Reason. If
the Employee's employment is terminated by the Company without Cause
and other than for Disability or death, or by him for Good Reason,
then he shall be entitled to the benefits provided below:
(i) Accrued Compensation. The Company shall pay him his full base
salary through the Date of Termination at the rate in effect
at the time the Notice of Termination is given;
(ii) Severance Payment. In lieu of any further salary payments to
him for periods subsequent to the Date of Termination, the
Company shall pay him, as severance pay, not later than the
thirtieth (30th) business day following the Date of
Termination (the "Payment Date"), a lump sum severance payment
(the "Severance Payment") equal to the amount of base salary
he would have earned had he continued to be employed until the
end of the twenty-four (24) month period following the Date of
Termination (the "Severance period") assuming that his rate of
monthly base salary during the Severance Period would be equal
to the highest monthly rate of base salary which was payable
to him by the Company (or any Company affiliated with the
Company) during the twenty-four (24) month period immediately
preceding the Date of Termination (the "Severance Salary
Rate");
(iii) Incentive Compensation Plans. The Company shall pay him any
amounts required to be paid to him under the terms of any
Company Stock Option Plan or any successor plan(s) in which he
participates. The Company shall pay
9
<PAGE> 10
him, in cash, in a lump sum, no later than the Payment Date,
an amount in lieu of his participation in the Company's Annual
Incentive Plan during the Severance Period which shall be
equal to his target annual bonus, i.e. the set percentage of
base salary pursuant to the Company's Annual Incentive Plan
times his "Severance Salary Rate", for the year during which
the Date of Termination occurs multiplied by the number of
months during the Severance Period.
(iv) Employment Benefits. The Company shall continue to provide him
and his dependants with the same level of life, accidental
death, disability, medical insurance benefits which he and his
dependants were receiving or entitled to receive immediately
prior to the Date of Termination until the end of the
Severance Period or, if earlier, the date on which he and his
dependants are provided coverage under similar plans of a
subsequent employer. Contributions by the Employee required
under such programs shall be payable to the Company or to the
insurer, as applicable, on the same basis as if he continued
to be employed during the Severance Period.
(v) Vacation. The Company shall pay him, in cash, in a lump sum,
no later than the Payment Date, an amount equal to all accrued
but unused vacation determined as of the Date of Termination.
The amount of such payment shall be determined based upon his
Severance Salary Rate. In no event shall the amount of
vacation time to which the Employee is entitled be less than
the amount to which he would have been entitled under the
vacation policy in effect as of the change in Control.
(vi) Loans. The Employee shall make repayments of any loan issued
by the Company in accordance with the repayment
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<PAGE> 11
schedule under the loan as though he had not terminated
employment; except that full repayment of the loan shall be
due on the earlier of the end of the Severance Period or the
date repayment of the loan is due.
(d) Tax Withholding. Unless expressly provided otherwise in an
applicable provision of this Agreement, all payments to be made
under this Section shall be subject to required statutory deductions
at source.
(e) No Mitigation. The Employee shall not be required to mitigate the
amount of any payment provided for in this Section by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section be reduced by any compensation
earned by him as the result of employment whether by another
employer or self-employment, after the Date of Termination, or
otherwise, except as specifically provided in this Section.
6.0 Successors; Binding Agreement.
(a) Assumption by Successor. The Company will require any successor
company (whether direct or indirect, and whether by purchase,
merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and
agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it had no such
succession taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the
Employee to compensation from the Company in the same amount and on
the same terms as that to which he would be entitled hereunder if he
had terminated his employment for Good Reason following a Change in
Control, except that for purposes of implementing
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<PAGE> 12
the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this
Agreement, "the Company" shall include any successor to the
Company's business and/or assets as aforesaid that assumes and
agrees to perform this Agreement by operation of law, otherwise.
(b) Enforceability by Beneficiaries. This Agreement shall inure to the
benefit of and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee should die
while any amount would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement
to his devisee, legatee or other designee or, if there is no such
designee, to his estate.
7.0 Confidential Information. The Employee shall hold in a fiduciary capacity
for the benefit of the Company all secret or confidential information,
knowledge or date relating to the Company or any of its affiliated
companies, and their respective business, that shall have been obtained by
him during his employment by the Company or any of its affiliated
companies and that shall not be or become public knowledge unless required
by law (other than by acts of him or his representatives in violation of
this Agreement). After termination of the Employee's employment with the
Company, he shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or date to anyone
other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section constitute a basis
for deferring or withholding any amounts otherwise payable to the Employee
under this Agreement.
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<PAGE> 13
8.0 Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing,
addressed to GILDAN ACTIVEWEAR INC., 725, Montree de Liesse, Montreal
(Quebec) H4T 1P5, Attention: Chief Executive Officer or to the Employee at
the address set forth on the first page of this Agreement or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
9.0 Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in
writing. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.
10.0 Final Agreement. It is the intention of the Company and the Employee that
the compensation and benefits to be provided to him under this Agreement
shall be the only compensation and benefits to be provided to him by the
Company in the event of his termination of employment following a Change
in Control. No Agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by
either party that are not expressly set forth in this Agreement and this
Agreement shall supersede all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or
written, with respect to the subject matter hereof.
11.0 Governing Law. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of Canada.
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<PAGE> 14
12.0 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13.0 Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
14.0 No Contract of Employment. Nothing in this Agreement shall be construed as
giving the Employee any right to be retained in the employ of the Company.
15.0 Headings. The headings contained in this Agreement are intended solely for
convenience and shall not affect the rights of the parties to this
Agreement.
16.0 English Language. The parties hereto declare that they require that this
Agreement and any related documents be drawn up and executed in English.
Les parties declarent qu'elles requierent que cette convention ainsi que
tous documents relatifs a cette convention soient rediges et executes en
anglais.
GILDAN ACTIVEWEAR INC. EMPLOYEE
(the Company)
/s/ H. Greg Chamandy /s/ Francois Vinette
------------------------ --------------------------
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<PAGE> 1
Exhibit 10.24
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
June 24, 1998 is made and entered into by Gildan Activewear Inc., a Canadian
corporation (the "Company"), Harco Holdings Ltd., a Canadian corporation
("Harco"), Le Fonds de Solidarite des Travailleurs du Quebec (FTQ), a Canadian
corporation (the "Fund"), Royal Bank of Canada Financial Corporation, acting as
trustee for the H. Gregory Chamandy Family Trust ("the Greg Trust"), Royal Bank
of Canada Financial Corporation, acting as trustee for the Glenn Chamandy Family
Trust (the "Glenn Trust"), Royal Bank of Canada Financial Corporation, acting as
trustee for the Shirley Chamandy Family Trust (the "Shirley Trust") and Royal
Bank of Canada Financial Corporation, acting as trustee for the Tisch Family
Trust (the "Benni Trust"), each a trust established and existing under the laws
of Barbados (together, the "Trusts").
In consideration of the mutual covenants herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto do hereby agree as follows:
1. Background. Harco currently owns an aggregate of 3,047,000 shares
of the Company's Class B Subordinate Voting Shares, without par value (the
"Class B Shares"); the Fund currently owns an aggregate of 1,939,000 shares of
the Company's Class A Subordinate Voting Shares, without par value (the "Class A
Shares"); the Greg Trust currently owns an aggregate of 856,300 Class A Shares;
the Glenn Trust currently owns an aggregate of 856,300 Class A Shares; the
Shirley Trust currently owns an aggregate of 196,400 Class A Shares; the Benni
Trust currently owns an aggregate of 55,000 Class A Shares.
2. Definitions. As used in this Agreement, the following capitalized
terms shall have the following respective meanings:
Exchange Act - The Securities Exchange Act of 1934, as amended.
Holder - Harco, the Fund, the Trusts or any holder of Registrable
Securities who agrees in writing to be bound by the provisions of this
Agreement.
Person - Any individual, partnership, joint venture, corporation,
trust, unincorporated organization or government or any department or
agency thereof.
Registrable Securities - Any Class A Shares issued or issuable to
Harco, the Fund and the Trusts and any Class A Shares which may be issued
or distributed in respect of such Class A Shares by way of stock dividend
or stock split or other distribution, recapitalization or
reclassification. As to any particular Registrable Securities, once issued
such Securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such Securities shall
have become
<PAGE> 2
2
effective under the Securities Act and such Securities shall have been
disposed of in accordance with such registration statement, (ii) they
shall have been distributed to the public pursuant to Rule 144 or 144A (or
any successor provisions) under the Securities Act, (iii) they shall have
been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any state securities or
blue sky law then in force, or (iv) they shall have been repurchased or
redeemed by the Company or have otherwise ceased to be outstanding.
Registration Expenses - Any and all expenses incident the
performance of or compliance with this Agreement, including, without
limitation, (i) all SEC and stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees and
expenses of complying with securities or blue sky laws (including fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications of the Registrable Securities), (iii) all printing,
messenger and delivery expenses, (iv) all fees and expenses incurred in
connection with the listing of the Registrable Securities on any
securities exchange pursuant to clause (viii) of Section 5, (v) the fees
and disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits and/or "cold
comfort" letters required by or incident to such performance and
compliance, (vi) the reasonable fees and disbursements of one counsel
selected by the Holder of a majority of the Registrable Securities being
registered to represent all Holders of the Registrable Securities being
registered in connection with each such registration, and (vii) any fees
and disbursements of underwriters customarily paid by the issuers or
sellers of securities, including liability insurance if the Company so
desires or if the underwriters so require, and the reasonable fees and
expenses of any special experts retained in connection with the requested
registration, but excluding underwriting discounts and commissions and
transfer taxes, if any.
Securities Act - The Securities Act of 1933, as amended.
SEC - The Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act or the Exchange Act.
3. Incidental Registrations.
(a) Right to Include Registrable Securities. If the Company at any
time after the date hereof proposes to register its Class A Shares under the
Securities Act (other than a registration on Form F-4 or S-8, or any successor
or other forms promulgated for similar purposes), whether or not for sale for
its own account, pursuant to a registration statement on which it is permissible
to register Registrable Securities for sale to the public under the Securities
Act, it will at such time give prompt written notice to all Holders of
Registrable Securities of its intention to do so and of such Holders' rights
under this Section 3, at least 30 days prior to the anticipated date of the
initial filing of the registration statement relating to such registration. Upon
the written request of any such Holder made within 15 days after the
<PAGE> 3
3
receipt of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such Holder), the Company will use its
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Holders thereof provided, that (i) if, at any time after giving written
notice of its intention to register any securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to proceed with the proposed
registration of the securities to be sold by it, the Company may, at its
election, give written notice of such determination to each Holder of
Registrable Securities and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith, and (ii) if such registration involves an underwritten offering, all
Holders of Registrable Securities requesting to be included in the Company's
registration must sell their Registrable Securities to the underwriters selected
by the Company on the same terms and conditions as apply to the Company, with
such differences, including any with respect to indemnification and liability
insurance, as may be customary or appropriate in combined primary and secondary
offerings.
(b) Expenses. The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 3.
(c) Priority in Incidental Registrations. If a registration pursuant
to this Section 3 involves an underwritten offering and the managing underwriter
advises the Company in writing that, in its opinion, the amount of securities
requested to be included in such registration exceeds the amount which can be
sold in such offering, so as to be likely to have an adverse effect on such
offering as contemplated by the Company (including the price at which the
Company initially proposes to sell such securities), then the Company will
include in such registration (i) first, 100% of the securities the Company
proposes to sell for its own account or for the account of a demanding
shareholder pursuant to a demand registration right granted under Section 4,
(ii) second, to the extent of the amount of Registrable Securities requested to
be included in such registration which, in the opinion of such managing
underwriter, can be sold without having the adverse effect referred to above,
the amount of Registrable Securities which the Holders have requested to be
included in such registration, such amount to be allocated pro rata among all
requesting Holders on the basis of the relative number of shares of Registrable
Securities then held by each such Holder (provided that any Registrable
Securities thereby allocated to any such Holder that exceed such Holder's
request will be reallocated among the remaining requesting Holders in like
manner).
4. Registration on Request.
(a) Request by Holders. After any Class A Shares of the Company have
been registered after the date hereof under the Securities Act (other than a
registration on Form F-4 or S-8, or any successor or other forms promulgated for
similar purposes), upon the written request of any Holder or Holders requesting
that the Company effect a registration under the Securities Act of all or part
of such Holder's or Holders' Registrable Securities and specifying the intended
method of disposition thereof, the Company will promptly give written notice of
<PAGE> 4
4
such requested registration to all other Holders of Registrable Securities, and
thereupon will, as expeditiously as possible, use its best efforts to effect the
registration under the Securities Act, of:
(i) the Registrable Securities which the Company has been so
requested to register by such Holder or Holders; and
(ii) all other Registrable Securities which the Company has been
requested to register by any other Holder thereof by written request given
to the Company within 15 days after the giving of such written notice by
the Company (which request shall specify the intended method of
disposition of such Registrable Securities),
so as to permit the disposition (in accordance with the intended method thereof
as aforesaid) of the Registrable Securities so to be registered; provided, that,
the Company shall not be obligated to file a registration statement relating to
any registration request under this Section 4(a) (i) if the aggregate requests
by the Holder or Holders for such registration do not cover at least 5% of the
number of Registrable Securities then outstanding, (ii) if a period of one year
has not elapsed since the date that the SEC has declared effective (x) the
registration statement last requested by any Holder pursuant to this Section
4(a) or (y) any registration statement effected under Section 3 hereof or (iii)
if with respect thereto, the managing underwriter, the SEC, the Securities Act
or the rules and regulations thereunder, or the form on which the registration
statement is to be filed, would require the conduct of an audit other than to
regular audit conducted by the Company at the end of its fiscal year, in which
case the filing may be delayed until the completion of such regular audit
(unless the Holders of the Registrable Securities to be registered agree to pay
the expenses of the Company in connection with such an audit other than the
regular audit).
(b) Registration Statement Form. If any registration requested
pursuant to this Section 4 which is proposed by the Company to be effected by
the filing of a registration statement on Form F-3 (or any successor or similar
short-form registration statement) shall be in connection with an underwritten
public offering, and if the managing underwriter shall advise the Company in
writing that, in its opinion, the use of another form of registration statement
is of material importance to the success of such proposed offering, then such
registration shall be effected on such other form.
(c) Expenses. The Company will pay all Registration Expenses in
connection with the first five registrations of Registrable Securities pursuant
to this Section 4 upon the written request of any of the Holders. All expenses
for any subsequent registrations of Registrable Securities pursuant to this
Section 4 shall be paid pro rata by the Company and all other Persons (including
the Holders) participating in such registration on the basis of the relative
number of Class A Shares of each such Person included in such registration.
(d) Effective Registration Statement. A registration requested
pursuant to this Section 4 will not be deemed to have been effected unless it
has become effective; provided, that if, within 180 days after it has become
effective, the offering of Registrable Securities pursuant to such registration
is interfered with by any stop order, injunction or other order or
<PAGE> 5
5
requirement of the SEC or other governmental agency or court, such registration
will be deemed not to have been effected.
(e) Selection of Underwriters. If a requested registration pursuant
to this Section 4 involves an underwritten offering, the Company shall have the
right to select the investment banker or bankers and managers to administer the
offering; provided, however, that such investment banker or bankers and managers
shall be satisfactory to holders of a majority of the Registrable Securities
which are held by Holders and which the Company has been requested to register.
(f) Priority in Requested Registrations. If a requested registration
pursuant to this Section 4 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
securities requested to be included in such registration (including securities
of the Company which are not Registrable Securities) exceeds the number which
can be sold in such offering, the Company will include in such registration only
the Registrable Securities requested to be included in such registration. In the
event that the number of Registrable Securities requested to be included in such
registration exceeds the number which, in the opinion of such managing
underwriter, can be sold, the number of such Registrable Securities to be
included in such registration shall be allocated pro rata among all requesting
Holders on the basis of the relative number of shares of Registrable Securities
then held by each such Holder (provided that any shares thereby allocated to any
such Holder that exceed such Holder's request shall be reallocated among the
remaining requesting Holders in like manner). In the event that the number of
Registrable Securities requested to be included in such registration is less
than the number which, in the opinion of the managing underwriter, can be sold,
the Company may include in such registration the securities the Company proposes
to sell up to the number of securities that, in the opinion of the underwriter,
can be sold.
(g) Additional Rights. If the Company at any time grants to any
other holders of Class A Shares any rights to request the Company to effect the
registration under the Securities Act of any such Class A Shares on terms more
favorable to such holders than to terms set forth in this Section 4, the terms
of this Section 4 shall be deemed amended or supplemented to the extent
necessary to provide the Holders such more favorable rights and benefits.
(h) Other Registrations. The Company shall not effect any
registration of its Securities (except on Form S-8, F-4 or any successor forms
to such Forms), or effect any public or private sale or distribution of any of
its Securities, including a sale pursuant to Regulation D under the Securities
Act, whether on its own behalf or at the request of any Holder or Holders of
such Securities (other than pursuant to and in accordance with this Section 4),
from the date of a registration on request to register Registrable Securities
pursuant to and in accordance with Section 4(a) until to earlier of (i) 90 days
after the date on which all securities covered by such registration statement
have been sold or (ii) 180 days after the effectiveness date of such
registration statement unless the Company shall have first notified in writing
the selling stockholders of the Registrable Securities covered by such
registration statement of its intention to do so, and a majority in interest of
such selling
<PAGE> 6
6
stockholders and, if applicable, the managing Underwriter, shall have consented
thereto in writing; provided, however, that in the event of any conflict between
the provisions of clause (ii) of this paragraph (h) and to lock-up provisions
contained in any underwriting agreement which has been entered into in
connection with a registered underwritten offering, the provisions of such
underwriting agreement shall be controlling.
(i) Postponement and Suspension of Registration. Notwithstanding
anything to the contrary contained herein, the Company may postpone for up to
sixty (60) days the filing or the effectiveness of a registration statement
under Section 4(a) or may suspend the right to transfer securities which are the
subject of an effective registration statement under Section 4(a) if a majority
of the Board of Directors, including a majority of independent directors, has in
good faith determined, and has delivered to the Holders a written certification
to the effect that, (i) the Company is intending to currently consummate, and
has a reasonable likelihood of currently consummating, a material corporate
transaction outside of the ordinary course of business (any such transaction, a
"Significant Corporate Transaction") that would, in the written opinion of
outside counsel, require additional disclosure regarding such Significant
Corporate Transaction in the applicable registration statement in order for
sales of securities pursuant to such registration statement to not be in
violation of applicable securities laws, (ii) failure to engage in such
Significant Corporate Transaction at such time would be materially adverse to
the Company and (iii) no disclosure could be made in the applicable registration
statement regarding such Significant Corporate Transaction that would not be
materially adverse to the Company; provided, however, that no such postponement
or suspension shall be imposed unless at least four (4) months have expired
since the termination of any prior such postponement or suspension pursuant to
this Section 4(i).
5. Registration Procedures. If and whenever the Company is required
to use its best efforts to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in this Agreement, the Company
will, as expeditiously as possible:
(i) prepare and, in any event within 120 days after the end of the
period within which a request for registration may be given to the
Company, file with the SEC a registration statement with respect to such
Registrable Securities and use its best efforts to cause such registration
statement to become effective; provided, however, that the Company may
discontinue any registration of its securities which is being effected
pursuant to Section 3 at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period not in excess of 180 days and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement; provided, that
before filing a registration statement or prospectus, or any amendments or
supplements thereto, the Company will furnish to one counsel selected by
the Holders of a majority of the Registrable
<PAGE> 7
7
Securities covered by such registration statement to represent all Holders
of Registrable Securities covered by such registration statement, copies
of all documents proposed to be filed, which documents will be subject to
the review of such counsel;
(iii) furnish to each seller of such Registrable Securities such
number of copies of such registration statement and of each amendment and
supplement thereto (in each case including all exhibits), such number of
copies of the prospectus included in such registration statement
(including each preliminary prospectus and summary prospectus), in
conformity with the requirements of the Securities Act, and such other
documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities by such seller;
(iv) use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by
such seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction where, but for the requirements of this clause (iv), it
would not be obligated to be so qualified, to subject itself to taxation
in any such jurisdiction, or to consent to general service of process in
any such jurisdiction;
(v) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) notify each seller of any such Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act within the
appropriate period mentioned in clause (ii) of this Section 5, of the
Company's becoming aware that the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing, and at the request of any such seller,
prepare and furnish to such seller a reasonable number of copies of an
amended or supplemental prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable (but not more than eighteen
months) after the effective date of the registration statement, an
earnings statement which shall satisfy the provisions of
<PAGE> 8
8
Section 11(a) of the Securities Act and to rules and regulations
promulgated thereunder;
(viii) use its best efforts to list such Registrable Securities on
any securities exchange or automated quotation system on which the
Ordinary Shares are then listed, if such Registrable Securities are not
already so listed and if such listing is then permitted under the rules of
such exchange, and to provide a transfer agent and registrar for such
Registrable Securities covered by such registration statement not later
than the effective date of such registration statement;
(ix) enter into such customary agreements (including an underwriting
agreement in customary form) and take such other actions as sellers of a
majority of such Registrable Securities or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of
such Registrable Securities;
(x) obtain a "cold comfort" letter or letters from the Company's
independent public accountants in customary form and covering matters of
the type customarily covered by "cold comfort" letters as the seller or
sellers of a majority of such Registrable Securities shall reasonably
request (provided that Registrable Securities constitute at least 25% of
the Securities covered by such registration statement); and
(xi) make available for inspection by any seller of such Registrable
Securities covered by such registration statement, by any underwriter
participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and properties
of the Company, and cause all of the Company's officers, directors and
employees to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company with such
information regarding such seller and pertinent to the disclosure requirements
relating to the registration and the distribution of such securities as the
Company may from time to time reasonably request in writing.
Each Holder of Registrable Securities agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in clause (vi) of this Section 5, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by clause (vi) of this
Section 5, and, if so directed by the Company, such Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the prospectus covering such Registrable
Securities current at the
<PAGE> 9
9
time of receipt of such notice. In the event the Company shall give any such
notice, the period mentioned in clause (ii) of this Section 5 shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to clause (vi) of this Section 5 and including
the date when each seller of Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by clause (vi) of this Section 5.
6. Indemnification.
(a) Indemnification by the Company. In the event of any registration
of any securities of the Company under the Securities Act pursuant to Section 3
or 4, the Company will, and it hereby does, indemnify and hold harmless, to the
extent permitted by law, the seller of any Registrable Securities covered by
such registration statement, each affiliate of such seller and their respective
directors and officers (and the directors, officers, affiliates and controlling
Persons thereof), each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who controls
such seller or any such underwriter within the meaning of the Securities Act
(collectively, the "Indemnified Parties"), against any and all losses, claims,
damages or liabilities, joint or several, and expenses to which such seller, any
such director or officer or affiliate or any such underwriter or controlling
Person may become subject under the Securities Act, common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof, whether or not such Indemnified Party is a party
thereto) arise out of or are based upon (a) any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary, final or summary prospectus contained therein, or any amendment or
supplement thereto, or (b) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of to circumstances then existing, and the
Company will reimburse such Indemnified Party for any legal or any other
expenses reasonably incurred by it in connection with investigating or defending
any such loss, claim, liability, action or proceeding; provided, that the
Company shall not be liable to any Indemnified Party in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement or amendment or supplement thereto or in any such
preliminary, final or summary prospectus in reliance upon and in conformity with
written information with respect to such seller furnished to the Company by such
seller for use in the preparation thereof and provided, further, that the
Company will not be liable to any Person who participates as an underwriter in
the offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the Securities Act, under the
indemnity agreement in this Section 6(a) with respect to any preliminary
prospectus or the final prospectus or the final prospects as amended or
supplemented, as the case may be, to the extent that any such loss, claim,
damage or liability of such underwriter or controlling Person results from the
fact that such underwriter sold Registrable Securities to a person to whom there
was not sent or given, at or prior to the written confirmation of such sale, a
copy of the final prospectus (including any documents incorporated by reference
therein) or of the final prospectus as then amended
<PAGE> 10
10
or supplemented (including any documents incorporated by reference therein),
whichever is most recent, if the Company has previously furnished copies thereof
to such underwriter. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any
Indemnified Party and shall survive the transfer of such securities by such
seller.
(b) Indemnification by the Seller. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed in accordance with Section 5 herein, that the Company shall have received
an undertaking reasonably satisfactory to it from to prospective seller of such
Registrable Securities or any underwriter to indemnify and hold harmless (in the
same manner and to the same extent as set fort in subdivision (a) of this
Section 6) the Company and all other prospective sellers or any underwriter, as
the case may be, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary,
final or summary prospects contained therein, or any amendment or supplement, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information with respect to such
seller or underwriter furnished to the Company by such seller or underwriter for
use in the preparation of such registration statement, preliminary, final or
summary prospects or amendment or supplement, or a document incorporated by
reference into any of the foregoing. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company
or any of the prospective sellers, or any of their respective affiliates,
directors, officers or controlling Persons and shall survive the transfer of
such securities by such seller.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party hereunder of written notice of to commencement of any action or proceeding
with respect to which a claim for indemnification may be made pursuant to this
Section 6, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, that the failure of the indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding subdivisions of this Section 6, except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party will be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party will consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof, the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
<PAGE> 11
11
(d) Other Indemnification. Indemnification similar to that specified
in the preceding subdivisions of this Section 6 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any federal or state law or regulation or governmental authority other than the
Securities Act.
(e) Non-Exclusivity. The obligations of the parties under this
Section 6 shall be in addition to any liability which any party may otherwise
have to any other party.
7. Rule 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company covenants that it will file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted by
the SEC thereunder (or, if to Company is not required to file such reports, it
will, upon the request of any Holder of Registrable Securities, make publicly
available such information), and it will take such further action as any Holder
of Registrable Securities may reasonably request, all to the extent required
from time to time to enable such Holder to sell shares of Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the SEC. Upon the request of any Holder of Registrable Securities,
the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements. Notwithstanding anything contained in this
Section 7, the Company may deregister under Section 12 of the Exchange Act if it
then is permitted to do so pursuant to the Exchange Act and the rules and
regulations thereunder.
8. Miscellaneous.
(a) Other Investors. The Company may enter into agreements with
other purchasers of Class A Shares who are then employees of the Company or any
of its subsidiaries making them parties hereto (and thereby giving them all of
the rights, preferences and privileges of an original party (other than the
Company) hereto) with respect to additional Class A Shares (the "Supplemental
Agreements"); provided that, pursuant to any such Supplemental Agreement, such
purchaser expressly agrees to be bound by all of the terms, conditions and
obligations of this Agreement as if such purchaser were an original party (other
than the Company) hereto; and further provided that such purchaser shall not
obtain any right to request registration under Section 4 hereof. All Class A
Shares issued or issuable pursuant to such Supplemental Agreements by such
purchasers shall be deemed to be Registrable Securities.
(b) Holdback Agreement. If any such registration shall be in
connection with an underwritten public offering, each Holder of Registrable
Securities agrees not to effect any public sale or distribution, including any
sale pursuant to Rule 144 under the Securities Act, of any equity securities of
the Company, or of any security convertible into or exchangeable or exercisable
for any equity security of the Company (in each case, other than as part of such
underwritten public offering), within 7 days before or 90 days (or such lesser
period as
<PAGE> 12
12
the managing underwriters may permit) after the effective date of such
registration, and the Company hereby also so agrees and agrees to cause each
other Holder of any equity security, or of any security convertible into or
exchangeable or exercisable for any equity security, of the Company purchased
from the Company (at any time other than in a public offering) to so agree.
(c) Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Holders of
a majority of the Registrable Securities then outstanding; provided, however,
that no such amendment shall adversely effect the rights of any Holder of
Registrable Securities hereunder without such Holder's prior written consent.
Each Holder of any Registrable Securities at the time or thereafter outstanding
shall be bound by any consent authorized by this Section 8(c), whether or not
such Registrable Securities shall have been marked to indicate such consent.
(d) Successors, Assigns and Transferees. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the parties hereto other than the Company shall also be for the
benefit of and enforceable by any subsequent Holder of any Registrable
Securities, subject to the provisions contained herein.
(e) Notices. All notices and other communications provided for
hereunder shall be in writing and shall be sent by first class mail, telecopier
or hand delivery:
(i) if to the Company, to:
Gildan Activewear Inc.
725 Montee de Liesse
Villa Sainte-Laurent, QC
Canada H4T 1P5
Telecopy No. (514) 738-2269
Attention: H. Greg Chamandy, Chief Executive Officer and
President
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
22nd Floor
New York, New York 10017-3909
Telecopy No. (212) 455-2502
Attention: Gary I. Horowitz, Esq.
<PAGE> 13
13
(ii) if to Harco, to:
Harco Holdings Ltd.
725 Montee de Liesse
Ville Sainte-Laurent, QC
Canada H4T 1P5
Telecopy No. (514) 738-2269
Attention: H. Greg Chamandy
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
22nd Floor
New York, New York 10017-3909
Telecopy No. (212) 455-2502
Attention: Gary I. Horowitz, Esq.
(iii) if to the Fund, to:
Le Fonds de Solidarite des Travailleurs
du Quebec (FTQ)
8717 Berri Street
Montreal, QC
Canada H2M 2T9
Telecopy No. (514) 383-2500
Attention: Legal Services
and
Telecopy No. (514) 383-2505
Attention: Vice President, Investments
(iv) if to Greg Trust, to:
Royal Bank of Canada Financial Corporation
Royal Bank House
The Garrison, St. Michael
P.O. Box 48B
Bridgetown, Barbados
Telecopy No. (809) 426-4139
Attention: Mr. N.L. (Roy) Smith, Managing Director
<PAGE> 14
14
(v) if to Glenn Trust, to:
Royal Bank of Canada Financial Corporation
Royal Bank House
The Garrison, St. Michael
P.O. Box 48B
Bridgetown, Barbados
Telecopy No. (809) 426-4139
Attention: Mr. N.L. (Roy) Smith, Managing Director
(vi) if to Shirley Trust, to:
Royal Bank of Canada Financial Corporation
Royal Bank House
The Garrison, St. Michael
P.O. Box 48B
Bridgetown, Barbados
Telecopy No. (809) 426-4139
Attention: Mr. N.L. (Roy) Smith, Managing Director
(vii) if to Benni Trust, to:
Royal Bank of Canada Financial Corporation
Royal Bank House
The Garrison, St. Michael
P.O. Box 48B
Bridgetown, Barbados
Telecopy No. (809) 426-4139
Attention: Mr. N.L. (Roy) Smith, Managing Director
(viii) if to any other holder of Registrable Securities, to the
address of such other holder as shown in the books and records
of the Company.
All such notices and communications shall be deemed to have been given or made
(1) when delivered by hand, (2) five business days after being deposited in the
mail, postage prepaid or (3) when telecopied, receipt acknowledged.
(f) Descriptive Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
<PAGE> 15
15
(g) Severability. In the event that any one or more of the
provisions, paragraphs, words, clauses, phases or sentences contained herein, or
the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the remaining provisions, paragraphs,
words, clauses, phrases or sentences hereof shall not be in any way impaired, it
being intended that all rights, powers and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
(h) Counterparts. This Agreement may be executed in two or more
counterparts, and by different parties on separate counterparts, each of which
shall be deemed an original, but all such counterparts shall together constitute
one and the same instrument, and it shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.
(i) Governing Law; Submission to Jurisdiction. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of New York applicable to contracts made and to be performed therein. The
parties to this Agreement hereby agree to submit to the jurisdiction of the
courts of the State of New York in any action or proceeding arising out of or
relating to this Agreement.
(j) Specific Performance. The parties hereto acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. Accordingly, it is agreed that they shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of competent jurisdiction in the United States or any state thereof, in
addition to any other remedy to which they may be entitled at law or equity.
<PAGE> 16
16
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first written above.
GILDAN ACTIVEWEAR INC.
By: /s/ H. Greg Chamandy
----------------------------
Title:
HARCO HOLDINGS INC.
By: /s/ H. Greg Chamandy
----------------------------
Title:
LE FONDS DE SOLIDARITE DES
TRAVAILLEURS DU QUEBEC (FTQ)
By: /s/ Daniel Laporte
----------------------------
Title:
ROYAL BANK OF CANADA FINANCIAL
CORPORATION, in its capacity as trustee of
the H. Gregory Chamandy Family Trust
By: /s/ Al Stevens
----------------------------
Title:
ROYAL BANK OF CANADA FINANCIAL
CORPORATION, in its capacity as trustee of
the Glenn Chamandy Family Trust
By: /s/ Al Stevens
----------------------------
Title:
<PAGE> 17
17
ROYAL BANK OF CANADA FINANCIAL
CORPORATION, in its capacity as trustee of
the Shirley Chamandy Family Trust
ROYAL BANK OF CANADA FINANCIAL CORPORATION
By: /s/ Al Stevens
----------------------------
Title: Managing Director
ROYAL BANK OF CANADA FINANCIAL
CORPORATION, in its capacity as trustee of
the Edwin B. Tisch Family Trust
ROYAL BANK OF CANADA FINANCIAL CORPORATION
By: /s/ Al Stevens
----------------------------
Title: Managing Director
<PAGE> 1
Exhibit 10.26
- --------------------------------------------------------------------------------
The SCORES goal is to align the interest of the employees with those of the
shareholders by rewarding the team effort and contribution of all employees when
GILDAN'S financial objectives will have been exceeded.
- --------------------------------------------------------------------------------
GILDAN is pleased to announce the introduction on May 1, 1998 of its new Annual
Incentive Plan for salaried employees. The Plan will be known by the acronym
SCORES (Supplementary Cash Opportunities for Results Exceeding Standards).
SCORES is designed to provide cash awards to the salaried employees when the
financial results of the Company exceed certain pre-established annual
standards. As GILDAN continues to grow, the purpose of SCORES is to give
tangible recognition to the team efforts that make it possible for GILDAN to
achieve superior financial results and build its future and that of its people.
The principles and objectives behind SCORES are easy to understand and GILDAN
wishes that each employee for whom the Plan has been established, will become
familiar with it and will participate in its success for himself as well as for
the Company.
1. HOW DOES SCORES WORK?
SCORES provides annual cash awards to eligible employees when GILDAN's two key
financial objectives for the Fiscal Year (October 1 to September 30 of each
year) are met. In other words, you score when GILDAN SCORES.
The amount of the cash award payable to an eligible employee corresponds to a
percentage of the employee's Gross Earnings (salary) during the Fiscal Year for
which the award is payable. That percentage of Gross Earnings is calculated as
the product of the following two variables:
1
<PAGE> 2
o the GILDAN Performance Factor, which is a factor common to all employees:
it is based on the performance achieved by GILDAN on its two key financial
objectives for the Fiscal Year;
o the Target Incentive Award, which is a pre-determined percentage of Gross
Earnings based on the employee position level in the Company.
Hence, SCORES is determined as follows:
<TABLE>
<CAPTION>
================================================================================
<S> <C> <C> <C>
EMPLOYEE TARGET GILDAN
AWARD = GROSS X INCENTIVE X PERFORMANCE
PAYABLE EARNINGS AWARD FACTOR
================================================================================
</TABLE>
2. WHO IS ELIGIBLE TO SCORES?
SCORES extends to all full-time permanent salaried employees of GILDAN. Every
such employee is eligible to SCORES provided he has completed six (6) months of
continuous service on May 1, 1998. If he has not completed the six (6) month
period of continuous service at that date or he is hired after that date, he
will be eligible for SCORES after six (6) months of continuous employment has
been completed; he will thus participate in SCORES based on his Gross Earnings
received in the Fiscal Year with respect to service beyond the waiting period of
six (6) months.
3. WHAT IS THE GILDAN PERFORMANCE FACTOR?
The GILDAN Performance Factor is calculated at the end of each Fiscal Year based
on the audited financial statements of the Company. It is a number between 0.00
(for objectives not achieved) and 2.00 (for objectives significantly exceeded),
taken from a pre-established grid. That grid is based on the two key financial
objectives of GILDAN for the Fiscal Year, as follows:
2
<PAGE> 3
o for the first objective, we measure the Company's actual Net Profits for
the Fiscal Year against the forecasted Net Profits (budgeted profits) and
determine the percentage by which it has been exceeded or achieved.
o for the second objective, we measure the Company's actual Return on Net
Assets or "RONA" against the forecasted Return on Net Assets (budgeted
RONA) and again determine the percentage by which it has been exceeded or
achieved.
Depending on the percentage of achievement under each of the financial
objectives, the grid provides the corresponding GILDAN Performance Factor
(Please refer to the grid attached as Appendix "A").
When both the actual Net Profits and actual RONA for the Fiscal Year exceed
their forecasted bases by 15% or more, the GILDAN Performance Factor is 2.00
which means that the award payable will be doubled the Target Incentive Award;
when both the actual Net Profits and actual RONA for the Fiscal Year exceed
their forecasted bases by 5%, the GILDAN Performance Factor is 1.00, which means
that the award payable is equal to the Target Incentive Award.
4. WHAT IS MEANT BY NET PROFITS AND RETURN ON NET ASSETS (RONA)?
The Company starts each new Fiscal Year with a budget that is approved by the
Board of Directors on behalf of the shareholders. That budget shows what the
GILDAN'S Net Profits (Profits after income taxes) should be at the end of the
Fiscal Year provided the revenues and expenses are as planned. That is what we
call the forecasted Net Profits for the Fiscal Year. This is also our commitment
to the financial community and to investors at large.
In a similar way, before the beginning of each new Fiscal Year, the Company also
seeks approval for its forecasted Return on Net Assets or (RONA). By RONA (also
known as Return on Investments), we refer to the rate of return achieved by
GILDAN on all monies it has invested in the Company in the form of buildings,
equipments, inventories, accounts
3
<PAGE> 4
receivable less payable, etc. RONA is calculated by dividing the amount of
profits before income taxes and interest charges by the average amount of
monthly net assets tied in the Company. For example, if the total assets or
investments of GILDAN amounted to say $50 millions and that the Company had
pre-tax profits of say $10 millions, this would be equivalent to a RONA of 20%.
The higher this return is, the healthier the Company is.
5. WHAT IS THE TARGET INCENTIVE AWARD?
The Target Incentive Award is the percentage of the employee's Gross Earnings
that is targeted as the award payable depending on the employee's position level
in the Company and the grouping he belongs to for Plan purposes.
There are seven groupings of employees for purposes of SCORES and they are
listed herebelow; accordingly, there are seven different Target Incentive Award
percentages.
EMPLOYEE GROUPINGS FOR SCORES' PURPOSES
Group A Top Executives
Group B All Vice-Presidents
Group C All Directors and Sales Managers
Group D All Plant Managers and Senior Staff Members
Group E All Managers in the Operations, Manufacturing,
Finance & Administration Departments
Group F All Supervisors (foremen)
Group G All Professional, Technical, Clerical and Support
Staff
Each eligible employee will be personally informed of his Target Incentive Award
percentage based on his position level and grouping.
4
<PAGE> 5
6. WHAT IS THE DEFINITION OF EMPLOYEE GROSS EARNINGS OVER A FISCAL YEAR?
The Gross Earnings of an employee over a Fiscal Year means the total of the
employee base salary over that Fiscal Year before any deductions but excluding
overtime, any award or payment that is not for earned wages or salary.
7. HOW IS SCORES DETERMINED?
The calculation of the SCORES' award to be paid to an employee for a Fiscal Year
is based on the following formula:
<TABLE>
<CAPTION>
================================================================================
<S> <C> <C> <C>
EMPLOYEE TARGET GILDAN
AWARD = GROSS X INCENTIVE X PERFORMANCE
PAYABLE EARNINGS AWARD FACTOR
================================================================================
</TABLE>
As an example, let us suppose the employee Gross Earnings for the Fiscal Year
are $34 000. Let us also suppose that the Target Incentive Award percentage is
7.5% and suppose finally that the GILDAN Financial Performance Factor for the
Fiscal Year is 1.10. In this case, the SCORES' award would be calculated as
follows and be equal to:
$34 000 X 0.075 X 1.10 = $2 805
8. WHAT IF THE EMPLOYEE HAS CHANGED POSITION IN THE COMPANY?
If the employee has changed position or has been promoted during the Fiscal
Year, the Target Incentive Award applicable might be the same or may be
different for each position he occupied. Accordingly for each position occupied
during a Fiscal Year, the proper award will be calculated based on the
employee's Gross Earnings in that position and the Target
5
<PAGE> 6
Incentive Award applicable to that same position; results will be summed up to
provide the total award payable.
9. WHEN WILL SCORES BE PAID?
As mentioned earlier, GILDAN's Fiscal Year ends on September 30. Immediately
after the Company's audited financial statements have been approved (usually 90
days), the SCORES awards will be determined, approved and paid to each eligible
employee. All awards will be paid in the currency of the country where resides
the employee.
10. HOW ABOUT ANOTHER EXAMPLE OF SCORES?
For this example, we will assume the employee's Gross Earnings for the Fiscal
Year ending September 30, 1998 are $42 500; we will also assume his Target
Incentive Award to be 10%.
We will also suppose that the GILDAN'S financial results for the same Fiscal
Year, measured against the Company's forecast, show that the actual Net Profits
are at 105 percent of forecasted Net Profits and the actual Return on Net Assets
is at 102 percent of forecasted Return on Net Assets.
The GILDAN Performance Factor corresponding to those results is to be found on
the fourth column from the left and the third row from the bottom in the grid
(see Appendix "A" attached). It shows a GILDAN Performance Factor of 0.75.
6
<PAGE> 7
Using the formula provided in answer to question 1 "How does SCORES work?" the
award that would be payable to that employee for such Fiscal Year would be
calculated as follows:
<TABLE>
<CAPTION>
================================================================================
EMPLOYEE TARGET GILDAN
GROSS X INCENTIVE X PERFORMANCE = AWARD
EARNINGS AWARD FACTOR PAYABLE
- --------------------------------------------------------------------------------
<C> <C> <C> <S>
42,500 $ X 0,10 X 0,75 = 3 188 $
================================================================================
</TABLE>
11. WHAT HAPPENS TO SCORES IN THE EVENT OF TERMINATION OF EMPLOYMENT, DEATH OR
RETIREMENT?
In case of termination of employment (whether voluntary or involuntary), no
SCORES award or fraction thereof is payable, except with respect to an earned
but yet unpaid award for the previous Fiscal Year.
In the event of retirement or death, a fraction of the SCORES award, if any that
may become payable for the Fiscal Year underway will be paid to the employee or
to his beneficiary based on the employee's Gross Earnings up to the date the
event took place.
*************
7
<PAGE> 8
APPENDIX "A"
FINANCIAL PERFORMANCE FACTORS FOR 1998
The performance factor is obtained by adjusting the factor in the applicable
cell of the grid as follows: when measuring the "Actual Net Profits vs
Forecasted Net Profits", add to the factor in the cell, 0.05 for every complete
percentage point by which the result exceeds the lower bound for that cell. This
adjusment process does not apply though when the factor in the cell is 0.00 or
2.00. It cannot either bring the GILDAN Performance Factor to exceed 2.00.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
115% & over 0.75 1.00 1.25 1.50 1.75 2.00
----------------------------------------------------------------------------------------------------------------
Actual Return 110% - 114.99% 0.50 0.75 1.00 1.25 1.50 1.75
on ----------------------------------------------------------------------------------------------------------------
Net Assets 105% - 109.99% 0.25 0.50 0.75 1.00 1.25 1.50
as a percentage ----------------------------------------------------------------------------------------------------------------
of 100% - 104.99% 0.00 0.25 0.50 0.75 1.00 1.25
Forecasted ----------------------------------------------------------------------------------------------------------------
Return 95% - 99.99% 0.00 0.00 0.25 0.50 0.75 1.00
on ----------------------------------------------------------------------------------------------------------------
Net Assets 90% - 94.99% 0.00 0.00 0.00 0.25 0.50 0.75
----------------------------------------------------------------------------------------------------------------
90% - 94.99% 95% - 99.99% 100% - 104.99% 105% - 109.99% 110% - 114.99% 115% & over
----------------------------------------------------------------------------------------------------------------
Actual Net earnings vs Forecasted Net Earnings
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 10.27
SECTION 1 -- PURPOSES OF THE PLAN
Purposes
The purposes of the GILDAN Stock Option Plan are to assist and encourage
officers, employees and non-employee directors of GILDAN ACTIVEWEAR INC.
(the "Company") to work towards and participate in the growth and
development of the Company and to assist the Company in attracting,
retaining and motivating its officers, key employees and non-employee
directors.
SECTION 2 -- DEFINITIONS
Definitions
For purposes of this Plan, the following terms shall have the following
meanings:
2.1 "Board" means the board of directors of the Company:
2.2 "Change of Control" has the meaning set forth in Schedule A hereto;
2.3 "Company" means GILDAN ACTIVEWEAR INC. and its subsidiaries;
2.4 "Eligible Participant" means any officer, key employee or
non-employee director of the Company designated by the Board as
eligible to participate in the Plan;
2.5 "Exercise Price" means the price per Share at which Shares may be
subscribed for by an Optionee pursuant to a particular Option
Agreement;
2.6 "Expiry Date" means the date on which an Option expires pursuant to
the Option Agreement relating to that Option;
2.7 "Grant Date" means the date on which an Option is granted, which
date may be on or, if determined by the Board at the time of grant,
after the date that the Board resolves to grant the Option;
<PAGE> 2
2.8 "Notice of Exercise" means a notice, substantially in the form of
the notice set out in Schedule B to this Plan, from an Optionee to
the Company giving notice of the exercise or partial exercise of an
Option previously granted to the Optionee;
2.9 "Option" means an option to subscribe Shares granted to an Eligible
Participant pursuant to the terms of the Plan;
2.10 "Option Agreement" means an agreement, substantially in the form of
the agreement set out in Schedule C to this Plan, between the
Company and an Eligible Participant setting out the terms of an
Option granted to the Eligible Participant:
2.11 "Optioned Shares" means the Shares that may be subscribed for by an
Optionee pursuant to a particular Option Agreement;
2.12 "Optionee" means an Eligible Participant to whom an Option has been
granted;
2.13 "Permanent Disability" shall mean incapacity due to a physical or
mental illness which is determined by the Company to cause a
permanent impairment in the ability of the Eligible Participant to
perform his or her duties as employee;
2.14 "Outstanding Issue" shall have the meaning, if any, set forth under
the rules and policies of the stock exchanges upon which the Shares
are then listed relating to Share Compensation Arrangements based
however, on a deemed conversion of all Class B Multiple Voting
Shares then issued and outstanding;
2.15 "Plan" means the GILDAN Stock Option Plan;
2.16 "Share Compensation Arrangement" means any stock option, stock
option plan, employee stock purchase plan or any other compensation
or incentive mechanism involving the issuance or potential issuance
of Shares;
2.17 "Shares" means Class A Subordinate Voting Shares of the Company.
<PAGE> 3
SECTION 3 -- GENERAL PROVISIONS OF THE PLAN
3.1 Administration
The Plan will be administered by the Board or, if determined by the
Board, by a compensation or human resources committee of the Board
consisting of not less than three directors, all of whom shall be
"outside" directors within the meaning of the corporate governance
guidelines of The Montreal Exchange and The Toronto Stock Exchange.
If a committee is appointed to administer the Plan, all reference in
this Plan to the Board will be deemed to be references to the
committee, with the exception that if a committee is appointed,
pursuant to this paragraph, to administer the Plan, approval of the
Board as to the number of Options granted and the number of Shares
subject to such Options will be required, and the Board shall retain
ultimate authority in connection with all decisions made by the
committee in the administration of the Plan.
3.2 Interpretation
The Board or committee, as the case may be, has full and complete
authority to interpret the Plan and to prescribe such rules and
regulations and make such determinations as it deems necessary or
desirable for the administration of the Plan and all such
interpretations, determinations or other actions taken by the Board
(or committee, as the case may be) shall be final and binding on the
Corporation and each Eligible Participant and conclusive for all
purposes thereunder;
Words denoting the singular number include the plural and vice versa
and words denoting the masculine include the feminine.
<PAGE> 4
3.3 Shares Reserved for the Plan
Subject to adjustment under section 4.9 and any applicable
limitations set forth at section 3.8, the maximum number of Shares
that are issuable under the Plan shall not exceed 995,000 Shares.
Any Shares subject to Options that expire or terminate in accordance
with the terms of the Plan without having been exercised may be made
subject to a further Option. No fractional Shares may be issued
under the Plan.
3.4 Eligibility
Subject to the limitations set forth at section 3.8, Options may be
granted by the Board to any Eligible Participant.
3.5 Non-Exclusivity
Nothing contained in this Plan will prevent the Board from adopting
other or additional Share Compensation Arrangements, subject to
obtaining the prior approval of applicable regulatory authorities,
including those stock exchanges upon which the Shares are then
listed or any other approvals as may be required in the
circumstances;
3.6 Amendment of Plan and Options
The Board may amend, suspend or terminate the Plan or any Option
granted thereunder at any time, provided that no such amendment,
suspension or termination may:
(a) be made without obtaining any required regulatory approval,
including the stock exchanges upon which the Shares are then
listed or, if requested by such regulatory authority, any
shareholder approval; and
<PAGE> 5
(b) alter or impair any rights of an Optionee under Options
previously granted without the consent or the deemed consent
of the Optionee.
3.7 Compliance with laws and stock exchange Rules
The Plan, the grant and exercise of Options under the Plan and the
Company's obligation to issue Shares on exercise of Options will be
subject to all applicable federal, provincial and foreign laws, as
well as all applicable policies, rules and regulations of any stock
exchanges on which the Shares are listed for trading, including
requirements as to listing of the Shares on such Stock Exchanges.
Shares issued to Optionees pursuant to the exercise of Options may
be subject to limitation on sale or resale under applicable
securities laws.
3.8 Quantitative Limitations
Notwithstanding anything to the contrary herein provided, (i) the
maximum number of Shares that may be reserved for issuance to any
one person pursuant to the exercise of Options granted under the
Plan or options under any other Share Compensation Arrangements
shall not exceed 5% of the Outstanding Issue at the time of grant;
(ii) the total number of Shares reserved for issuance to insiders
pursuant to the exercise of options under the Plan or other employee
options shall not, unless shareholder approval is obtained, exceed
10% of the Outstanding Issue; and (iii) the number of Shares which
may be issued under the Plan and other Share Compensation
Arrangements of the Corporation in a one-year period shall not
exceed (a) 10% of the Outstanding Issue, in the case of Shares
issued to insiders, or (b) 5% of the Outstanding Issue, in the case
of Shares issued to any one insider and his/her associates.
<PAGE> 6
SECTION 4 -- GRANT OF OPTIONS
4.1 Grant of Options
The Board shall from time to time, at its entire discretion,
designate the Eligible Participants to whom a grant of Options shall
be made, the number of Shares covered by such Options, and the Grant
Date. The Board shall further have discretion to establish, within
the restrictions set forth in the Plan, the time of exercise, Expiry
Dates, Exercise Price and other particulars applicable to an Option
granted hereunder.
4.2 Option Agreement
Upon the grant of an Option, the Company will deliver to the
Eligible Participant selected to receive same an Option Agreement
dated as of the Grant Date, containing the terms of the Option and
executed by the Company, and upon delivery to the Company of the
Option Agreement executed by the Eligible Participant in question,
Eligible Participant in question will be an Optionee under the Plan
and have the right to purchase the Optioned Shares on the terms set
out in the Option Agreement and in the Plan.
4.3 Exercise Price
The Exercise Price for an Option will be determined by the Board at
the time of grant and will not be less than the market price of the
Shares at the Grant Date, calculated as the higher of the closing
price of the Shares on either The Montreal Exchange, The Toronto
Stock Exchange or The American Stock Exchange on the last day
preceding the Grant Date.
<PAGE> 7
4.4 Time of Exercise
(a) Unless the Board otherwise determines, but provided that (i)
no Option may be exercised in whole prior to the second
anniversary of the Grant Date and (ii) that the term of an
Option will not exceed ten years, an Option may be exercised
by an Optionee as follows:
(1) on and after the second anniversary of the Grant Date,
as to 33 1/3% of the Optioned Shares or any part
thereof;
(2) on and after the third anniversary of the Grant Date, as
to an additional 33 1/3% of the Optioned Shares or any
part thereof; and
(3) on and after the fourth anniversary of the Grant Date,
as to the remaining 33 1/3% of the Optioned Shares or
any part thereof.
(b) Upon the occurrence of transactions that would result in a
Change of Control, all Options become exercisable as of the
date of the Change of Control, unless otherwise determined by
the Board prior to the occurrence of the Change of Control.
4.5 Expiry Date
The Expiry Date of an Option will be determined by the Board at the
time of grant, subject however to a maximum term of ten years from
the Grant Date and will be subject to the provisions of section 4.6
relating to early expiry.
4.6 Early Expiry
Unless otherwise determined by the Board at or after the time of
grant, and subject to the maximum term referred to at section 4.5
hereof:
<PAGE> 8
(a) Options will expire immediately upon the Optionee ceasing to
be an Eligible Participant as a result of being dismissed from
his office or employment for cause;
(b) Options will expire before its Expiry Date in the following
events and manner:
(i) if an Optionee resigns his office or employment, the
portion of any Option held by such Optionee that is
exercisable at the date of resignation may be exercised
by the Optionee during the period ending sixty days
after the date of resignation;
(ii) if an Optionee is dismissed without cause, the portion
of any Option held by such Optionee that is exercisable
at the date of dismissal or termination may be exercised
by the Optionee during the period ending sixty days
after the date of dismissal or termination;
(iii) if an Optionee dies or his employment with the Company
is terminated due to Permanent Disability, the portion
of any Option held by such Optionee that would be
exercisable at the date of the death of the Optionee or
of termination may be exercised by the Optionee or the
legal personal representative of the Optionee, as the
case may be, during the period ending twelve months
after the death of the Optionee or after the date of
termination;
(iv) if an Optionee attains the normal retirement age
established by the Company from time to time, and unless
the Board otherwise decides, the portion of any Option
held by such Optionee that would be exercisable at the
date of retirement may be exercised by the Optionee
during the period ending twelve months after the date of
retirement; and
<PAGE> 9
(c) the portion of any Option which is not exercisable at the time
of the occurrence of an event contemplated at (a) or (b) above
shall be immediately forfeited.
4.7 Non-Assignable
Except as provided in section 4.6(b)(iii), an Option may be
exercised only by the Optionee and will not be assignable.
4.8 No Implied Rights
(a) An Optionee will only have rights as a shareholder of the
Company with respect to those of the Optioned Shares that the
Optionee has acquired through the exercise of an Option in
accordance with its terms.
(b) Nothing in this Plan or in any Option Agreement will confer or
be construed as conferring on an Optionee any right to remain
as an officer, key employee or non-employee director of the
Company, or on an Eligible Participant the right to be granted
Options hereunder.
4.9 Adjustment to Shares
The number of Shares delivered to an Optionee upon exercise of an
Option will be adjusted in the following events and manner, subject
to the requirements of applicable regulatory authorities, including
the stock exchanges on which the Shares are then listed, and to the
right of the Board to make such other or additional adjustments as
are appropriate in the circumstances;
<PAGE> 10
a) upon (i) a subdivision of the Shares into a greater number of
Shares, (ii) a consolidation of the Shares into a lesser
number of Shares or (iii) the issue of a stock dividend to
holders of the Shares, the Company will deliver upon exercise
of an Option, in addition to or in lieu of the number of
Optioned Shares in respect of which the right to purchase is
being exercised and without the Optionee making additional
payment, such greater or lesser number of Shares as would have
resulted from the subdivision, consolidation or stock dividend
if the Optioned Shares had been issued and outstanding at the
relevant time;
b) upon a capital reorganization, reclassification or change of
the Shares, a consolidation, an amalgamation, arrangement or
other form of business combination of the Company with another
corporation or a sale, lease or exchange of all or
substantially all of the property of the Company, the Company
will deliver upon exercise of an Option, in lieu of the
Optioned Shares in respect of which the right to purchase is
being exercised, the kind and amount of shares or other
securities or property as would have resulted from such event
if the Optioned Shares had been issued and outstanding at the
relevant time.
Comparable and corresponding adjustments as set forth above will be
made to the number and kind of Shares authorized for issuance under
the Plan, regardless of whether such Shares are covered by Options
at the relevant time. An adjustment will take effect at the time of
the event giving rise to the adjustment, and the adjustments
provided for in this section are cumulative.
The Company will not be required to issue fractional Shares or other
securities under the Plan and any fractional interest in a Share or
other
<PAGE> 11
security that would otherwise be delivered upon exercise of an
Option will be cancelled without payment therefor.
SECTION 5 -- EXERCISE OF OPTIONS
5.1 Manner of Exercise
An Optionee who wishes to exercise an Option may do so by delivering
the following to the Company on or before the Expiry Date of the
Option;
(a) a completed Notice of Exercise; and
(b) a cheque or bank draft in Canadian funds payable to the
Company for the aggregate Exercise Price for the Optioned
Shares being acquired.
If pursuant to section 4.6(b)(iii), the Option may be exercised by
the legal personal representative of the Optionee, such
representative, in addition to delivering to the Company the Notice
of Exercise and cheque or bank draft described above, shall also be
required to deliver to the Company sufficient and satisfactory
evidence of their status.
5.2 Delivery of Share Certificate
Not later than five business days after receipt of the Notice of
Exercise and payment in full for the Optioned Shares being acquired,
the Company will direct its transfer agent to issue a certificate in
the name of the Optionee (or, if deceased, his estate) for the
number of Optioned Shares purchased by the Optionee (or his estate),
which will be issued as fully paid and non-assessable Shares.
<PAGE> 12
SECTION 6 -- EFFECTIVE DATE
The Plan will be effective on June 24, 1998.
<PAGE> 13
SCHEDULE "A"
For purposes of this Plan, a "Change of Control" shall mean a change in
control of the Company of a nature that would be required to be reported,
whether or not the Company is then subject to such reporting requirement,
provided that, without limitation, a Change in Control shall be deemed to have
occurred if:
(a) any individual, partnership, firm, company, association, trust,
unincorporated organization or other entity, or any syndicate or
group deemed to be a person, becomes the "beneficial owner",
directly or indirectly, of securities of the Company representing
twenty (20) percent or more of the combined voting power of the
Company's then outstanding securities entitled to vote in the
election of directors of the Company (the "Company Voting
Securities"); provided, however, that any acquisition of Company
Voting Securities by the Company or any of its subsidiaries, or any
employee benefit plan (or related trust) of the Company or its
subsidiaries, or any company with respect to which, following such
acquisition, substantially all of the combined voting power of the
then outstanding voting securities of such company entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by the individuals and entities who were the
beneficial owners of Company Voting Securities immediately prior to
such acquisition in substantially the same proportion as their
ownership immediately prior to such acquisition, shall not
constitute a Change in Control;
(b) individuals who, on the date of implementation of the Plan,
constitute the Board and any new directors whose appointment by the
Board or whose nomination for election by the Company's shareholders
was approved by a vote of at least three-quarters (3/4) of the
directors then still in office who
<PAGE> 14
either were directors on the date of implementation of the Plan or
whose appointment or nomination for election was previously so
approved cease for any reason to constitute a majority of the
members of the Board;
(c) assets of the Company representing fifty (50) percent or more of the
net book value of the assets of the Company determined as of the
date of the audited financial statements of the Company then most
recently published, are sold, liquidated or distributed; or
(d) ten (10) percent or more of the value of the assets of the Company
or the voting securities of the Company are about to be transferred
or have been transferred because of any taking, seizure or
defeasance as a result of, or in connection with (i)
nationalization, expropriation, confiscation, coercion, force or
duress or other similar action or (ii) the imposition of a
confiscatory tax, assessment or other governmental charge or levy.
The value of the assets of the Company shall be determined as of the
date of the audited financial statements of the Company most
recently published prior to the date of the transfer.
A Change in Control shall also be deemed to occur as of the date the
Company executes an agreement which, if carried out, would result in the
occurrence of a Change in Control as described above.
<PAGE> 15
SCHEDULE B -- FORM OF NOTICE OF EXERCISE
STOCK OPTION PLAN
NOTICE OF EXERCISE
TO: Gildan Activewear Inc.
725 Montee de Liesse
Ville Saint Laurent, Quebec
H4T 1P5
Attention: Secretary
Reference is made to the Option Agreement made as of _____________________
between Gildan Activewear Inc. (the "Company") and the Optionee named below. The
Optionee hereby exercises the Option to purchase Shares of the Company as
follows:
<TABLE>
<S> <C>
Number of Optioned Shares for which
Option is being exercised; _______________________
Exercise Price per Share: $_______________________
Total Exercise Price (in the form of a
cheque or bank draft tendered with this
Notice of Exercise): $_______________________
Name of Optionee as it is to appear on
share certificate: _______________________
</TABLE>
<PAGE> 16
<TABLE>
<S> <C>
Address of Optionee as it is to appear _______________________
on the register of Shares of the Company _______________________
and to which a certificate representing _______________________
the Shares being purchased is to be _______________________
delivered: _______________________
Dated ______________________ _______________________
Name of Optionee
_______________________
Signature of Optionee
</TABLE>
<PAGE> 17
SCHEDULE C -- FORM OF OPTION AGREEMENT
STOCK OPTION PLAN
OPTION AGREEMENT
This Option Agreement is entered into between GILDAN ACTIVEWEAR INC. (the
"Company") and the Optionee named below pursuant to the GILDAN Stock Option Plan
(the "Plan"), a copy of which is attached hereto, and confirms that
1. on________________________(the "Grant Date");
2. _________________________(the "Optionee");
3. was granted a non-assignable option to purchase ____________________
Shares (the "Optioned Shares") of the Company, in accordance with
the terms of the Plan;
4. at a price (the "Exercise Price") of $_________________________ per
Share: and
5. for a maximum term expiring at 5;00 P.M., Eastern __________________
(the "Expiry Date");
all on the terms and subject to the conditions set out in the Plan. By signing
this agreement, the Optionee acknowledges that he or she has read and
understands the Plan, and agrees to be bound thereby.
This Agreement and all related documents have been drawn up in the English
language at the specific request of the parties hereto. La presente entente,
ainsi que tout autre document y afferent, ont ete rediges en langue anglaise a
la demande expresse des parties.
<PAGE> 18
IN WITNESS WHEREOF the Company and the Optionee have executed this Option
Agreement as of _______________________
By:__________________________
By:__________________________
_____________________________
Name of Optionee
_____________________________
Signature of Optionee
<PAGE> 1
Exhibit 10.28
Gildan Activewear Inc.
(Corporation incorporated under the Canada Business Corporations Act)
$15,000,000 No. A-4
11% Interest Unsecured Debenture
================================================================================
1. DEFINED TERMS AND INTERPRETATION
1.1 Definitions
For the purposes of this Debenture, the following expressions shall have the
following meanings:
1.1.1 "Capital Amount" shall mean the capital amount of $15,000,000;
1.1.2 "Corporation" means Gildan Activewear Inc.;
1.1.3 "Debenture" means this 11% Interest Unsecured Debenture;
1.1.4 "Event of Default" has the meaning ascribed thereto in Article 7 thereof;
1.1.5 "Holder" means Le Fonds de solidarite des travailleurs du Quebec (F.T.Q.);
1.1.6 "Indebtedness" means the unpaid portion of the Capital Amount and the
unpaid portion of the accrued interest payable on the Capital Amount
pursuant to the provisions hereof, together with all arrears thereof;
1.1.7 "Maturity Date" shall mean the 25th day of June, 2003;
1.1.8 "Old Debentures" means Debenture No. A-1 in the principal amount of
$3,000,000, Debenture No. A-2 in the principal amount of $6,000,000 and
Debenture No. A-3 in the principal amount of $6,000,000 previously issued
by the Corporation to the Holder.
1.2 Other Interpretational Provisions
1.2.1 Successors and Assigns: Except as otherwise specified herein, all
references in this Debenture to any person shall be deemed to include such
person's successors and permitted assigns.
<PAGE> 2
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1.2.2 Currency: Except as otherwise specified herein, all references to dollars
in this Debenture are to Canadian dollars.
1.2.3 Gender: Whenever the context so requires, the neuter gender includes the
masculine or feminine and the singular includes the plural and vice versa.
1.2.4 Parties or Party: Whenever used in this Debenture or in any Schedule,
"parties" shall mean the Corporation and the Holder, and "party" shall
mean either the Corporation or the Holder, in each case as the context may
require.
1.2.5 Titles and Headings: The titles and other headings contained in this
Debenture are for reference purposes only and shall not affect in any way
the meaning or interpretation to be given to this Debenture.
1.2.6 Preamble: The preamble to this Debenture forms an integral part hereof.
2. PROMISE TO PAY
2.1 Payments: For and in consideration of the cancellation of the Old
Debentures, the Corporation hereby acknowledges owing and promises to pay
to the Holder the following:
2.1.1 Capital Amount: The Corporation shall pay the Capital Amount to the Holder
on the Maturity Date at the registered office of the Holder or at any
other place which the Holder may communicate from time to time in writing
to the Corporation;
2.1.2 Interest: The Corporation shall pay interest to the Holder on the unpaid
portion of the Capital Amount until paid in full at a yearly rate of
eleven percent (11%), calculated daily and payable monthly on the last day
of each month, and interest on all overdue interest at the same rate,
calculated daily and compounded monthly; and
2.1.3 Arrears: The Corporation shall pay interest on any and all arrears on the
payment of the Capital Amount until fully paid, at a yearly rate of eleven
percent (11 %) calculated daily and compounded monthly in arrears.
<PAGE> 3
Gildan Activewear Inc./11% Interest Unsecured Debenture .../3
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2.2 Place of Payment: All payments to be made to the Holder pursuant to this
Debenture shall be made at the registered office of the Holder or at any
other place which the Holder may communicate from time to time in writing
to the Corporation.
3. REDEMPTION
3.1 Redemption by Holder: Subject to section 7.2 below, the Holder may not
request the redemption of the Debenture prior to the Maturity Date.
3.2 Redemption by Corporation: Provided the Corporation is not In default
hereunder, the Corporation may at any time and from time to time prepay
the whole or any portion of the Capital Amount in minimum installments of
$100,000, subject to the payment of an indemnity equal to three percent
(3%) of the Capital Amount being prepaid.
4. SECURITY
4.1 The Debenture is unsecured.
5. RANK
5.1 The Debenture shall rank junior to all secured indebtedness or preferred
creditors of the Corporation and without distinction or preference with
all the other creditors of the Corporation.
6. REPLACEMENT ISSUE UPON LOSS OF THE DEBENTURE
6.1 In case of deterioration or loss, destruction or theft of this Debenture,
the Corporation shall, subject to section 6.2, issue, sign and deliver a
new Debenture having the same date, the same Capital Amount and the same
tenor as the Debenture, in exchange for and in replacement of the
Debenture.
<PAGE> 4
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6.2 The Holder shall assume the cost of the issue and shall also, as a
condition precedent to the issue of the new Debenture, provide the
Corporation with (a) proof of an attestation regarding the deterioration,
loss, destruction or theft of the Debenture which is reasonably acceptable
to the Corporation and (b) an indemnity bond in form and tenor reasonably
acceptable to the Corporation.
7. DEFAULT UNDER THE DEBENTURE AND ENFORCEMENT
7.1 An event of default ("Event of Default") shall arise if:
7.1.1 the Corporation fails to make any payment of the Capital Amount or fails
to make any interest payment when due and the Corporation does not remedy
such default within ten (10) days after having received a written notice
from the Holder to such effect;
7.1.2 the Corporation fails to perform or comply with any other undertaking or
any condition hereof and the Corporation does not remedy such default
within ten (10) days after the Corporation has received a written notice
from the Holder to such effect;
7.1.3 (a) an order is issued or a resolution passed to wind up the Corporation,
or (b) the Corporation makes a proposal or an assignment of its property
for the benefit of its creditors, or (c) a petition under the Companies
Creditors Arrangement Act (Canada) or for a receiving order is filed
against the Corporation and is not refused within 30 days of the filing of
such petition or a receiver is appointed thereto under the Bankruptcy and
Insolvency Act (Canada) or any other insolvency legislation, or (d) a
seizure is made (unless the seizure is validly contested) or a judgment is
enforced on the aggregate or a material part of the property of the
Corporation or on the shares held by the Corporation in the share capital
of a subsidiary of the Corporation which is material to the operation of
the Corporation's business, or (e) the Corporation ceases to operate its
business;
7.1.4 the Corporation loses its legal existence;
7.1.5 unless otherwise agreed to in writing by the Holder, there is a change of
control (as that term is defined in section 2(3) of the Canada Business
Corporations Act) of the Corporation;
<PAGE> 5
Gildan Activewear Inc./11% Interest Unsecured Debenture .../5
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7.1.6 the Corporation is under default pursuant to an agreement executed with
the Holder and the Corporation does not remedy such default within the
prescribed period provided in such agreement or, if no such period is
provided, within a ten (10) day period following a written notice to that
effect given by the Holder to the Corporation;
7.1.7 in any such case where it may have a material adverse effect on the
Corporation, (a) the Corporation is in default pursuant to any other
financial agreement or other agreement material in nature to the
operations of the Corporation and the Corporation does not remedy such
default within the period provided for in such agreement, or (b) any sum
payable by the Corporation becomes due by anticipation in accordance with
any default in any contract or financial undertaking, provided however,
that if such default is remedied by the Corporation or waived by the
beneficiary thereof, then the Corporation shall be deemed to have remedied
any such default in accordance with the present paragraph; or
7.1.8 any of the above-described events occurs with respect to any subsidiary
(as this term is defined in section 2(5) of the Canada Business
Corporations Act) of the Corporation provided that such event may have a
material adverse effect on the assets of the Corporation, its business or
its financial situation on a consolidated basis.
7.2 Upon the occurrence of an Event of Default and without prejudice to any
other rights it may have in law, the Holder may, at its option, by written
notice given to the Corporation in the manner set out in section 8.1,
require the reimbursement of the Debenture, and the Corporation shall then
promptly pay to the Holder the unpaid portion of the Indebtedness.
7.3 When an event of default occurs, the Holder may, at its option, assert its
rights through any action, proceeding, recourse or procedure authorized or
permitted by law and may file its evidence and other documents necessary
or desirable in order that the Holder's demands may be considered in any
winding-up or other procedure, in respect of the Corporation.
7.4 Unless the sending of a notice is provided for in the circumstances, in
which case the notice shall constitute a putting in default, the
Corporation's default shall be established by the mere lapse of the time
allotted to perform its obligation or to remedy an omission to perform it
and no putting in default shall then be necessary.
<PAGE> 6
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7.5 The Holder shall not be obliged to receive any partial payment of the
Indebtedness outstanding, however, the acceptance of such partial payment
shall not entail a waiver for the remainder.
8. GENERAL PROVISIONS
8.1 Notice: Any and all notices to be given hereunder shall be given in
writing and sent by registered mail, telecopier or other technological
means of reproducing, in writing, said notices, or by personal delivery
thereof, and for the purposes of all acts and notices to be given and
executed hereunder, the parties hereby elect domicile at the following
addresses or such others as the parties may advise in writing, in
accordance with the provisions hereof:
to the Holder: Fonds de solidarite des travailleurs du
Quebec (F.T.Q.)
8717 Berri Street
Montreal, Quebec
H2M 2T9
Attention: Legal Services
Facsimile number 514/383-2500
and Attention: Vice-President Investment
Facsimile number: 514/383-2505
to the Corporation: Gildan Activewear Inc.
725 Montee de Liesse
Montreal, Quebec
H4T 1P5
Attention: Chief Executive Officer
Facsimile number: 514/738-2269
<PAGE> 7
Gildan Activewear Inc./11% Interest Unsecured Debenture .../7
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with a copy to: Hart, Saint-Pierre
1 Place Ville-Marie
Suite 2125
Montreal, Quebec
H3B 2C6
Attention: Gino Martel
Facsimile number: 514/866-8323
8.2 Assignment: Subject to prior written notification to the Corporation, the
Holder may transfer or assign any of its rights under this Debenture
either in whole or in part.
8.3 Concurrent Remedies: The rights and remedies available to the Holder under
the terms of this Debenture or recognized by law may be exercised
concurrently and are not alternatives.
8.4 Renunciation: The failure or omission by the Holder to require that the
Corporation or the parties bound by the undertakings contemplated by this
Debenture perform any of their obligations under the terms of this
Debenture, or to exercise any right or remedy available to it, shall not
prejudice the Holder's right to subsequently demand the execution thereof
or to subsequently exercise such right or remedy, unless the Holder has
expressly renounced to its right to do so in writing. Such a renunciation
is valid only for those matters which are specifically mentioned therein.
8.5 Further Assurances: Upon reasonable request, the parties agree to sign and
to ensure the signature of all documents, and to perform and to ensure the
performance of all acts which are necessary or useful in order to give
full effect to the letter and to the spirit of this Debenture.
8.6 Severability: If any term or provision of this Debenture shall be held
invalid or unenforceable, the remaining terms hereof shall not be affected
but shall be valid and enforced to the fullest extent permitted by law.
The parties hereto shall use best efforts to substitute a valid, legal and
enforceable provision which insofar as practical, implements the purpose
hereof.
8.7 Domicile: For the purposes of the Debenture, the Corporation elects
domicile in the judicial district of Montreal.
<PAGE> 8
Gildan Activewear Inc./11% Interest Unsecured Debenture .../8
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8.8 Entire Agreement: This Debenture constitutes the entire agreement between
the parties relating to the subject matter hereof and all prior proposals,
discussions and writings by and between the parties and relating to the
subject matter hereof are superseded.
8.9 Governing Law: This Debenture shall be interpreted by and construed
according to the substantive laws of the Province of Quebec.
IN WITNESS WHEREOF, this Debenture has been duly signed by the Corporation on
this 25th day of June, 1998.
Gildan Activewear Inc.
Per: /s/ H. Gregory Chamandy
-------------------------
Name: H. Gregory Chamandy
Title: Chairman and Chief Executive
Officer
<PAGE> 1
Exhibit 10.29
GILDAN ACTIVEWEAR INC.
(Corporation incorporated under the CANADA BUSINESS CORPORATIONS ACT)
$15,000,000 No. A-5
Unsecured Debenture
================================================================================
1 DEFINED TERMS AND INTERPRETATION
1.1 DEFINITIONS
For the purposes of this Debenture, the following expressions shall have the
following meanings:
1.1.1 "CAPITAL AMOUNTS" shall means the capital amount of $15,000,000;
1.1.2 "CORPORATION" means Gildan Activewear Inc.;
1.1.3 "DEBENTURE" means this Unsecured Debenture No. A-5;
1.1.4 "EVENT OF DEFAULT" has the meaning ascribed thereto in Article 8
hereof;
1.1.5 "EXCESS CASH FLOW" means the net after tax profits plus depreciation
and amortization but less the amount of (a) repayment of long-term
and (b) disbursements in connection with the project contemplated
under section 2.3 of the Subscription Agreement;
1.1.6 "HOLDER" means Le Fonds de solidarite des travailleurs du Quebec
(F.T.Q.);
1.1.7 "INDEBTEDNESS" means the unpaid portion of the Capital Amount and the
unpaid portion of the accrued interest payable on the Capital Amount
pursuant to the provisions hereof, together with all arrears thereof;
1.1.8 "MATURITY DATA" shall means the 25th day of June 2004;
1.1.9 "SUBSCRIPTION AGREEMENT" means the Subscription Agreement entered
into this day between the Corporation and the Holder.
<PAGE> 2
1.2 OTHER INTERPRETATIONAL PROVISIONS
1.2.1 SUCCESSORS AND ASSIGNS: Except as otherwise specified herein, all
references in this Debenture to any person shall be deemed to include
such person's successors and permitted assigns.
1.2.2 CURRENCY: Except as otherwise specified herein, all references to
dollars in this Debenture are to Canadian dollars.
1.2.3 GENDER: Whenever the context so requires, the neuter gender includes
the masculine or feminine and the singular includes the plural and
vice versa.
1.2.4 PARTIES OR PARTY: Whenever used in this Debenture or in any Schedule,
"PARTIES" shall mean the Corporation and the Holder, and PARTY shall
mean either the Corporation of the Holder, in each case as the
context may require.
1.2.5 TITLES AND HEADINGS: The titles and other headings contained in this
Debenture are for reference purposes only and shall not affect in any
way the meaning or interpretation to be given to this Debenture.
1.2.6 PREAMBLE: The preamble to this Debenture forms an integral part
hereof.
2. PROMISE TO PAY
2.1 PAYMENTS: For and in consideration of the sum of $15,000,000 advanced
this day to the Corporation, the receipt of which is hereby
acknowledged, the Corporation hereby acknowledges owing and promises
to pay to the Holder the following:
2.1.1 CAPITAL AMOUNT: The Corporation shall pay the Capital Amount to the
Holder on the Maturity Date at the registered office of the Holder or
at any other place which the Holder may communicate from time to time
in writing to the Corporation;
2.1.2 INTEREST: The Corporation shall pay interest to the Holder on the
unpaid portion of the Capital Amount until paid in full at a yearly
rate of twelve percent (12%) for the period from the date of the
Issuance of this Debenture until the second anniversary of the date
of issuance of this Debenture and at the rate of
<PAGE> 3
thirteen percent (13%) for the period from the second anniversary of
the date of issuance of this Debenture until payment in full of the
Capital Amount, calculated daily and payable monthly on the last day
of each month, and interest on all overdue interest at a yearly rate
of thirteen percent (13%), calculated daily and compounded monthly;
and
2.1.3 ARREARS: The Corporation shall pay interest on any and all arrears on
the payment of the Capital Amount until fully paid, at a yearly rate
of thirteen percent (13%) calculated daily and compounded monthly in
arrears.
2.2 PLACE OF PAYMENT: All payments to be made to the Holder pursuant to
this Debenture shall be made at the registered office of the Holder or
at any other place with the Holder may communicate from time to time
in writing to the Corporation.
3. REDEMPTION
----------
3.1 REDEMPTION BY HOLDER: Subject to section 8.2 below, the Holder may not
request the redemption of the Debenture prior to the Maturity Date.
3.2 REDEMPTION BY CORPORATION: Provided the Corporation is not in default
hereunder, the Corporation may at any time and from time to time
prepay the whole or any portion of the Capital Amount in minimum
instalments of $100,000, subject to the payment of an indemnity equal
to three percent (3%) of the Capital Amount being prepaid.
4. SECURITY
--------
4.1 The Debenture is unsecured.
5. RANK
----
5.1 The Debenture shall rank junior to all secured indebtedness or
preferred creditors of the Corporation but PARI PASSU with Debenture
A-4 issued by the Corporation on June 25, 1998 and any other debenture
issued by the Corporation and without distinction or preference with
all the other creditors of the Corporation.
<PAGE> 4
6. COVENANTS
---------
6.1 The Corporation hereby covenants and agrees in favour of the Holder as
follows:
6.1.1 LONG-TERM DEBT: The secured long term debt of the Corporation shall
not exceed Sixty Million Dollars ($60,000,000) without the prior
written consent of the Holder;
6.1.2 BARBADIAN OPERATIONS: In the event the Corporation directly or
indirectly establishes a place of business or expands its operations
in Barbados, then the Corporation shall ensure that all Excess Cash
Flow generated from Barbadian operations is forthwith repatriated to
Canada, unless the prior written consent of the board of directors of
the Corporation and of the Holder, acting reasonably, is obtained;
6.1.3 CURRENT RATIO: The Corporation will not permit its current ratio of
current assets to current liabilities to be less than 1.2:1 at any
time;
6.1.4 DEBT TO EQUITY RATIO: The Corporation will not permit the ratio of its
total debt (including all debentures issued by the Corporation) to
equity to be more than 3:1 at any time; and
6.1.5 EBITDA: The Borrower will maintain as at the end of each fiscal year
prior to the Maturity Date, a ratio of its earnings before interest,
taxes and depreciation to the sum of (a) principal payments which the
Corporation was required to make on its long-term debt during each
such fiscal year and (b) interest payable during each such fiscal year
on the Corporation's long-term debt, of not less than 2:1.
7. REPLACEMENT ISSUE UPON LOSS OF THE DEBENTURE
--------------------------------------------
7.1 In case of deterioration or loss, destruction or theft of this
Debenture, the Corporation shall, subject to section 7.2, issue, sign
and deliver a new Debenture having the same date, the same Capital
Amount and the same tenor as the Debenture, in exchange for and in
replacement of the Debenture.
7.2 The Holder shall assume the cost of the issue and shall also, as a
condition precedent to the issue of the new Debenture, provide the
Corporation with (a) proof of an attestation regarding the
deterioration, loss, destruction or theft of the
<PAGE> 5
Debenture which is reasonably acceptable to the Corporation and (b) an
indemnity bond in form and tenor reasonably acceptable to the
Corporation.
8. DEFAULT UNDER THE DEBENTURE AND ENFORCEMENT
8.1 An event of default ("EVENT OF DEFAULT") shall arise if:
8.1.1 the Corporation fails to make any payment of the Capital Amount or
fails to make any interest payment when due and the Corporation does
not remedy such default within ten (10) days after having received a
written notice from the Holder to such effect:
8.1.2 the Corporation fails to perform or comply with any of the covenants
under section 6 above or with any other undertaking or any condition
hereof and the Corporation does not remedy such default within ten
(10) days after the Corporation has received a written notice from the
Holder to such effect;
8.1.3 (a) an order is issued or a resolution passed to wind up the
Corporation, or (b) the Corporation makes a proposal or an assignment
of its property for the benefit of its creditors, or (c) a petition
under the COMPANIES CREDITORS ARRANGEMENT ACT (Canada) or for a
receiving order is filed against the Corporation and is not refused
within 30 days of the filing of such petition or a receiver is
appointed thereto under the BANKRUPTCY AND INSOLVENCY ACT (Canada) or
any other insolvency legislation, or (d) a seizure is made (unless the
seizure is validly contested) or a judgment is enforced on the
aggregate or a material part of the property of the Corporation or on
the shares held by the Corporation in the share capital of a
subsidiary of the Corporation which is material to the operation of
the Corporation's business, or (e) the Corporation ceases to operate
its business:
8.1.4 the Corporation loses its legal existence;
8.1.5 unless otherwise agreed to in writing by the Holder, there is a change
of control (as that term is defined in section 2(3) of the CANADA
BUSINESS CORPORATIONS ACT) of the Corporation;
8.1.6 the Corporation is under default pursuant to an agreement executed
with the Holder and the Corporation does not remedy such default
within the prescribed period provided in such agreement or, if no such
period is provided, within a ten
<PAGE> 6
(10) day period following a written notice to that effect given by the
Holder to the Corporation;
8.1.7 in any such case where it may have a material adverse effect on the
Corporation, (a) the Corporation is in default pursuant to any other
financial agreement or other agreement material in nature to the
operations of the Corporation and the Corporation does not remedy such
default within the period provided for in such agreement, or (b) any
sum payable by the Corporation becomes due by anticipation in
accordance with any default in any contract or financial undertaking,
provided however, that if such default is remedied by the Corporation
or waived by the beneficiary thereof, then the Corporation with the
present paragraph; or
8.1.8 any of the above-described events occurs with respect to any
subsidiary (as this term is defined in section 2(5) of the CANADA
BUSINESS CORPORATIONS ACT) of the Corporation provided that such event
may have a material adverse effect on the assets of the Corporation,
its business or its financial situation on a consolidated basis.
8.2 Upon the occurrence of an Event of Default and without prejudice to
any other rights it may have in law, the Holder may, at its option, by
written notice given to the Corporation in the manner set out in
section 9.1, require the reimbursement of the Debenture, and the
Corporation shall then promptly pay to the Holder the unpaid portion
of the Indebtedness.
8.3 When an event of default occurs, the Holder may, at its option, assert
its rights through any action, proceeding, recourse or procedure
authorized or permitted by law and may file its evidence and other
documents necessary or desirable in order that the Holder's demands
may be considered in any winding-up or other procedure, in respect of
the Corporation.
8.4 Unless the sending of a notice is provided for in the circumstances,
in which case the notice shall constitute a putting in default, the
Corporation's default shall be established by the mere lapse of the
time allotted to perform its obligation or to remedy an omission to
perform it and no putting in default shall then be necessary.
<PAGE> 7
8.5 The Holder shall not be obliged to receive any partial payment of the
Indebtedness outstanding, however, the acceptance of such partial
payment shall not entail a waiver for the remainder.
9. GENERAL PROVISIONS
9.1 NOTICE: Any and all notices to be given hereunder shall be given in
writing and sent by registered mail, telecopier or other technological
means of reproducing, in writing, said notices, or by personal
delivery thereof, and for the purposes of all acts and notices to be
given and executed hereunder, the parties hereby elect domicile at the
following addresses or such others as the parties may advise in
writing, in accordance with the provisions hereof:
TO THE HOLDER: Fonds de solidarite des travailleurs du Quebec (F.T.Q.)
8717 Berri Street
Montreal, Quebec
H2M 2T9
ATTENTION: LEGAL SERVICES
Facsimile number: 514/383-2500
and Attention: Director, Investments.
SECTORS OF TRANSPORT, TEXTILE, WOOD, PAPER AND OTHER
Facsimile number: 514/383-2505
TO THE Gildan Activewear Inc.
CORPORATION: 725 Montee de Liesse
Montreal, Quebec
H4T 1P5
ATTENTION: CHIEF EXECUTIVE OFFICER
Facsimile number: 514/738-2269
<PAGE> 8
WITH A COPY TO: Hart, Saint-Pierre
1 Place Ville-Marie
Suite 2125
Montreal, Quebec
H3B 2C6
Attention: Gino Martel
----------------------
Facsimile number: 514/866-8323
9.2 ASSIGNMENT: Subject to prior written notification to the Corporation,
the Holder may transfer or assign any of its rights under this
Debenture either in whole or in part.
9.3 CONCURRENT REMEDIES: The rights and remedies available to the Holder
under the terms of this Debenture or recognized by law may be
exercised concurrently and are not alternatives.
9.4 RENUNCIATION: The failure or omission by the Holder to require that
the Corporation or the parties bound by the undertakings contemplated
by this Debenture perform any of their obligations under the terms of
this Debenture, or to exercise any right or remedy available to it,
shall not prejudice the Holder's right to subsequently demand the
execution thereof or to subsequently exercise such right or remedy,
unless the Holder has expressly renounced to its right to do so in
writing. Such a renunciation is valid only for those matters which are
specifically mentioned therein.
9.5 FURTHER ASSURANCES: Upon reasonable request, the parties agree to sign
and to ensure the signature of all documents, and to perform and to
ensure the performance of all acts which are necessary or useful in
order to give full effect to the letter and to the spirit of this
Debenture.
9.6 SEVERABILITY: If any term or provision of this Debenture shall be held
invalid or unenforceable, the remaining terms hereof shall not be
affected but shall be valid and enforced to the fullest extent
permitted by law. The parties hereto shall use best efforts to
substitute a valid, legal and enforceable provision which, insofar as
practical, implements the purpose hereof.
<PAGE> 9
9.7 DOMICILE: For the purposes of the Debenture, the Corporation
elects domicile in the judicial district of Montreal.
9.8 ENTIRE AGREEMENT: This Debenture constitutes the entire agreement
between the parties relating to the subject matter hereof and all
prior proposals, discussions and writings by and between the parties
and relating to the subject matter hereof are superseded.
9.9 GOVERNING LAW: This Debenture shall be interpreted by and
construed according to the substantive laws of the Province of Quebec.
IN WITNESS WHEREOF, this Debenture has been duly signed by the Corporation on
this 15th day of January, 1999.
GILDAN ACTIVEWEAR INC.,
Per: /s/ H. Gregory Chamandy
--------------------------------------
Name: H. Gregory Chamandy
Title: Chairman and Chief Executive Officer
<PAGE> 1
Exhibit 10.30
SHARE SUBSCRIPTION AND DEBENTURE PURCHASE AGREEMENT
entered into as of February 1, 1999
BETWEEN: GILDAN ACTIVEWEAR INC., a corporation duly constituted
under the laws of Canada having its registered office at
725 Montee de Liesse, Ville St-Laurent, Quebec H4T 1P5,
herein acting and represented by H. Greg Chamandy, its
Chairman and Chief Executive Officer, duly authorized;
(hereinafter the "Corporation")
AND: CAPITAL D'AMERIQUE CDPQ INC., a corporation duly
constituted under the laws of the Province of Quebec
having its head office at 1981 McGill College Ave,
Montreal, Quebec H3A 3C7 herein acting and represented
by Luc Houle and Eric Doyon;
(hereinafter ("Capital d'Amerique")
WHEREAS Capital d'Amerique submitted to the Corporation a financing offer under
letter agreement dated December 17, 1998 and accepted by the Corporation on
December 18, 1998 (the "Financing Offer");
WHEREAS the Financing Offer provides that Capital d'Amerique is to subscribe for
444,444 Class A Subordinate Voting Shares ("Class A Shares") of the share
capital of the Corporation for a subscription price of $4,999,995 and to
purchase at par a debenture having a principal amount of $15,000,000, the whole
in accordance with the terms and conditions contained therein; and
WHEREAS the parties hereto wish to give effect to such Financing Offer;
ACCORDINGLY, the parties hereto have agreed as follows:
1. Preamble and Schedules
The preamble hereof and the schedules hereto form part of this Agreement.
2. Share Subscription, Purchase of Debenture and Payment
2.1 Share Subscription and Payment
2.1.1 Subject to the terms and conditions contained herein, Capital d'Amerique
hereby subscribes for 444,444 Class A Shares of the share capital of the
Corporation in
<PAGE> 2
[LETTERHEAD OF HART, SAINT-PIERRE]
TELECOPY TRANSMISSION
===============================================================================
DATE: February 3, 1999
- --------------------------------------------------------------------------------
Name Office Telecopier Number
- --------------------------------------------------------------------------------
Kevin Morley Meighen Demers 416/977-5239
- --------------------------------------------------------------------------------
Tom Karlov Bank of America Canada 312/974-8780
- --------------------------------------------------------------------------------
Ken Cieply, CA Gildan Activewear Inc. 728-2269
- --------------------------------------------------------------------------------
FROM: Gino Martel
NUMBER OF PAGES: 26 (Including this page)
RE: Gildan Activewear Inc. - CDPQ
Our file no.: 11002-097
================================================================================
CONFIDENTIALITY CAUTION: This message is intended only for the use of the
individual or person to which it is addressed and contains information that is
privileged and confidential. If the reader of this message is not the intended
recipient, or the employee or agent responsible for delivering the message to
the intended recipient, you are hereby notified that any dissemination,
distribution or copying of this communication is strictly prohibited. If you
have received this communication by error, please notify us immediately by
telephone and return the original message to us at the above address at our
cost.
================================================================================
MESSAGE:
Enclosed please find an English translation of the Subscription Agreement and
Debenture that was signed in French by Gildan and CDPQ on February 1, 1999.
You may presume that this English translation is a true and complete translation
of the French documents.
If you have any questions with respect to the foregoing, please do not hesitate
to contact the undersigned.
Yours truly,
/s/ Gino Martel
Gino Martel
GM:sdp
Encl.
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consideration of a total subscription price of $4,999,995, being a
subscription price of $11.25 per share, such subscription price being paid
to the Corporation at the date hereof by cheque and receipt thereof being
acknowledged by the Corporation.
2.12 The Corporation hereby confirms having accepted this share subscription
and has caused the registrar to issue as of the date hereof a share
certificate representing 444,444 Class A Shares of the share capital of
the Corporation registered in the name of "Capital d'Amerique CDPQ Inc.".
2.2 Debenture Purchase and Payment
2.2.1 Subject to the provisions hereof and the adjustments contemplated herein
or in any document incorporated by reference, Capital d'Amerique hereby
purchases from the Corporation, in consideration for the payment of a
principal amount of $15,000,000, a debenture identified as "Debenture A-6"
and having the form and content of the debenture reproduced as Schedule
2.2 hereof and having a principal amount of $15,000,000.
2.2.2 Capital d'Amerique hereby pays to the Corporation, as of the date hereof,
by cheque, an amount of $15,000,000 as the aggregate purchase price of
Debenture A-6, the Corporation acknowledging receipt of payment thereof in
full and issuing as of the date hereof Debenture A-6 registered in the
name of "Capital d'Amerique CDPQ Inc.".
2.3 Use of Proceeds by the Corporation
The Corporation hereby represents and declares that the proceeds derived
by the Corporation from the share subscription and purchase of the
debenture by Capital d'Amerique shall be added to the general funds of the
Corporation to improve its working capital.
3. Representations and Warranties
The Corporation hereby represents and warrants to Capital d'Amerique as
follows, and acknowledges that Capital d'Amerique is relying upon the
accuracy and completeness of each of such representations and warranties
in connection with its share subscription and its purchase of Debenture
A-6 and the completion of the other transactions hereunder.
3.1 Status and Corporate Authority
The Corporation and its subsidiaries ("Subsidiaries") are duly
incorporated and organized and validly exist under the laws of their
respective jurisdiction of incorporation and are duly qualified to carry
on their respective businesses as presently conducted and, further, the
Corporation has full corporate power and authority to enter into this
Agreement and to issue to Capital d'Amerique 444,444 Class A Shares and
Debenture A-6 in the manner contemplated herein and to perform all of its
obligations under this Agreement.
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3.2 Authorization
The Corporation has taken all necessary actions, steps and corporate and
other proceedings to approve or authorize, validly and effectively, the
entering into of, and the execution, delivery and performance of, this
Agreement and the issuance of 444,444 Class A Shares and the sale to
Capital d'Amerique of Debenture A-6. This Agreement and Debenture A-6 as
well as any other agreement executed in favour of Capital d'Amerique
pursuant to the Financing Offer or this Agreement, constitute legal, valid
and binding obligations of the Corporation enforceable against the
Corporation in accordance with their respective terms and conditions,
except as enforcement may be limited by bankruptcy, insolvency and other
laws affecting the enforcement of rights of creditors generally and except
that equitable remedies may only be granted in the discretion of a court
of competent jurisdiction.
3.3 Necessary Licences
To the best of the Corporation's knowledge and save and except for
omissions or errors which do not have a material adverse effect on the
Corporation nor prevent the Corporation from operating in the normal
course, the Corporation and each of its Subsidiaries hold all necessary
licenses, registrations and qualifications in each Jurisdiction in which
they own or lease any property or the nature or conduct of their
respective businesses or any part thereof, makes such qualification
necessary or desirable to enable their respective businesses to be carried
on as now conducted or to enable the businesses to be owned, leased and
operated.
To the best of the Corporation's knowledge and save and except for
omissions or errors which do not have a material adverse effect on the
Corporation and its Subsidiaries nor prevent the Corporation and its
Subsidiaries from operating in the normal course, all of the Corporation's
and its Subsidiaries' licenses, registrations and qualifications to carry
on their respective businesses are valid and subsisting and the
Corporation and such Subsidiaries are in compliance with all the material
terms and conditions of such licenses, registrations and qualifications to
allow them to carry on business in the ordinary course. There are no
proceedings in progress, pending or, to the best of the knowledge of the
Corporation, threatened, which could result in the revocation,
cancellation or suspension of any such licenses, registrations or
qualifications.
3.4 Authorized and Issued Share Capital
The authorized share capital of the Corporation is reproduced at Schedule
3.4 hereto. Such schedule also provides for the name of all shareholders
of the Corporation who own 10% or more shares of any one class of shares
of the Corporation and for the number of shares of each class held by such
shareholders in the share capital of the Corporation. Except as disclosed
in Schedule 3.4 (A) attached hereto, no person holds any share or purchase
option, warrant, right of first refusal, pre-emptive right conversion
right or any other right whatsoever in connection with the share capital
of the Corporation or
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any of its Subsidiaries. The minute books of the Corporation and of its
Subsidiaries are true, accurate and complete.
All issued and outstanding shares of the share capital of the Corporation
and of each of its Subsidiaries have been duly authorized and issued as
fully paid and non assessable and are not subject to any statutory
transfer restrictions other than those contained in the articles of the
Corporation or of its Subsidiaries and, in the case of the issued and
outstanding Class B Multiple Voting Shares, those further restrictions set
forth in Schedule 3.4(B) hereto.
3.5 Constating Documents, Subsidiaries and Investments
The Corporation has no subsidiaries other than the Subsidiaries listed in
Schedule 3.5 hereto and does not have any direct or indirect equity or
convertible into equity investments of a material nature in any other
entitles or businesses. The constating documents of the Corporation are
attached hereto as Schedule 3.5 (A).
3.6 Financial Information
The Corporation has, prior to the date hereof, provided Capital d'Amerique
with copies of certain audited and unaudited financial statements of the
Corporation and its Subsidiaries. Such financial statements are attached
as Schedule 3.6. The documents contained in Schedule 3.6 are herein
referred to as the "Financial Statements". The Financial Statements
disclose adequately and accurately the financial condition of the
Corporation and its Subsidiaries as well as the results of their
operations on the date and for the periods covered by such Financial
Statements. Such Financial Statements have been prepared in accordance
with generally accepted accounting principles applied on a basis
consistent with prior periods, are correct and complete and present fairly
the assets, liabilities (whether accrued, absolute, contingent or
otherwise) and financial condition of the Corporation and its Subsidiaries
as of the respective dates of the Financial Statements and earnings and
results of operations of the Corporation and its Subsidiaries for the
respective periods covered by the Financial Statements. The financial
position and condition of the Corporation and its Subsidiaries is now as
good as that shown on or reflected in the Financial Statements; the
Corporation and its Subsidiaries have carried on business and continued
their operations only in the ordinary and normal course of business
consistent with past practice and them has not been: (i) any material
adverse change in the condition (financial or otherwise), assets,
liabilities, operations, earnings, business or prospects of the
Corporation or any of its Subsidiaries; (ii) except as set out in Schedule
3.6 (B), any obligation or liability (whether absolute, accrued,
contingent or otherwise and, whether due or to become due) incurred by the
Corporation or any of its Subsidiaries other than those incurred in the
ordinary and normal course and consistent with past practice; (iii) any
declaration, setting aside or payment of any dividend or other
distribution with respect to any shares in the capital of the Corporation
or of any of its Subsidiaries or any direct or indirect redemption,
purchase. or other acquisition of any such shares; or (iv) any issuance or
sale by the Corporation or any of its Subsidiaries or undertaking by the
Corporation or any of its Subsidiaries, for the issuance or sale by the
Corporation or any of its Subsidiaries, of any shares in
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the share capital or securities convertible into or exercisable for shares
in the share capital of the Corporation or of any of its Subsidiaries.
3.7 Tax Reporting
a) Save and except as set forth in Schedule 3.7 hereto, the Corporation
and its Subsidiaries have duly filed on a timely basis all tax
returns required to be filed by them and have paid all taxes that am
due and payable, and all assessments, reassessments, governmental
charges, penalties, interest and fines due and payable by them.
b) The Corporation and its Subsidiaries have made adequate provision
for taxes payable by them for the current period and any previous
period for which tax returns are not yet required to be filed. There
are no actions, suits, proceedings, investigations or claims pending
or, to the knowledge of the Corporation, threatened against the
Corporation or any of its Subsidiaries in respect of taxes,
governmental charges or assessments, nor are any material matters
under discussion with any governmental authority with respect to any
charges or assessments asserted by such authority.
c) The Corporation and its Subsidiaries have withheld from each payment
made to any of their past or present employees, officers or
directors, and to any non-resident of Canada, the amount of all
taxes and other deductions required to be withheld therefrom and has
paid the same to the proper tax or other receiving officers within
the time required under any applicable legislation. The Corporation
has remitted to the appropriate tax authority when required by law
to do so all amounts collected by it on account of GST or any other
goods and services taxes.
d) Save and except as set forth in Schedule 3.7 hereto, the income tax
liability of the Corporation and its Subsidiaries have been assessed
by the appropriate tax authorities for all fiscal years up to and
including the fiscal year ended [October 5, 1997] and there are no
agreements, waivers or other arrangements providing for an extension
of time with respect to the filing of any tax return by, or payment
of any tax, governmental charge or deficiency against the
Corporation or any of its Subsidiaries. The Corporation has provided
to Capital d'Amerique a true copy of all tax returns filed by the
Corporation and each of its Subsidiaries in respect of the five last
completed fiscal years of the Corporation and of each of its
Subsidiaries.
3.8 Intellectual Property
Attached hereto as Schedule 3.8 is a complete and accurate list of all
trade marks, trade names, business names, patents, inventions, know-how,
copyrights, service marks, brand names, industrial designs and all other
industrial or intellectual property owned or used by the Corporation and
its Subsidiaries in carrying on the business in Canada and all
applications therefor and all goodwill connected therewith, including,
without limitation, all licenses, registered user
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agreements and all like rights used by or granted to the Corporation or to
its Subsidiaries in connection with the business and all right to register
or otherwise apply for the protection of any of the foregoing
(collectively the "Intellectual Property"). The Corporation is the
beneficial owner of the Intellectual Property, free and clear of all
encumbrances. The Corporation is not aware of a claim of any infringement
or breach of any industrial or intellectual property rights of any other
person by the Corporation, nor has the Corporation or any of its
Subsidiaries received any notice that the conduct of the business,
including the use of the Intellectual Property, infringes upon or breaches
any industrial or intellectual property rights of any other person, and
the Corporation, after due inquiry, has no knowledge of any infringement
or violation of any of the rights of the Corporation or any of its
Subsidiaries in the Intellectual Property. The conduct of the business of
the Corporation and its Subsidiaries does not infringe upon the patents,
trade marks, licences, trade names, business names, copyright or other
industrial or intellectual property rights, domestic or foreign, of any
other person.
3.9 Insurance
(a) The Corporation and its Subsidiaries have all of their property and
assets insured against loss or damage by all hazards or risks on a
replacement cost basis. The Corporation and its Subsidiaries are not
in default in respect to any of the provisions contained in any such
insurance policy and have not failed to give any notice or present
any claim under any such insurance policy in a due and timely
fashion.
(b) The Corporation has directors' and officers' liability insurance
providing for a minimum coverage of $50 million and subject to a
deductible of $250,000 for security claims and $50,000 for other
claims per occurrence.
(c) The Corporation has taken necessary steps to subscribe life
insurance policies over the life of H. Greg Chamandy and Glenn J.
Chamandy, on a "last to die" basis for an amount of at least $15
million with terms and conditions to be agreed to by Capital
d'Amerique. The Corporation shall provide Capital d'Amerique within
sixty (60) days from the date hereof with acceptable evidence that
such life insurance has been subscribed and is in full force and in
effect.
(d) Until all sums due under Debenture A-6 have been paid in full, the
Corporation shall maintain the above mentioned insurance policies in
force and effect and shall provide to Capital d'Amerique from time
to time, at its request, with confirmation that such insurance
coverages are in force. In addition, such insurance coverages shall
not be amended or changed without Capital d'Amerique prior written
consent, not to be unreasonably withheld or delayed.
3.10 Consents and Approvals
3.10.1 Except for the filing of a notice pursuant to section 46 of the
Securities Act (Quebec) with the Quebec Securities Commission within
10 days hereof, the Corporation has made and/or obtained all
necessary filings,
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approvals, consents and acceptances of appropriate regulatory
authorities (including the Montreal and Toronto exchanges) in order
to permit Capital d'Amerique to purchase the Class A Shares as
contemplated hereby, to permit the Corporation to sell the Class A
Shares as herein provided.
3.10.2 Promptly following the consummation of the transactions
contemplated herein, the Corporation shall effect such filings as
may be required by the Montreal and Toronto exchanges in order that
the Class A Shares may be listed and posted for trading on such
exchanges.
3.10.3 The Corporation confirms that immediately after the date hereof,
the hold period applicable to the alienation (first trade) in the
Class A Shares by Capital d'Amerique under the securities laws of
the Province of Quebec will be 12 months from the date hereof.
3.10.4 Except as previously made and/or obtained and as set forth in
paragraph 3.10.1, there is no additional requirement to make any
filing with, give any notice to or obtain any licence, permit
certificate, registration, authorization, consent or approval of,
any governmental or regulatory authority as a condition to the
lawful consummation of the transactions contemplated by this
Agreement. Additionally, there is no requirement under any contract
relating to the business or the Corporation or any of is
Subsidiaries to which the Corporation or any of its Subsidiaries is
a party or by which it is bound to give any notice to, or to obtain
the consent or approval of, any party to such agreement, instrument
or commitment relating to the consummation of the transactions
contemplated by this Agreement.
3.11 Litigation
There are no actions, suits or proceedings pending or, to the knowledge of
the Corporation, after due inquiry, threatened against or affecting, the
Corporation or any of its Subsidiaries at law or in equity, or before or
by any federal, provincial, municipal or other governmental department
court, commission, board, bureau, agency or instrumentality, domestic or
foreign or by or before an arbitrator or arbitration board. The
Corporation is not aware of any ground on which any such action, suit or
proceeding might be commenced with any reasonable likelihood of success
against the Corporation or any of its Subsidiaries.
3.12 No Violation
The execution and delivery of this Agreement by the Corporation and the
consummation of the transactions herein provided for will not result in
either: (a) the breach or violation of any of the provisions of, or
constitute a default under, or conflict with or cause the acceleration of
any obligation of the Corporation under: (i) any contract to which the
Corporation or any of its Subsidiaries is a party or by which any of them
is bound; (ii) any provision of the constating documents, by-laws or
resolutions of the board of directors (or any committee thereof) or
shareholders of the Corporation or any of its Subsidiaries; (iv) any
material licence, permit, approval, consent or authorization held by the
Corporation or any
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of its Subsidiaries or (v) any applicable law, statute, ordinance,
regulation or rule; or (b) the creation or imposition of any charge on any
of the property or assets of the Corporation or any of its Subsidiaries.
3.13 Non-Arm's Length Transactions
The Corporation has not since October 4, 1998 made any payment or loan to,
or borrowed any money from or is otherwise indebted to, any officer,
director, employee, shareholder or any other person not dealing at arm's
length with the Corporation or any of its Subsidiaries (within the meaning
of the Tax Act), except as disclosed in the Financial Statements and in
Schedule 3.13 (A) and except for usual employee reimbursements and
compensation paid in the ordinary and normal course of business. Except as
disclosed in the Corporation's proxy circular for the 1998 year end and
for contracts of employment and for the agreements described in Schedule
3.13 (B), the Corporation or any of its Subsidiaries are not a party to
any contract with any officer, director, employee, shareholder or any
other person not dealing at arm's length with the Corporation or any of
its Subsidiaries and no entity that is an affiliate or associate of one or
more of such individuals: (a) owns, directly or indirectly, any interest
in, or is an officer, director, employee or consultant of, any person
which is, or is engaged in business as, a competitor of the Corporation or
any of its Subsidiaries or a lessor, lessee, supplier, distributor, sales
agent or customer of the Corporation of any of its Subsidiaries; (b) owns,
directly or indirectly, in whole or in part, any property that the
Corporation or any of its Subsidiaries uses in the operation of their
respective businesses; or (c) has any cause of action or other claim
whatsoever against, or owes any amount to, the Corporation or any of its
Subsidiaries, except for any liabilities reflected in the Financial
Statements and claims in the ordinary and normal course of business, such
as for accrued vacation pay and accrued benefits under any applicable
employee plans.
3.14 Environmental Matters
To the best of the Corporation's knowledge except for matters which,
singly or in the aggregate, would not have a material adverse impact on
the business or financial condition of the Corporation:
(a) The Corporation and its Subsidiaries have been and are in compliance
with all applicable federal, provincial and municipal laws,
statutes, ordinances, by-laws and regulations and orders, directives
and decisions rendered by any ministry, department or administration
or regulatory agency ("Environmental Laws") relating to the
protection of the environment, occupational health and safety or the
manufacture, processing, distribution, use, treatment, storage,
disposal, discharge, transport or handling of any pollutants,
contaminants, chemicals or industrial, toxic or hazardous wastes or
substances ("Hazardous Substances") necessary to carry on business
in the normal course;
(b) Except as disclosed in Schedule 3.14 (B) hereto, the Corporation and
its Subsidiaries have obtained all licences, permits, approvals,
consents, certificates, registrations and other authorizations under
Environmental Laws (the "Environmental Permits") required for the
operation of their
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respective businesses. Each Environmental Permit is valid,
subsisting and in good standing and the Corporation and its
Subsidiaries are not in default or breach of any Environmental
Permit and no proceeding is pending, or threatened, to revoke or
limit any Environmental Permit;
(c) The Corporation and its Subsidiaries have not used or permitted to
be used, except in compliance with all Environmental Laws, any of
their property or facilities or any property or facility that they
previously owned or leased, to generate, manufacture, process,
distribute, use, treat, store, dispose of, transport or handle any
Hazardeous Substance;
(d) Except as disclosed in Schedule 3.14 (D) hereto, The Corporation and
its Subsidiaries have never received any notice of, nor been
prosecuted for an offence alleging, non-compliance with any
Environmental Laws, and neither the Corporation nor any of its
Subsidiaries has settled any allegation of non-compliance short of
prosecution. There are no orders or directions relating to
environmental matters requiring any work, repairs, constructions or
capital expenditures with respect to any property of the Corporation
or any of its Subsidiaries nor has the Corporation or any of its
Subsidiaries received notice of any of the same;
(e) Neither the Corporation nor any of its Subsidiaries has caused or
permitted, or does it have any knowledge of, the release, in any
manner whatsoever, of any Hazardous Substance on or from any of its
properties or assets or any property or facility that it previously
owned or leased, or any such release on or from a facility owned or
operated by third parties but with respect to which the Corporation
or any of its Subsidiaries is or may reasonably be alleged to have
liability.
(f) Neither the Corporation nor any of its Subsidiaries has received any
notice that it is potentially responsible for a federal, provincial,
municipal or local clean-up site or corrective action under any
Environmental Laws.
3.15 Reporting Issuer
The Corporation is a reporting issuer not in default for the purposes of
the Securities Act (Quebec), the Securities Act (Ontario) and similar
securities legislation of all the provinces of Canada.
3.16 Covenant to maintain status The Corporation shall use its best efforts to
maintain its status as a reporting issuer not in default for the purpose
of the Securities Act (Quebec) and similar securities legislation in all
provinces of Canada at least until such time the principal amount of
Debenture A-6 has been paid in full.
3.17 Full Disclosure
Neither this Agreement nor any document to be delivered pursuant to this
Agreement by the Corporation nor any certificate, report, statement or
other document furnished by the Corporation in connection with the
negotiation of this Agreement contains any untrue statement of a material
fact or omits to state a
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material fact necessary to make the statements contained herein not
misleading. To the best of the knowledge of the Corporation, after due
enquiry, there has been no event, transaction or information that has come
to the attention of the Corporation that has not been disclosed to Capital
d'Amerique in writing that could reasonably be expected to have a material
adverse effect on the assets, business, earnings, prospects, properties or
condition (financial or otherwise) of the Corporation and its Subsidiaries
on a consolidated basis.
4. Additional Conditions in favour of Capital d'Amerique
The purchase of Debenture A-6 and the share subscription provided herein
are subject to the following additional terms and conditions for the
exclusive benefit of Capital d'Amerique, to be fulfilled no later than on
the date of execution hereof.
4.1 The Corporation shall have executed a certificate addressed to Capital
d'Amerique stating that all terms and conditions contemplated by the
Financing Offer referred to in the preamble or contained in this Agreement
have been satisfied or met and confirming that there have been no material
adverse changes in the condition (financial or otherwise), assets,
liabilities, operations, earnings, business or prospects of the
Corporation and its Subsidiaries since October 4, 1998.
4.2 The Corporation shall deliver to Capital d'Amerique favourable legal
opinion of Hart, Saint-Pierre, Counsel to the Corporation and of Ogilvy
Renault, special counsel to the Corporation, in the foam of the draft
attached hereto as Schedule 4.2.
4.3 The appropriate parties shall have executed contemporaneously with the
execution of this Agreement a Non-Competition and Non-Diversion Agreement
in the form of the final draft of such agreement attached hereto as
Schedule 4.3.
4.4 The Corporation hereby grants the right to Capital d'Amerique to appoint
from time to time a representative to act as an observer at all meetings
of the board of directors of the Corporation and of committees thereof for
as long as Capital d'Amerique is the holder of Debenture A-6 or Capital
d'Amerique or any affiliate thereof holds at least 222,222 Class A Shares
of the Corporation, as adjusted to take into account any share
reorganization. Such representative shall also be entitled to receive, on
a timely basis, all notices, communications and material sent to directors
of the Corporation. Such representative shall not be paid any fees but all
pre-approved costs incurred in connection with the attendance at meetings
shall promptly be reimbursed by the Corporation upon presentation of
vouchered expenses.
5. Representations and Warranties of Capital d'Amerique
Capital d'Amerique hereby represents and warrants to the parties hereto as
follows:
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a) Capital d'Amerique is a corporation duly constituted and subsisting
under the laws of the Province of Quebec.
b) Capital d'Amerique has the corporate power and necessary authority
to enter into and perform its obligations under this Agreement.
c) This Agreement and the Financing Offer and all agreements executed
by Capital d'Amerique in favour of the Corporation pursuant thereto,
have been duly authorized, executed and delivered by Capital
d'Amerique and constitute legal, valid and binding obligations of
Capital d'Amerique, enforceable against Capital d'Amerique in
accordance with their respective terms, except as enforcement may be
limited by bankruptcy, insolvency and other laws affecting the
enforcement of rights of creditors generally and except that
equitable remedies may only be granted in the discretion of a court
of competent jurisdiction.
d) The information supplied, or to be supplied, by Capital d'Amerique
to the Corporation in connection with the transactions herein
contemplated, including, without limitation, the information
provided to the Montreal and Toronto exchanges, is true and correct
in all material respects.
6. Covenants of Capital d'Amerique
6.1 Capital d'Amerique shall prepare and deliver to the Corporation, no later
than the date hereof, the private placement questionnaires and
undertakings required by the Montreal and Toronto exchanges.
6.2 Capital d'Amerique shall provide and/or deliver, in timely fashion, all
such documents, and information as may be reasonably requested by the
Corporation in connection with the transactions contemplated by this
Agreement.
6.3 Capital d'Amerique shall not offer, sell, distribute or otherwise transfer
the Class A Shares, or agree to do any of the foregoing, during the period
of forty (40) days from the date hereof, except in compliance with the
United States Securities Act of 1933, as amended. Capital d'Amerique
hereby acknowledges that:
6.3.1 the Class A Shares covered by this Agreement have not been
registered under the United States Securities Act of 1933 (the
"Securities Act") and many not be offered or sold in the United
States or to, or for the account or benefit of, a U.S. person (as
defined in Regulation S of the Securities Act), unless such
securities are registered under such Act, or an exemption from the
registration requirements of such Act is available;
6.3.2 a legend to that effect shall be placed on the certificate(s)
representing the Class A Shares; and
6.3.3 the Corporation is relying upon the covenants set forth in this
section 6 when making the representations on its part set forth in
Subsection 3.10 hereof.
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7. Indemnification
7.1 Each of the parties hereto (the "Indemnifying Party"), agrees to indemnify
and save harmless the other party hereto (the "Indemnified Party") from
all claims, demands, proceedings, losses, damages, liabilities,
deficiencies, reasonable costs and expenses (including, without
limitation, all legal and other professional fees and disbursements,
interest, penalties and amounts paid in settlement), suffered or incurred
by the Indemnified Party as a result of or arising directly or indirectly
out of or in connection with:
7.1.1 any breach by the Indemnifying Party of or any inaccuracy of any
representation or warranty of the Indemnifying Party contained in
this Agreement or in any agreement, certificate or other document
delivered pursuant hereto;
7.1.2 any breach or non-performance by the Indemnifying Party of any
covenant to be performed by it that is contained in this Agreement
or in any agreement, certificate or other document delivered
pursuant hereto;
7.2 The Indemnified Party shall give the Indemnifying Party prompt written
notice of any claim, assertion, event or proceeding concerning any
liability or damage as to which it may request indemnification from the
Indemnifying Party hereunder. Upon written notice to the Indemnified Party
given by the Indemnifying Party after receipt of notice of any such action
or proceedings, the Indemnifying Party may assume the defense thereof at
its own expense with counsel chosen by the Indemnifying Party.
Notwithstanding the foregoing, with respect to any action, suit proceeding
or investigation for which the Indemnified Party may request
indemnification hereunder, the Indemnified Party may assume the defense
thereof with counsel chosen by the Indemnified Party and approved by the
Indemnifying Party, at the expense of the Indemnifying Party. In the
circumstances referred to in the immediately preceding sentence, if the
Indemnified Party does not assume such defense, the Indemnifying Party
shall not, without the prior written consent of the Indemnified Party,
which consent shall not be unreasonably withheld, settle or compromise any
claim, or permit a default or consent to the entry of any judgement in
respect thereof, unless such settlement, compromise or consent includes,
as an unconditional term thereof, the giving by the claimant to the
Indemnified Party, of an unconditional release from all liability in
respect of such claim. If the Indemnified Party assumes the defense of any
such claim or proceeding prior to such a final judgement thereon or to
forego appeal with respect thereto, then the Indemnified Party shall give
the Indemnifying Party prompt written notice thereof and the Indemnifying
Party shall have the right to participate in the settlement or assume the
defense of such claim or proceedings.
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8. General Provisions
8.1 Notices
8.1.1 Any notice, designation, communication, request, demand or other
document, required or permitted to be given or sent or delivered
hereunder to any party hereto shall be in writing and shall be
sufficiently given or sent or delivered if it is:
(a) delivered personally to an officer or director of such party;
(b) sent to the party entitled to receive it by registered mail,
postage prepaid, mailed in Canada, or
(c) sent by telecopy machine.
8.1.2 Notices shall be sent to the following addresses or telecopy
numbers:
(a) In the case of the Corporation,
Gildan Activewear Inc.
725 Montee de Liesse
Ville St-Laurent (Quebec)
H4T 1P5
Tel.: (514) 735-2023
Fax: (514) 738-2269
Attention: Mr. H. Greg Chamandy. Chairman
With a copy to:
Hart, Saint-Pierre
1 Place Ville-Marie, Suite 2125
Montreal (Quebec)
H3B 2C6
Tel.: (514) 866-6883
Fax: (514) 866-8323
Attention: Mr. Gino Martel
(b) in the case of Capital d'Amerique,
Capital d'Amerique CDPQ Inc.
1981 McGill College Avenue
9th Floor
Montreal (Quebec) H3A 3C7
Tel.: (514) 847-5915
Fax: (514) 847-2493
Attention: Vice-President, Legal Affairs
<PAGE> 15
14
or to such other address or telecopier number as the party entitled to or
receiving such notice, communication, request, demand or other document
shall, by a notice given in accordance with this section, have
communicated to the party giving or sending or delivering such notice,
communication, request demand or other document.
8.1.3 Any notice, communication, request demand or other document given or
sent or delivered as aforesaid shall:
(a) If delivered as aforesaid, be deemed to have been given, sent,
delivered and received on the date of delivery;
(b) if sent by mail as aforesaid, be deemed to have been given,
sent delivered and received (but not actually received) on the
third business day following the date of mailing, unless at
any time between the date of mailing and the third business
day thereafter there is a discontinuance or interruption of
regular postal service, whether due to strike or lockout or
work slowdown, affecting postal service at the point of
dispatch or delivery or any intermediate point, in which case
the same shall be deemed to have been given, sent, delivered
and received in the ordinary course of the mails, allowing for
such discontinuance or interruption of regular postal service;
and
(c) if sent by telecopy machine, be deemed to have been given,
sent, delivered and received on the date the sender receives
the telecopy answer back confirming receipt by the recipient.
8.2 Counterparts
This Agreement may be executed in several counterparts, each of which so
executed shall be deemed to be an original, and such counterparts together
shall constitute but one and the same instrument.
8.3 Announcements
No announcement with respect to this Agreement will be made by any party
hereto without the prior approval of the other party. The foregoing will
not apply to any announcement by any party required in order to comply
with laws pertaining to timely disclosure or the requirements of the
Montreal, Toronto and American exchanges, provided that such party
consults with the other party before making any such announcement.
8.4 Assignment
The rights of Capital d'Amerique hereunder may not be assigned without the
prior written consent of the other party unless such assignment is in
favour of the Caisse de depot et placement du Quebec or an affiliate
thereof, in which case no consent shall be required.
<PAGE> 16
15
8.5 Successors and Assigns
This agreement shall be binding on and enure to the benefit of the parties
hereto and their respective successors and permitted assigns. Nothing
herein, express or implied, is intended to confer on any person, other
than the parties hereto and their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by
reason of this agreement.
8.6 Defined Terms and Interpretation
Any terms used herein without being defined herein shall have the meaning
ascribed to them in Debenture A-6.
For the purposes of this Agreement material adverse effect" shall mean any
one or more fact(s) or situation(s) involving on an aggregate basis
expenses or liabilities in excess of $750,000. In addition, any reference
herein to "the best of the Corporation's knowledge" shall be deemed to
mean the actual knowledge of the Corporation and the knowledge it would
have had if they had conducted a diligent enquiry into the relevant
subject-matter.
8.7 Entire Agreement
This Agreement and the Schedules referred to herein constitute the entire
agreement between the parties hereto and supersede all prior agreements.
representations, warranties, statements, promises, information,
arrangements and understandings, whether oral or written, express or
implied, with respect to the subject matter hereof, including the
Financing Offer which is attached hereto as Schedule 8.7, except with
respect to fees and disbursements (and all applicable taxes) of Counsel to
Capital d'Amerique which the Corporation acknowledges being responsible
for.
8.8 Applicable Laws
This Agreement shall be construed with and be governed by the laws of the
Province of Quebec.
<PAGE> 17
16
IN WITNESS WHEREOF the parties hereto have duly executed this agreement under
seal as of the day and year first above written.
Gildan Activewear Inc.
by:
------------------------------
H. Gregory Chamandy, Chairman
Chief Executive Officer
Capital d'Amerique CDPQ Inc.
by:
------------------------------
by:
------------------------------
<PAGE> 18
GILDAN ACTIVEWEAR INC.
(Incorporated under the laws of Canada)
DEBENTURE No. A-6
Principal Amount: $15,000,000
Issue date: February 1, 1999
Maturity date: June 25, 2004
A. Interpretation
1. Whenever used in this debenture, unless there is something in the subject
matter or context inconsistent therewith, the following words and phrases
shall have the respective meanings ascribed to them as follows:
(a) "Corporation" means Gildan Activewear Inc., a corporation
incorporated under the laws of Canada, and its successors and
assigns and in the context of the calculation of the Current Assets,
Current Liabilities, Debt, Debt to EBITDA, Ratio and the Working
Capital Ratio, means Gildan Activewear Inc. and the subsidiaries
thereof included in the formulation of Gildan Activewear Inc.'s
consolidated financial statements pursuant to GAAP.;
(b) "Current Assets" means, on any date, the current assets of the
Corporation as at such date determined in accordance with GAAP and
on a consolidated basis;
(c) "Current Liabilities" means, on any date, the current liabilities of
the Corporation as at such date determined in accordance with GAAP
and on a consolidated basis;
(d) "Debt" of the Corporation means any indebtedness or liability (other
than trade payables, income taxes payable and future income taxes)
which, in accordance with GAAP, would be classified as a liability
on the consolidated balance sheet of the Corporation, but in any
event including, without limitation or duplication:
(i) all indebtedness of the Corporation for or in respect of
borrowed money, credit or other financial accommodation;
including the indebtedness of the Corporation under this
debenture bankers' acceptances and, in the case of bank
borrowings under operating lines of credit, the monthly
average of amounts drawn under bank facilities during the
preceding twelve (12) months;
(ii) all indebtedness of the Corporation for or in respect of the
purchase or acquisition price of property or services, unless
<PAGE> 19
2
recourse is limited to the repossession and sale of any such
property and in the opinion of the auditors of the Corporation
the recording of such debt on the balance sheet of the
Corporation is not required (provided, however, that debt on
account of an equipment purchase shall not be included as Debt
until the earlier of the date of receipt of such equipment or
the date of payment for same);
(iii) all obligations under any lease entered into by the
Corporation as lessee which would be classified as a capital
lease in accordance with GAAP;
(iv) all obligations under or in respect of performance bonds, bid
bonds, letters of credit, letters of guarantee issued by
financial institutions and similar instruments; and
(v) all indebtedness which is directly or indirectly guaranteed by
the Corporation (in favour of third parties other than for the
benefit of Affiliates of the Corporation) or which the
Corporation has agreed (contingently or otherwise) to purchase
or otherwise acquire or in respect of which the Corporation
has otherwise assured a creditor against loss;
(e) "Debt to EBITDA Ratio" means, at any time, the ratio of (i) the Debt
of the Corporation at such time; to (ii) EBITDA of the Corporation
at such time;
(f) "EBITDA" means, in respect of any twelve month period, the net
earnings of the Corporation before deduction of interest expense,
income taxes and depreciation and amortization expense based on the
most recent audited or unaudited financial statements of the
Corporation, as the case may be, and determined on a consolidated
basis in accordance with GAAP for the twelve month period
immediately preceding the date of the calculation;
(g) "Event of Default" means any one or more of the events listed in
Section 7 herein, the occurrence of which entitles the Holder to
accelerate the Corporation's obligation to make payment of the Debt
evidenced by this debenture;
(h) "GAAP" means, at any time, Canadian generally accepted accounting
principles and practice then in effect applied on a basis consistent
with prior years;
(i) "Holder" means Capital d'Amerique CDPQ Inc. and its successors and
any assigns permitted pursuant to the provisions hereof;
(j) "Maturity Date" means June 25, 2004;
(k) "Working Capital Ratio" means, at any time, the ratio of (i) the
amount equal to the Current Assets of the Corporation at such time;
to (ii) the amount equal to the Current Liabilities of the
Corporation at such time.
<PAGE> 20
3
B. Promise to Pay
2. For value received, the Corporation hereby promises to the Holder that it
will on the Maturity Date pay to the Holder at its place of business
indicated herein the principal sum of $15,000,000 in lawful money of
Canada. Interest on the said principal sum shall accrue at the rate of
12.5% per annum calculated daily and compounded and be payable quarterly
on the 1st day of May, August, November and January of each year
thereafter not in advance, and interest on all overdue interest at the
same rate, calculated daily and compounded quarterly. The Corporation
shall pay interest on any amounts in default after the Maturity Date at
the same rate and compounded quarterly.
C. Prepayment of Principal
3. Except as permitted below, the Corporation may not prepay in whole or in
part the principal amount of this debenture prior to February 1, 2002. The
Corporation may at its option, prepay to the Holder the full principal
amount of this debenture, plus accrued interest, prior to such date in the
event the Corporation has at any time prior to such date been the target
of a public offer to purchase accepted by holders of securities
representing more than 50% of the votes attached to securities outstanding
of the Corporation and that the accepted offer price was higher than
$16.875 per share, as adjusted to reflect any share reorganization. In
such case, the whole principal amount of this debenture, with accrued
interest, plus a prepayment penalty equal to three percent (3%) of the
principal amount prepaid shall be paid to the Holder within thirty (30)
days from the date the public offer shall have been closed.
4. On and after February 1, 2002, the Corporation shall be entitled to prepay
all or any portion of the principal amount of this debenture in tranches
of at least $1,000,000 principal amount plus accrued interest if the Class
A Subordinate Voting Shares of the Corporation have traded on The Toronto
Stock Exchange at a weighted average closing price of at least $16.875 per
share, as adjusted to reflect any share reorganization, during a period of
twenty (20) consecutive trading days ending no more than five (5) trading
days before notice of the prepayment is given to the Holder. In such case,
a prepayment penalty equal to three percent (3%) of the principal amount
prepaid shall then be paid to the Holder with the prepaid amount with
accrued interest thereon until the date of payment within five (5) days of
the giving of the notice of prepayment.
D. Agreements of the Corporation
5. The Corporation covenants and agrees with the Holder that, until all
indebtedness and liability owing by the Corporation to the Holder
evidenced by and payable pursuant to this debenture is paid in full:
<PAGE> 21
4
(a) it will:
(i) and shall cause each of its Subsidiaries which the
Corporation shall reasonably deem necessary for its
consolidated operations to preserve and maintain its
corporate existence and to qualify and remain duly qualified
to carry on business and own property in each jurisdiction in
which such qualification is necessary;
(ii) maintain and preserve in good working order and condition all
of its properties that are useful and necessary in the
conduct of the business of the Corporation and its
Subsidiaries, ordinary wear and tear excepted;
(iii) maintain key man life insurance on the life of H. Gregory
Chamandy and Glenn Chamandy on a "last to die" basis in an
amount of at least $15 million with the Holder hereof being
the designated loss payee to the extent of the amount
remaining unpaid under this debenture it being understood,
however, that such policy is currently being negotiated and
shall only be in force and effect within sixty (60) days of
the date of this debenture;
(v) maintain (A) property and liability insurance with
responsible and reputable insurance companies in such amounts
and covering such risks as are usually carried by companies
engaged in similar businesses and owning similar properties
in the same general areas in which the Corporation and its
Subsidiaries operate; and (B) directors' and officers'
liability insurance with minimum coverage of $30,000,000;
(v) comply and ensure that its Subsidiaries (subject to the
qualification contained in paragraph (i) above) comply in all
respects with all applicable laws, rules, regulations and
orders to enable the Corporation and its Subsidiaries to
carry on business as is currently the case;
(vi) strictly comply with every covenant and undertaking
heretofore or hereafter given by it to the Holder whether
contained herein or not;
(vii) at all times maintain Working Capital Ratio at not less than
1.2 to 1;
(viii) at all times maintain the Debt to EBITDA Ratio at no greater
than 4.0 to 1 as at the last day of each month until June 30,
1999 and 3.5 to 1 as at the last day of each month
thereafter.
(ix) deliver to the Holder as soon as practicable and in any event
within 140 days after the end of each fiscal year of the
Corporation the audited consolidated financial statements of
the Corporation and of its Subsidiaries included in the
consolidated financial statements together with any and all
notes thereto, consisting, in each case, of at least a
balance sheet, statement of changes in
<PAGE> 22
5
financial position and statements of earnings and retained
earnings (in each case howsoever designated) together with
the applicable report and opinion of the Corporation's
auditors as well as the annual audited or unaudited, as the
case may be, unconsolidated financial statements of the
Corporation and of its Subsidiaries;
(x) deliver to the Holder as soon as practicable and in any event
within 45 days after the end of each quarter of each fiscal
year, the unaudited consolidated financial statements of the
Corporation as at the end of such quarter, consisting in each
case of at least a balance sheet, income statement and
statement of changes in financial position.
(xi) deliver or cause to be delivered to the Holder, concurrently
with delivery thereof for approval to the Corporation's board
of directors, the annual budget for itself and for its
Subsidiaries for the then coming fiscal year. Each such
budget shall include the anticipated capital and operating
expenditures in respect of the Corporation and any such
subsidiary on a consolidated basis;
(xii) to the extent permitted by applicable law, deliver or cause
to be delivered to the Holder such other information relating
to the conduct of the business and affairs or the financial
position of the Corporation as the Holder may reasonably
request from time to time; and
(xiii) without duplication of the rights granted to the Holder under
that certain Share Purchase and Debenture Purchase Agreement
entered into as of February 1, 1999 between the Corporation
and Capital d'Amerique CDPQ Inc. grant the right to the
Holder to appoint from time to time a representative to act
as an observer at all meetings of the board of directors of
the Corporation and of committees thereof for as long as the
Holder or any affiliate thereof is the holder of this
debenture. Such representative shall also be entitled to
receive, on a timely basis, all notices, communications and
material sent to directors of the Corporation.
(b) It will not without the prior written consent of the Holder:
(i) incur or create any secured long term indebtedness which,
including existing secured long term indebtedness, would
aggregate more than $60,000,000;
(ii) substantially change the nature of the business of the
Corporation and its Subsidiaries as it exists as of the date
hereof;
(iii) incur any additional unsecured debt in excess of $15 million
having a maturity date earlier than the Maturity Date of this
debenture; such consent not to be reasonably withheld by the
Holder hereof in such instance; or
<PAGE> 23
6
(iv) issue securities if such issuance would effect a change in the
effective control of the Corporation; such consent not to be
unreasonably withheld by the Holder hereof in such instance.
E. Default
6. All indebtedness and liability owing by the Corporation to the Holder
hereunder shall, at the option of the Holder, become immediately payable
in each and every of the events following:
(a) If the Corporation is in default in the observance or performance of
any written agreement or undertaking given by the Corporation to the
Holder and such default continues for more than thirty (30) days
after written notice by the Holder of such default is received by
the Corporation;
(b) if the Corporation is in default in making payment of any amount due
hereunder;
(c) if any representation or warranty made by the Corporation in this
debenture or in any other agreement outstanding between the
Corporation and the Holder proves to have been incorrect in any
material respect when made;
(d) if a default or an event of default under any one or more
agreements, indentures or instruments under which the Corporation or
any of its Subsidiaries have at the time of this debenture or shall
thereafter have outstanding indebtedness shall happen and be
continuing, or if any indebtedness of the Corporation or any of its
Subsidiaries which is payable on demand is not paid on demand;
provided, however that if such default and event of default under
such agreement, indenture or instrument shall be remedied or cured
as provided in such agreement or waived by the holder or holders of
such indebtedness, or if such demand for payment has been rescinded
or such default waived then the Event of Default hereunder by mason
thereof shall be deemed likewise to have been thereupon remedied,
cured or waived without further action;
(e) if an order is made or a resolution passed for the winding-up of the
Corporation, or if a petition is filed for the winding-up of the
Corporation;
(f) If the Corporation ceases or threatens to cease to carry on business
or if the Corporation commits or threatens to commit any act of
bankruptcy or if the Corporation becomes insolvent or makes an
assignment or proposal in bankruptcy or makes a bulk sale of its
assets or if a bankruptcy petition is filed or presented against the
Corporation; or
(g) if any proceedings with respect to the Corporation are commenced
under the Companies' Creditors Arrangement Act or the Bankruptcy and
insolvency Act and such proceedings are not successfully contested
by the Corporation within 60 days from the commencement thereof or
if the
<PAGE> 24
7
Corporation shall seek relief or consents to the filing of a
petition against it under any law which involves any compromise of
any creditors rights against the Corporation or if the Corporation
shall file a notice of intention to make a proposal under any such
statute or law.
7. The Holder may in writing (and not otherwise) waive any breach by the
Corporation of any of the provisions contained in this debenture or any
default by the Corporation in the observance or performance of any
provision of this debenture; provided always that no waiver by the Holder
shall extend to or be taken in any manner whatsoever to affect any
subsequent breach or default, whether of the same or a different nature,
or the rights resulting therefrom.
8. No remedy herein conferred upon or reserved to the Holder is intended to
be exclusive of any other remedy, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder
or now existing or hereafter to exist by law or by statute.
9. The delay or omission of the Holder to exercise any recourse mentioned
above shall not invalidate any such recourse nor be interpreted as a
waiver or any default hereunder.
10. The Corporation shall assume and pay all reasonable costs, charges and
expenses including reasonable solicitors' fees and disbursements as
between solicitor and his own client which may be incurred by the Holder
in respect of any proceedings taken or things done by the Holder or on its
behalf in connection with this debenture to collect all amounts due
hereunder or otherwise exercise its rights. and the Corporation shall
consent to those costs, charges and expenses being reasonably charged.
F. Rights of the Holder
11. The Holder, without exonerating in whole or in part the Corporation, may
grant time, renewals, extensions, releases and discharges to, may take
securities from and give the same and any or all existing securities up
to, may abstain from taking securities from or from perfecting securities
of, may accept compositions from, and may otherwise deal with the
Corporation and all other persons and securities as the Holder (and the
Corporation if its consent thereto is required) may see fit.
12. The Holder may not assign any of its rights hereunder without the prior
written consent of the Corporation unless such assignment is in favour of
the Caisse de depot et placement du Quebec or an affiliate thereof, in
which case no consent shall be required. The Corporation may not assign
any of its obligations hereunder without the prior written consent of the
Holder.
<PAGE> 25
8
G. Miscellaneous
13. If one or more of the provisions contained herein shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in
any way be affected or impaired thereby.
14. Upon payment by the Corporation, its successors or permitted assigns, of
all indebtedness and liability of the Corporation to the Holder evidenced
hereby and the fulfilment of all other obligations of the Corporation to
the Holder hereunder, the Holder shall release and surrender this
debenture to the Corporation for cancellation.
15. This debenture shall be construed in accordance with and be governed by
the laws of the Province of Quebec. For the purpose of legal proceedings,
this debenture shall be deemed to have been made in the said Province and
to be performed there and the courts of that Province shall have
jurisdiction over all disputes which may arise under this debenture. The
Corporation hereby irrevocably and unconditionally submits to the
non-exclusive jurisdiction of such courts, provided always that nothing
herein contained shall prevent the Holder from proceeding at its election
against the Corporation in any other province, country or jurisdiction.
16. The headings in this debenture are included for convenience of reference
only, and shall not constitute a part of this debenture for any other
purpose.
17. This debenture and all its provisions shall enure to the benefit of the
Holder, its successors and permitted assigns, and shall be binding on the
Corporation, its successors and permitted assigns.
18. Any demand or notice by the Holder in connection with this debenture may
be made or given by delivering or mailing or sending the same to the
Corporation at 725 Montee de Liesse, Ville St-Laurent, Quebec, H4T 1P5 to
the attention of Mr. H. Greg Chamandy with a copy to Hart, Saint-Pierre, 1
Place Ville-Marie, Suite 2125, Montreal, Quebec H3B 2C6, to the attention
of Gino Martel and by the Corporation to the Holder in the same fashion at
1981 avenue McGill College, Montreal, Quebec H3A 3C7, to the attention of
Vice-President, Legal Affairs, shall be deemed to have been received by
the Corporation or the Holder, as the case may be, on the date of delivery
or the third business day following the date of such mailing.
19. In construing this debenture, the term "successors" shall include, without
limiting its meaning, any corporation resulting from the amalgamation of a
corporation with another corporation.
<PAGE> 26
IN WITNESS WHEREOF the Corporation has executed this debenture as of the 1st day
of February, 1999.
GILDAN ACTIVEWEAR INC.
by:
------------------------------
Chairman and Chief Executive
Officer
<PAGE> 1
Exhibit 10.31
LEASE CONTRACT
Nicolas Chahin of legal age, married, Business Executive, with domicile in San
Pedro Sula, Cortes, Honduras, acting as General Manager and Legal Representative
of PARQUE INDUSTRIAL EL PORVENIR, S.A. (ZIP EL PORVENIR), with domicile in El
Progreso, Yoro, Honduras, duly authorized to develop, make use of and manage
Export Processing Zones (EPZ'S), through authorization number 001-93 issued by
the Ministry of Economy and Commerce of Honduras, on January 4, 1993 (date),
whom in this document will be accounted as "LESSOR", and CONFECCIONES EL
PORVENIR with nationality of Honduras with domicile in San Pedro Sula, whom in
this document will be accounted as "LESSEE", have agreed to celebrate, and by
this act do, a LEASE CONTRACT subject to EPZ law valid on this date and to the
terms and conditions specified in the next clauses:
1. DEMISE OF PREMISES
1.1. "LESSOR" declares that he is the actual and legitimate proprietor of a
piece of land and building identified with number 22 twenty two and 23 twenty
three on the plan attached hereto and incorporated herein as EXHIBIT A located
in the Export Processing Zone, ZIP EL PORVENIR situated in El Progreso,
Department of Yoro, Honduras "LESSOR" agrees to hand in a building (the
"building") on a certain portion of stage III and IV (such portion of stage III
and IV and the building are referred to together herein as the "Demised
Premises"). The plans and specification of the building are part of this
contract, which has been approved.
1.2. "LESSOR" continues declaring that the "building" is of approximately 73,000
square feet as per attached plan, to be leased by" LESSEE". The exact final
footage will be determine by our engineering department and we are going to
provide the LESSEE a blue print of the building for it's verification upon
delivery of the building.
1.3. "LESSOR" declares that by this act, he leases and has all rights, title and
authority to enter into such a lease, the leasehold consisting of the building
on lots known as numbers 22 twenty two and 23 twenty three and described in the
previous clause.
2. TERM OF THE CONTRACT
2.1. This contract will have a duration of 5 (five) "lease years" starting from
delivery date projected October 19th, 1998 (The "Commencement Day" that will be
notify by LESSOR to LESSEE in a separate letter) with another two five years
options. The term "lease Year" shall mean each successive twelve calendar month
period commencing October 19th of 1998.
1
<PAGE> 2
3. VALUE OF THE CONTRACT AND RENT
3.1. The annual rental rate shall be at US$4.65 (Rent) per square foot for the
first 60 months term, US$5.25 (Rent) per square foot for the next 60 months term
and US$ 5.75 (Rent) for the next 60 months term and shall be paid in equally
monthly installments on the first day of each month. The initial square footage
of the building shall be approximately 70,840.69 square feet with exact total
area to be determined as set forth above.
4. PAYMENTS
4.1. The agreed proportional installments will be paid by "LESSEE" to "LESSOR"
by check or wire transfer for immediately available funds to the following
address:
Mr. Jorge Hayne
Republic International Bank of New York
30th Floor, One Biscayne Tower
Miami, Fla. 33131
Act. No. 033-0132132 ABA 066010445
Tel. (305) 539-4777
A copy of all rent payments shall be sent by mail and fax to the address listed
below:
ZIP EL PORVENIR S.A.
P.O. Box #3702
San Pedro Sula, Honduras
Tel. (504) 69-1418, 69-1419, 69-1420.
Fax (504) 69-1421.
4.2. Both parties agree that this contract implies an international financial
transaction valued in the in the U.S.A. currency. According to the preceding,
both parties agree expressly and accept to make all payments related to this
contract in United States Dollars (US$).
4.3. The delay in the payment of the rent will cause a monthly interest charge
of Two percent (2%) over the payments due. After a 5-day written notice, this
interest charge must be calculated from the date the payment was due until the
date in which the payment is effectively canceled. Even though the interest
charges are paid delay to pay rent for a period of at least 60 days, will give
"LESSOR" the right to terminate the lease contract and exercise the
corresponding actions, having "LESSEE" to pay the due rent any ways.
2
<PAGE> 3
5. GUARANTEES
5.1. In guarantee of this lease Agreement, "LESSEE" will provide:
A. - A security deposit equivalent to 2 months rent at the time contract is
signed, which will be returned by "LESSOR" to "LESSEE".
B.- "LESSEE" is obligated to guarantee the amount of this lease contract with an
endorsement of GILDAN Corporation. "LESSOR" may execute this guarantee when
"LESSEE" does not comply within thirty days with any one of the obligations
contracted by means of this lease contract and collateral contract.
5.2. The security deposit will cause no interest at all. This amount responds
for any damage and/or modifications caused to the leasehold by "LESSEE". It also
responds to delay rent payments or any other pecuniary responsibility in favor
of "LESSOR". "LESSOR" will have the right to credit the payment of the amount
received as security deposit, but won't be obligated to apply that amount to
delayed payment. Therefore, the deposit won't obstruct discharge action or any
judicial action initiated in case of default. In case "LESSOR" applies this
deposit or part of this deposit to the payments of the obligation guaranteed by
it, as previously expressed, "LESSEE" will reimburse or restore the said deposit
within the next seven days following a written request from "LESSOR", to do so,
in order that the contract is guaranteed by the total of the said deposit at any
moment. If "LESSEE" does not reimburse or restore the required amount within the
stipulated period of time, "LESSOR" is expressly authorized to take any amount
that "LESSEE" pays as a rent as corresponding restoration, this way leaving the
next month payment incomplete.
6. GOVERNING LAWS. EFFECT.
6.1. "LESSEE" will utilize the leasehold for manufacturing products for export.
"THE LESSEE" obligates to use the leasehold according to the stipulations
established in the Decree No. 37-87, contained in the Export Processing Zones
Law of Honduras; this law's the rules and obligations issued by the Executive
Power and Municipality of El Progreso, Department of Yoro, Honduras, The Labor
Code of Honduras and the future by-laws governing the use of the industrial
buildings, maneuvering yard, areas and common services of EL PORVENIR INDUSTRIAL
PARK.
6.2. This lease shall be governed by and construed in accordance with the laws
of the county in which the leasehold are located and shall have the effect of a
sealed instrument. "LESSOR" will register this lease agreement following all
regulations and laws pertinent to such rent agreement. "LESSEE" agrees and
accepts to pay, at the time of registration, all such cost related to
translation into Spanish language, legal fees, stamps and registration-related
expenses. The amount to be paid by "LESSEE" will be no more than US$2,000.00.
3
<PAGE> 4
7. UTILITIES/"LESSOR" SERVICES
7.1. "LESSEE" shall pay, directly to the appropriate utility or "LESSOR" all
charges for gas, electricity, water for laundry or industrial use only, light,
heat, telephone, fax, power supplied, and purchased security supplied to or
consumed within the leasehold.
It is understood that "LESSOR" will provide to the "LESSEE" an amount of 15
gallons of water daily free of charge for each employee or the proportion of one
(1) gallon per nine (9) square feet, and the usage of water over that amount
will be paid by the Lessee, according to published rates in effect from time,
which rates should be base in markets rates available to preferred customers at
ZIP EL PORVENIR.
8. SERVICES
8.1. "LESSOR" responsibilities: "LESSOR" will supply "LESSEE" the perimeter
security services of the industrial complex, will provide the customs facilities
at the industrial park site, and Human Resource Prescreening and pre-selection,
lightning and maintenance of common areas, garbage collection and maintenance of
external sewage, pluvial water systems.
9. REPAIRS AND MAINTENANCE
9.1 "LESSEE" Responsibilities: "LESSEE" will keep in good shape and at all his
expenses the leasehold, making all the necessary leasehold improvements as well
as all the required operations for the good maintenance of the leasehold, in
order to keep in good shape the building, and in the same condition as the
building was in at the commencement of this lease, for this purpose "LESSEE"
will be in charge of (A) Exterior painting for the building no more than every
12 months. (B) Roof, if its damage is cause by "LESSEE". (C) Floors, doors,
window, sanitary and electric installation repairs, it is understood,
nevertheless, that "LESSOR" will be responsible for repairs of the damages
originated by hidden or structural defects of the rented building. (D) Normal
maintenance and operation of the air conditioning system, for this purpose
"LESSEE" agrees to have a service maintenance contract for all air condition
units in the rented building with a company provided by "LESSOR". "LESSOR" is
responsible to replace if necessary any part for each air conditioning unit at
LESSOR cost for the first 12 months. (E) "LESSEE" agrees that it will keep the
building (including interior portions of all walls, windows, doors and all other
glass in a neat, clean and sanitary condition). (F) All the above will be
revised monthly or as needed.
9.2 If "LESSEE" is to set a laundry facility or any other type of process that
will produce or generate chemical or toxic waste (solid or liquid waste) inside
the leasehold a written approval must be obtained from "LESSOR" clearly
specifying how such waste will be treated and disposed in accordance with the
laws of Honduras and general reasonable regulations of "LESSOR". All costs and
expenses related to such treatment and disposal of waste will be "LESSEE"
responsibility. Failure to comply with the above 30 days after a written
notification will allow "LESSOR" to terminate the lease agreement.
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9.3. "LESSEE" will be responsible for the loss and/or damage that the leasehold
may suffer other that normal wear and tear, as well as for damages caused to
third parties as a result of its operations and "LESSEE" will keep out "LESSOR"
of any liability regarding these concepts. Regarding this matter "LESSEE shall
obtain all necessary insurance in order to cover these risks.
10. RIGHT OF ENTRY.
10.1 "LESSOR" will have the right to periodically inspect the leasehold, with
reasonable notice, with qualified personnel to evaluate the physical and
operational conditions of the rented facilities, at any time he considers it
convenient, during "LESSEE'S" working hours, except in case of emergency, in
which all hours are considered as working hours. If as a result of such
inspections it is determined those repairs are required; "LESSEE" will be asked
to repair such damages. If "LESSEE" doesn't want to repair such damages, and
such repairs are required hereunder, "LESSOR" will carry on with work and will
charge "LESSEE" with the cost and the overhead expenses. It is understood,
nevertheless, that "LESSOR" will be responsible for the repairs of the damages
originated by hidden or structural defects of the rented building.
11. INDEMNIFICATIONS
11.1 "LESSEE" covenants to indemnity and save "LESSOR" harmless from and against
any and all claims actions, costs, expenses, liabilities, losses, damages,
suits, fines, penalties and demands due to "LESSEE'S" failure to comply with the
foregoing and "LESSEE" shall not look to "LESSOR" for any disbursement or outlay
whatsoever in connection therewith, and hereby discharges "LESSOR" of and form
any liability therefor.
12. FORCE MAJEURE
12.1 "LESSOR" will have no responsibility whatsoever for the damages caused by
fortuitous event of force major that either disrupt or not "LESSEE's" normal
operations, but will proceed immediately to the pertinent repairs. If the
damage's magnitude is so great that it causes the building substantial
alterations, provoking the suspension of work, "LESSOR" or "LESSEE" may
terminate this contract with a thirty-day notification. The thirty-day
notification will be calculated starting from the date of the damage. No rental
shall be due during any period in which the building is unusable for the
purposes intended hereunder.
12.2. "LESSEE" agrees to obey all laws and regulations imposed by the Export
Processing Zones, the government of Honduras of any of the obligations, and
"LESSOR" when applicable. "THE LESSEE" will have the obligation to follow
reasonable recommendations from "LESSOR" and provide "LESSOR" with all necessary
information requested by "LESSOR" in relation to labor relations according to
Honduras laws and customs. If "LESSEE" does not comply with Honduras laws and
customs (as specified by the Honduran Law) "LESSOR" will have the right to
cancel this lease contract immediately, and "LESSOR" will be liable for all
remedies according to this lease and the Honduran laws.
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13. ALTERATIONS
13.1. During the term of the contract, "LESSEE" may not introduce any structural
modifications or substantial alterations to the leasehold without prior written
authorization issued by "LESSOR", which authorization shall not unreasonably be
denied. "LESSEE" at its own cost and expense may make interior non-structural
renovations and decoration of the leasehold with the consent of "LESSOR". At the
end of the contract, "LESSEE" may remove any such improvements, at "LESSEE's"
cost, if such removal can be accomplished without damaging the leasehold.
Otherwise, those improvements will remain in "LESSOR" benefit, free of any cost.
14. COMMON AREAS
14.1 (A) The term " common areas" shall include, without limitation the parking
areas, lanes, drives, and driveways, entrances, all means of ingress and/ or
egress, curb cuts, roadways, loading, docks, packages pick up areas, ramps
sidewalks, landscaped and planted areas, retaining walls, lighting facilities
which are intended for or are available exclusively for land or buildings
comprising the Industrial Park (B) The common areas shall at all times be
subject to the exclusive control and management of "LESSOR" and "LESSOR" shall
have the right to establish, modify and enforce reasonable rules and regulations
with respect to all facilities and areas in the common areas.
15. INSURANCE
15.1. "LESSEE" shall maintain at sole cost and expense, for the benefit of "THE
LESSOR", insurance covering the leasehold against loss or damage by fire and
against loss caused by any other peril, vandalism or malicious mischief in
amounts not less than the full replacement cost of the leasehold.
15.2. "LESSEE" acknowledges that "LESSOR" will not carry insurance on "LESSEE's
furniture and/or furnishings or any fixtures or equipment, piece goods, trims,
cut work, finished garment improvements or appurtenance by "LESSEE" agrees that
"LESSOR" will not be obligated to repair any damage thereto or replace the same.
16. ASSIGNMENTS: SUBLETTING
16.1. "LESSEE" shall not assign or sublet all or any portion of the rights held
by over the leasehold and granted by this contract without "LESSOR" written
consent, which consent shall not be unreasonably withheld or delayed; provided
however, that "LESSEE" may assign all of its rights under this lease to an
affiliated party, if simultaneously with such; assignment the subsidiary assumes
all of "THE LESEE" obligations hereunder. In the event of such assignment,
"LESSEE" shall be relieved of all liability under this lease.
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17. NOTICES
17.1. Any notice, approval, request, demand, consent or other communication
under this lease shall be in writing and shall be considered effective when
faxed or when mailed by registered or certified mail, return, receipt,
requested, postage prepaid, the parties at the address indicated below (or at
such other address as the parties may specify by notice to the others pursuant
hereto).
If to "LESSOR"
Nicolas Chahin Chahin
ZIP EL PORVENIR, S.A.
El Progreso, Yoro, Honduras.
Phone: (504) 69-1418, 69-1419, 69-1420
Fax: (504) 69-1421
If to "LESSEE"
Ira Kaminsky
Los Angeles San Jose
ZIP San Jose
San Pedro Sula, Cortes
Honduras, C.A.
And
Greg Chamandy
725 Montee de Liesse
Ville Saint-Laurent, QC
Canada H4T IP5
18. END OF TERM AND HOLDOVER
"LESSEE" shall, upon the expiration or other termination of the term of this
lease contract, peaceable vacate and surrender the leasehold and remove all
"LESSEE's goods and effects including "LESSEE" will return the leasehold object
of this contract in the same physical conditions he received it, except for the
damage, caused by normal wear and tear of it, excepting matters for which
"LESSOR" is responsible under clause number 8.1. herein.
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19. - REMEDIES
19.1 Any infraction to the stipulations of the present contract obligates the
infractor to repair the damage or give the right to the affected party to ask
for the termination of the contract; in both cases indemnification is applicable
for all the damages caused. The competent court to resolve any case dealing the
compliance of interpretation of this contract will be the Arbitration Board
designated by the Chamber of Commerce and Industry of San Pedro Sula, Department
of Cortes, Honduras, thus "LESSEE" renounces expressly to his domicile and both
parties subject themselves to the jurisdiction of the said Arbitration Board.
20.ACCEPTANCE
20.1 "LESSEE" declares that it accepts each and every one of the preceding
clauses and obligates itself to comply with the present contract. In faith of
the proceeding, we sign two originals of the present contract in El Progreso on
the nine days of the month of march of 1998.
PARQUE INDUSTRIAL EL PORVENIR, S.A.
BY: /s/ Nicolas Chahin Chahin
NAME: Nicolas Chahin Chahin
TITLE: General Manager
"CONFECCIONES EL PORVENIR"
BY: /s/ Ira Kaminsky
NAME: Ira Kaminsky
TITLE: General Manager
ENDORSEMENT: GILDAN ACTIVEWEAR INC.
BY: /s/ Greg Chamandy
NAME: Greg Chamandy
TITLE: Chairman & Chief Officer
8
<PAGE> 1
Exhibit 10.32
FLEMING COMPANIES, INC.
INDUSTRIAL GROSS LEASE
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease between the Lessor and
Lessee named below. Other Articles, Sections and Paragraphs of the Lease
referred to in this Article One explain and define the Basic Terms and are to be
read in conjunction with the Basic Terms.
Section 1.01. Date of Lease: May 28, 1998
Section 1.02. Lessor: Fleming Companies, Inc., an Oklahoma
Corporation
Address of Lessor: 6301 Waterford Boulevard, P.O. Box
26647, Oklahoma City, Oklahoma,
73126
Section 1.03. Lessee: Gildan Activeware, Inc. a Canadian
Corporation
Address of Lessee: 725 Montee de Liesse, Ville Saint-
Laurent QC H4T 1P5 CANADA
Section 1.04. Property:
The Property is part of Lessor's property known as the Fleming Miami Facility
located at 3400 NW 74th Avenue, Miami, Florida and described or depicted in
Exhibit "A" (the "Project"). The Project includes the land, approximately
763,451 square feet of buildings and all other improvements located on the land,
and the common areas described in Paragraph 4.05(a). The Property is defined as
a portion of the Fleming Miami Facility consisting of approximately 210,654
square feet of warehouse space within the Project including currently installed
racking systems (Property graphically identified in Exhibit 'A').
Section 1.05. Lease Term:
This Lease is for a period of nineteen (19) Months beginning on July 1, 1998, or
such other date as is specified in this Lease, and ending on January 31, 2000,
the "Lease Term".
Section 1.06. Permitted Uses: (See Article Five) Storage and distribution of
garments.
Section 1.07. Lessee's Guarantor: NONE
Section 1.08. Brokers: (See Article Fourteen)
Lessor's Broker: CUSHMAN & WAKEFIELD of ARIZONA, INC., Mr. Leighton Fisk and
CUSHMAN & WAKEFIELD of FLORIDA, INC., Mr. Ben Eisenberg
<PAGE> 2
INDUSTRIAL GROSS LEASE
----------------------
By and Between:
FLEMING COMPANIES, INC.
an Oklahoma Corporation
as "Lessor'
and
GILDAN ACTIVEWEAR, INC.
a Canadian Corporation
as "Lessee"
Dated: May 28, 1998
------------
<PAGE> 3
Lessee's Broker: CUSHMAN & WAKEFIELD of FLORIDA, INC., Mr. Wayne Ramoski
Section 1.09. Commission Payable to Brokers: $85,051.55
Section 1.10. Initial Security Deposit: (See Section 3.03) None
Section 1.11. Vehicle Parking Spaces Allocated to Lessee: (See Section 4.05)
Unrestricted parking around the Property within the boundaries
identified in Exhibit "A" and subject to the provisions of Section
4.05.
Section 1.12. Rent and Other Charges Payable by Lessee:
(a) BASE RENT: Starting on the Rental Commencement Date, which is herein defined
as August 1, 1998, Lessee shall pay Lessor, as provided in Section 3.01, base
rent in the monthly amount of Seventy Four Thousand Six Hundred Six and 63/100
Dollars ($74,606.63), ("Base Rent").
(b) OTHER PERIODIC PAYMENTS: In addition to the foregoing Base Rent due in
consideration for this Lease, Lessee shall pay:
(i) Utilities, other than electricity water and sewer
service, paid directly to the appropriate supplier (See
Section 4.03);
(ii) Liability Insurance (See Section 4.04); and
(iii) Maintenance, alterations & repairs pursuant to the terms
of Article Six.
Section 1.13. Lessor's Share of Profit on Assignment or Lease: (See Section
9.05) Lessor's share of Profit on Assignment or Lease is one hundred percent
(100%) of the Profit (the "Lessor's Share").
Section 1.14. Riders:
The following Riders are attached to and made a part of this Lease:
Exhibit "A" - Site Plan
ARTICLE TWO: LEASE TERM
Section 2.01. Lease of Property For Lease Term.
Lessor leases the Property to Lessee and Lessee leases the Property from Lessor
for the Lease Term. The Lease Term is for the period stated in Section 1.05
above and shall begin and end on the dates specified in Section 1.05 above,
unless the beginning or end of the Lease Term is changed under any provision of
this Lease. The "Commencement Date" shall be the date specified in Section 1.05
above for the beginning of the Lease Term, unless advanced or delayed under any
provision of this Lease.
Section 2.02. Delay in Commencement
Lessor shall not be liable to Lessee if Lessor does not deliver possession of
the Property to Lessee on the Commencement Date. Lessor's non-delivery of the
Property to Lessee on that
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date shall not affect this Lease or the obligations of Lessee under this Lease,
except that the Commencement Date shall be delayed until Lessor delivers
possession of the Property to Lessee, and the Lease Term shall be extended for a
period equal to the delay In delivery of possession of the Property to Lessee,
plus the number of days necessary to end the Lease Term on the last day of a
month. If Lessor does not deliver possession of the Property to Lessee within
fifteen (15) days after the Commencement Date, Lessee may elect to cancel this
Lease by giving written notice to Lessor within ten (10) days after the fifteen
(15) day period ends. If Lessee gives such notice, the Lease shall be canceled
and neither Lessor nor Lessee shall have any further obligations to the other.
If Lessee does not give such notice, Lessee's right to cancel the Lease shall
expire and the Lease Term shall commence upon the delivery of possession of the
Property to Lessee. If delivery of possession of the Property to Lessee is
delayed, Lessor and Lessee shall, upon such delivery, execute an amendment to
this Lease, setting forth the actual Commencement Date and expiration date of
the Lease. Failure to execute such amendment shall not affect the actual
Commencement Date and expiration date of the Lease.
Section 2.03. Early Occupancy.
If Lessee occupies the Property prior to the Commencement Date, Lessee's
occupancy of the Property shall be subject to all of the provisions of this
Lease. Early occupancy of the Property shall not advance the expiration date of
this Lease. Lessee shall not pay Base Rent or any other charges specified in
this Lease for the early occupancy.
Section 2.04. Holding Over.
Lessee shall vacate the Property upon the expiration or earlier termination of
this Lease. Lessee shall reimburse Lessor for and indemnify Lessor against
actual damages which Lessor incurs from Lessee's delay in vacating the Property.
If Lessee does not vacate the Property upon the expiration or earlier
termination of the Lease, and Lessor hereafter accepts rent from Lessee,
Lessee's occupancy of the Property shall be a "month-to-month" tenancy, subject
to all of the terms of this Lease applicable to a month-to-month tenancy, except
that the Base Rent then in effect shall be increased by 25%.
ARTICLE THREE: BASE RENT
Section 3.01. Time and Manner of Payment.
Upon execution of this Lease, Lessee shall pay Lessor the Base Rent in the
amount stated in Paragraph 1.12(a) above for August, 1998. On the first day of
September, 1998 and each month thereafter, Lessee shall pay Lessor the Base
Rent, in advance, without offset, deduction or prior demand. The Base Rent shall
be payable at Lessor's Local Address identified in Section 1.02, above, or at
such other place as Lessor may designate in writing.
Section 3.02. Termination - Advance Payments.
Upon termination of this Lease under Article Seven (Damage & Destruction),
Article Eight (Condemnation) or any other termination not resulting from
Lessee's default, and after Lessee has vacated the Property in the manner
required by this Lease, Lessor shall refund or credit to Lessee (or Lessee's
successor) the unused portion of the Security Deposit, any advance rent or other
advance payments made by Lessee to Lessor, and any amounts paid for real
property taxes and other reserves which apply to any time periods after
termination of the Lease.
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ARTICLE FOUR: OTHER CHARGES PAYABLE BY LESSEE
Section 4.01. Additional Rent.
All charges payable by Lessee other than Base Rent are called "Additional Rent."
Unless this Lease provides otherwise, Lessee shall pay all Additional Rent then
due with the next monthly installment of Base Rent. The term "rent" shall mean
Base Rent and Additional Rent.
Section 4.02. Expenses
The purpose of this Section 4.02 is to ensure that Lessee bears the cost of all
general maintenance to the Property and to the outside area surrounding the
Property segregated from the Project for the purpose of Lessee's access, loading
and parking. Lessee shall perform the maintenance required of it by Article Six
and pay directly to its chosen supplier the cost of such general maintenance and
shall operate the Property in a first class manner. In addition, Lessee shall
pay all costs and expenses of maintaining liability insurance defined in Section
4.04.(a), below, directly to the appropriate insurance providor and the cost of
any personal property taxes as defined below:
Personal Property Taxes.
(i) Lessee shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to
Lessee. Lessee shall try to have personal property taxed separately
from the Property.
(ii) If any of Lessee's personal property is taxed with the Property,
Lessee shall pay Lessor the taxes for the personal property within
fifteen (15) days after Lessee receives a written statement from
Lessor for such personal property taxes.
Section 4.03. Utilities.
Water, sewer and electrical utility service to the dry warehouse area and the
office area of the Project ("Reimbursable Utilities") are separately metered and
paid by Lessor. As the Property is a portion of the dry warehouse area, Lessee
shall be responsible for reimbursing Lessor twenty six percent (26%) of
Reimbursable Utilities within fifteen (15) days after receipt of Lessor's
written statement. In no event shall such reimbursements for Lessee's share of
Reimbursable Utilities exceed seventy three thousand five hundred dollars
($73,500) per year during the Lease Term. Lessee shall pay, directly to the
appropriate supplier, the cost of all telephone, refuse disposal and other
utilities and services supplied to the Property for Lessee's use.
Section 4.04. Insurance Policies.
(a) Liability Insurance. During the Lease Term, Lessee shall maintain, at
Lessee sole expense, a policy of commercial general liability insurance
(sometimes known as broad form comprehensive general liability insurance)
insuring Lessee against liability for bodily injury, property damage
(including loss of use of property) and personal injury arising out of the
operation, use or occupancy of the Property. Lessee shall name Lessor as
an additional insured under such policy. The initial amount of such
insurance shall be Two Million Dollars ($2,000,000) per occurrence. The
liability insurance obtained by Lessee under this Paragraph 4.04(a) shall
contain cross-liability endorsements; and insure
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Lessor against Lessee's performance under Section 5.05, if the matters
giving rise to the indemnity under Section 5.05 result from the negligence
of Lessee. The amount and coverage of such insurance shall not limit
Lessee's liability nor relieve Lessee of any other obligation under this
Lease. Lessor may also obtain comprehensive public liability insurance in
an amount and with coverage determined by Lessor insuring Lessor against
liability arising out of ownership, operation, use or occupancy of the
Property. The policy obtained by Lessor shall not be contributory and
shall not provide primary insurance.
(b) Property Insurance. During the Lease Term, Lessor shall maintain policies
of insurance covering loss of or damage to the Property in the full amount
of its replacement value. Such policy shall contain an Inflation Guard
Endorsement and shall provide protection against all perils included
within the classification of fire, extended coverage, vandalism, malicious
mischief, special extended perils (all risk), sprinkler leakage and any
other perils which Lessor deems reasonably necessary. Lessor shall have
the right to obtain flood and earthquake insurance if required by any
lender holding a security interest in the Property. Lessor shall not
obtain insurance for Lessee's fixtures or equipment or building
improvements installed by Lessee on the Property. Lessee shall not do or
permit anything to be done which invalidates any insurance policies.
(c) General Insurance Provisions.
(i) Any insurance which Lessee is required to maintain under this Lease
shall include a provision which requires the insurance carrier to
give Lessor not less than thirty (30) days' written notice prior to
any cancellation or modification of such coverage.
(ii) If Lessee fails to deliver any insurance certificate to Lessor
required under this Lease within the prescribed time period or if
any such certificate or its underlying insurance policy is canceled
or modified during the Lease Term without Lessor's consent Lessor
may obtain such insurance, in which case Lessee shall reimburse
Lessor for the cost of such insurance within fifteen (15) days after
receipt of a statement that indicates the cost of such insurance.
(iii) Lessee shall maintain all insurance required under this Lease with
companies holding a "General Policy Rating" of A-12 or better, as
set forth in the most current issue of "Best Key Rating Guide".
Lessee acknowledges that the insurance described in this Section
4.04 is for the primary benefit of Lessor. Lessor makes no
representation as to the adequacy of such insurance to protect
Lessor's or Lessee's interests. Therefore, Lessee shall obtain any
such additional property or liability insurance which Lessee deems
necessary to protect Lessor and Lessee.
(iv) Unless prohibited under any applicable insurance policies
maintained, Lessor and Lessee each hereby waive any and all rights
of recovery against the other, or against the officers, employees,
agents or representatives of the other, for loss of or damage to its
property or property of others under its control, if such loss or
damage is covered by any insurance policy in force (whether or not
described in this Lease) at the time of such loss or damage. Upon
obtaining the required policies of insurance, Lessor and Lessee
shall give notice to the insurance carriers of this mutual waiver of
subrogation.
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Section 4.05. Lessee's Access, Security, and Use of the Parking Areas
Lessee shall have use of the land surrounding the Property roughly identified on
the site plan incorporated as Exhibit A for purposes of vehicular parking and
delivery maneuvering room.
Section 4.06. Late Charges.
Lessee's failure to pay rent promptly may cause Lessor to incur unanticipated
costs. The exact amount of such costs are impractical or extremely difficult to
ascertain. Such costs may include, but are not limited to, processing and
accounting charges and late charges which may be imposed on Lessor by any ground
lease, mortgage or trust deed encumbering the Property. Therefore, if Lessor
does not receive any rent payment within ten (10) days after it becomes due,
Lessee shall pay Lessor a late charge equal to ten percent (10%) of the overdue
amount. The parties agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of such late payment.
Section 4.07. Interest on Past Due Obligations.
Any amount owed by Lessee to Lessor which is not paid when due shall bear
interest at the rate of fifteen percent (15%) per annum from the due date of
such amount. However, interest shall not be payable on late charges to be paid
by Lessee under this Lease. The payment of interest on such amounts shall not
excuse or cure any default by Lessee under this Lease. If the interest rate
specified in this Lease is higher than the rate permitted by law the interest
rate is hereby decreased to the maximum legal interest rate permitted by law.
ARTICLE FIVE: USE OF PROPERTY
Section 5.01. Permitted Uses.
Lessee may use the Property only for the Permitted Uses set forth in Section
1.06 above.
Section 5.02 Manner of Use.
Lessee shall not cause or permit the Property to be used in any way which
constitutes a violation of any law, ordinance, or governmental regulation or
order, which annoys or interferes with the rights of Lessor or other users of
the Project, or which constitutes a nuisance or waste. Lessee shall obtain and
pay for all permits, including a Certificate of Occupancy, required for Lessee's
occupancy of the Property and shall promptly take all actions necessary to
comply with all applicable statutes, ordinances, rules, regulations, orders and
requirements regulating the use by Lessee of the Property including the
Occupational Safety and Health Act as well as all applicable statutes,
ordinances, rules, regulations, orders and requirements requiring alterations or
improvements to the Property (such as the Americans with Disabilities Act), the
requirement for compliance with which arises by reason of (a) the Lessee's use
of the Property (other than requirements applicable to warehousing usage of the
Property); or (b) improvements, alterations or additions to the Property made by
Lessee.
Section 5.03. Hazardous Materials.
As used in this Lease, the term "Hazardous Material" means any flammable items,
explosives, radioactive materials, hazardous or toxic substances, material or
waste or related materials, including any substances defined as or included in
the definition of "hazardous substances", "hazardous wastes", "hazardous
materials" or "toxic substances" now or subsequently regulated under any
applicable federal, state or local laws or regulations, including without
limitation
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petroleum-based products, paints, solvents, lead, cyanide, DDT, printing inks,
acids, pesticides, ammonia compounds and other chemical products, asbestos, PCBs
and similar compounds, and including any different products and materials which
are subsequently found to have adverse effects on the environment or the health
and safety of persons. Lessee shall not cause or permit any Hazardous Materials
to be generated, produced, brought upon, used, stored, treated or disposed of in
or about the Project by Lessee, its agents, employees, contractors, subtenants
or invitees without the prior written consent of Lessor. Lessor shall be
entitled to take into account such other factors or facts as Lessor may
reasonably determine to be relevant in determining whether to grant or withhold
consent to Lessee's proposed activity with respect to Hazardous Materials. In no
event, however, shall Lessor be required to consent to the installation or use
of any storage tanks on the Property.
Section 5.04. Signs and Auctions.
Lessee shall not place any signs on the Property without Lessor's prior written
consent, which consent will not be unreasonably withheld. Lessee shall not
conduct or permit any auctions or sheriffs sales at the Property.
Section 5.05. Indemnity.
Lessee shall indemnify, defend and hold Lessor harmless from and against any and
all claims, damages, liabilities, actions, causes of action, costs and expenses
arising from, in connection with or in any way related to: (i) Lessee's use of
the Property; (ii) the conduct of Lessee's business or anything else done in or
about the Property, including any contamination of the Property or any other
property resulting from the presence or use of Hazardous Material caused or
permitted by Lessee; (iii) any breach or default in the performance of Lessee's
obligations under this Lease; (iv) any misrepresentation or breach of warranty
by Lessee under this Lease; or (v) other acts or omissions of Lessee. Lessee
shall defend Lessor against any such cost, claim or liability at Lessee's
expense with counsel reasonably acceptable to Lessor or, at Lessor's election,
Lessee shall reimburse Lessor for any legal fees or costs incurred by Lessor in
connection with any such claim. As a material part of the consideration to
Lessor, Lessee assumes all risk of damage to property or injury to persons in or
about the Property arising from any cause other than Lessor's negligence or
willful misconduct, and Lessee hereby waives all claims in respect thereof
against Lessor, except for any claim arising out of Lessor's negligence or
willful misconduct. As used in this Section, the term "Lessee" shall include
Lessee's employees, agents, contractors and in invitees, if applicable.
Section 5.06. Lessor's Access.
Lessor or its agents may, upon providing Lessee with prior notice, enter the
Property at all reasonable times show the Property to potential buyers,
investors or lessees or other parties; to do any other act or to inspect and
conduct tests in order to monitor Lessee's compliance with all applicable
environmental laws and all laws governing the presence and use of Hazardous
Material; or for any other purpose Lessor deems necessary. Lessor shall give
Lessee prior notice of such entry, except in the case of an emergency. Lessor
may place customary "For Sale" or "For Lease" signs on the Property.
Section 5.07. Quiet Possession.
If Lessee pays the rent and complies with all other terms of this Lease, Lessee
may occupy and enjoy the Property for the full Lease Term, subject to the
provisions of this Lease.
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ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.01. Existing Conditions.
In order to accommodate Lessee's use of the Property, Lessor agrees to make the
following repairs and alterations prior to the Lease Commencement Date, at
Lessor's sole expense:
2) Install two double-occupant restrooms in the warehouse area;
3) Block all wall openings between the Property and the Project with drywall
and framing studs; and
4) Install new fencing along the northern boundary of the property line in
order to separate Lessee's and Lessor's truck traffic.
In addition to the foregoing specific repairs, the Property will be delivered to
Lessee upon Lease Commencement broom-cleaned with all mechanical and lighting
systems in good working order. With the exception of the foregoing improvements
Lessor is required to make, Lessee accepts the Property in its condition as of
the execution of the Lease, subject to all recorded matters, laws, ordinances,
and governmental regulations and orders. Except as provided herein, Lessee
acknowledges that neither Lessor nor any agent of Lessor has made any
representation as to the condition of the Property or the suitability of the
Property for Lessee's intended use. Lessee represents and warrants that Lessee
has made its own inspection of and inquiry regarding the condition of the
Property and is not relying on any representations of Lessor or any Broker with
respect thereto.
Lessor does not represent or warrant to Lessee that the Property is in
compliance with the Americans with Disabilities Act of 1990, as amended ("ADA")
although Lessor will undertake any alterations or improvements hereafter
required by appropriate authority to bring the Property into compliance except
to the extent Lessee is required to undertake the same under Section 5.02.
Section 6.02. Exemption of Lessor from Liability.
Lessor shall not be liable for any damage or injury to the person, business (or
any loss of income therefrom), goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers or any other person in or about
the Property, whether such damage or injury is caused by or results from: (a)
fire, steam, electricity, water, gas or rain; (b) the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures or any other cause; (c) conditions arising
in or about the Property or upon other portions of the Property, or from other
sources or places; or (d) any act or omission of any other lessee of the
Property. Lessor shall not be liable for any such damage or injury even though
the cause of or the means of repairing such damage or injury are not accessible
to Lessee. The provisions of this Section 6.02 shall not, however, exempt Lessor
from liability for Lessor's negligence or willful misconduct.
Section 6.03. Lessor's Obligations.
(a) Except as provided in Article Seven (Damage or Destruction) and Article
Eight (Condemnation), Lessor shall keep the following in good order,
condition and repair the foundations, exterior walls and roof of the
Property. However, Lessor shall not be
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obligated to maintain or repair windows, doors, plate glass or the
interior surfaces of exterior walls. Lessor shall make repairs under this
Section 6.03 wIthin a reasonable time after receipt of written notice from
Lessee of the need for such repairs.
(b) Lessee waives the benefit of any statute in effect now or in the future
which might give Lessee the right to make repairs at Lessor's expense or
terminate this Lease due to Lessor's failure to keep the Property in good
order, condition and repair.
Section 6.04. Lessee's Obligations.
(a) Except as provided in Section 6.03, Article Seven (Damage or Destruction)
and Article Eight (Condemnation), Lessee shall keep all portions of the
Property (including nonstructural, interior, systems and equipment) in
good order, condition and repair, excepting latent defects. If any portion
of the Property any system or equipment in the Property which Lessee is
obligated to repair cannot be fully repaired or restored, Lessee shall
promptly replace such portion of the Property or system or equipment in
the Property, regardless of whether the benefit of such replacement
extends beyond the Lease Term; but if the benefit or useful life of such
replacement extends beyond the Lease Term (as such term may be extended by
exercise of any options), the useful life of such replacement shall be
prorated over the remaining portion of the Lease Term (as extended), and
Lessee shall be liable only for that portion of the cost which is
applicable to the Lease Term (as extended). Lessee shall maintain a
preventative maintenance contract providing for the regular inspection and
maintenance of the heating and air conditioning system by a licensed
heating and air conditioning contractor. If any part of the Property is
damaged by any act or omission of Lessee, Lessee shall pay Lessor the cost
of repairing or replacing such damaged property, whether or not Lessor
would otherwise be obligated to pay the cost of maintaining or repairing
such property.
(b) Lessee shall fulfill all of Lessee's obligations under this Section 6.04
at Lessee's sole expense. If Lessee fails to maintain, repair or replace
the Property as required by this Section 6.04, Lessor may, upon ten (10)
days' prior notice to Lessee (except that no notice shall be required in
the case of an emergency), enter the Property and perform such maintenance
or repair (including replacement, as needed) on behalf of Lessee. In such
case, Lessee shall reimburse Lessor for all costs incurred in performing
such maintenance or repair immediately upon demand.
Section 6.05. Alterations, Additions, Improvements
Lessee shall not make any alterations, additions, or improvements to the
Property without Lessor's prior written consent, except for non-structural
alterations which do not exceed Ten Thousand Dollars ($10,000) in cost
cumulatively over the Lease Term and which are not visible from the outside of
any building of which the Property is part. Lessor may require Lessee to provide
demolition and/or lien and completion bonds in form and amount satisfactory to
Lessor. Lessee shall promptly remove any alterations, additions, or improvements
constructed in violation of this Paragraph 6.05(a) upon Lessor's written
request. All alterations, additions, and improvements shall be done in a good
and workmanlike manner, in conformity with all applicable laws and regulations,
and by a contractor approved by Lessor, which approval will not be unreasonably
withheld. Upon completion of any such work, Lessee shall provide Lessor with "as
built" plans, copies of all construction contracts, and proof of payment for all
labor and materials.
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For any improvements made to the Property, Lessee shall pay when due all claims
for labor and material furnished to the Property. Lessee shall give Lessor at
least twenty (20) days' prior written notice of the commencement of any work on
the Property, regardless of whether Lessor's consent to such work is required.
Lessor may elect to record and post notices of non-responsibility on the
Property.
Section 6.06. Condition upon Termination.
Upon the termination of the Lease, Lessee shall surrender the Property to
Lessor, broom clean and in the same condition as received except for ordinary
wear and tear which Lessee was not otherwise obligated to remedy under any
provision of this Lease. Specifically, Lessee shall be obligated to restore the
racking system to its original configuration delivered at the time of Lease
Commencement. In addition, to the extent Lessor requires Lessee to remove any
alterations, additions or improvements (whether or not made with Lessor's
consent) prior to the expiration of the Lease and to restore the Property to its
prior condition, Lessee shall do so at Lessee's expense. All alterations,
additions and improvements which Lessor has not required Lessee to remove shall
become Lessor's property and shall be surrendered to Lessor upon the expiration
or earlier termination of the Lease, except that Lessee may remove any of
Lessee's machinery or equipment which can be removed without material damage to
the Property. Lessee shall repair, at Lessee's expense, any damage to the
Property caused by the removal of any such machinery or equipment. In no event
however, shall Lessee remove any of the following materials or equipment (which
shall be deemed Lessor's property) without Lessor's prior written consent: any
power wiring or power panels; lighting or lighting fixtures; wall coverings;
drapes, blinds or other window coverings; carpets or other floor coverings;
heaters, air conditioners or any other heating or air conditioning equipment;
fencing or security gates; or other similar building operating equipment and
decorations.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.01. Partial Damage to Property.
(a) Lessee shall notify Lessor in writing immediately upon the occurrence of
any damage to the Property. If the Property is only partially damaged
(i.e., less than fifty percent (50%) of the Property is untenantable as a
result of such damage or less than fifty percent (50%) of Lessee's
operations are materially impaired) and if the proceeds received by Lessor
from the insurance policies described in Paragraph 4.04(b) are sufficient
to pay for the necessary repairs, this Lease shall remain in effect and
Lessor shall repair the damage as soon as reasonably possible. Lessor may
elect (but is not required) to repair any damage to Lessee's fixtures,
equipment, or improvements
(b) If the insurance proceeds received by Lessor are not sufficient to pay the
entire cost of repair, or if the cause of the damage is not covered by the
insurance policies which Lessor maintains under Paragraph 4.04(b), Lessor
may elect either to (i) repair the damage as soon as reasonably possible,
in which case this Lease shall remain in full force and effect, or (ii)
terminate this Lease as of the date the damage occurred. Lessor shall
notify Lessee within thirty (30) days after receipt of notice of the
occurrence of the damage whether Lessor elects to repair the damage or
terminate the Lease. If Lessor elects to repair the damage and the damage
was due to an act or omission of Lessee, or Lessee's employees, agents,
contractors or invitees, Lessee shall pay Lessor the
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"deductible amount" (if any) under Lessor's insurance policies.
Furthermore, if the damage was due to an act or omission of Lessee, or
Lessee's employees, agents, contractors or invitees, the difference
between the actual cost of repair and any insurance proceeds received by
Lessor. If Lessor elects to terminate the Lease, Lessee may elect to
continue this Lease in full force and effect, in which case Lessee shall
repair any damage to the Property. Lessee shall pay the cost of such
repairs, except that upon satisfactory completion of such repairs, Lessor
shall deliver to Lessee any insurance proceeds received by Lessor for the
damage repaired by Lessee. Lessee shall give Lessor written notice of such
election within ten (10) days after receiving Lessor's termination notice.
(c) If the damage to the Property occurs during the last six (6) months of the
Lease Term and such damage will require more than thirty (30) days to
repair, either Lessor or Lessee may elect to terminate this Lease as of
the date the damage occurred, regardless of the sufficiency of any
insurance proceeds. The party electing to terminate this Lease shall give
written notification to the other party of such election within thirty
(30) days after Lessee's notice to Lessor of the occurrence of the damage.
Section 7.02. Substantial or Total Destruction.
If the Property is substantially or totally destroyed by any cause whatsoever
(i.e., the damage to the Property is greater than partial damage as described in
Section 7.01), and regardless of whether Lessor receives any insurance proceeds,
this Lease shall terminate as of the date the destruction occurred. If the
Property can be rebuilt within thirty (30) days after the date of destruction,
Lessor may elect to rebuild the Property at Lessor's own expense, in which case
this Lease shall remain in full force and effect. Lessor shall notify Lessee of
such election within thirty (30) days after Lessee's notice of the occurrence of
total or substantial destruction. If Lessor so elects, Lessor shall rebuild the
Property at Lessor's sole expense, except that if the destruction was caused by
an act or omission of Lessee, Lessee shall pay Lessor the difference between the
actual cost of rebuilding and any insurance proceeds received by Lessor
Section 7.03. Temporary Reduction of Rent.
If the Property is destroyed or damaged and Lessor repairs or restores the
Property pursuant to the provisions of this Article Seven, any rent payable
during the period of such damage, repair and/or restoration shall be reduced
according to the degree, if any, to which Lessee's use of the Property is
impaired. However, the reduction shall not exceed the sum of one year's payment
of Base Rent. Except for such possible reduction in Base Rent, Lessee shall not
be entitled to any compensation, reduction, or reimbursement from Lessor as a
result of any damage, destruction, repair, or restoration of or to the Property.
Section 7.04. Waiver.
Lessee waives the protection of any statute, code or judicial provision which
grants a Lessee the right to terminate a lease in the event of the substantial
or total destruction of the leased property. Lessee agrees that the provisions
of Article Seven shall govern the rights and obligations of Lessor and Lessee in
the event of any substantial or total destruction to the Property.
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ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of eminent domain
or sold under the threat of that power (all of which are called "Condemnation"),
this Lease shall terminate as to the part taken or sold on the date the
condemning authority takes title or possession, whichever occurs first. If more
than twenty percent (20%) of the floor area of the Property is taken, either
Lessor or Lessee may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
takes title or possession). If neither Lessor nor Lessee terminates this Lease,
this Lease shall remain in effect as to the portion of the Property not taken,
except that the Base Rent and Additional Rent shall be reduced in proportion to
the reduction in the floor area of the Property. Any Condemnation award or
payment shall be distributed in the following order: (a) first, to any ground
Lessor, mortgagee or beneficiary under a deed of trust encumbering the Property,
the amount of its interest in the Property; (b) second, to Lessee, only the
amount of any award specifically designated for loss of or damage to Lessee's
trade fixtures or removable personal property; and (c) third, to Lessor, the
remainder of such award, whether as compensation for reduction in the value of
the leasehold, the taking of the fee, or otherwise. If this Lease is not
terminated, Lessor shall repair any damage to the Property caused by the
Condemnation, except that Lessor shall not be obligated to repair any damage for
which Lessee has been reimbursed by the condemning authority. If the severance
damages received by Lessor are not sufficient to pay for such repair, Lessor
shall, have the right to either terminate this Lease or make such repair at
Lessor's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01. Lessor's Consent Required.
No portion of the Property or of Lessee's interest in this Lease may be acquired
by any other person or entity, whether by sale, assignment, mortgage, lease,
transfer, operation of law, or act of Lessee, without Lessor's prior written
consent, except as provided in Section 9.02 below. Lessor has the right to grant
or withhold its consent as provided in Section 9.05 below. Any attempted
transfer without consent shall be void and shall constitute a non-curable breach
of this Lease.
Section 9.02. Lessee Affiliate.
Lessee may assign this Lease or Lease the Property, without Lessor's consent, to
any corporation which controls, is controlled by or is under common control with
Lessee, or to any corporation resulting from the merger of or consolidation with
Lessee ("Lessee's Affiliate").
Section 9.03. No Release of Lessee.
No transfer permitted by this Article Nine, whether with or without Lessor's
consent, shall release Lessee or change Lessee's primary liability to pay the
rent and to perform all other obligations of Lessee under this Lease. Lessor's
acceptance of rent from any other person is not a waiver of any provision of
this Article Nine. Consent to one transfer is not a consent to any subsequent
transfer. If Lessee's transferee defaults under this Lease, Lessor may proceed
directly against Lessee without pursuing remedies against the transferee. Lessor
may consent to subsequent assignments or modifications of this Lease by Lessee's
transferee, without notifying Lessee or
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obtaining its consent. Such action shall not relieve Lessee's liability under
this Lease.
Section 9.04. Offer to Terminate.
If Lessee desires to assign the Lease or sublease the Property, Lessee shall
have the right to offer, in writing, to terminate the Lease as of a date
specified in the offer. If Lessor elects in writing to accept the offer to
terminate within twenty (20) days after notice of the offer, the Lease shall
terminate as of the date specified and all the terms and provisions of the Lease
governing termination shall apply. If Lessor does not so elect, the Lease shall
continue in effect until otherwise terminated and the provisions of Section 9.05
with respect to any proposed transfer shall continue to apply.
Section 9.05. Lessor's Consent
(a) Lessee's request for consent to any transfer described in Section 9.01
shall set forth in writing the details of the proposed transfer, including
the name, business and financial condition of the prospective transferee,
financial details of the proposed transfer (e.g., the term of and the rent
and security deposit payable under any proposed assignment or sublease),
and any other information Lessor deems relevant. Lessor shall have the
right to withhold consent, if reasonable, or to grant consent based on the
following factors: (i) the business of the proposed assignee or subtenant
and the proposed use of the Property; (ii) the net worth and financial
reputation of the proposed assignee or subtenant; (iii) Lessee's
compliance with all of its obligations under the Lease; and (iv) such
other factors as Lessor may reasonably deem relevant. If Lessor objects to
a proposed assignment solely because of the net worth and/or financial
reputation of the proposed assignee, Lessee may nonetheless sublease (but
not assign), all or a portion of the Property to the proposed transferee,
but only on the other terms of the proposed transfer.
(b) If Lessee assigns or subleases, the following shall apply:
(i) Lessee shall pay to Lessor as Additional Rent under the Lease the
Lessor's Share (stated in Section 1.13) of the Profit (defined
below) on such transaction as and when received by Lessee, unless
Lessor gives written notice to Lessee and the assignee or subtenant
that Lessor's Share shall be paid by the assignee or subtenant to
Lessor directly. The "Profit" means (A) all amounts paid to Lessee
for such assignment or sublease, including "key" money, monthly rent
in excess of the monthly rent payable under the Lease, and all fees
and other consideration paid for the assignment or sublease,
including fees under any collateral agreements, less (B) costs and
expenses directly incurred by Lessee in connection with the
execution and performance of such assignment or sublease for real
estate brokers commissions and costs of renovation or construction
of improvements required under such assignment or sublease and rent
paid by Lessee hereunder. Lessee is entitled to recover such costs
and expenses before Lessee is obligated to pay the Lessor's Share to
Lessor. The Profit in the case of a sublease of less than all the
Property shall be determined with references to the rent allocable
to the subleased space as a percentage on a square footage basis.
(ii) Lessee shall provide Lessor a written statement certifying all
amounts to be paid
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from any assignment or sublease of the Property within thirty (30)
days after the transaction documentation is signed, and Lessor may
inspect Lessee's books and records to verify the accuracy of such
statement. On written request Lessee shall promptly furnish to
Lessor copies of all the transaction documentation, all of which
shall be certified by Lessee to be complete, true and correct.
Lessor's receipt of Lessor's Share shall not be a consent to any
further assignment or subletting. The breach of Lessee's obligation
under this Paragraph 9.05(b) shall be a material default of the
Lease.
Section 9.06. No Merger.
No merger shall result from Lessee's Lease of the Property under this Article
Nine, Lessee's surrender of this Lease or the termination of this Lease in any
other manner. In any such event, Lessor may terminate any or all subtenancies or
succeed to the interest of Lessee as sublandlord under any or all subtenancies.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01. Covenants and Conditions.
Lessee's performance of each of Lessee's obligations under this Lease is a
condition as well as a covenant. Lessee's right to continue in possession of the
Property is conditioned upon such performance. Time is of the essence in the
performance of all covenants and conditions.
Section 10.02. Defaults.
Lessee shall be in material default under this Lease:
(a) If Lessee's vacation of the Property results in the cancellation of any
insurance described in Section 4.04;
(b) If Lessee fails to pay rent or any other charge when due;
(c) If Lessee fails to perform any of Lessee's non-monetary obligations under
this Lease for a period of thirty (30) days after written notice from
Lessor; provided that if more than thirty (30) days are required to
complete such performance, Lessee shall not be in default if Lessee
commences such performance within the thirty (30)-day period and
thereafter diligently pursues its completion. However, Lessor shall not be
required to give such notice if Lessee's failure to perform constitutes a
non-curable breach of this Lease. The notice required by this Paragraph is
intended to satisfy any and all notice requirements imposed by law on
Lessor and is not in addition to any such requirement.
(d) (i) If Lessee makes a general assignment or general arrangement for the
benefit of creditors; (ii) if a petition for adjudication of bankruptcy or
for reorganization or rearrangement is filed by or against Lessee and is
not dismissed within thirty (30) days; (iii) it a trustee or receiver is
appointed to take possession of substantially all of Lessee's assets
located at the Property or of Lessee's interest in this Lease and
possession is not restored to Lessee within thirty (30) days; or (iv) if
substantially all of Lessee's assets located at the Property or of
Lessee's interest in this Lease is subjected to attachment, execution or
other judicial seizure which is not discharged within thirty (30) days. If
a
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court of competent jurisdiction determines that any of the acts described
in this subparagraph (d) is not a default under this Lease, and a trustee
is appointed to take possession (or if Lessee remains a debtor in
possession) and such trustee or Lessee transfers Lessee's interest
hereunder or subleases all or a portion of the Property, then Lessor shall
receive, as Additional Rent the excess, if any, of the rent (or any other
consideration) paid in connection with such assignment or sublease over
the rent payable by Lessee under this Lease.
(e) If any guarantor of the Lease revokes or otherwise terminates, or purports
to revoke or otherwise terminate, any guaranty of all or any portion of
Lessee's obligations under the Lease. Unless otherwise expressly provided,
no guaranty of the Lease is revocable.
Section 10.03. Remedies.
On the occurrence of any material default by Lessee, Lessor may, at any time
thereafter, with or without notice or demand and without limiting Lessor in the
exercise of any right or remedy which Lessor may have:
(a) Terminate Lessee's right to possession of the Property by any lawful
means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Property to Lessor. In such event
Lessor shall be entitled to recover from Lessee all damages incurred by
Lessor by reason of Lessee's default, including (i) the worth at the time
of the award of the unpaid Base Rent, Additional Rent and other charges
which Lessor had earned at the time of the termination: (ii) the worth at
the time of the award of the amount by which the unpaid Base Rent,
Additional Rent and other charges which Lessor would have earned after
termination until the time of the award exceeds the amount of such rental
loss that Lessee proves Lessor could have reasonably avoided; (iii) the
worth at the time of the award of the amount by which the unpaid Base
Rent, Additional Rent and other charges which Lessee would have paid for
the balance of the Lease Term after the time of award exceeds the amount
of such rental loss that Lessee proves Lessor could have reasonably
avoided; and (iv) any other amount necessary to compensate Lessor for all
the detriment proximately caused by Lessee's failure to perform its
obligations under the Lease or which in the ordinary course of things
would be likely to result therefrom, including, but not limited to, any
costs or expenses Lessor incurs in maintaining or preserving the Property
after such default, the cost of recovering possession of the Property,
expenses of releasing, including necessary renovation or alteration of the
Property, Lessor's reasonable attorneys' fees incurred in connection
therewith, and any real estate commission paid or payable. As used in
subparts (i) and (ii) above, the "worth at the time of the award" is
computed by allowing interest on unpaid amounts at the rate of fifteen
percent (15%) per annum, or such lesser amount as may then be the maximum
lawful rate. As used in subpart (iii) above, the "worth at the time of the
award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award, plus one
percent (1%). If Lessee has abandoned the Property, Lessor shall have the
option of (i) retaking possession of the Property and recovering from
Lessee the amount specified in this Paragraph 10.03(a), or (ii) proceeding
under Paragraph 10.03(b);
(b) Maintain Lessee's right to possession, in which case this Lease shall
continue in effect whether or not Lessee has abandoned the Property. In
such event, Lessor shall be
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entitled to enforce all of Lessor's rights and remedies under this Lease,
including the right to recover the rent as it becomes due;
(c) Terminate this Lease or pursue any other remedy now or hereafter available
to Lessor under the laws or judicial decisions of the state in which the
Property is located.
Section 10.04. Automatic Termination.
Notwithstanding any other term or provision hereof to the contrary, the Lease
shall terminate on the occurrence of any act which affirms the Lessor's
intention to terminate the Lease as provided in Section 10.03 hereof. On such
termination, Lessor's damages for default shall include all costs and fees,
including reasonable attorneys' fees that Lessor incurs in connection with the
filing, commencement, pursuing and/or defending of any action in any bankruptcy
court or other court with respect to the Lease; the obtaining of relief from any
stay in bankruptcy restraining any action to evict Lessee; or the pursuing of
any action with respect to Lessor's right to possession of the Property. All
such damages suffered (apart from Base Rent and other rent payable hereunder)
shall constitute pecuniary damages which must be reimbursed to Lessor prior to
assumption of the Lease by Lessee or any successor to Lessee in any bankruptcy
or other proceeding.
Section 10.05. Cumulative Remedies.
Lessor's exercise of any right or remedy shall not prevent it from exercising
any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.01. Subordination.
Lessor shall have the right to subordinate this Lease to any ground lease, deed
of trust or mortgage encumbering the Property, any advances made on the security
thereof and any renewals, modifications, consolidations, replacements or
extensions thereof, whenever made or recorded. Lessee shall cooperate with
Lessor and any lender which is acquiring a security interest in the Property or
the Lease. Lessee shall execute such further documents and assurances as such
lender may require, provided that Lessee's obligations under this Lease shall
not be increased in any material way (the performance of ministerial acts shall
not be deemed material), and Lessee shall not be deprived of its rights under
this Lease. Lessee's right to quiet possession of the Property during the Lease
Term shall not be disturbed if Lessee pays the rent and performs all of Lessee's
obligations under this Lease and is not otherwise in default. If any ground
Lessor, beneficiary or mortgagee elects to have this Lease prior to the lien of
its ground lease, deed of trust or mortgage and gives written notice thereof to
Lessee, this Lease shall be deemed prior to such ground lease, deed of trust or
mortgage whether this Lease is dated prior or subsequent to the date of said
ground lease, deed of trust or mortgage or the date of recording thereof.
Any subordination document prepared and presented to Lessee for execution
pursuant to this Section 11.01 shall contain non disturbance and attornment
provisions which are consistent with the terms of this Section.
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Section 11.02. Attornment.
If Lessor's interest in the Property is acquired by any ground Lessor,
beneficiary under a deed of trust, mortgagee, or purchaser at a foreclosure
sale, Lessee shall attorn to the transferee of or successor to Lessor's interest
in the Property and recognize such transferee or successor as Lessor under this
Lease. Lessee waives the protection of any statute or rule of law which gives or
purports to give Lessee any right to terminate this Lease or surrender
possession of the Property upon the transfer of Lessor's interest.
Section 11.03. Signing of Documents.
Lessee shall sign and deliver any instrument or documents necessary or
appropriate to evidence any such attornment or subordination or agreement to do
so. If Lessee fails to do so within ten (10) days after written request Lessee
shall be in material default of this Lease.
Section 11.04. Estoppel Certificates.
(a) Upon Lessor's written request, Lessee shall execute, acknowledge and
deliver to Lessor a written statement certifying: (i) that none of the
terms or provisions of this Lease have been changed (or if they have been
changed, stating how they have been changed); (ii) that this Lease has not
been canceled or terminated; (iii) the last date of payment of the Base
Rent and other charges and the time period covered by such payment; (iv)
that Lessor is not in default under this Lease (or, if Lessor is claimed
to be in default, stating why); and (v) such other representations or
information with respect to Lessee or the Lease as Lessor may reasonably
request or which any prospective purchaser or encumbrancer of the Property
may require. Lessee shall deliver such statement to Lessor within ten (10)
days after Lessor's request. Lessor may give any such statement by Lessee
to any prospective purchaser or encumbrancer of the Property. Such
purchaser or encumbrancer may rely conclusively upon such statement as
true and correct.
(b) If Lessee does not deliver such statement to Lessor within such ten
(10)-day period, Lessor, and any prospective purchaser or encumbrancer,
may conclusively presume and rely upon the following facts: (i) that the
terms and provisions of this Lease have not been changed except as
otherwise represented by Lessor; (ii) that this Lease has not been
canceled or terminated except as otherwise represented by Lessor; (iii)
that not more than one month's Base Rent or other charges have been paid
in advance; and (iv) that Lessor is not in default under the Lease. In
such event, Lessee shall be estopped from denying the truth of such facts.
ARTICLE TWELVE: LEGAL COSTS
Section 12.01. Legal Proceedings.
If Lessee or Lessor shall be in breach or default under this Lease, such party
(the "Defaulting Party") shall reimburse the other party (the "Non defaulting
Party") upon demand for any costs or expenses that the Non defaulting Party
incurs in connection with any breach or default of the Defaulting Party under
this Lease, whether or not suit is commenced or judgment entered. Such costs
shall include legal fees and costs incurred for the negotiation of a settlement,
enforcement of rights of otherwise. Furthermore, if any action for breach of, or
to enforce the provisions of
Page 17
<PAGE> 19
this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys fees and costs.
The losing party in such action shall pay such attorneys fees and costs. Lessee
shall also indemnify Lessor against and hold Lessor harmless from all costs,
expenses, demands and liability Lessor may incur if Lessor becomes or is made a
party to any claim or action (a) instituted by Lessee against any third party,
or by any third party against Lessee, or by or against any person holding any
interest under or using the Property by license of or agreement with Lessee; (b)
for foreclosure of any lien for labor or material furnished to or for Lessee or
such other person; (c) otherwise arising out of or resulting from any act or
transaction of Lessee or such other person; or (d) necessary to protect Lessor's
interest under this Lease in a bankruptcy proceeding, or other proceeding under
Title 11 of the United States Code, as amended. Lessee shall defend Lessor
against any such claim or action at Lessee's expense with counsel reasonably
acceptable to Lessor or, at Lessor's election, Lessee shall reimburse Lessor for
any legal fees or costs Lessor incurs in any such claim or action.
Section 12.02. Lessor's Consent.
Lessee shall pay Lessor's reasonable attorneys fees incurred in connection with
Lessee's request for Lessor's consent under Article Nine (Assignment and
Subletting), or in connection with any other act which Lessee proposes to do and
which requires Lessor's consent.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.01. Non-Discrimination.
Lessee promises, and it is a condition to the continuance of this Lease, that
there will be no discrimination against, or segregation of, any person or group
of persons on the basis of race, color, sex, creed, national origin or ancestry
in the leasing, subleasing, transferring, occupancy, tenure or use of the
Property or any portion thereof.
Section 13.02. Lessor's Liability; certain Duties.
(a) As used in this Lease, the term Lessor means only the current owner or
owners of the fee title to the Property or Property or the leasehold
estate under a ground lease of the Property or Property at the time in
question. Each Lessor is obligated to perform the obligations of Lessor
under this Lease only during the time such Lessor owns such interest or
title. Any Lessor who transfers its title or interest is relieved of all
liability with respect to the obligations of Lessor under this Lease to be
performed on or after the date of transfer. However, each Lessor shall
deliver to its transferee all funds that Lessee previously paid if such
funds have not yet been applied under the terms of this Lease.
(b) Lessee shall give written notice of any failure by Lessor to perform any
of its obligations under this Lease to Lessor and to any ground Lessor,
mortgagee or beneficiary under any deed of trust encumbering the Property
whose name and address have been furnished to Lessee in writing. Lessor
shall not be in default under this Lease unless Lessor (or such ground
Lessor, mortgagee or beneficiary) fails to cure such non-performance
within thirty (30) days after receipt of Lessee's notice. However, if such
non-performance reasonably requires more than thirty (30) days to cure,
Lessor shall not be in default if such cure is commenced within such
thirty (30)-day period and thereafter
Page 18
<PAGE> 20
diligently pursued to completion.
(c) Notwithstanding any term or provision herein to the contrary, the
liability of Lessor for the performance of its duties and obligations
under this Lease is limited to Lessor's interest in the Property, and
neither the Lessor nor its partners, shareholders, officers or other
principals shall have any personal liability under this Lease.
Section 13.03. Severability.
A determination by a court of competent jurisdiction that any provision of this
Lease or any part thereof is illegal or unenforceable shall not cancel or
invalidate the remainder of such provision or this Lease, which shall remain in
full force and effect.
Section 13.04. Interpretation.
The captions of the Articles or Sections of this Lease are to assist the parties
in reading this Lease and are not a part of the terms or provisions of this
Lease. Whenever required by the context of this Lease, the singular shall
include the plural and the plural shall include the singular. The masculine,
feminine and neuter genders shall each include the other. In any provision
relating to the conduct, acts or omissions of Lessee, the term "Lessee" shall
include Lessee's agents, employees, contractors, invitees, successors or others
using the Property with Lessee's expressed or implied permission.
Section 13.05. Incorporation of Prior Agreements; Modifications.
This Lease is the only agreement between the parties pertaining to the lease of
the Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.
Section 13.06. Notices.
All notices required or permitted under this Lease shall be in writing and shall
be personally delivered or sent by certified mail, return receipt requested,
postage prepaid. Notices to Lessee shall be delivered to the address specified
in Section 1.03 above, except that upon Lessee's taking possession of the
Property, the Property shall be Lessee's address for notice purposes. In
addition to the foregoing, notice to Lessee shall require delivery to the
following addresses:
1. Hart, St. Pierre
c/o Gino Martel
1 Place Ville Marie
Montreal, Quebec
AND
2. Leonard Rosenberg, Esq.
Sandier, Travis & Rosenberg
5200 Blue Lagoon Drive
Miami, FL 33126
Notices to Lessor shall be delivered to the address specified in Section 1.02
above. All notices shall be effective upon delivery. Either party may change its
notice address upon written notice to the other party.
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<PAGE> 21
Section 13.07. Waivers.
All waivers must be in writing and signed by the waiving party. Lessor's failure
to enforce any provision of this Lease or its acceptance of rent shall not be a
waiver and shall not prevent Lessor from enforcing that provision or any other
provision of this Lease in the future. No statement on a payment check from
Lessee or in a letter accompanying a payment check shall be binding on Lessor.
Lessor may, with or without notice to Lessee, negotiate such check without being
bound to the conditions of such statement.
Section 13.08. No Recordation.
Lessee shall not record this Lease without prior written consent from Lessor.
However, either Lessor or Lessee may require that a "Short Form" memorandum of
this Lease executed by both parties be recorded. The party requiring such
recording shall pay all transfer taxes and recording fees.
Section 13.09. Binding Effect; Choice of Law.
This Lease binds any party who legally acquires any rights or interest in this
Lease from Lessor or Lessee. However, Lessor shall have no obligation to
Lessee's successor unless the rights or interests of Lessee's successor are
acquired in accordance with the terms of this Lease. The laws of the State of
Florida shall govern this Lease.
Section 13.10. Authority.
Lessee is a corporation, and each person signing this Lease on behalf of Lessee
represents and warrants that he has full authority to do so and that this Lease
binds the Lessee. Lessee agrees to provide Lessor evidence of the Lessee's power
and authority to enter into this Lease as reasonably requested by Lessor.
Section 13.11. Force Majeure.
If Lessor or Lessee cannot perform any of its obligations due to events beyond
Lessor's or Lessee's control, the time provided for performing such obligations
shall be extended by a period of time equal to the duration of such events.
Events beyond Lessor's or Lessee's control include, but are not limited to, acts
of God, war, civil commotion, labor disputes, strikes, fire, flood or other
casualty, shortages of labor or material, government regulation or restriction
and weather conditions.
Section 13.12. Execution of Lease.
This Lease may be executed in counterparts and, when all counterpart documents
are executed, the counterparts shall constitute a single binding instrument.
Lessor's delivery of this Lease to Lessee shall not be deemed to be an offer to
lease and shall not be binding upon either party until executed and delivered by
both parties.
Section 13.13. Survival.
All representations and warranties of Lessor and Lessee shall survive the
termination of this Lease.
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<PAGE> 22
ARTICLE FOURTEEN: BROKERS
Section 14.01. Broker's Fee.
When this Lease is signed by and delivered to both Lessor and Lessee, Lessor
shall pay a real estate commission to Lessor's Broker named in Section 1.08
above, if any, as provided in the written agreement between Lessor and Lessor's
Broker. Lessor shall pay Lessor's Broker a commission if Lessee exercises any
option to extend the Lease Term or to buy the Property, or any similar option or
right which Lessor may grant to Lessee, or if Lessor's Broker is the procuring
cause of any other lease or sale entered into between Lessor and Lessee covering
the Property. Such commission shall be the amount set forth in Lessor's Brokers
commission schedule in effect as of the execution of this Lease. If a Lessee's
Broker is named in Section 1.08 above, Lessor's Broker shall pay an appropriate
portion of its commission to Lessee's Broker if so provided in any agreement
between Lessor's Broker and Lessee's Broker. Nothing contained in this Lease
shall impose any obligation on Lessor to pay a commission or fee to any party
other than Lessor's Broker.
Section 14.02. Protection of Brokers.
If Lessor sells the Property, or assigns Lessor's interest in this Lease, the
buyer or assignee shall, by accepting such conveyance of the Property or
assignment of the Lease, be conclusively deemed to have agreed to make all
payments to Lessor's Broker thereafter required of Lessor under this Article
Fourteen. Lessor's Broker shall have the right to bring a legal action to
enforce or declare rights under this provision. The prevailing party in such
action shall be entitled to reasonable attorneys' fees to be paid by the losing
party. Such attorneys' fees shall be fixed by the court in such action. This
Paragraph is included in this Lease for the benefit of Lessor's Broker.
Section 14.03. Agency Disclosure; No Other Brokers; Transaction Brokerage
Lessor and Lessee each warrant that they have dealt with no other real estate
broker(s) in connection with this transaction except CUSHMAN & WAKEFIELD OF
ARIZONA, INC., Mr. Leighton Fisk and CUSHMAN & WAKEFIELD OF FLORIDA, INC., Mr.
Ben Eisenberg who both represent Lessor under a certain National Agreement
"Lessor's Broker" and CUSHMAN & WAKEFIELD OF FLORIDA, INC., Mr. Wayne Ramoski
who represents the Lessee, "Lessee's Broker".
Lessor and Lessee acknowledge that Cushman and Wakefield represents both Lessor
and Lessee and hereby consent to such intermediary representation. Furthermore,
Lessor and Lessee understand and accept this representation creates a situation
of transaction brokerage.
ARTICLE FIFTEEN: EXTENSION OPTION
In the event Lessee is not in default of any terms and conditions of this Lease,
Lessee may extend this Lease for two periods of six (6) months each, the first
from February 1, 2000 through July 31, 2000 and the second from August 1, 2000
through January 31, 2001. Each extension option shall be granted to Lessee
provided Lessor has received ninety (90) - days' prior written notice of
Lessee's intention to extend. During such extended term, the terms and
conditions of this Lessee shall remain the same.
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<PAGE> 23
Lessor and Lessee have signed this Lease at the place and on the dates specified
adjacent to their signatures below and have initialed all Riders which are
attached to or Incorporated by reference in this Lease.
"Lessor"
Signed on June 5, 1998 Fleming Companies Inc., an
Oklahoma Corporation.
at Oklahoma City, Oklahoma
Witness: /s/ Dan F. Shopman By: /s/ Tom Myers
------------------------- ----------------------------
/s/ Janet K. Harris Tom Myers
-------------------------
Its: Vice President Logistics
----------------------------
"Lessee"
Signed on June 1st, 1998 Gildan Activeware, a Canadian
Corporation
at Minneapolis, Minnesota
Witness: /s/ Ken Cieply By: /s/ H. Gregory Chamandy
------------------------- ------------------------------
Its: Chairman & Chief Executive
-----------------------------
Officer
IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT WITH A
PROFESSIONAL, SUCH AS A CIVIL ENGINEER, INDUSTRIAL HYGIENIST OR OTHER PERSON
WITH EXPERIENCE IN EVALUATING THE CONDITION OF THE PROPERTY, INCLUDING THE
POSSIBLE PRESENCE OF ASBESTOS, HAZARDOUS MATERIALS AND UNDERGROUND STORAGE
TANKS. ADDITIONALLY, IT IS RECOMMENDED THAT YOU CONSULT WITH YOUR LEGAL COUNSEL
REGARDING THE TERMS AND CONDITIONS OF THIS LEASE.
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<PAGE> 24
ASSIGNMENT OF LEASE
================================================================================
THIS AGREEMENT ENTERED INTO AT THE CITY OF ________________, PROVINCE OF QUEBEC,
AS OF THE __________ DAY OF ____________________, 19__, BY AND BETWEEN:
GILDAN ACTIVEWEAR INC., a duly incorporated corporation having its
principal place of business at 725 Montee de Liesse Road, in the City of
St-Laurent, Province of Quebec, hereinacting and represented by Mr. H.
Gregory Chamandy, its Chairman, hereunto duly authorized for all purposes
hereof as he so declares
(hereinafter called the "Assignor");
-AND-
MIAMI ACTIVEWEAR DISTRIBUTION INC., a duly incorporated corporation having
its principal place of business at ________________, in the City of Miami,
in the State of Florida, hereinacting and represented by Mr. _____________
its _______________________, hereunto duly authorized for all purposes
hereof as he so declares
(hereinafter called the "Assignee");
W I T N E S S E T H:
WHEREAS by a lease dated the 28th day of May, 1998 (hereinafter called the
"Lease") between Fleming Companies, Inc. an Oklahoma corporation, as landlord,
(hereinafter called the "Lessor") and the Assignor, as tenant, the Lessor leased
to the Assignor approximately 210,654 square feet of warehouse space of the
Fleming Miami Facility located at 3400 NW 74th Avenue, Miami, Florida
(hereinafter called the "Leased Premises") for a term commencing on the 1st day
of July, 1998 and ending on the 31st day of January, 2000, (hereinafter called
the "Term"); and
<PAGE> 25
Assignment of Lease .../2
- --------------------------------------------------------------------------------
WHEREAS the Assignor is desirous of assigning the Lease to the Assignee who is
desirous of acquiring same, the whole in accordance with the terms and
conditions hereinafter set forth;
NOW, THEREFORE, THE PARTIES HERETO HEREBY COVENANT AND AGREE AS FOLLOWS:
1. The preamble hereto shall be deemed to form an integral part hereof as if
recited herein at length.
2. For and in consideration of the sum of One Dollar ($1.00) and other good
and valuable consideration paid by the Assignee to the Assignor, the
sufficiency of which and receipt whereof are hereby acknowledged by the
Assignor, the Assignor hereby assigns to the Assignee the Lease and any
and all of Assignor's rights, title and interest in and to the Lease, the
whole for the unexpired residue of the Term, as hereinafter modified, and
all benefits to be derived therefrom, subject to the payment of the rent
and the observance and performance of the covenants, provisos and
conditions on the part of the Assignor contained therein.
3. The Assignee hereby acknowledges that the Leased Premises are accepted on
an "as is" basis without any warranty whatsoever and covenants with the
Assignor that:
a) the Assignee will throughout the unexpired residue of the Term, as
hereinafter modified, pay all rents reserved at the times and in the
manner provided in the Lease and observe and perform the covenants,
provisos and conditions on the part of the Assignor therein set
forth; and
b) the Assignee will indemnify and save harmless the Assignor from all
actions, suits, costs, losses, damages and expenses (including legal
fees) resulting from or in respect of any breach by Assignee of the
covenants stipulated in this paragraph 3.
4. The parties hereto agree to do all acts and things and sign all documents
necessary to give full force and effect to all of the provisions hereof.
<PAGE> 26
Assignment of Lease .../3
- --------------------------------------------------------------------------------
5. The provisions of this instrument shall be binding upon and shall inure to
the benefit of the Assignor and its legal representatives, successors or
assigns, and upon the Assignee, its successors and assigns.
6. This Assignment is intended to bind and apply to the parties herein
referred to as well as to their successors.
7. This agreement shall be interpreted and construed in accordance with the
laws of the state of Florida.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE SIGNED ON THE DATE AND AT THE PLACE
FIRST HEREINABOVE MENTIONED.
Gildan Activewear Inc.
/s/ Daniele Boismenu Per: /s/ H. Gregory Chamandy
- --------------------------- ---------------------------
Witness H. Gregory Chamandy
/s/ N. Planzer
- ---------------------------
Witness
Miami Activewear Distribution Inc.
/s/ Daniele Boismenu Per: /s/ H. Gregory Chamandy
- --------------------------- ---------------------------
Witness H. Gregory Chamandy
/s/ N. Planzer
- ---------------------------
Witness
The foregoing instrument was acknowledged before me this 25 day of August, 1998,
by H. Gregory Chamandy, on behalf of Gildan Activewear Inc. and of Miami
Activewear Distribution Inc.
/s/ Ken Cieply
- ---------------------------[SEAL]
Commissioner for oaths for
the City and District of Montreal
<PAGE> 1
EXHIBIT 10.33
CREDIT AGREEMENT
Bearing Formal Date of March 31, 1999
between
GILDAN ACTIVEWEAR INC.
(as Borrower)
and
THE LENDERS NAMED HEREIN AS LENDERS
(as Lenders)
and
NATIONAL BANK OF CANADA
(as Agent)
CDN $90,000,000
(LOGO)
DESJARDINS DUCHARME STEIN MONAST
(general partnership)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
1. INTERPRETATION 1
1.1 Definitions 1
1.2 Accounting Terms and Practices 1
1.3 Headings 1
1.4 Governing Laws 2
1.5 Formal Notice 2
1.6 Schedules 2
1.7 References to this Agreement 2
2. REVOLVING CREDIT FACILITY 2
2.1 Maximum Amount Available 2
2.2 Margined Limit of the Revolving Credit Facility 2
2.3 Revolving Nature of the Revolving Credit Facility 3
2.4 Voluntary Reduction of the Revolving Credit Facility 3
2.5 Use of Proceeds from Advances 4
2.6 Availability Under the Revolving Credit Facility 4
3. DRAW DOWNS AND OPERATION OF ACCOUNTS 4
3.1 Draw Downs Under the Revolving Credit Facility 4
3.2 Disbursement OF Funds 5
3.3 Maintenance of Accounts 5
3.4 Authority to Debit and Credit 5
4. CONDITIONS PRECEDENT 6
4.1 Conditions Precedent to Advances 6
5. INTEREST ON PRIME RATE BASIS 9
5.1 Cdn Prime Rate 9
5.2 U.S. Prime Rate 9
5.3 Interest on Revolving Loans Generally 9
6. INTEREST ON LIBOR BASIS 10
6.1 Interest on Libor Basis 10
6.2 Determination of Libor Rate 10
6.3 Establishment of Libor Rate as at 11:00 A.M., London time 10
6.4 Limits on Libor Advances 10
6.5 Availability 10
7. COMPUTATION AND PAYMENT OF INTEREST 11
7.1 Computation of Interest 11
7.2 Annual Equivalent of Libor and Federal Funds Effective Rate 11
7.3 Payment of Interest 11
</TABLE>
- 2 -
<PAGE> 3
<TABLE>
<S> <C>
8. BANKER'S ACCEPTANCES 12
8.1 Request for Banker's Acceptances 12
8.2 Requirements for Banker's Acceptances 12
8.3 Stamping Fee 12
8.4 The Agent to Advise Lenders 12
8.5 Maturity Date of Banker's Acceptances 12
8.6 Deemed Conversion on Maturity Date 13
8.7 Power of Attorney 13
8.8 Waiver 13
8.9 Obligations Absolute 13
9. LETTERS OF GUARANTEE 13
9.1 Request for Letters of Guarantee 14
9.2 Issuance of Letters of Guarantee 14
9.3 Limits of Letters of Guarantee 14
9.4 LG Fee 14
9.5 Distribution of LG Fee 14
9.6 Advances on Payment of Letters of Guarantee 15
9.7 Obligations Absolute 15
10. STAND-BY AND AGENCY FEE 15
10.1 Stand-by Fee 15
10.2 Payment of Stand-By Fee 15
10.3 Agency Fee 15
10.4 Structuring and Underwriting Fee 16
11. CONVERSIONS AND CONTINUATIONS 16
11.1 Conversions and Continuations 16
11.2 No Revocation or Withdrawal of Notices 16
11.3 Limits on Conversions 16
11.4 Determinations of Equivalent of Canadian Dollars and of U.S. Dollars 16
12. PAYMENTS AND REPAYMENTS 16
12.1 Repayment of Revolving Loans 16
12.2 Compulsory Repayment of Part of Revolving Loans 17
12.3 Currency of Payments 17
12.4 Overadvances - Exchange Rate Fluctuations 17
12.5 Manner of Payments 17
12.6 Payments at Branch of Account Only 18
12.7 Payment on Business Day and by 1:00 P.M., Montreal Time 18
13. SECURITY 18
13.1 Deed of Hypothec 18
13.2 Security Agreement 18
13.3 Bank Act Documents 18
13.4 Pledge of Shares 19
13.5 Endorsements of Insurance Policies 19
</TABLE>
- 3 -
<PAGE> 4
<TABLE>
<S> <C>
13.6 Corporate Guarantees 19
14. REPRESENTATIONS AND WARRANTIES 19
14.1 Organization 19
14.2 Authorization of Documents by the Borrower 19
14.3 Authorization of Documents by Unrestricted Subsidiaries 20
14.4 No Conflict 20
14.5 Governmental Regulation 20
14.6 Compliance with Law 20
14.7 Litigation 20
14.8 Taxes 21
14.9 Financial Statements of the Borrower 21
14.10 No Adverse Change 21
14.11 Material Agreements and Restrictions 21
14.12 Approvals 21
14.13 Environment 21
14.14 No Subsidiary 22
14.15 Head Office - Places of Business 22
14.16 Title of Ownership 22
14.17 Erisa 22
14.18 Labour Disputes 22
14.19 Intangible Assets 23
14.20 Ownership of Accounts Reveivable and Inventory 23
14.21 Accuracy and Completeness of Information 23
14.22 Survival of Representations and Warranties 23
15. GENERAL COVENANTS 23
15.1 Preservation of Existence, etc. 24
15.2 Preservation of Authorizations 24
15.3 Business, Compliance with Applicable Law 24
15.4 Insurance 24
15.5 Payment of Taxes and Claims 24
15.6 Visits and Inspections 24
15.7 Maintenance of Ratios 24
15.8 Payment of Legal and Other Fees and Disbursements 25
15.9 Renewal of Registration 25
15.10 Transactions with Affiliates of the Borrower 25
15.11 Lock Box Agreement 26
15.12 Financial Information 26
15.13 Notice of Litigation and Other Matters 27
15.14 Disclosure of Environmental Matters 27
15.15 Year 2000 Compliance 27
16. NEGATIVE COVENANTS 28
16.1 Consolidation, Amalgamation, Merger, Etc. 28
16.2 Change of Control 28
16.3 Indebtedness 28
</TABLE>
- 4 -
<PAGE> 5
<TABLE>
<S> <C>
16.4 Sale of Assets 29
16.5 Advances, Revolving Loans and Investments 29
16.6 Loans and Guarantees 29
16.7 Liens 29
16.8 Change in Business 29
16.9 Dividends 30
16.10 Capital Expenditures 30
16.11 Subordination of Debt 30
16.12 Consulting Fees to Affiliates 30
16.13 Change of Year End 30
16.14 Creation of Subsidiaries 30
16.15 Derivative Instruments 30
16.16 Reorganization 30
17. EVENTS OF DEFAULT AND REALIZATION 31
17.1 Events of Default 31
17.2 Remedies 34
17.3 Proceeds of Realization 34
17.4 Compensation and Set-Off 34
17.5 Dealing with the Borrower 34
18. INCREASED COSTS AND INDEMNITY 35
18.1 Indemnification 35
18.2 Reimbursement of Losses 35
19. ENVIRONMENTAL INDEMNITY 36
19.1 Indemnity 36
19.2 Rights of the Lenders to Act 36
19.3 Acknowledgement from the Borrower 37
20. MISCELLANEOUS 37
20.1 Notices 37
20.2 Amendments and Waivers 37
20.3 Calculations 37
20.4 Assignments by the Borrower 39
20.5 Assignments by the Lenders 39
20.6 Judgment Currency 39
20.7 Counterparts 40
20.8 Severability 40
20.9 Replacement of Commitment Letter 40
20.10 Inconsistency with Security Documents 40
20.11 Obligation to Pay Absolute 40
20.12 Formal Date 40
20.13 English Language 41
</TABLE>
- 5 -
<PAGE> 6
SCHEDULES
<TABLE>
<S> <C>
Schedule "A" The Commitments
Schedule 1.1 Definitions
Schedule 2.2.4 Prior Claims
Schedule 3.1.2 Draw Down Notice
Schedule 4.1.1 Closing Agenda
Schedule 10.1 Relevant Margin and Stand-by-Fee
Schedule 11.1 Conversion Notice
Schedule 14.8 Tax Matters
Schedule 14.11 Material Contracts
Schedule 14.13 Environmental Matters
Schedule 14.14 Subsidiaries
Schedule 14.15 Places of Business
Schedule 15.12.1 Quarterly Certificate
Schedule 15.12.2 Monthly Certificate
Schedule 15.12.3 Annual Certificate
Schedule 16.6 Existing Loans and Advances
Schedule 16.7 Existing Liens
Schedule 16.16 Reorganization
</TABLE>
- 6 -
<PAGE> 7
CREDIT AGREEMENT entered into at Montreal, Province of Quebec, on March 30,
1999.
<TABLE>
<S> <C>
BETWEEN: GILDAN ACTIVEWEAR INC., a corporation incorporated under the
CANADA BUSINESS CORPORATIONS ACT, as borrower
AND: THE LENDERS SET FORTH IN SCHEDULE "A", as Lenders
AND: NATIONAL BANK OF CANADA, as Agent
</TABLE>
WHEREAS the Borrower has requested that a credit facility be made available
to it for an aggregate amount of Cdn $90,000,000 by way of a revolving operating
credit facility (the "REVOLVING CREDIT FACILITY");
WHEREAS the Lenders have agreed to provide the requested Revolving Credit
Facility to the Borrower, subject to the terms and conditions set forth
hereunder.
NOW THE PARTIES HAVE AGREED AS FOLLOWS:
1. INTERPRETATION
1.1 DEFINITIONS
Unless there be something in the subject or the context inconsistent
therewith, the capitalized words and expressions used in this Agreement, in its
schedules or in any deed or agreement supplemental or ancillary hereto shall
have the meaning ascribed to them in Schedule 1.1.
1.2 ACCOUNTING TERMS AND PRACTICES
Unless otherwise defined herein, each accounting term used in this
Agreement has the meaning ascribed to it under generally accepted accounting
principles in Canada as established, specified and up-dated, INTER ALIA, in the
Canadian Institute of Chartered Accountants Handbook. The financial
calculations, audits, audit reports and financial statements (and their
different items) referred to herein or pertaining to the Borrower's business
shall be made or prepared in accordance with such accounting principles applied
on a consistent basis and in accordance with the normal practice in the
Borrower's industry.
1.3 HEADINGS
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The division of this Agreement into Articles, Sections, subsections,
paragraphs and subparagraphs and the insertion of titles are for convenience of
reference only and do not affect the meaning or the interpretation of the
present Agreement.
1.4 GOVERNING LAWS
This Agreement and the interpretation and enforcement thereof shall be
governed by and construed in accordance with the laws applicable in the Province
of Quebec.
1.5 FORMAL NOTICE
The Borrower shall be deemed to have received formal notice to fulfil its
obligations by the mere lapse of the time provided for their execution or by the
end or forfeiture of the term, or by any other cause provided by the law.
1.6 SCHEDULES
The schedules annexed hereto shall form an integral part of this Agreement.
1.7 REFERENCES TO THIS AGREEMENT
The expressions "hereto" or "hereunder" or "hereof" or "herein" or "this
Agreement" refer to this Agreement together with any future amendment, updating
or restatement.
2. REVOLVING CREDIT FACILITY
2.1 MAXIMUM AMOUNT AVAILABLE
The Lenders, severally but not solidarily, make the following Revolving
Credit Facility available to the Borrower, up to a maximum amount which shall
not exceed the lower of:
2.1.1 the amount resulting from the calculation referred to in Section
2.2; and
2.1.2 an amount equal to the difference between (i) Cdn $90,000,000 and
(ii) the total outstanding amount discounted by SODEX pursuant to
a Master Agreement entered into (or to be entered into) with the
Borrower (as same may be amended, supplemented or restated from
time to time) in connection with the sale by the Borrower or
Gildan Activewear SRL, at a discount, of accounts receivable to
SODEX (the "SODEX Amount"); for the purpose set forth herein the
Borrower undertakes to instruct SODEX to deliver, to the Agent, as
often as necessary, the SODEX Amount as of such day in order to
allow the Agent and the Borrower to evaluate the maximum amount
available under the Revolving Credit Facility;
None of the Lenders is bound, in connection with the Revolving Credit
Facility, to make an advance or to contract an obligation over and above its
Commitment.
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2.2 MARGINED LIMIT OF THE REVOLVING CREDIT FACILITY
The aggregate principal amount outstanding under the Revolving Credit
Facility, expressed in the Equivalent of Canadian Dollars if any portion thereof
is outstanding in U.S. Dollars, shall not exceed the aggregate of:
2.2.1 an amount equal to the sum of (i) an amount equal to 80% of the
aggregate book value of all the Insured Eligible Accounts
Receivable with respect to which the insurance coverage (i.e. the
insured percentage) is at least equal to 85% of the book value of
said insured accounts receivable and (ii) an amount equal to the
aggregate of the Insured Amounts of all of the Insured Eligible
Accounts Receivable with respect to which the insurance coverage
(i.e. the insured percentage) is less than 85% of the book value
of said insured accounts receivable; for the purpose set forth
herein "Insured Amount" means that portion of the insured account
receivable which is covered by the receivable insurance and is
obtained by multiplying the book value of the account receivable
by the applicable insured percentage;
2.2.2 an amount equal to 75% of the amount resulting from the difference
between (i) the book value of the Uninsured Eligible Accounts
Receivable and (ii) an amount equal to Cdn $1,000,000 (or such
other greater amount equal to the aggregate Uninsured Eligible
Accounts Receivable which are owed by Disqualified Account
Debtor); and
2.2.3 an amount equal to the lesser of (i) Cdn$45,000,000 and (ii) an
amount equal to 60% of the book value of the Eligible Inventory;
less
2.2.4 the aggregate amount of liabilities owing by the Borrower or an
Unrestricted Subsidiary, the non-payment of which shall or may
result in the creation of a Lien or other claim ranking in
priority to any of the Liens of the Lenders under the Security
Documents including, without limitation, the claims listed in
Schedule 2.2.4 hereto;
less
2.2.5 until such time as the Borrower shall have delivered to the Agent
satisfactory evidence that GE Capital Quebec Equipment Financing
Inc. and GE Capital Canada Equipment Financing Inc. have granted a
release and discharge of all the Liens created in their favour on
the Borrower's assets subject to the Liens created by the Security
Documents, an amount equal to Cdn$2,000,000;
For the purposes of determining the Margined Limit of the Revolving Credit
Facility, all amounts should be calculated on a consolidated basis with the
Unrestricted Subsidiaries.
2.3 REVOLVING NATURE OF THE REVOLVING CREDIT FACILITY
Subject to the relevant terms and conditions of this Agreement, the amount
of any repayment of the whole or any part of the principal amount outstanding
under the Revolving Credit Facility may be
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reborrowed by the Borrower at any time.
2.4 VOLUNTARY REDUCTION OF THE REVOLVING CREDIT FACILITY
At any time on any Business Day during the Revolving Period, upon giving
the Agent three (3) Business Days prior written notice, the Borrower may
voluntarily either terminate or reduce the Revolving Credit Facility in whole
multiples of Cdn $1,000,000. Concurrently with any such termination or
reduction, the Borrower shall pay to the Agent, the amount, if any, by which the
Revolving Loans exceeds the amount of the Commitments so reduced. Where the
aggregate principal amounts outstanding under the Revolving Loans by way of
Prime Rate Advances are less than the required repayment, the Borrower shall,
subject to the provisions of Section 18.2, be required to repay, prior to their
stated date of maturity a sufficient amount outstanding by way of Bankers'
Acceptances or Libor Advances.
2.5 USE OF PROCEEDS FROM ADVANCES
The proceeds of all advances by the Lenders under the Revolving Credit
Facility shall be used by the Borrower exclusively for general corporate
purposes including investments in Unrestricted Subsidiaries.
2.6 AVAILABILITY UNDER THE REVOLVING CREDIT FACILITY
Subject to the restrictions set forth hereunder, the Borrower may request
that the whole or any portion of the Revolving Credit Facility be advanced by
the Lenders, either in Canadian Dollars or U.S. Dollars, by way of:
2.6.1 direct advance by way of overdraft where interest thereon is to be
calculated on a Prime Rate Basis;
2.6.2 direct advances where interest thereon is to be calculated on a
Prime Rate Basis in whole multiples of Cdn$50,000 or U.S.$50,000;
2.6.3 the issuance of Letters of Guarantee;
2.6.4 the issuance of Banker's Acceptances; and
2.6.5 direct advances where interest thereon is to be calculated on a
Libor Basis.
Notwithstanding the provisions of Section 5.2 and subject to further review
by the Agent and the Borrower, the amounts available to the Borrower under the
Revolving Credit Facility shall be reduced by the amounts outstanding under the
credit facility made available to the Borrower or its subsidiaries by SODEX.
3. DRAW DOWNS AND OPERATION OF ACCOUNTS
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3.1 DRAW DOWNS UNDER THE REVOLVING CREDIT FACILITY
All advances under the Revolving Credit Facility shall be requested by the
Borrower:
3.1.1 subject to a maximum amount not to exceed Cdn $5,000,000 or its
Equivalent in U.S. Dollars, by incurring overdrafts (by drawing
cheques or being deemed to have drawn cheques) against the
Borrower's Account; where an overdraft exists against the
Borrower's Account as contemplated in this subsection, the amount
of such overdraft shall be deemed to constitute an advance under
the Revolving Credit Facility with respect to which the Borrower
shall be deemed to have requested that interest thereon be
calculated on a Prime Rate Basis; and
3.1.2 by delivering to the Agent a draw down notice substantially in the
form attached hereto as Schedule 3.1.2 before 10:30 a.m. at least
two (2) Business Days prior to any advance, where the Borrower has
requested that interest thereon be calculated on a Prime Rate
Basis, two (2) Business Days prior to any advance where the
Borrower wishes to request that the whole or any part thereof be
outstanding by way of Banker's Acceptances or Letters of Guarantee
or three (3) Banking Days prior to any advance where the Borrower
has requested that interest on the whole or any portion thereof be
calculated on a Libor Basis; any such notice, once delivered to
the Agent, may not subsequently be revoked or withdrawn by the
Borrower.
3.2 DISBURSEMENT OF FUNDS
3.2.1 Whenever the overdraft in the Borrower's Account (expressed in its
Equivalent in Canadian Dollars if any portion thereof is
outstanding in U.S. Dollars) reaches or exceeds Cdn $5,000,000,
the Agent shall deposit into such account, an amount, rounded up
to the nearest Cdn $10,000 or U.S. $10,000, as the case may be,
sufficient to ensure that said overdraft is eliminated and a
positive balance is established in each of the Canadian Dollar
Account and the U.S. Dollar Account.
3.2.2 Where the proposed advance is requested by the Borrower through a
draw down notice, the said advance shall be made as follows:
3.2.2.1 where the whole or any portion of any such advance is requested to
be made by way of direct advance with interest thereon calculated
on a Prime Rate Basis or the Libor Basis, the Lenders shall
disburse such portion of such advance by depositing their
respective Pro Rata Share of said amount into the Borrower's
Canadian Dollar Account or U.S. Dollar Account, as the case may
be;
3.2.2.2 where the whole or any portion of any such advance is requested to
be made by way of the issuance of one or more Letters of
Guarantee, the Agent shall disburse such portion of such advance
by delivering the Letter or Letters of Guarantee to the Borrower;
3.2.2.3 where the whole or any portion of any such advance is requested to
be made by way of the issuance of one or more Banker's
Acceptances, the Lenders shall disburse such portion of such
advance by delivering such Banker's Acceptances to or to the order
of the Borrower.
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3.3 MAINTENANCE OF ACCOUNTS
The Agent will open and maintain on its books at the Branch of Account, for
the purpose of this Agreement, bank accounts for deposits in Canadian Dollars
and for deposits in U.S. Dollars, as well as a loan account or ledger for the
Borrower evidencing the aggregate Indebtedness of the Borrower to the Lenders
hereunder and each constituent part of the Revolving Loans. Such loan ledger
shall constitute, in the absence of manifest error, conclusive evidence of the
whole and each constituent part of the Revolving Loans, the date any advance is
made to the Borrower and the aggregate amounts from time to time paid by the
Borrower on account of such Revolving Loans in principal, interest, fees and
other amounts due hereunder.
3.4 AUTHORITY TO DEBIT AND CREDIT
Subject to the provisions of this Agreement, the Borrower does hereby
expressly and irrevocably authorize the Agent to effect all the necessary
debits, deposits and credits in the Borrower's accounts in order to accommodate
the Lenders in making advances and in order to accommodate the Borrower in
making payments to the Lenders, the whole under and subject to the terms of this
Agreement.
4. CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO ADVANCES
The obligations of the Lenders to make advances to the Borrower under the
Revolving Credit Facility as provided hereunder are conditional upon each of the
following conditions precedent having been met to the satisfaction of the Agent
and its legal counsel:
4.1.1 the Borrower shall have:
4.1.1.1 executed and delivered the Security Documents referred to under
the closing agenda annexed hereto under Schedule 4.1.1;
4.1.1.2 attended to the due publication of such forms and the due
registration or filing of any financing statement registrations
required under all applicable Laws with respect to the Security
Documents delivered pursuant to paragraph 4.1.1.1;
4.1.1.3 attended to the due registration of the notice of intention
forming part of the Bank Act Documents at the agency of the Bank
of Canada situated in Montreal, Province of Quebec;
4.1.2 an executed counterpart of this Agreement, the Interlender
Agreement, the Guarantee and Subordination Agreement and the
Intercreditor Agreements will have been executed and/or remitted
to the Agent;
4.1.3 the Borrower shall have delivered to the Agent and its legal
counsel, in form and substance satisfactory to them;
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4.1.3.1 a certified copy of the Borrower's constating documents and
by-laws;
4.1.3.2 a certified copy of the constating documents and by-laws of each
Unrestricted Subsidiary and Guarantor Subsidiary;
4.1.3.3 a Certificate of incumbency in respect of the directors and
officers of the Borrower and each of the Unrestricted Subsidiaries
and Guarantor Subsidiary;
4.1.3.4 a certified copy of a resolution of the board of directors of the
Borrower authorizing inter alia the transactions contemplated in
this Agreement;
4.1.3.5 a certified copy of a resolution of the board of directors of each
Unrestricted Subsidiary and Guarantor Subsidiary authorizing INTER
ALIA the Corporate Guarantee and the Security Documents to which
it is a party;
4.1.3.6 the opinion (in form and substance satisfactory to the Agent and
Hart, Saint-Pierre) of Hart, Saint-Pierre, addressed to the
Lenders, the Agent and Desjardins Ducharme Stein Monast, dated the
date of the draw down notice relating to the initial advance under
the Revolving Credit Facility covering INTER ALIA (i) the
corporate status of the Borrower; (ii) the authorization and
capacity for the Borrower to execute this Agreement and to perform
each of the obligations contained herein or incidental thereto;
and (iii) the legal, valid, and binding nature of the obligations
of the Borrower under this Agreement; such opinion shall include a
report on searches made in the province of Quebec on Liens
existing on the movable assets of the Borrower subject to such
qualifications and reservations as may be agreed to between the
Agent and Hart, Saint-Pierre;
4.1.3.7 the opinion (in form and substance satisfactory to the Agent) of
the Borrower's U.S. legal counsel, addressed to the Lenders, the
Agent and Desjardins Ducharme Stein Monast, dated the date of the
draw down notice relating to the initial advance under the
Revolving Credit Facility covering INTER ALIA (i) the corporate
status of the U.S. Unrestricted Subsidiaries; (ii) the ability for
the U.S. Unrestricted Subsidiaries to guarantee the obligations of
the Borrower under this Agreement pursuant to the terms and
conditions of the Security Documents to which they are a party and
to perform each of the obligations contained therein or incidental
thereto; and (iii) the legal, valid, and binding nature of the
obligations of the U.S. Unrestricted Subsidiaries under the
Security Documents to which they are party to;
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4.1.3.8 the opinion (in form and substance satisfactory to the Agent) of
the Borrower's Barbados legal counsels, addressed to the Lenders,
the Agent, the Lenders' Barbados legal counsel and Desjardins
Ducharme Stein Monast, dated the date of the draw down notice
relating to the initial advance under the Revolving Credit
Facility covering INTER ALIA (i) the corporate status of the
Barbados Unrestricted Subsidiaries; (ii) the ability for the
Barbados Unrestricted Subsidiaries to guarantee the obligations of
the Borrower under this Agreement pursuant to the terms and
conditions of the Security Documents to which the Barbados
Unrestricted Subsidiaries are party and to perform each of the
obligations contained therein or incidental thereto; and (iii) the
legal, valid, and binding nature of the obligations of the
Barbados Unrestricted Subsidiaries under the Security Documents to
which they are party to;
4.1.3.9 the opinion (in form and substance satisfactory to the Agent) of
the Borrower's British Virgin Islands' legal counsels, addressed
to the Lenders, the Agent, the Lenders' British Virgin Islands'
legal counsel and Desjardins Ducharme Stein Monast, dated the date
of the draw down notice relating to the initial advance under the
Revolving Credit Facility covering INTER ALIA (i) the corporate
status of B.V.I.; (ii) the ability for B.V.I. to guarantee the
obligations of the Borrower under this Agreement pursuant to the
terms and conditions of the Security Documents to which B.V.I. is
a party to and to perform each of the obligations contained
therein or incidental thereto;
4.1.4 the Agent shall have received the opinion of Desjardins Ducharme
Stein Monast addressed to the Lenders and the Agent and dated the
date of the drawdown notice related to the initial advance under
the Revolving Credit Facility, covering such matters incident to
the transactions contemplated hereby as the Lenders may reasonably
request;
4.1.5 the opinion of the Agent's U.S. legal counsel addressed to the
Lenders and the agent and dated the date of the drawdown notice
related to the initial advance under the Revolving Credit
Facility, covering such matters incident to the transactions
contemplated hereby as the Lenders may reasonably request;
4.1.6 the Agent shall have received, for the year ended October 4, 1998:
(i) the audited consolidated financial statements of the Borrower
and its Subsidiaries, (ii) the audited unconsolidated financial
statements of the Borrower and (iii) unaudited unconsolidated
financial statements of each other Subsidiary;
4.1.7 The Agent shall have received the latest quarterly unaudited
consolidated and unconsolidated financial statements of the
Borrower and the Unrestricted Subsidiairies and the unaudited
internal balance sheet and income statement of Gildan Activewear
SRL dated March 7, 1999;
4.1.8 the Agent shall have received the financial projections of the
Borrower, on a consolidated basis, for the next three fiscal years
comprised of a balance sheet, income statement, cash flow,
Borrowing Base, capital expenditures and financial ratios
(including without limitation, the assumptions upon which such
budget is based);
4.1.9 the Agent shall have received evidence that since the financial
statements referred to under subsection 4.1.6, no event has
occurred or failed to occur which may have a material adverse
effect on the business, assets, liabilities, financial position,
results of operations or business prospects of the Borrower (on a
consolidated basis) or on the ability of the Borrower or any
Unrestricted Subsidiary to perform its obligations under the
Credit Agreement or any of the Security Documents;
4.1.10 the Agent shall have received evidence that the Borrower complies
with all other financial undertakings presently outstanding
towards any other person;
4.1.11 the Agent shall be satisfied with the results of the due diligence
conducted by it with respect to environmental matters as well as
with respect to the internal reports prepared by or on behalf of
the Borrower of the manufacturing facilities of the Borrower;
4.1.12 the Agent shall have received evidence that all the assets to be
charged under the terms of the Security
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Documents are free and clear from all encumbrances, save and
except for Permitted Encumbrances;
4.1.14 the Agent shall be satisfied with the results of the due diligence
conducted by the Agent's field auditors with regards to accounts
receivable and inventory which due diligence shall be at the
Borrower's expense and which shall include a visit of the
Borrower's premises located in Canada and the United States of
America;
4.1.15 the Agent shall have received evidence of the adequacy of the
insurance coverage of the Borrower and of the Unrestricted
Subsidiaries;
4.1.16 the Agent shall have received certified copies (by the Borrower)
of all deeds, contracts and agreements pursuant to which any
secured indebtedness of the Borrower and the Unrestricted
Subsidiaries was created and any individual unsecured indebtedness
in excess of Cdn $1,000,000; and
4.1.17 the Agent shall have received search reports in respect of all the
charges or encumbrances of the whole or any part of the assets
owned respectively by the Borrower and the Unrestricted
Subsidiaries for each jurisdiction where the Borrower or/and
Unrestricted Subsidiary has a place of business or in which
inventory is located. The searches should be performed under the
name of the Borrower and under the names of each of the
Unrestricted Subsidiary and all of the respective predecessors.
For the purposes hereof, an encumbrance includes any conditional
sale, sale with a balance of price, sale with a resulatory clause
as well as any leasing contract;
4.1.18 the Agent shall have received satisfactory evidence that the
Borrower has entirely repaid all of its Indebtedness under the B
of A Credit Agreement, provided that any portion of such repayment
may be made with the proceeds of the first advance under the
Revolving Credit Facility, in which case, this condition precedent
shall be deemed to have been met where the Borrower provides the
Agent with such satisfactory evidence concurrently with such first
advance;
4.1.19 the Agent shall have received from Bank of America (Canada) a
general release and discharge with respect to all Liens created in
their favor in connection with the B of A Credit Agreement. Such
general release and discharge shall also contain the unconditional
and irrevocable undertaking to execute all such documents and do
all such things as may be required in order to grant and register
such release and discharge of the aforesaid Liens;
4.1.20 the Agent shall have received on behalf of the Lenders, the entire
amount of that portion of the structuring and underwriting fee
which is payable concurrently with the execution of this
Agreement.
5. INTEREST ON PRIME RATE BASIS
5.1 CDN PRIME RATE
The principal amounts denominated in Canadian Dollars and outstanding under
the Revolving Credit Facility with respect to which the Borrower has elected or
pursuant to the provisions of this
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Agreement is required to pay interest on a Prime Rate Basis shall bear interest,
computed daily, on the respective daily balances outstanding from the date of
their respective first advance up to and including the day preceding the day of
their respective repayment in full, at an annual rate applicable for each such
day equal to the Cdn Prime Rate in effect on such day plus the Relevant Margin.
5.2 U.S. PRIME RATE
The principal amounts denominated in U.S. Dollars and outstanding under the
Revolving Credit Facility with respect to which the Borrower has elected or
pursuant to the provisions of this Agreement is required to pay interest on a
Prime Rate Basis shall bear interest, computed daily, on the respective daily
balances outstanding from the date of their respective first advance up to and
including the day preceding the day of their respective repayment in full, at an
annual rate applicable for each such day equal to the U.S. Prime Rate in effect
on such day plus the Relevant Margin.
5.3 INTEREST ON REVOLVING LOANS GENERALLY
Where no specific provision for interest on any amount outstanding and
payable by the Borrower is made in this Agreement, interest thereon shall be
computed and be payable on a Prime Rate Basis relating to the Revolving Credit
Facility.
6. INTEREST ON LIBOR BASIS
6.1 INTEREST ON LIBOR BASIS
The principal amounts of the Libor Advances shall bear interest, computed
daily, on the respective daily balances outstanding from each relevant Rollover
Date at an annual rate applicable for each such day equal to the Libor Rate
applicable to such Selected Amount plus the Relevant Margin and shall be in
effect from and including such Rollover Date up to and including the day
preceding their respective maturity date.
6.2 DETERMINATION OF LIBOR RATE
Where, under the provisions of this Agreement, the Borrower has requested
that the interest on any principal amount outstanding under the Revolving
Credit Facility be calculated on a Libor Basis, the Libor Rate shall be
determined by the Agent two Banking Days prior to a Rollover Date.
6.3 ESTABLISHMENT OF LIBOR RATE AS AT 11:00 A.M., LONDON TIME
The Libor Rate shall be established as at 11:00 a.m., London time, two
Banking Days prior to the relevant Rollover Date. Before the end of business,
two (2) Banking Days prior to the said Rollover Date, the Agent shall notify the
Borrower of the Libor Rate applicable to each Selected Amount for each
applicable Selected Maturity.
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6.4 LIMITS ON LIBOR ADVANCES
In connection with any Libor Advances, the Borrower shall not be entitled:
6.4.1 to elect a Selected Amount for any Selected Maturity which is less
than U.S. $500,000 and a whole multiple of U.S. $100,000 per
Lender;
6.4.2 to elect a Selected Maturity for any Selected Amount other than
one, two, three or six months; and
6.4.3 to elect a Selected Maturity which has a maturity date that is
beyond the last day of the Revolving Period.
6.5 AVAILABILITY
If, on the date referred to in Section 6.3, a Lender determines in good
faith that because of conditions affecting the interbank market, for a Selected
Maturity,
6.5.1 adequate and fair means do not exist to ascertain the Libor Rate;
or
6.5.2 it is unfeasible to make or continue a Libor Advance; or
6.5.3 the Libor Rate is less than the actual cost to make and maintain a
Libor Advance; or
6.5.4 a sufficient quantity of U.S. Dollars deposits is not available to
such Lender;
the Agent shall give notice of this situation to the Borrower as soon as
possible (the "Initial Notice").
Once the Initial Notice has been given, the concerned Lender shall be under
no obligation to make new Libor Advances to renew outstanding Libor Advances
until the Agent gives notice to the contrary to the Borrower. During a period of
thirty (30) days following the date of the Initial Notice, the concerned Lender
shall consult the Borrower with a view to concluding in good faith and
implementing an agreement as to an alternative basis of borrowing.
The terms and conditions of this alternative basis of borrowing take effect
upon the conclusion of such agreement relating to an alternative basis of
borrowing, and the provisions hereof pertaining to this Libor Advance shall be
automatically amended to reflect the terms and conditions of the alternative
basis.
7. COMPUTATION AND PAYMENT OF INTEREST
7.1 COMPUTATION OF INTEREST
Under the terms of this Agreement:
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7.1.1 interest at Cdn Prime Rate shall be calculated on the basis of a
365-day year for the actual days elapsed;
7.1.2 interest at U.S. Prime Rate shall be calculated on the basis of
(i) a 365-day year for the actual days elapsed during such period
if the U.S. Prime Rate is calculated using the National Bank of
Canada's U.S. Prime Rate and (ii) a 360-day year for the actual
days elapsed during such period if the U.S. Prime Rate is
calculated using the Federal Funds Effective Rate; and
7.1.3 interest at Libor Rate shall be calculated on the basis of a
360-day year for the actual days elapsed.
7.2 ANNUAL EQUIVALENT OF LIBOR AND FEDERAL FUNDS EFFECTIVE RATE
For the purposes of the INTEREST ACT (Canada), the annual rates of
interest to which the rates determined in accordance with the provisions
respectively of subsection 7.1.3 and of clause (ii) of subsection 7.1.2 are
equivalent, are the specified rates multiplied by the actual number of days in
the year divided by 360.
Furthermore, for the purposes of the same Act, in the case of a leap year,
the yearly rate of interest to which the rate of interest calculated on a
365-day basis is equivalent, is such rate multiplied by 366 and divided by 365.
7.3 PAYMENT OF INTEREST
The interest payable in accordance with the foregoing provisions and
computed as aforesaid on the amount outstanding from time to time shall be
payable, in arrears, on the 26th day of each month or, with respect to Libor
Advances, on the appropriate Libor Interest Payment Date, with interest on all
overdue interest at the rate applicable to the principal during the period in
which it remains unpaid, computed daily and payable upon the demand of the
Agent.
8. BANKER'S ACCEPTANCES
8.1 REQUEST FOR BANKER'S ACCEPTANCES
Provided that no Default or Event of Default exists at that time, the
Borrower may request that any part of the Revolving Credit Facility be advanced
or that any amount outstanding thereunder be converted into or continued
respectively as Banker's Acceptances. Such request may be made by delivering to
the Agent a draw down notice or conversion notice to that effect pursuant to
the provisions of this Agreement.
8.2 REQUIREMENTS FOR BANKER'S ACCEPTANCES
Each advance requested by way of a Banker's Acceptance pursuant to this
Agreement:
8.2.1 shall have a Selected Amount which must be in a minimum amount of
Cdn $500,000 and a whole multiple of Cdn $100,000 per Lender;
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8.2.2 shall have a Selected Maturity of one, two, three or six months,
excluding days of grace as that term is defined in the BILLS OF
EXCHANGE ACT (Canada); and
8.2.3 shall not have a Selected Maturity which has a maturity date that
is beyond the last day of the Revolving Period.
8.3 STAMPING FEE
The Borrower shall pay to the Agent on behalf of the Lenders, forthwith
upon the issue of each Banker's Acceptance, a stamping fee on the face amount of
each Banker's Acceptance equal to the product resulting from multiplying the
said face amount by a fraction, the numerator of which shall consist of the
product resulting from multiplying the Relevant Margin by the number of days in
the Selected Maturity selected by the Borrower for such Banker's Acceptance and
the denominator of which shall consist of 365.
8.4 THE AGENT TO ADVISE LENDERS
The Agent, following receipt of a draw down notice or a conversion notice
requesting Banker's Acceptances, shall advise each Lender of the applicable
Selected Maturity for, and the nominal amount of, each of the Banker's
Acceptances to be accepted by it. The aggregate nominal amount of Banker's
Acceptances to be accepted by a Lender shall be equal to the Pro Rata Share of
such Lender of the aggregate nominal amount of Banker's Acceptances requested by
the Borrower, except that, if the nominal amount of a Banker's Acceptance would
not be a whole multiple of Cdn $100,000, such nominal amount shall be increased
or reduced by the Agent in its sole discretion to the nearest whole multiple of
Cdn $100,000.
8.5 MATURITY DATE OF BANKER'S ACCEPTANCES
Within the time period stipulated in the relevant provisions hereof, prior
to or on the maturity date of each Banker's Acceptance, the Borrower shall
either issue a conversion notice as contemplated in Section 11.1 or by no later
than 11:00 a.m., Montreal time, on the maturity date of the Banker's Acceptances
then outstanding and about to mature, deposit into the Canadian Dollar Account
an amount equal to the nominal amount of such Banker's Acceptances.
8.6 DEEMED CONVERSION ON MATURITY DATE
In the event the Borrower does not deliver to the Agent any conversion
notice or make a deposit as contemplated in Section 8.5, or, in the event the
Borrower does deliver any such notice, but at any relevant Conversion Date,
there exists a Default or an Event of Default, then the Borrower shall be deemed
to have issued a conversion notice requesting that the face value of the
Banker's Acceptances about to mature be converted into an advance under the
Revolving Credit Facility with respect to which interest is to be calculated on
a Prime Rate Basis.
8.7 POWER OF ATTORNEY
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Each of the Lenders is hereby appointed the irrevocable agent of the
Borrower with the power and authority to execute the Banker's Acceptances to be
issued and accepted by it. Furthermore, the Agent is hereby appointed the
irrevocable agent of the Borrower with power and authority to make the necessary
arrangements for the negotiation, sale and delivery on the money market, in
accordance with normal market practice, of Banker's Acceptances accepted by the
Lenders.
8.8 WAIVER
The Borrower shall not claim from the Lenders any days of grace for the
payment at maturity of any Banker's Acceptance presented to and accepted
pursuant to this Agreement. Furthermore, the Borrower hereby waives any defense
to payment which might otherwise exist if for any reason a Banker's Acceptance
shall be held by a Lender in its own right at the maturity thereof.
8.9 OBLIGATIONS ABSOLUTE
The obligations of the Borrower with respect to Banker's Acceptances under
this Article shall be unconditional and irrevocable, and shall be paid strictly
in accordance with the terms of this Agreement under all circumstances,
including, without limitation, the following circumstances:
8.9.1 any lack of validity or enforceability of any draft issued by the
Borrower and accepted by a Lender as a Banker's Acceptance; or
8.9.2 the existence of any defense, right of action, right of
compensation or set-off or claim of any nature whatsoever which
the Borrower may at any time have or have had against the holder
of a Banker's Acceptance, the Lenders or any other Person, whether
in connection with this Agreement or otherwise.
9. LETTERS OF GUARANTEE
9.1 REQUEST FOR LETTERS OF GUARANTEE
Provided that no Default or Event of Default exists at that time, the
Borrower may request that any part of the Revolving Credit Facility be advanced,
converted into or continued as a Letter of Guarantee to be denominated in
Canadian Dollars or U.S. Dollars. Such request may be made by delivering to the
Agent a draw down notice or conversion notice to that effect pursuant to the
provisions of this Agreement.
9.2 ISSUANCE OF LETTERS OF GUARANTEE
By no later than 10:30 a.m., Montreal time, on the date requested, the
Agent shall deliver to the Borrower the requested Letter of Guarantee duly
executed by it. The parties hereto do hereby expressly acknowledge and agree
that the Borrower shall only have the right to request that the issuance of any
such Letter of Guarantee be made only by the Lender which is also the Agent,
provided, however, that any such advance by way of the issuance of any such
Letter of Guarantee shall be allocated among the Lenders on the basis of their
respective Pro Rata Share of such advance.
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9.3 LIMITS OF LETTERS OF GUARANTEE
Nothing in this Agreement contained shall be construed or interpreted so as
to entitle the Borrower:
9.3.1 to request or have outstanding any Letter of Guarantee expiring
more than 364 days from the date of its issuance or renewal;
9.3.2 to request or have outstanding any Letter of Guarantee which
constitutes a documentary letter of credit which is not payable at
sight;
9.3.3 to request or have outstanding any Letter of Guarantee the term of
which goes beyond the last day of the Revolving Period; or
9.3.4 to request or have outstanding any Letter of Guarantee in any
currency other than in Canadian Dollars or U.S. Dollars.
9.4 LG FEE
The Borrower shall pay to the Agent, as issuer, forthwith upon the issue,
renewal or amendment of each Letter of Guarantee:
9.4.1 which is not a documentary letter of credit, subject to a minimum
of Cdn $150 per such Letter of Guarantee, a fee, calculated on an
amount equal to the maximum liability of the Agent under such
Letter of Guarantee equal to the product resulting from
multiplying the said amount by a fraction, the numerator of which
shall consist of the product resulting from multiplying the
Relevant Margin by the number of days in the Selected Maturity
selected by the Borrower for such Letter of Guarantee (subject,
for the sole purpose of this subsection to a minimum of 30 days)
and the denominator of which shall consist of 365; and
9.4.2 which is a documentary letter of credit, a fee in accordance with
the fee schedule of the Agent in force from time to time with
respect to the issuance, renewal or amendment of such documentary
letters of credit.
9.5 DISTRIBUTION OF LG FEE
Upon receipt of any fee pursuant to the provisions of Section 9.4, same
shall forthwith be distributed among the Lenders as follows:
9.5.1 the Agent, as issuer, shall keep for its own account and exclusive
benefit that portion of any such fee corresponding to the product
resulting from multiplying the amount corresponding to the maximum
liability under the relevant Letter of Guarantee by a fraction,
the numerator of which shall consist of the product resulting from
multiplying 10% by the number of days in the Selected Maturity
selected by the Borrower for such Letter of Guarantee and the
denominator of which shall consist of 365; and
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9.5.2 the balance of such fee shall be paid over by the Agent to the
Lenders on a Pro Rata Basis.
9.6 ADVANCES ON PAYMENT OF LETTERS OF GUARANTEE
The aggregate principal amount or amounts of monies paid by the Agent at
any time under any of the Letters of Guarantee, shall constitute an advance
under the Revolving Credit Facility with respect to which interest is to be
calculated on a Prime Rate Basis.
9.7 OBLIGATIONS ABSOLUTE
The obligations of the Borrower with respect to Letters of Guarantee under
this Article shall be unconditional and irrevocable, and shall be paid strictly
in accordance with the terms of this Agreement under all circumstances,
including, without limitation, the following circumstances:
9.7.1 any lack of validity or enforceability of any draft or other
document presented in connection with any payment requested under
any Letter of Guarantee; or
9.7.2 the existence of any defense, right of action, right of
compensation or set-off or claim of any nature whatsoever which
the Borrower may at any time have or have had against the
beneficiary of a Letter of Guarantee, the Lenders or any other
Person, whether in connection with this Agreement or otherwise.
10. STAND-BY AND AGENCY FEE
10.1 STAND-BY FEE
As of the date of execution of this Agreement and until the termination of
the Revolving Credit Facility, the Borrower hereby covenants and agrees to pay
to the Lenders, a stand-by fee equal to the percentage per annum set out in
Schedule 10.1 hereof, computed daily on the undisbursed portion of the Revolving
Credit Facility.
10.2 PAYMENT OF STAND-BY FEE
The stand-by fee shall be calculated on the basis of a 365-day year for the
actual days elapsed and shall be payable quarterly in arrears. Any arrears on
the payment of the stand-by fee shall bear interest, computed daily, on the
daily balance thereof on a Prime Rate Basis applicable to the Revolving Credit
Facility from the date it becomes due up to and including the day preceding the
day of the payment in full thereof.
10.3 AGENCY FEE
The Borrower shall pay to the Agent, for its account exclusively, an annual
agency fee (to be determined by separate agreement between the Agent and the
Borrower) payable on the date contemplated by such separate agreement and
thereafter, on each renewal date of the Revolving Credit
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Facility until the date which the Revolving Credit Facility is terminated and
the Revolving Loans are repaid in full. No portion of the agency fee paid
pursuant to the provisions of this Agreement and such separate agreement shall,
under any circumstances, be refundable.
10.4 STRUCTURING AND UNDERWRITING FEE
The Borrower shall pay to the Agent, for the account of the Lenders, a
structuring and underwriting fee (to be determined by separate agreement between
the Borrower and the Lenders) payable on the date contemplated by such separate
agreement. No portion of the structuring and underwriting fee paid pursuant to
the provisions of this Agreement and such separate agreement shall, under any
circumstances, be refundable.
11. CONVERSIONS AND CONTINUATIONS
11.1 CONVERSIONS AND CONTINUATIONS
The Borrower may choose to convert the currency of any principal amount
outstanding under the Revolving Credit Facility or change the basis on which all
or a part of such amounts bear interest or are outstanding as provided
hereunder. Such election shall be expressed by delivering to the Agent a written
notice substantially in the form attached hereto as Schedule 11.1 by no later
than 10:30 a.m., Montreal time, at least three (3) Business Days prior to its
effective date (or at least three (3) Banking Days prior to its effective date
whenever the Borrower elects to have interest thereon calculated on a Libor
Basis).
11.2 NO REVOCATION OR WITHDRAWAL OF NOTICES
Any notice under this Article, once delivered to the Agent, may not
subsequently be revoked or withdrawn by the Borrower.
11.3 LIMITS ON CONVERSIONS
No conversion may be made in respect of outstanding Letters of Guarantee
until the expiry thereof, nor with respect to outstanding Banker's Acceptances
or outstanding amounts with interest thereon calculated on a Libor Basis until
the maturity thereof.
11.4 DETERMINATIONS OF EQUIVALENT OF CANADIAN DOLLARS AND OF U.S. DOLLARS
Where, under any provision of this Agreement, the Agent has the right or is
required to determine the Equivalent in Canadian Dollars of any values or sums
denominated or expressed in U.S. Dollars, or the Equivalent in U.S. Dollars of
any values or sums denominated or expressed in Canadian Dollars, the rate of
exchange applied shall be that quoted by the Bank of Canada as the noon
mid-market spot rate for conversion of U.S. Dollars into Canadian Dollars or of
Canadian Dollars into U.S. Dollars on the day preceding the Business Day on
which such determination is made.
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<PAGE> 24
12. PAYMENTS AND REPAYMENTS
12.1 REPAYMENT OF REVOLVING LOANS
The Borrower shall repay to the Agent on behalf of the Lenders on the
last day of the Revolving Period the entire amount of the Revolving Loans
outstanding at such date, plus any interest, fees and related expenses thereto.
During the Revolving Period, the Borrower may, at any time with a 30-day
notice, without penalty or premium, voluntarily repay the Revolving Loan in
whole or in part provided that where such part of such loans is outstanding by
way of Banker's Acceptances or by way of Libor Advances, no such repayment may
be made on any day other than the date of maturity thereof unless Borrower pays
the reasonable breakage costs referred to under Section 18.2 in respect thereof.
The amount of each such repayment shall be an integral multiple of Cdn $50,000
or U.S. $50,000.
12.2 COMPULSORY REPAYMENT OF PART OF REVOLVING LOANS
Where at any time the Agent determines that the Revolving Loans at such
time exceed the limits set forth under Section 2.1, the Borrower shall forthwith
repay such excess amount to the Agent on behalf of the Lenders.
Where the aggregate principal amounts outstanding by way of advances with
interest thereon calculated on a Prime Rate Basis are less than the required
repayment, the Borrower shall, subject to the provisions of Section 18.2, be
required to repay, prior to their stated date of maturity a sufficient amount
outstanding by way of Banker's Acceptances or Libor Advances.
12.3 CURRENCY OF PAYMENTS
All payments and repayments:
12.3.1 of principal or of interest under the Revolving Credit Facility
shall be made in the same currency in which such principal
amounts are outstanding or to which it relates;
12.3.2 of the stamping fee, the stand-by fee, the structuring and
underwriting fee and the agency fee, shall be made in Canadian
Dollars only;
12.3.3 of the fee relating to Letters of Guarantee shall be made in the
same currency as that in which the Letter of Guarantee to which
it relates is outstanding; and
12.3.4 of amounts referred to in Section 18.2 with respect to losses
shall be made in the same currency as the losses incurred by the
Lenders.
12.4 OVERADVANCES - EXCHANGE RATE FLUCTUATIONS
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On the First Business Day of each month and each time particular
circumstances justify it, the Agent shall establish the Equivalent in Canadian
Dollars of any principal amounts outstanding in U.S. Dollars. If, at any such
time, the aggregate amount of the utilizations made under the Revolving Credit
Facility exceeds the limits set forth under Section 2.1, the Borrower shall,
fortwith following a demand to this effect by the Agent, pay the amount in
excess to the Agent on behalf of the Lenders.
12.5 MANNER OF PAYMENTS
In order to effect all payments of interest on the Revolving Loans, and
of fees and other amounts due and to become due hereunder by the Borrower, the
Borrower shall be deemed to have issued under the provisions of subsection
3.1.1, as of the date any such payment is due hereunder, a draw down cheque, in
Canadian Dollars or U.S. Dollars, as the case may be, in an amount equal to the
aggregate amount of all said payments due to the Lenders on such date.
12.6 PAYMENTS AT BRANCH OF ACCOUNT ONLY
All payments or repayments of principal, interest, fees and other amounts
due and to become due hereunder by the Borrower, if not effected or which cannot
be effected in the manner set forth in Section 12.5, must be effected by direct
payments to the Agent on behalf of the Lenders at the Branch of Account only.
12.7 PAYMENT ON BUSINESS DAY AND BY 1:00 P.M., MONTREAL TIME
Whenever any payment or repayment falls due on a day which is not a
Business Day, such payment or repayment shall be made on the next following
Business Day. Furthermore, any amounts received after 1:00 p.m., Montreal time,
on any Business Day shall be applied to the appropriate payment or repayment
which was required to be made on such Business Day, on the next following
Business Day. Until so applied, interest shall continue to accrue as provided in
this Agreement on the amount of such payment or repayment.
13. SECURITY
As a general and continuing collateral security for the performance by
the Borrower of all its obligations, present and future, direct and indirect,
absolute and contingent, presently owing and due and hereafter to become owing
and due to the Agent on behalf of the Lenders by the Borrower under the terms
and conditions of this Agreement (including, without limitation, the obligation
of the Borrower to repay the Revolving Loans), the Security Documents, and any
Derivative Instruments concluded from time to time by the Borrower and any of
the Lenders (collectively the "Obligations"), the Borrower shall, in form and
substance satisfactory to the Agent and subject only to Permitted Encumbrances:
13.1 DEED OF HYPOTHEC
execute and deliver to the Agent, as collateral agent for the Lenders (or
to any Person designated by
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the Lenders), a movable hypothec and security interest on the universality of
the Borrower's present and future accounts receivable and claims (including
insurance and assignment of Lockbox), inventory, securities (such as shares that
the Borrower holds in all Unrestricted Subsidiaries) and intangible assets (such
as patents, trademarks and material agreements), to be governed by the laws of
the Province of Quebec, for an amount of $200,000,000, the whole bearing
interest at the rate of 25% per annum;
13.2 SECURITY AGREEMENT
execute and deliver to the Agent, as collateral agent for the Lenders (or
to any Person designated by the Lenders), a security agreement to be governed by
the laws of the state of New York under the terms of which there shall be
created in favour of the Lenders a Lien upon and a continuing security interest
in all the Borrower's inventory situated in the United States of America;
13.3 BANK ACT DOCUMENTS
execute and deliver to any Lender that is a bank under the BANK ACT
(Canada) documents, pursuant to the terms of which the Borrower shall assign its
inventory in favour of such Lender, free from any Liens, subject only to
Permitted Encumbrances, the whole pursuant to the provisions of Section 427 of
the BANK ACT (Canada);
13.4 PLEDGE OF SHARES
execute and deliver to the Agent, as collateral agent for the Lenders (or
to any Person designated by the Lenders), a first ranking pledge with delivery
on the shares that the Borrower holds in all Unrestricted Subsidiaries to be
governed by the laws of a jurisdiction to be mutually agreed upon by the Agent
and the Borrower;
13.5 ENDORSEMENTS OF INSURANCE POLICIES
execute and deliver to the Agent endorsements under all insurance
policies of the Borrower designating the Lenders and the Agent as loss payee
under such insurance policies as their interests may appear. Furthermore, such
endorsements shall include industry standard mortgagee clauses under terms and
conditions acceptable to the Agent; and
13.6 CORPORATE GUARANTEES
deliver to the Agent, as collateral agent for the Lenders (or to any
Person designated by the Lenders), a Corporate Guarantee from each Unrestricted
Subsidiary and Guarantor Subsidiary supported by a first ranking hypothec and
security interest, subject only to Permitted Encumbrances, on the accounts
receivable and claims, inventory, securities (such as shares that such
Unrestricted Subsidiary holds in another Unrestricted Subsidiary or in a
Guarantor Subsidiary) and intangible assets of each Unrestricted Subsidiary
(such as patents, trademarks and material agreements), for an amount sufficient
to cover their respective obligations under the Corporate Guarantee and under
all other Security Documents to which they are respectively a party, plus an
additional amount of 25%, the whole bearing interest at the rate of
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25% per annum; these Security documents shall comply with the laws of each
jurisdiction in which the charged property is located and shall be perfected in
accordance with the requirements of the laws applicable to each of such
jurisdictions;
14. REPRESENTATIONS AND WARRANTIES
The Borrower does hereby represent and warrant that:
14.1 ORGANIZATION
Each of the Borrower and the Unrestricted Subsidiaries is a corporation
duly incorporated, validly existing and in good standing under the Laws of its
jurisdiction of incorporation and of all jurisdictions in which it carries on
business, and is in compliance with all provisions of its constating documents
and by-laws. Each of the Borrower and the Unrestricted Subsidiaries has all
requisite power and authority, corporate or otherwise, to own its property and,
subject to Section 14.13, to carry on its business as now being and hereafter
proposed to be conducted.
14.2 AUTHORIZATION OF DOCUMENTS BY THE BORROWER
The Borrower has the corporate power, and has taken all necessary action,
to authorize it to borrow under the terms hereof and has the corporate power and
has taken all necessary action to authorize it to execute, deliver and perform
this Agreement, the Interlender Agreement, the Intercreditor Agreements and each
of the Security Documents to which it is a party in accordance with the terms
thereof and to consummate the transactions contemplated hereby and thereby. This
Agreement, the Interlender Agreement, the Intercreditor Agreements and the
Security Documents have been duly executed and delivered by the duly authorized
officers of the Borrower and constitute legal, valid and binding obligations of
the Borrower enforceable in accordance with their terms, except as enforcement
may be limited by bankruptcy, insolvency and other laws affecting the
enforcement of rights of creditors generally and except that equitable remedies
may be granted in the discretion of a court of competent jurisdiction.
14.3 AUTHORIZATION OF DOCUMENTS BY UNRESTRICTED SUBSIDIARIES
Each of the Unrestricted Subsidiaries has the corporate power, and has
taken all necessary action, to authorize it to execute, deliver and perform the
Guarantee and Subordination Agreement and each of the Security Documents to
which it is a party in accordance with the terms thereof and to consumate the
transactions contemplated therein. The Guarantee and Subordination Agreement and
the Security Documents to which each Unrestricted Subsidiary is a party have
been duly executed and delivered by the duly authorized officers of each of the
Unrestricted Subsidiaries and constitute legal, valid and binding obligations of
the Unrestricted Subsidiaries enforceable in accordance with their terms, except
as enforcement may be limited by bankruptcy, insolvency and other laws affecting
the enforcement of rights of creditors generally and except that equitable
remedies may be granted in the discretion of a court of competent jurisdiction.
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14.4 NO CONFLICT
The execution, delivery and performance by the Borrower or by any
Unrestricted Subsidiary of this Agreement, the Interlender Agreement, the
Intercreditor Agreements and the Security Documents to which it is a party in
accordance with their respective terms and the consummation of the transactions
contemplated hereby and thereby do not violate any Law, conflict with, result in
a breach of or constitute a default under the constating documents or by-laws of
the Borrower or of any Unrestricted Subsidiary or under any agreement or
instrument to which it is a party or by which it or any of the Charged Property
may be bound.
14.5 GOVERNMENTAL REGULATION
Neither the Borrower nor any of the Unrestricted Subsidiaries is required
to obtain any consent, Approval, authorization, permit or license from, or
effect any filing or registration with, any federal, provincial, state or local
regulatory authority in connection with the execution, delivery and performance,
in accordance with their respective terms, of this Agreement, the Interlender
Agreement, the Intercreditor Agreements or any Security Documents, except the
registrations and filings contemplated in subsection 4.1.1.
14.6 COMPLIANCE WITH LAW
Each of the Borrower and the Unrestricted Subsidiaries is in compliance
with all Laws, the non-compliance with which could, singly or in the aggregate,
have a Material Adverse Effect.
14.7 LITIGATION
There is no notice of infraction, action, suit or proceeding pending
against (nor, to the knowledge of the Borrower, threatened against or in any
other manner relating adversely to) the Borrower or the Unrestricted
Subsidiaries or any of their respective properties in any court or before any
arbitrator of any kind or before or by any governmental body except those
described in Sections 14.8 and 14.13.
14.8 TAXES
Save and except as described in Schedule 14.8, all federal, provincial
and other tax returns of the Borrower and the Unrestricted Subsidiaries,
required by Law to be filed have been duly filed, and all federal, provincial
and other taxes, assessments and other governmental charges or levies upon the
Borrower and the Unrestricted Subsidiaries, and any of their properties, income,
profits and assets, which are due and payable, have been paid. The charges,
accruals and reserves on the books of the Borrower and the Unrestricted
Subsidiaries in respect of taxes are adequate, in the judgment of the Borrower.
14.9 FINANCIAL STATEMENTS OF THE BORROWER
The audited consolidated financial statements of the Borrower for the
fiscal year ended October 5, 1998 and the latest quarterly audited and unaudited
consolidated financial statements of the
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Borrower, copies of which have been provided to the Lenders, present fairly, in
accordance with generally accepted accounting principles, the financial position
of the Borrower as at such date.
14.10 NO ADVERSE CHANGE
Since October 5, 1998, no Material Adverse Effect has occurred and is
continuing.
14.11 MATERIAL AGREEMENTS AND RESTRICTIONS
Neither the Borrower nor any Unrestricted Subsidiary is a party to any
deed, indenture, loan or credit agreement, or any lease or other agreement or
instrument, or subject to any governmental or other restriction, or any
judgment, decree or order of any court or governmental body which has or will
have a Material Adverse Effect except those described in Schedule 14.11.
14.12 APPROVALS
Save and except as described in Section 14.13, all approvals, certificates
of approval, authorizations, consents, permits, licenses, orders, registrations,
declarations, filings, notices and other actions to be taken in respect of any
federal, provincial or local governmental body (the "Approvals"), which are
necessary for the ownership and operation by the Borrower or any of the
Unrestricted Subsidiaries of their respective business and all the properties
related thereto, have been duly obtained, made or taken and are in full force
and effect, are not subject to further Approval or appeal, or any pending or
threatened legal or administrative proceedings, and the Borrower has no
knowledge of any fact which, as a matter of Law, is sufficient to justify the
commencement by any governmental or regulatory body of any proceeding for
termination or revocation of such Approvals.
14.13 ENVIRONMENT
Save and except as described in Schedule 14.13, neither the Borrower nor
any Unrestricted Subsidiary is in contravention of and neither of the Borrower
nor any Unrestricted Subsidiary has been notified by any government agency or
regulatory body or by any other interested person that it has contravened or
that its predecessor in title has contravened or is in contravention of
Environmental Laws or the requirements of any Environmental Permit, in any way
whatsoever, except where such contravention would not have, individually or in
the aggregate, a Material Adverse Effect. The exercise of their respective
activities was and is in compliance with Environmental Laws, at all times, and
the performance of their respective obligations under this Agreement and the
Security Documents shall not entail any contraventions and shall not conflict
with any Environmental Laws, except where such non-compliance, contravention or
conflict would not have, individually or in the aggregate, a Material Adverse
Effect.
14.14 NO SUBSIDIARY
On the date of execution of this Agreement there are no corporations or
limited partnerships which would constitute a Subsidiary of the Borrower except
those specifically listed in Schedule 14.14. The
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organizational chart set forth in Schedule 14.14 illustrates the corporate
structure of the Borrower and its Unrestricted Subsidiaries.
14.15 HEAD OFFICE - PLACES OF BUSINESS
The addresses of the head office, executive office and of all places of
business of each of the Borrower and the Unrestricted Subsidiaries, are listed
in Schedule 14.15.
14.16 TITLE OF OWNERSHIP
Each of the Borrower and the Unrestricted Subsidiaries is the sole title
and beneficial owner of all assets, rights, title and interest forming part of
the Charged Property, free and clear of all Liens whatsoever, except Permitted
Encumbrances, if any.
14.17 ERISA
During the five-year period ending on the date hereof (or, with respect to
(vi) or (viii) below, as of the date such representation is made or deemed
made), except as set forth under Schedule 14.17 or as reflected in the financial
statements referred to in Section 14.9 none of the following events or
conditions has occurred which, either individually or in the aggregate, has
resulted or could reasonably be expected to result in a liability to the
Borrower or any of the Unrestricted Subsidiaries which could have a Material
Adverse Effect: (i) a Reportable Event; (ii) an "accumulated funding deficiency"
(within the meaning of Section 412 of the Code or Section 302 of ERISA); (iii)
any material noncompliance with the applicable provisions of ERISA or the Code;
(iv) a termination of a Single Employer Plan (other than a standard termination
pursuant to Sections 4041(b) of ERISA); (v) a Lien in favour of the PBGC or a
Plan; (vi) Underfunding with respect to any Single Employer Plan; (vii) a
complete or partial withdrawal from any Multiemployer Plan by the Borrower, any
of the Unrestricted Subsidiaries or any Commonly Controlled Entity; (viii) any
liability of the Borrower or any Commonly Controlled Entity under ERISA if the
Borrower or any such Commonly Controlled Entity were to withdraw completely from
all Multiemployer Plans as of the annual valuation date most closely preceding
the date on which this representation is made or deemed made; (ix) the
Reorganization or insolvency (within the meaning of Section 4245 of ERISA) of
any Multiemployer Plan; (x) the excess of the present value (determined using
actuarial and other assumptions which are reasonable in respect of the benefits
provided and the employees participating) of the aggregate liability of the
Borrower or any Commonly Controlled Entity for post-retirement benefits to be
provided to their current and former employees under Plans which are welfare
benefit plans (as defined in Section 3(1) of ERISA) over the assets under all
such Plans; and (xi) an event or condition with respect to which the Borrower or
any Commonly Controlled Entity could incur any liability in respect of a Former
Plan.
14.18 LABOUR DISPUTES
As of the date hereof (i) there is no pending or threatened strike, work
stoppage, material unfair labour practice claim or charge, arbitration or other
material labour dispute against or affecting the
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Borrower, the Unrestricted Subsidiaries or any of their employees, and (ii)
there are no actions, suits, charges, demands, claims, counterclaims or
proceedings pending or, to the knowledge of the Borrower or the Unrestricted
Subsidiaries, threatened against any of them, by or on behalf of, or with, their
employees, other than employee grievances arising in the ordinary course of
business which singly or in the aggregate would not have a Material Adverse
Effect.
14.19 INTANGIBLE ASSETS
Each of the Borrower and the Unrestricted Subsidiaries possess all
necessary patents, know-how, trademarks, service marks, trade names, and
copyrights, and rights with respect to each of the foregoing, necessary to carry
on their business as currently conducted and the possession and use thereof in
their business does not conflict with the patents, know-how, trademarks, service
marks, trade names, and copyrights, and rights with respect to the foregoing, of
any other Person, except where such conflict or failure to hold or possess would
not have a Material Adverse Effect.
14.20 OWNERSHIP OF ACCOUNTS REVEIVABLE AND INVENTORY
As of the date of execution of this Agreement and until the effective date
of the Reorganization, none of the Borrower's Insured Eligible Accounts
Receivable, Uninsured Eligible Accounts Receivable and Eligible Inventory are
owned by any Subsidiary of the Borrower.
14.21 ACCURACY AND COMPLETENESS OF INFORMATION
All information, reports and other papers and data furnished to the Lenders
by or on behalf of the Borrower and the Unrestricted Subsidiaries were, at the
time the same were so furnished, complete and correct in all material respects
to the extent necessary to give the Lenders a true and accurate knowledge of the
subject matter. No undisclosed fact is currently known to the Borrower and the
Unrestricted Subsidiaries, which has or may have a Material Adverse Effect which
has not been set forth or referred to herein or in such information, reports and
other papers and data or otherwise specifically disclosed to the Lenders.
14.22 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties made under this Agreement shall be
deemed to be made and shall be true and correct in all material respects, at and
as of the date of execution of this Agreement and at and as of the date of any
advance, conversion or continuation hereunder. All representations and
warranties made under this Agreement shall survive until the full repayment of
the Revolving Loans and the termination of the Revolving Credit Facility, and
not be waived, by the execution and delivery of this Agreement, any
investigation by or on behalf of the Lenders or the making of any advance,
conversion or continuation under this Agreement.
15. GENERAL COVENANTS
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So long as the Revolving Loans or any other amount payable hereunder are
outstanding and unpaid or the Borrower shall have the right to borrow hereunder
(whether or not the conditions to borrowing have been or can be fulfilled), and
unless the Agent, acting in accordance with the instructions of the Majority
Lenders, shall otherwise consent in writing, the Borrower covenants and agrees
that it will and cause each of the Unrestricted Subsidiaries, as the case may
be, to:
15.1 PRESERVATION OF EXISTENCE, ETC.
Preserve and maintain its existence and all material rights, franchises,
licenses and privileges necessary or desirable in the normal conduct of its
business and remain qualified and authorized to do business in each jurisdiction
which the nature of each of the Borrower's and the Unrestricted Subsidiaries
business requires such qualification or authorization.
15.2 PRESERVATION OF AUTHORIZATIONS
Maintain, and take all actions necessary to maintain, in full force and
effect the action taken by it to authorize the borrowings hereunder and the
execution, delivery and performance in accordance with their respective terms of
this Agreement, the Interlender Agreement, the Intercreditor Agreements, the
Security Documents and any other documents required or contemplated hereunder.
15.3 BUSINESS, COMPLIANCE WITH APPLICABLE LAW
Conduct its business in a proper and efficient manner, keep or cause to
be kept, proper and lawful records and books of account and make or cause to be
made therein, true and faithful entries of all dealings and transactions in
relation to its business, all in accordance with generally accepted accounting
principles applied on a consistent basis and comply with all requirements of
Law.
15.4 INSURANCE
Maintain insurance from responsible companies in such amounts and against
such risks as is contemplated in the Security Documents.
15.5 PAYMENT OF TAXES AND CLAIMS
Pay and discharge all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or upon any properties
belonging to it and forming part of the Charged Property prior to the date on
which penalties attach thereto unless such charges or levies are being contested
in good faith, and all lawful claims for rents, labour, materials and supplies
which, if unpaid, might become a Lien or charge upon the Charged Property other
than a Permitted Encumbrance.
15.6 VISITS AND INSPECTIONS
Upon reasonable notice, permit representatives of the Lenders and the
Agent and their advisors to visit and inspect the properties of the Borrower and
the Unrestricted Subsidiaries during normal business
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hours, inspect and make extracts from and copies of its books and records
pertaining to the Borrower's or any of the Unrestricted Subsidiaries' business
and discuss with its principal officers the business, assets, liabilities,
financial position, results of operations and business prospects of the
Borrower.
15.7 MAINTENANCE OF RATIOS
With respect to the Borrower, maintain at all times, on a consolidated
basis:
15.7.1 a Senior Debt to EBITDA Ratio of no more than 3.75 : 1.00 up to
and including September 29, 1999 and of 3.25 : 1.00 thereafter;
15.7.2 a Fixed Charge Coverage Ratio of at least 2.00 : 1.00;
15.7.3 a ratio of Senior Debt to Total Capitalization of no more than
0.65 : 1.00 up to and including September 29, 1999 and of no
more than 0.60 : 1.00 thereafter.
15.8 PAYMENT OF LEGAL AND OTHER FEES AND DISBURSEMENTS
Pay upon demand all reasonable legal, notarial and professional fees and
disbursements or any out of pocket costs and expenses incurred from time to time
by the Agent on behalf of the Lenders in connection with the:
15.8.1 the negotiation, preparation and delivery of the Commitment
Letter, this Agreement, the Interlender Agreement, the
Intercreditor Agreements, the Security Documents and all other
documents accessory thereto or in implementation thereof as well
as any amendment to be made from time to time to any of the
foregoing;
15.8.2 the registration, filing and renewal of the Security Documents;
15.8.3 advice sought by the Agent in connection with the
interpretation of this Agreement, the Interlender Agreement, the
Intercreditor Agreements or the Security Documents or in
connection with the exercise of any or all of their rights and
remedies;
15.8.4 the visits and inspections pursuant to Section 15.6;
15.8.5 publicity relating to the Revolving Commitment made available
to the Borrower by the Lenders pursuant to the terms and
conditions of the Commitment Letter and the Credit Agreement,
including, without limitation, the insertion of standard
advertisements ("TOMBSTONES") in various financial publications
and any other form of advertising;
15.8.6 the conduct in Montreal (Qc) by the Agent's examiners of the
pre-closing audit referred to in Section 4.1.13 and the
semi-annual field audits for evaluating the Borrower's inventory
and accounts receivable;
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15.8.7 the permitted assignments pursuant to Section 20.5; and
15.8.8 the collection of any moneys due hereunder or under the
Interlender Agreement, the Intercreditor Agreements or any of
the Security Documents.
the whole whether or not any advances are made under the terms
hereof.
15.9 RENEWAL OF REGISTRATION
Renew and keep renewing the registration and filing of financing
statements registered or filed with respect to the Security Documents, no later
than 180 days before the expiry date stipulated for the preservation of the Lien
created under the terms of such documents and the perfection of the security
interest created thereby and execute and deliver all other documents and do all
other things which the Agent may require with respect to the Security Documents
in order to maintain in full force and effect the validity and perfection of the
security created thereunder.
15.10 TRANSACTIONS WITH AFFILIATES OF THE BORROWER
Negotiate and conclude agreements or transactions to be entered into from
time to time, as between the Borrower and any one or more of its Affiliates
(other than an Unrestricted Subsidiary) on no less favourable terms than
prevailing commercially reasonable market terms as between parties acting at
arm's length with respect to similar agreements or transactions negotiated and
concluded in similar circumstances and, as between the Borrower and any one or
more Unrestricted Subsidiary in accordance with such terms may be prescribed
from time to time by the Canadian taxation authorities for the purposes of their
international transfer pricing policies.
15.11 LOCK BOX AGREEMENT
Obtain an undertaking from Gildan Activewear SRL to maintain a Lockbox
with the Agent at the Agent's branch situated in Chicago or any other branch
which may be determined by the Agent from time to time, where all payments under
all U.S. accounts receivable will be deposited and whereby standing irrevocable
instructions will be given to wire the funds so deposited, daily to the
Borrower's account in Montreal (Quebec).
15.12 FINANCIAL INFORMATION
Deliver to the Agent:
15.12.1 within 60 days after the last day of each quarter, the
consolidated quarterly financial statements of the Borrower and
the unconsolidated quarterly financial statements of the
Borrower and of each Unrestricted Subsidiary and Guarantor
Subsidiary and the certificate of the Vice-President Finance of
the Borrower in form and substance substantially as set out in
Schedule 15.12.1 setting forth all such amounts and values
accompanied by all such information and calculations required to
establish that the Borrower is in compliance with the financial
ratios described and referred to under Section 15.7;
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15.12.2 within 25 days after the last day of each calendar month, a
detailed list of the Borrower's inventory and aged accounts
receivable accompanied by a certificate of the Vice-President
Finance of the Borrower in form and substance substantially as
set out in Schedule 15.12.2 showing the required calculations
for the Borrowing Base and confirming compliance with the Credit
Agreement;
15.12.3 within 120 days after the end of each fiscal year of the
Borrower: (i) the audited consolidated financial statements of
the Borrower, (ii) the audited unconsolidated financial
statements of the Borrower and Gildan Activewear SRL and (iii)
the unaudited unconsolidated financial statements of all other
Subsidiaries and related companies (if any), as at the end of
such fiscal year, accompanied by a compliance certificate of the
Vice-President Finance of the Borrower in form and substance
substantially as set out in Schedule 15.12.3 confirming the
absence of any default;
15.12.4 on a semi-annual basis, access to its facilities in order to
allow the Agent and its representatives to conduct audits on
accounts receivable and inventory;
15.12.5 within 120 days after the end of each fiscal year of the
Borrower, the updated financial information referred to under
subsection 4.1.7;
15.12.6 within 120 days after the end of each fiscal year of the
Borrower, an environmental report prepared by in-house engineers
confirming the environmental status of all production facilities
of the Borrower or of the Unrestricted Subsidiaries, accompanied
by a certificate signed by the Vice-President Manufacturing, the
whole to the satisfaction of the Agent;
15.12.7 promptly upon each request, such other data, certificates,
reports, statements, documents or further information regarding
the business, assets, liabilities, financial position, results
of operations or business prospects of the Borrower and of the
Unrestricted Subsidiaries as the Agent may reasonably request.
15.13 NOTICE OF LITIGATION AND OTHER MATTERS
Furnish or cause to be furnished to the Agent, prompt notice of the
following events after the Borrower has become aware thereof:
15.13.1 the commencement of all proceedings (including any notices of
infraction) and investigations by or before any governmental
body and all actions and proceedings in any court or before any
arbitrator against, or (to the extent known to the Borrower) in
any other way relating adversely to the Borrower or to any
Unrestricted Subsidiary or any of their properties, assets or
businesses which, if adversely determined, could singly or when
aggregated with all other such proceedings, investigations and
actions have a Material Adverse Effect;
15.13.2 the occurrence or the failure to occur of any event which would
result in the occurrence of a Material Adverse Effect;
15.13.3 the occurrence of any Default or Event of Default.
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15.14 DISCLOSURE OF ENVIRONMENTAL MATTERS
Without limiting the generality of the covenant set forth under Section
15.13:
15.14.1 the Borrower shall immediately notify the Agent of any Release
of a Contaminant or of the discovery of the presence of a
Contaminant at, upon, under, over, within, with respect to or
emanating from its property or from the property of any
Unrestricted Subsidiary;
15.14.2 the Borrower shall immediately forward to the Agent, copies of
all orders, notices or permits from environmental authorities
and copies of all technical reports prepared by or on behalf of
the Borrower (or of an Unrestricted Subsidiary) in connection
with the environmental status of its (their) property and of its
(their) activities or operations.
15.14.3 promptly upon the written request of the Agent, acting in
accordance with the instructions of the Majority Lenders, the
Borrower shall provide the Agent, at the Borrower's expense,
with an environmental site assessment or environmental audit
report prepared by an environmental consultant approved by the
Agent, to assess with a reasonable degree of certainty the
Release of any Contaminant and the potential costs in connection
with abatement, clean-up or removal of such Contaminant on,
under, upon, over, at, within, or with respect to its property
or the property of any Unrestricted Subsidiary and/or the
material conformity with Environmental Laws of the activities or
operations of the Borrower or of Unrestricted Subsidiaries.
15.15 YEAR 2000 COMPLIANCE
Take appropriate and reasonable steps to ensure that its computer
software, hardware and other products incorporating embedded software or
microcode, used in carrying on business are (i) designed to be used for the year
2000 without error relating to date, data and shall operate transparently to the
user and (ii) capable of recognizing and accurately treating and handling dates
subsequent to December 31, 1999 as well as all data associated to such dates.
On June 30, 1999 deliver to the Agent a progress report stating the
progress made by the Borrower in its effort to comply with the foregoing problem
and, by October 29, 1999, a progress report confirming that as at October 3,
1999 all essential systems are Y2K compliant.
On January 31, deliver to the Agent a report stating any incident or
unresolved problem associated to the recognition and the treatment and handling
of dates subsequent to December 31, 1999 by any computer software, hardware and
other products incorporating embedded software or micro code used in carrying on
business.
16. NEGATIVE COVENANTS
So long as the Revolving Loans or any other amount payable hereunder is
outstanding and unpaid or the Borrower shall have the right to borrow hereunder
(whether or not the conditions to borrowing have
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been or can be fulfilled), and without the prior written consent of the Agent,
which consent shall not be unreasonably withheld, acting in accordance with the
instructions of the Majority Lenders, the Borrower covenants and agrees that it
will not do any of the following:
16.1 CONSOLIDATION, AMALGAMATION, MERGER, ETC.
Consolidate, amalgamate or merge with or wind-up into any other
corporation. The Lenders are aware that the Borrower will submit a request for
consent in connection with the proposed merger between Harco Holdings Ltd. and
the Borrower. Upon reception of particulars, the Lenders shall consider such
proposal.
16.2 CHANGE OF CONTROL
Effect, agree to or permit any change to its controlling ownership as it
exists on the date hereof without giving a prior notice of such change to the
Agent it being understood that a change to its controlling ownership means that
the combined aggregate shares held directly or indirectly by Greg Chamandy and
Glenn Chamandy would not be sufficient to maintain the controlling ownership of
the Borrower.
16.3 INDEBTEDNESS
Incur, create, assume or suffer to exist, on a consolidated basis, any
Indebtedness other than (i) Indebtedness incurred in the ordinary course of
business and for the purpose of carrying on same, representing the deferred
purchase price of property or services; (ii) Indebtedness of the Borrower under
derivative instruments contracted with a Lender and entered into in the ordinary
course of business to hedge or mitigate risks to which the Borrower or any
Unrestricted Subsidiary is exposed to in the conduct of its business or the
management of its liabilities and not for speculative purposes;
(iii) Indebtedness under the Revolving Credit Facility; (iv) Purchase Money
Obligations and other forms of debt for borrowed money incurred to finance
permitted capital expenditures; (v) operating leases; vi) corporate guarantees
by the Borrower or an Unrestricted Subsidiary in support of permitted
indebtedness of an Unrestricted Subsidiary or the Borrower; (vii) Sale and
Leaseback Transaction or (viii) Subordinated Debt.
16.4 SALE OF ASSETS
On a consolidated basis, sell, alienate, lease or otherwise dispose of
the whole or any part of its assets or properties other than (i) inventory and
obsolete equipment in the ordinary course of its business and for the purpose of
carrying on the same, (ii) annually, such assets or properties, the net book
value of which does not exceed an amount equal to 10% of the aggregate
consolidated net book value of the total fixed assets of the Borrower and
(iii) accounts receivable for a discounted amount not to exceed an amount equal
to US$20,000,000.
16.5 ADVANCES, REVOLVING LOANS AND INVESTMENTS
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Except as permitted under Section 16.6, directly or indirectly (including
through any one or more subsidiaries) but except in favour of an Unrestricted
Subsidiary or subject to an aggregate maximum amount equal to 10% of the
aggregate consolidated net book value of the total assets of the Borrower, in
favor of a Guarantor Subsidiary, on a consolidated basis: (i) make any loan,
advance, extension of credit (excluding terms of credit granted to third parties
in the normal course of business) or advances to third parties in an aggregate
amount not to exceed Cdn $2,000,000 in the form of down payments under services
contracts reasonably acceptable to Agent; (ii) make any capital contribution or
investment to or in any person; or (iii) except in connection with the proposed
acquisition of all the issued and outstanding shares in the capital stock of
Sula Textiles S.A. de C.V. and Winners Manufacturing, S.A. for an aggregate
purchase price of approximately Cdn $4,000,000, purchase or otherwise acquire
for a consideration any evidence of indebtedness, capital stock, partnership
units or other securities of any person (except short-term certificates of
deposit of financial institutions and readily marketable money market
securities) in excess of Cdn 5,000,000 per fiscal year, subject to an aggregate
limit of Cdn $10,000,000;
16.6 LOANS AND GUARANTEES
Make any loans to or give guarantees with respect to the obligations of
any Subsidiary or Affiliate or any one of its or their respective officers or
directors in excess of an aggregate amount of Cdn $3,000,000 annually, except
for those set forth in Schedule 16.6;
16.7 LIENS
Save only for Permitted Encumbrances, create, incur, assume or suffer to
exist any Lien or other charge or encumbrance upon or in respect of any of its
present or future assets or properties, other than (i) Liens created under the
Security Documents, (ii) Liens securing Purchase Money Obligations within the
limits set forth under Section 16.3 (iii) the Liens existing as of the date of
execution of this Agreement and listed in Schedule 16.7, (iv) and the Liens
specifically authorized by the Agent and the Lenders.
16.8 CHANGE IN BUSINESS
Effect any material change in the nature of its business or reevaluation
of assets for accounting purposes.
16.9 DIVIDENDS
Declare or pay dividends, redeem shares or return capital to its
shareholders in cash or by delivery of other property (a "DISTRIBUTION") if at
the time of such Distribution a Default or Event of Default exists or results as
a consequence thereof.
16.10 CAPITAL EXPENDITURES
For the fiscal year ending in October 1999, undertake or incur, on a
consolidated basis, capital expenditures in excess of an aggregate amount of
Cdn $25,600,000. For any fiscal year thereafter,
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undertake or incur capital expenditures in excess of the amounts forecasted in
the Borrower's budget which shall be revised and approved by the Lenders on an
annual basis.
16.11 SUBORDINATION OF DEBT
Save as otherwise specifically permitted by the Lenders under the terms
of an agreement entered into between the Lenders, the Agent, the Borrower and
the subordinated creditor, pay or repay any portion of any Subordinated Debt
(on account of principal, interest, fees or costs) or set aside any funds or
property for any of the foregoing purposes.
16.12 CONSULTING FEES TO AFFILIATES
Pay or undertake to pay any management or consulting fees to any
Affiliate (other than an Unrestricted Subsidiary) of the Borrower.
16.13 CHANGE OF YEAR END
Change its fiscal year-end or the fiscal year-end of any Unrestricted
Subsidiary.
16.14 CREATION OF SUBSIDIARIES
Create or incorporate any corporation or limited partnership which would
constitute a Subsidiary of the Borrower or acquire the shares or other ownership
units of any corporation or limited partnership which would, following such
acquisition, become a Subsidiary of the Borrower.
16.15 DERIVATIVE INSTRUMENTS
Enter into any Derivative Instrument for purposes other than for hedging
and risk management.
16.16 REORGANIZATION
Proceed with the proposed Reorganization unless each of the following
conditions precedent are met to the satisfaction of the Agent and its legal
counsel:
16.16.1 the Borrower shall have given to the Agent not less than
10 Business Days' prior written notice of its intention to
proceed with the Reorganization;
16.16.2 each of Gildan Activewear SRL, Gildan Activewear Barbados Inc.
and Gildan Activewear (BVI) Inc. shall have executed and
delivered all of the Security Documents referred to under
Section 13.6 which were not delivered pursuant to subsection
4.1.1;
16.16.3 the Borrower shall have attended to the due publication of such
forms and the due registration or filing of any financing
statement registrations required under all applicable Laws with
respect to the Security Documents referred to under subsection
16.16.2;
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16.16.4 the Borrower shall have delivered to the Agent and its legal
counsel, in form and substance satisfactory to them, a copy of
the closing agenda relating to the Reorganization and of all
documents and contracts pertaining to the Reorganization and
each transaction contemplated in the structure of transactions
set forth under Schedule 16.16.4 including all disclosures,
schedules and exhibits thereto (the "REORGANIZATION DOCUMENTS");
16.16.5 the Borrower shall have delivered to the Agent and its legal
counsel, in form and substance satisfactory to them, the
opinions of Hart, Saint-Pierre and each of the Borrower's U.S.
and Barbados counsel addressed to the Lenders, the Agent and
Desjardins Ducharme Stein Monast, dated the effective date of
the Reorganization covering such matters incident to the
Reorganization as the Lenders may reasonably request;
16.16.6 the Agent shall have received a copy of all material contracts
to which the Borrower or any of the Unrestricted Subsidiaries is
a party including, without limitation any agreement which will
permit the Agent and the Lenders to keep track of the
circulation of goods and the flow funds;
16.16.7 the Agent shall have received a certified copy of the Lock Box
Agreement;
16.16.8 with respect to the Unrestricted Subsidiaries that are
delivering the Security Documents referred to under subsection
16.16.2, the Borrower shall have delivered to the Agent the
documents and opinions referred to under subsections 4.1.3.7,
4.1.3.8, 4.1.3.9 and 4.1.18;
16.16.9 the Borrower shall have delivered to the Agent a certificate
from an Officer of the Borrower to the effect that no Material
Adverse Effect has occurred or is likely to occur as determined
on the date of such certificate;
16.16.10 the Agent shall have confirmed in writing that it is satisfied
that all of the conditions precedent set forth under this
section have been complied with.
17. EVENTS OF DEFAULT AND REALIZATION
17.1 EVENTS OF DEFAULT
The occurrence of any of the following events during the term of this
Agreement shall constitute an event of default (herein referred to as an "Event
of Default"):
17.1.1 should the Borrower fail to make, as and when same are due, any
payment of principal, or any payment of interest, fees or
related costs with respect to the Revolving Loans; or
17.1.2 should the Borrower or any Unrestricted Subsidiary, as the case
may be, default in the performance or fulfillment of any of its
obligations under Article 16 or under Section 15.7; or
17.1.3 should the Borrower or any Unrestricted Subsidiary default in
the performance or fulfillment of any other
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obligation or covenant hereunder, or any other obligation or
covenant under any one of the Interlender Agreement, the
Intercreditor Agreements or the Security Documents, under any
Derivative Instruments or under any other covenant assumed by
the Borrower or any Unrestricted Subsidiary in relation to the
Revolving Loans or the Revolving Credit Facility and such
default is not remedied within 10 days following the issuance by
the Lenders of a notice thereof, (provided however that if the
Borrower shall have diligently taken steps to correct such
default within the said 10 days following such notice, the same
shall not constitute an Event of Default for so long as the
Borrower or any Unrestricted Subsidiary is continuing to take
such steps to correct such default and provided however that
such default is fully cured within 20 days following the
issuance by the Lenders of said notice); or
17.1.5 should any Guarantor default under any of its obligations under
the Guarantee and Subordination Agreement or should the
guarantee provided for thereunder cease to be applicable or
valid with respect to any portion of the Guaranteed Obligations
(within the meaning set forth under the Guarantee and
Subordination Agreement) or with respect to any future advances
under the Commitment;
17.1.6 should the Borrower use the proceeds of any advances for
purposes not permitted hereunder;
17.1.7 should the Borrower or any Unrestricted Subsidiary make an
assignment for the benefit of creditors, or file or consent to
the filing of a petition in bankruptcy, a proposal or a notice
of intention under the Bankruptcy and Insolvency Act (Canada) or
any other equivalent Law of any jurisdiction, or be adjudicated
insolvent or bankrupt, or petition or apply to any tribunal for
any receiver, trustee, coordinator, liquidator or sequestrator
of, or for any substantial part of its property (collectively
the "Proceedings") or the Borrower or any Unrestricted
Subsidiary commences any such Proceedings; or should there be
commenced against the Borrower or any Unrestricted Subsidiary
any such Proceedings relating to it or its property or any
substantial portion thereof under any reorganization,
arrangement or readjustment, composition or liquidation Law of
any jurisdiction which Proceeding remains undismissed for a
period of 30 days; or should any receiver, trustee, coordinator,
liquidator or sequestrator of, or for the Borrower, any
Unrestricted Subsidiary or any substantial portion of their
property be appointed or should the Borrower or any Unrestricted
Subsidiary consent to or approve or accept any Proceeding or the
appointment of any receiver, trustee, coordinator, liquidator or
sequestrator of, or for the Borrower, any Unrestricted
Subsidiary or any substantial portion of their Property; or
17.1.8 should any statement, certificate, representation or warranty
which has been made by or on behalf of the Borrower or any of
the Unrestricted Subsidiaries to the Lenders in or pursuant to
this Agreement or any of the Security Documents prove at any
time to be either incorrect or substantially inaccurate with
respect to a material aspect; or
17.1.9 should any interest of the Borrower or of any Unrestricted
Subsidiary in any of their assets or property be sold or
foreclosed by any creditor or encumbrancer or any Person acting
under legal process, or should any Person take possession, or
assume control through distress or legal process, of the
property and assets of the Borrower or of any Unrestricted
Subsidiary or any part thereof and which would, singly or in the
aggregate, have a Material Adverse Effect; or
17.1.10 should the Borrower or any of the Unrestricted Subsidiaries, as
the case may be, default with respect to any of its Indebtedness
(other than the Indebtedness of the Borrower hereunder), the
amount of which exceeds, singly or in the aggregate,
Cdn $1,000,000; or
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17.1.11 should there occur a change of control of the Borrower as
described in Section 16.2 or should any Unrestricted Subsidiary
or Guarantor Subsidiary ceases to be a, direct or indirect,
wholly-owned Subsidiary of the Borrower without the prior
written consent of the Agent (acting upon the instructions of
the Majority Lenders), which consent shall not be unreasonably
withheld or delayed; or
17.1.12 should the Borrower or an Unrestricted Subsidiary have received
any notice of infraction or should there be any action, suit or
proceeding pending or threatened against the Borrower or any
Unrestricted Subsidiary or their properties in any court or
before any arbitrator of any kind or before or by any
governmental body, which, if adversely determined, would, singly
or in the aggregate, have a Material Adverse Effect; or
17.1.13 should there be any material adverse change in the business,
assets, liabilities, financial position, results of operations
or business prospects of the Borrower on a consolidated basis,
or should any event occur or fail to occur which would, singly
or in the aggregate, have a Material Adverse Effect;
17.1.14 should a Derivative Instrument entered into between the Borrower
and any financial or brokerage institution be terminated prior
to its scheduled maturity as the result of the Borrower's
inability to meet its obligations in respect thereof;
17.1.15 should (i) any Person engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived, exist with respect to any Plan or any
Lien in favour of the PBGC or a Plan arise on the assets of the
Borrower or of any of the Guarantors or any Commonly Controlled
Entity, (iii) a Reportable Event occur with respect to, or
proceedings commence to have a trustee appointed, or a trustee
be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is reasonably likely to result in the
termination of such Plan for purposes of Title IV of ERISA
(other than a standard termination pursuant to Section 4041(b)
of ERISA), (iv) any Single Employer Plan terminate for purposes
of Title IV of ERISA, (v) the Borrower or any of the
Unrestricted Subsidiaries or any Commonly Controlled Entity, or
is reasonably likely to, incur any liability in connection with
a withdrawal from, or the insolvency (within the meaning of
Section 4245 of ERISA) or Reorganization of, a Multiemployer
Plan, (vi) the occurrence or expected occurrence of any event or
condition which results or is reasonably likely to result in
such Obligor's or any Commonly Controlled Entity's becoming
responsible for any liability in respect of a Former Plan, or
(vii) any other event or condition occur or exist with respect
to a Plan; and in each case in clauses (i) through (vii) above,
such event or condition, together with all other such event or
condition, if any, could result in liability which could
reasonably be expected to have a Material Adverse Effect;
17.1.16 should the Borrower fail to complete the Reorganization by
June 1, 1999.
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<PAGE> 43
17.2 REMEDIES
17.2.1 Upon the occurrence of an Event of Default:
17.2.1.1 the Agent, acting in accordance with the instructions of the
Majority Lenders, may terminate the Revolving Period and demand
the immediate payment of all or part of the amounts owing to the
Lenders hereunder, in principal, interest, fees and related
costs as well as the immediate payment of the face amount of all
outstanding Banker's Acceptances and Letters of Guarantee;
17.2.1.2 the Lenders and/or the Agent, acting in accordance with the
instructions of the Majority Lenders, may exercise any and all
of the Lenders rights and recourses under this Agreement and the
Security Documents;
17.2.2 Notwithstanding the provisions set forth above in subsection
17.2.1, upon the occurrence of an Event of Default specified in
subsection 17.1.6, the Revolving Period shall forthwith
terminate and all amounts specified in subsection 17.2.1.1 shall
thereupon and concurrently therewith become due and payable, all
without any action by the Agent or the Lenders and without
presentment, demand, protest, or other notice of any kind, all
of which are expressly waived, anything in this Agreement or the
Security Documents to the contrary notwithstanding.
17.3 PROCEEDS OF REALIZATION
The proceeds of realization under any of the Security Documents or any
credit or compensating balances of the Borrower held by any Lender shall be
applied as set forth under the Interlender Agreement.
17.4 COMPENSATION AND SET-OFF
In addition to any right now or hereafter granted under Law and not by way
of limitation of any such right, upon the occurrence of a Default or an Event of
Default, the Lenders are hereby authorized by the Borrower, at any time, without
notice to the Borrower or to any other Person other than as is required by Law,
any such notice being hereby expressly waived, to effect compensation, to
set-off and to appropriate and to apply any and all deposits, whether matured or
unmatured, and any other indebtedness at any time held or owing by the Lenders
to or for the credit or the account of the Borrower against and on account of
the obligations and liabilities of the Borrower to the Lenders under this
Agreement. Such compensation and set-off may be effected irrespective of whether
or not the Agent or the Lenders shall have made any demand hereunder or shall
have declared the amounts of the Revolving Loans to be due and payable as
permitted hereunder and although any of the said obligations and liabilities
shall be contingent or unmatured.
17.5 DEALING WITH THE BORROWER
The Agent may grant extensions of time and other indulgences, take or
abstain from taking or give up securities, accept compositions, grant releases
and discharges and otherwise deal with the Borrower as
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<PAGE> 44
it may see fit, without prejudice to the liability of the Borrower or to the
rights of the Lenders hereunder.
18. INCREASED COSTS AND INDEMNITY
18.1 INDEMNIFICATION
If a law, regulation, directive or policy generally applicable to
financial institutions, emanating from an administrative authority or other
institution, or to which a Lender is held to have subscribed voluntarily or the
creation of a tax other than on such Lender's income or a decision of
a competent court has the effect (i) of increasing for such Lender the cost
of Letters of Guarantee, Libor Advances, Banker's Acceptances or Derivative
Instruments or of making any advance or maintaining any amounts outstanding
under the Revolving Credit Facility or (ii) of reducing the revenue or return
accruing to it from such advances, letters, acceptances or instruments, or
(iii) of increasing the cost incurred by it for the unused portion of the
Revolving Credit Facility or (iv) of imposing the payment or collection of a tax
in connection with the Revolving Credit Facility or Derivative Instruments, the
Agent may send to the Borrower a notice, indicating the amount of such
additional cost or of such reduction of revenue or return, as well as the cause
thereof; such notice is prima facie evidence of the amount of such additional
cost or of such reduction of revenue or return and the Borrower shall, within
two (2) Business Days following receipt of such notice, pay such amount to such
Lender as will, on an after-tax basis, compensate such Lender for such
additional cost or such reduction of revenue or return.
Furthermore, the Borrower shall at all times protect, indemnify and hold
harmless the Lenders, the Agent and each of their respective affiliates,
directors, officers, agents and employees (collectively, the "INDEMNIFIED
PARTIES") from and against any losses, claims, damages, liabilities or other
expenses which arise out of or in connection with the Revolving Credit Facility,
the Commitment Letter or the credit documentation, including those which may
arise from or in connection with any action, suit or proceeding (whether or not
any Indemnified Parties is a party or is subject thereto).
18.2 REIMBURSEMENT OF LOSSES
Whenever any Lender shall sustain or incur any losses in connection with:
18.2.1 the failure of the Borrower to borrow pursuant to a draw down
notice (whether by reason of the Borrower's determination not to
proceed, the non-fulfillment of any of the conditions set forth
in this Agreement or for any other reason attributable to the
Borrower); or
18.2.2 the declaration by the Agent or the Lenders following the
occurrence of an Event of Default, that the Revolving Loans are
immediately due and payable;
18.2.3 the conversion or repayment of the whole or a part of any Libor
Advances or of any amount outstanding by way of Banker's
Acceptances on any day other than their stated date of maturity
for any reason whatsoever including a change in circumstances
specified in Section 6.5;
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<PAGE> 45
18.2.4 the failure to pay principal, interest, fees or any other amount
under this Agreement when due (whether at maturity, by reason of
acceleration or otherwise); or
18.2.5 the failure to follow through with a conversion notice duly
delivered to the Agent due to the existence of a Default or
Event of Default on the relevant Conversion Date;
The Borrower agrees to pay the Lenders, upon demand, an amount certified
by the Lenders to be sufficient to compensate them for all such losses. The
obligations of the Borrower with respect to this Section shall survive the
repayment of the Revolving Loans. Furthermore, the Borrower shall at all times
indemnify and hold harmless the Lenders and the Agent against and from any and
all claims, suits, actions, debts, damages, costs, losses, obligations,
judgments, charges and expenses, of any nature whatsoever suffered or incurred
by them or any one thereof, in connection with any of the events described above
in subsections 18.2.1 through 18.2.5.
19. ENVIRONMENTAL INDEMNITY
19.1 INDEMNITY
The Borrower shall at all times protect, indemnify and hold harmless the
Lenders, the Agent and their directors, officers, employees and agents (for the
purpose of this Article, the "Lenders-Indemnified Parties") against and from
(and pay the full amount of) any and all liabilities, claims, suits, actions,
debts, damages, costs, losses, obligations, judgments, charges, and expenses, of
any nature whatsoever (for the purposes of this Article, collectively the
"Losses") suffered or incurred by the Lenders-Indemnified Parties, whether as
secured party under any of the Security Documents, as hypothecary creditor or
mortgagee in possession, or as successor-in-interest to the Borrower by
foreclosure deed, deed of taking of possession or deed in lieu of foreclosure or
taking of possession, or by any other means relating to the Borrower, under or
on account of the Environmental Laws, including the assertion of any Lien
thereunder other than a Permitted Encumbrance, with respect to:
19.1.1 the Release of any Contaminant on, from or upon any property of
the Borrower or any Unrestricted Subsidiary or any part thereof
or the presence of any Contaminant affecting the property of the
Borrower or of any Unrestricted Subsidiary or any part thereof;
19.1.2 any costs of removal or remedial action incurred by any federal,
provincial, state, municipal, local or other government or any
costs incurred by any other Person or damages from injury to,
destruction of, or loss of natural resources, including
reasonable costs of assessing such injury, destruction or loss
incurred in relation with the property of the Borrower or any
Unrestricted Subsidiary or any part thereof or the operations
and activities of the Borrower or any Unrestricted Subsidiary
pertaining to its business; and/or
19.1.3 liability for personal injury or property damage arising under
any statutory or civil law, private nuisance or for the carrying
on of an Environmental Activity at, near, or with respect to the
property of the Borrower or of any Unrestricted Subsidiary;
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<PAGE> 46
the Borrower's obligations under this Section shall arise upon the
Release of a Contaminant or the discovery of the presence of any Contaminant,
whether or not any federal agency or any provincial, state, municipal or local
environmental agency has taken or threatened any action in connection with the
Release or presence of any Contaminant on, from or upon the property of the
Borrower or of any Unrestricted Subsidiary or any part thereof.
19.2 RIGHTS OF THE LENDERS TO ACT
Following the Release of a Contaminant, or in the event of the presence
of any Contaminant affecting or relating to any part of the property of the
Borrower or of any Unrestricted Subsidiary which would have a Material Adverse
Effect, and/or the failure to comply with any of the requirements of any
applicable Environmental Law in respect to the activities of the Borrower or the
Unrestricted Subsidiaries, the non-compliance with which would have a Material
Adverse Effect, should the Borrower or any Unrestricted Subsidiary fail to abide
and comply with any final and binding order, judgment or instruction issued or
given by any court and/or competent environmental authority pursuant to any
applicable Environmental Law and fail to diligently and in good faith contest
such order, judgment or instruction within the time period prescribed in any
applicable Environmental Law, the Agent, acting in accordance with the
instructions of the Majority Lenders, may give written instructions to the
Borrower or any Unrestricted Subsidiary to cause the work required by such
order, judgment or instruction to be performed at the property of the Borrower
and/or take any and all other actions as the Agent shall deem necessary or
advisable in order to cure the Borrower's or any Unrestricted Subsidiary's
non-compliance. Should the Borrower or any Unrestricted Subsidiary fail to
diligently commence the implementation of the Agent's instructions within ten
(10) Business Days following the receipt by the Borrower or any Unrestricted
Subsidiary of said written instructions, the Agent, acting in accordance with
the instructions of the Majority Lenders, may, at their election, but without
the obligation to do so, cause to be performed or perform such work and/or
actions itself. Any amounts expended by the Agent in any of the foregoing
activities, shall be repayable by the Borrower or the Unrestricted Subsidiaries
upon the demand of the Agent and shall bear interest on a Prime Rate Basis
applicable to the Revolving Credit Facility and shall form part of the
Obligations.
19.3 ACKNOWLEDGEMENT FROM THE BORROWER
The Borrower acknowledges that the Lenders have agreed to enter into this
Agreement in reliance upon the Borrower's representations, warranties, and
covenants. For this reason, it is the intention of the Borrower and the Lenders
that the Borrower shall be personally liable for any liability or Indebtedness
arising under this Article. All covenants and indemnities under this Article
shall survive the repayment of the Revolving Loans indefinitely and shall
survive the transfer of any or all right, title and interest in and to any part
of the Charged Property by the Borrower to any party, whether or not affiliated
with the Borrower.
20. MISCELLANEOUS
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<PAGE> 47
20.1 NOTICES
Except as otherwise specified herein, all notices requests, demands or
other communications to or upon the respective parties hereto shall be deemed to
have been duly given or made to the party to which such notice, request, demand
or other communication is required or permitted to be given or made under this
Agreement, when delivered to such party (by certified mail, postage prepaid, or
by telegraph, telex, telecopier or hand delivery) at its address and attention
set forth with its signature below, or at such other address as any of the
parties hereto may hereafter notify the others in writing. No other method of
giving notice is hereby precluded.
20.2 AMENDMENTS AND WAIVERS
The rights and remedies of the Lenders under this Agreement and the
Security Documents shall be cumulative and not exclusive of any rights or
remedies which it would otherwise have and no failure or delay by the Agent or
the Lenders in exercising any right shall operate as a waiver thereof, nor shall
any single or partial exercise of any power or right preclude its other or
further exercise or the exercise of any other power or right. Subject to the
provisions set forth below with respect to amendments only, any term, covenant,
agreement or condition contained in this Agreement or the Security Documents may
be amended with the consent of the Agent, acting in accordance with the
instructions of the Majority Lenders, and the Borrower and such amendment shall
be binding upon all of the parties hereto and thereto, or compliance therewith
may be waived (either generally or in a particular instance and either
retroactively or prospectively) by the Agent, acting in accordance with the
instructions of the Majority Lenders, and such waiver shall be binding upon all
of the Lenders. Without the prior unanimous written consent of the Lenders, no
amendment shall:
20.2.1 affect the maximum amount of the Revolving Credit Facility set
forth under Section 2.1 or of the Commitment of any Lender, save
and except with respect to any modification to the Commitment of
any Lender resulting from the operation of the provisions of
Section 20.5, in which case, only the consent of the parties
involved in such operation shall be required to effect such
modification;
20.2.2 alter the agreed time for the payment of the principal of or
interest on the Revolving Loans or the amount of principal
thereof or reduce the rate of interest thereon;
20.2.3 permit any subordination of the principal of or interest of any
Revolving Loans;
20.2.4 reduce the amount of any fees to be paid to any Lender;
20.2.5 be made to the definition of the expression "Majority Lenders"
in Schedule 1.1;
20.2.6 be made to the provisions of any of the Security Documents;
20.2.7 release or permit the release of the whole or any part of the
Liens created under the Security Documents provided however that
where the Borrower makes a sale, alienation, assignment, lease
or other disposition of any asset affected by a Lien, to the
extent permitted under the Security Documents, and requests the
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<PAGE> 48
Agent to release the Liens created under the Security Documents
on the property so disposed of, the Agent shall be permitted to
grant such release without the prior written consent of the
Lenders or the Majority Lenders, or where, for the purposes of
accelerating the process of realization on the assets of the
Borrower subject to the Liens created under the Security
Documents, the Agent, acting in accordance with the instructions
of the Majority Lenders, determines that it is necessary or
useful to grant a release with respect to such Liens affecting
the assets which are subject to such process of realization, the
Agent shall be authorized to grant such release with the consent
only of the Majority Lenders;
20.2.9 be made to the definition of the expression "Revolving Period"
in Schedule 1.1; and
20.2.10 be made to the provisions of this Section 20.2;
Nothing contained in this Agreement, the Interlender Agreement, or the
Security Documents including, without limitation, the specific reference to
Lenders in certain provisions and to Majority Lenders in other provisions,
should be construed or interpreted as in any way limiting or restricting the
generality of the provisions of this Section. The parties hereto acknowledge and
agree that any waiver referred to in this Section, once issued by the Agent to
the Borrower in writing, for and on behalf of the Majority Lenders (or, in
connection with the elements described in subsections 20.2.1 to 20.2.9, for and
on behalf of all the Lenders), shall be binding upon all the parties hereto.
20.3 CALCULATIONS
In the absence of manifest error, any calculation or determination to be
made by the Agent or the Lenders under this Agreement or any of the Security
Documents, when made, shall be conclusive and shall constitute prima facie
evidence for all of the parties hereto.
20.4 ASSIGNMENTS BY THE BORROWER
The rights of the Borrower hereunder are declared to be purely personal
and may therefore not be assigned or transferred, nor can the Borrower assign or
transfer any of its obligations, any such assignment being null and void insofar
as the Lenders are concerned and rendering any balance then outstanding of the
Revolving Loans immediately due and payable at the option of the Lenders, and
relieving the Lenders from the obligation of making any or any further advances
hereunder.
20.5 ASSIGNMENTS BY THE LENDERS
Each of the Lenders may grant participations in, and sell, assign,
transfer or otherwise dispose of, all or any portion of the Revolving Loans and
the equivalent portion of its Commitment under the Revolving Credit Facility and
other obligations of such Lender under this Agreement to any financial
institution approved by the Borrower (which approval shall not be unreasonably
withheld or required where a Default or an Event of Default has occurred and is
continuing at the time of such assignment, transfer or disposal) which is not a
non-resident of Canada, within the meaning of the INCOME TAX ACT (Canada). Each
such disposition shall be effective upon the execution of an instrument, in form
and substance satisfactory to the Agent, by the transferee, the transferor, the
Borrower and the Agent and the
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<PAGE> 49
delivery of such instrument to the Borrower and the Agent in such capacity. The
Borrower hereby covenants and agrees not to unreasonably withhold its execution
of the aforesaid instrument.
Upon such execution and delivery, the Lender shall be released from its
Commitments and other obligations hereunder to the extent of such disposition
and such transferee shall for all purposes be a Lender party to this Agreement
and shall have all the rights and obligations of a Lender under this Agreement,
the Interlender Agreement, the Intercreditor Agreements and the Security
Documents and shall be entitled to the benefit of the provisions hereof and
thereof, to the same extent, as if it were an original party hereto and thereto,
and no further consent or action by the Borrower or the Lender shall be
required.
Without in any way limiting the generality of any of the foregoing, the
Borrower shall, at the request of the Agent execute and deliver to the Agent or
to the party or parties as the Agent may designate any and all further
instruments, use its best efforts to obtain any and all further authorizations
or approvals, and make any and all further registrations, filings or
notifications, as may be necessary or desirable to give full force and effect to
such disposition.
The Borrower does hereby authorize the assigning Lender to provide any
serious prospective assignees, on a confidential basis, with all financial
information and documents made available to such Lender by the Borrower, from
time to time.
20.6 JUDGMENT CURRENCY
If for the purpose of obtaining or enforcing judgment, it is necessary to
convert an amount due hereunder into Canadian Dollars, the rate of exchange
applied shall be that quoted by the Bank of Canada as the noon mid-market spot
rate for conversion of the original currency into Canadian Dollars on the
Business Day on which judgment is given.
If a fluctuation occurs in the exchange rate between the Business Day
prior to the date of judgment and the date of payment, the Borrower shall pay on
demand or, as the case may be, shall deduct from payment, the sum, if any,
necessary so that the sum paid in Canadian Dollars shall be equal to the sum due
in the other currency, after conversion at the spot rate quoted by the Bank of
Canada at noon at the time of payment. Any obligation of the Borrower under this
Section shall constitute a distinct debt and an obligation which is added to
those resulting from the judgment which may have been rendered.
20.7 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all such separate counterparts
shall together constitute but one and the same instrument.
20.8 SEVERABILITY
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without
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<PAGE> 50
invalidating the remaining provisions hereof in that jurisdiction or affecting
the validity or enforceability of such provision in any other jurisdiction.
20.9 REPLACEMENT OF COMMITMENT LETTER
The present Agreement replaces and supersedes the Commitment Letter and
all other verbal or oral agreements, understandings and undertakings between the
Lenders or any one thereof, and the Borrower relating to the Revolving Credit
Facility.
20.10 INCONSISTENCY WITH SECURITY DOCUMENTS
Unless otherwise herein provided, to the extent that any provision of
this Agreement is inconsistent with the provisions of the Interlender Agreement
or of any of the Security Documents, the provisions of this Agreement shall
prevail.
20.11 OBLIGATION TO PAY ABSOLUTE
The obligations of the Borrower to make payments on the Revolving Loans
as and when provided in this Agreement shall be unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement under
all circumstances without any right of compensation or set-off and
notwithstanding any defense, right of action or claim of any nature whatsoever
which the Borrower may at any time have or have had against the Lender, whether
in connection with this Agreement or otherwise.
20.12 FORMAL DATE
For the purpose of convenience, this Agreement may be referred to as
bearing formal date of March 31, 1999 irrespective of the actual date of its
execution.
20.13 ENGLISH LANGUAGE
The parties hereto have expressly required that this Agreement and all
deeds, documents and notices relating thereto be drafted in the English
language. Les parties aux presentes ont expressement exige que la presente
convention et tous les autres contrats, documents ou avis qui y sont afferents
soient rediges en langue anglaise.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers as of the date and in the place first
hereinabove mentioned.
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<PAGE> 51
GILDAN ACTIVEWEAR INC.
per:
per:
Address: 725 Montee de Liesse
Montreal, Quebec
H4T 1P5
To the attention of the: President
Telecopier: (514) 738-2269
NATIONAL BANK OF CANADA,
in its capacity as Lender
per:
per:
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<PAGE> 52
Address: Corporate Banking
1155 Metcalfe Street
5th Floor
Montreal, Quebec
H3B 4S9
To the attention of the: Manager
Telecopier: (514) 394-6073
LAURENTIAN BANK OF CANADA, in its capacity
as Lender
per:
per:
Address: 1981 McGill College Avenue
Suite 1485
Montreal, Quebec
H3A 3K3
To the attention of the: Principal Manager
Telecopier: (514) 284-4551
BANCA COMMERCIALE ITALIANA OF CANADA, in
its capacity as Lender
per:
per:
Address: 888 Sherbrooke Street West
Montreal, Quebec
H3A 1G3
To the attention of the: Vice-President
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<PAGE> 53
Telecopier: (514) 284-1860
CAISSE CENTRALE DESJARDINS DU QUEBEC,
in its capacity as Lender
per:
per:
Address: 1 Complexe Desjardins
Tour Sud, Suite 2822
Montreal, Quebec
H5B 1B3
To the attention of the: Manager
Telecopier: (514) 281-7083
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<PAGE> 54
NATIONAL BANK OF CANADA, in its capacity as Agent
per:
per:
Address: Syndication Department
1155 Metcalfe Street
Montreal, Quebec
H3B 4S9
To the attention of the: Manager
Telecopier: (514) 394-4240
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<PAGE> 55
SCHEDULE "A"
THE COMMITMENTS
---------------
<TABLE>
<S> <C>
LENDER COMMITMENT
NATIONAL BANK OF CANADA Cdn $50,000,000
LAURENTIAN BANK OF CANADA Cdn $20,000,000
BANCA COMMERCIALE ITALIANA OF CANADA Cdn $10,000,000
CAISSE CENTRALE DESJARDINS DU QUEBEC Cdn $10,000,000
TOTAL Cdn $90,000,000
</TABLE>
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<PAGE> 56
SCHEDULE 1.1
DEFINITIONS
"AFFILIATE" means a body corporate which is an affiliate within the meaning
given to such term as of the date hereof in the CANADA BUSINESS CORPORATIONS ACT
as well as a partnership or limited partnership that would be deemed, because of
the way the shares of its capital stock are held, to be an affiliate within the
meaning of said act if it were a corporation governed by said act ;
"AGENT" means National Bank of Canada, in its capacity as Agent for the
Lenders for the purposes of this Agreement, the Interlender Agreement, the
Security documents and the Intercreditor Agreements and includes any successor
to National Bank of Canada in such capacity;
"APPROVALS" shall have the meaning ascribed to it in Section 14.12;
"BA CDOR RATE" means, for any day, the average rate for banker's
acceptances denominated in Canadian Dollars having a maturity of 1 month which
appears on the Reuters Screen CDOR page as of 10:00 a.m., Montreal time, on such
day, or if such day is not a Business Day, then on the immediately preceding
Business Day. If for any such Business Day such rate does not appear on such
CDOR page, "BA CDOR Rate" shall mean, for such Business Day, the discount rate
(expressed as an annual percentage, rounded to the nearest fifth decimal point)
charged by money market jobbers for non-interest bearing bills of exchange
accepted by National Bank of Canada, having a maturity of 30 days and for a
nominal amount approximately equal to the aggregate principal amount outstanding
under the Revolving Credit Facility, in Canadian Dollars and in respect to which
interest is calculated on a Prime Rate Basis;
"BANK ACT DOCUMENTS" is the collective reference to the documents referred
to in Section 13.3, as same may be amended, supplemented or restated from time
to time;
"BANKER'S ACCEPTANCE" means (i) the standard form of term bill of exchange
used by each of the Lenders on which the Borrower has drawn and which is
accepted by such Lender; (ii) Discount Note, in all cases denominated in
Canadian Dollars or (iii) a depositary bill pursuant to the DEPOSITARY BILLS
AND NOTES ACT;
"BANKING DAY" means any Business Day which is also a day that is not a
legal holiday or a day on which banking institutions are authorized by Law or by
local proclamation to close in London, England;
"BARBADOS UNRESTRICTED SUBSIDIARIES" means Gildan Activewear (Barbados)
Inc. and Gildan Activewear SRL;
"B OF A CREDIT AGREEMENT" refers to that certain Amended and Restated Loan
Agreement, dated as of August 6, 1997, between Gildan Activewear Inc./Les
V#tements de Sports Gildan Inc., as borrower, and Bank of America, as lender as
same was amended, supplemented or restated from time to time;
"BORROWER" means Gildan Activewear Inc., a legal person incorporated under
the CANADA BUSINESS CORPORATIONS ACT, and includes any successor thereto;
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<PAGE> 57
"BORROWER'S ACCOUNT" means either one of the Canadian Dollar account or
U.S. Dollar account established on behalf of the Borrower by the Agent at the
Branch of Account pursuant to Section 3.3;
"BORROWING BASE" means, as at any time, as determined by the Agent, the
amount resulting from the calculation referred to in Section 2.2 hereof;
"BRANCH OF ACCOUNT" means the branch of the Agent located at 600 de La
Gauchetiere Street West, Montreal, Province of Quebec, H3B 4L8, or such other
office or branch of the Agent as the Agent may specify from time to time;
"BUSINESS DAY" means any day excluding Saturday, Sunday and any other day
which in Montreal, Canada, Toronto, Canada or New York (United States of
America) is a legal holiday or a day on which the Lenders are authorized by Law
or by local proclamation to close;
"CANADIAN DOLLAR ACCOUNT" means the Canadian Dollar account established on
behalf of the Borrower by the Agent at the Branch of Account pursuant to Section
3.3;
"CANADIAN DOLLARS" and "CDN $" mean the lawful currency of Canada;
"CDN PRIME RATE" means, for any day, a rate per annum equal to the greater
of (i) the National Bank of Canada's Prime Rate in effect on such day and (ii)
the BA CDOR Rate in effect on such day plus 1% per annum;
"CHARGED PROPERTY" refers collectively to all of the property and assets of
the Borrower (on a consolidated basis) which are subject to the Liens created by
the Security Documents;
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time;
"COMMITMENT" means the obligation of a Lender, with respect to the
Revolving Credit Facility, to make such Revolving Credit Facility (up to the
amount referred to in Schedule "A") available to the Borrower;
"COMMITMENT LETTER" means that certain term sheet issued by National Bank
of Canada, dated February 16, 1999;
"COMMONLY CONTROLLED ENTITY" means an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes the Borrower and which is
treated as a single employer under Section 414(b) or 414(c) of the Code;
provided that for purposes of Section 4.19 (and, insofar as they apply to said
Section, for purposes of the definitions of the terms used therein) the term
"Commonly Controlled Entity" shall include any entity, whether or not
incorporated, which, at any relevant time as to which the representations
contained therein are made, was under common control with any Subsidiary of the
Borrower within the meaning of Section 4001 of ERISA or was part of a group
which included any Subsidiary of the Borrower and which was at the time treated
as a single employer under Section 414(b)
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<PAGE> 58
or 414 (c) of the Code;
"CONTAMINANT" means, any pollutants, dangerous substances, liquid waste,
industrial waste, hauled liquid waste, toxic substances, hazardous wastes,
hazardous materials, hazardous substances or contaminants as defined in any
Environmental Law;
"CONTROL" means control within the meaning given to such term as of the
date hereof in the CANADA BUSINESS CORPORATIONS ACT;
"CONVERSION DATE" means, as the case may be, the date as of which a
currency conversion occurs or the date as of which any basis of calculating
interest on the whole or any part of the Revolving Loans is converted into
another or is continued on the same basis or the date as of which any part of
the Revolving Loans is converted into or continued as a Banker's Acceptance or
a Letter of Guarantee;
"CORPORATE GUARANTEE" refers to the corporate guarantee executed and
delivered by each of the Unrestricted Subsidiaries and Guarantor Subsidiaries
pursuant to Article 13 hereof under the terms of which each of the Unrestricted
Subsidiary and Guarantor Subsidiary solidarity and irrevocably guarantees the
payment of the Obligations and "CORPORATE GUARANTEES" is the collective
reference to such corporate guarantees;
"DEFAULT" means any of the events specified in Section 17.1, the occurrence
or failure to occur of which constitutes, or with the passage of time or the
giving of notice or both, would constitute an Event of Default;
"DERIVATIVE INSTRUMENTS" means documents executed with respect to a rate
swap transaction, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index option,
bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of these transactions and
any combination of these transactions);
"DISCOUNT" means if it is
(i) a term bill of exchange or a depositary bill accepted by a bank:
the difference between the face amount of such Banker's
Acceptance and the price at which such Banker's Acceptance could
be sold on the money market at the time of its issue, calculated
on the basis of the formula referred to in Schedule 10.1; and
(ii) a Discount Note: the average (rounded upwards, if necessary, to
the nearest one hundredth) of the discounts applicable to the
Banker's Acceptances accepted by each of the Lenders which is a
bank and issued on the same day as such Discount Note;
"DISCOUNT NOTE" means a note issued by the Borrower to a Lender which is
not a bank, having a rate of return equivalent to the Discount;
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"DISQUALIFIED ACCOUNT DEBTOR" means any account debtor of the Borrower or
of an Unrestricted Subsidiary with respect to which more than 50% of the total
amount of accounts receivable (other than Insured Eligible Accounts Receivable)
is owed to the Borrower or to an Unrestricted Subsidiary and remains outstanding
and unpaid for more than 90 days;
"EBITDA" means, for any given period, the net earnings before interest,
income tax expense, depreciation and amortization, excluding therefrom any
non-cash expense (including in the form of unrealized foreign exchange gains
and losses);
"ELIGIBLE INVENTORY" means all of the inventory of the Borrower (on a
consolidated basis) located in Canada, the United States of America and
Barbados, (valued at the lower of cost, determined using the first-in-first-out
method, replacement cost and net realizable value, but in no event valued at
greater than fair market value), which consists of raw materials (which shall
include all yarn, greige goods and dyed fabrics), and finished goods inventory
(but in no event work in process including piece-cut goods), which are subject
to the Liens created by the Security Documents, excluding therefrom (i) any
supplies, spare parts, goods returned or rejected by customers and are not
saleable, (ii) goods to be returned to suppliers, (iii) goods in transit except
those delivered free on board (FOB) once they have cleared customs and are
either in Canada or in the United States of America, and (iv) goods held under
consignment or subject to title retention agreements pending complete payment
or subject to any other special arrangement affecting the title of the Borrower
thereto;
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
from time to time thereunder;
"ENVIRONMENTAL ACTIVITY" means any activity, event or circumstance in
respect of a Contaminant, including, without limitation, its storage, use,
holding, collection, purchase, accumulation, assessment, generation,
manufacture, construction, processing, treatment, stabilization, disposition,
handling or transportation, or its Release, escape, leaching, dispersal or
migration into the natural environment, including the movement through or in
the air, soil (land surface or subsurface strata), surface water or
groundwater;
"ENVIRONMENTAL LAW" means any and all Laws relating to pollution or the
environment or any Environmental Activity;
"ENVIRONMENTAL PERMITS" means, collectively, all permits, licenses,
certificates, remediation orders and authorizations of and registrations with,
any of the environmental authorities pursuant to any of the Environmental Laws;
"EQUIVALENT" means the equivalent in any one currency of any value or sum
denominated or expressed in any other currency using the rate of exchange
referred to in Section 11.4, the whole as calculated by the Agent as at the
date that any such calculation is so required to be made;
"EVENT OF DEFAULT" shall have the meaning ascribed to it in Section 17.1;
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<PAGE> 60
"FEDERAL FUNDS EFFECTIVE RATE" means, on any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published the following
Business Day by the Federal Reserve Bank of New York or, if such rate is not
published for any day which is a Business Day, the average quotations for the
day for such transactions received by National Bank of Canada from three (3)
federal funds brokers of recognized standing selected by National Bank of
Canada;
"FIXED CHARGE COVERAGE RATIO" means, for any given period, the ratio of:
(i) EBITDA less capital expenditures funded from cash flow during such period;
over (ii) the sum of interest payments and principal repayments on Senior Debt
(excluding therefrom any such repayments made from proceeds derived from a
public issue of shares in the capital stock of the Borrower) made during such
period. This ratio shall be determined by using the aggregate financial results
of four consecutive quarters, namely the quarter ending on the date on which
this ratio is calculated and the three preceding quarters;
"FORMER PLAN" means any employee benefit plan in respect of which the
Borrower or a Commonly Controlled Entity could incur liability because of
Section 4069 or Section 4212(c) of ERISA;
"GUARANTEE AND SUBORDINATION AGREEMENT" refers to the guarantee and
subordination agreement to be entered into concurrently with the execution of
this Agreement among the Unrestricted Subsidiaries, the Guarantor Subsidiaries,
the Lenders, the Agent and the Borrower, as same may be amended, supplemented or
restated from time to time;
"GUARANTORS" refers collectively to the Unrestricted Subsidiaries and the
Guarantor Subsidiaries;
"GUARANTOR SUBSIDIARY" refers to either of Los Ang de San Jos#, S.A.
(currently in the process of changing its name to Gildan Activewear San Jos#,
S.A.), Nicole Progreso, S.A. (currently in the process of changing its name to
Gildan Activewear El Progreso, S.A.) or Sula Textiles S.A. de C.V. and Winners
Manufacturing, S.A. (following the execution of the present Agreement, these two
companies will be merged to form a company which will be named Gildan Activewear
San Miguel, S.A.) and any other wholly-owned Subsidiary of the Borrower that
delivers a Corporate Guarantee by becoming a party to the Guarantee and
Subordination Agreement;
"INDEBTEDNESS" includes, for any Person:
(i) obligations for borrowed money;
(ii) obligations under letters of credit or letters of guarantee or
obligations to financial institutions who issued such letters of
credit or letters of guarantee for the account of such Person;
(iii) obligations under banker's acceptances;
(iv) obligations representing the deferred purchase price of property
or services;
(v) obligations, whether or not assumed, secured by Liens on, or
payable out of the proceeds
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<PAGE> 61
or production from, property owned by such Person;
(vi) lease obligations which would be shown as a liability on a
balance sheet of such Person;
(vii) obligations under Derivative Instruments;
(viii) any other obligations which in accordance with generally accepted
accounting principles would constitute a liability on the balance
sheet of such Person;
(ix) obligations of another Person of the type set forth in paragraphs
(i) to (vii) above which such Person has guaranteed (except by
reason of endorsement for collection in the ordinary course of
business) or in respect of which such Person is liable,
contingently or otherwise, including, without limitation, liable
by way of agreement to purchase property or services, to provide
funds for payment, to supply funds to or otherwise invest in such
other Person, or otherwise to assure a creditor of such other
Person against loss;
"INSURED ELIGIBLE ACCOUNTS RECEIVABLE" means on a consolidated basis, all
of the Borrower's claims, book debts and accounts receivable which are subject
to the Liens created by the Security Documents for which the account debtor is
located in Canada, in the United States of America, in the United Kingdom or in
any other jurisdiction to be agreed upon by the Agent, acting upon instructions
from the Lenders, and whose payment is insured by an adequate receivable
insurance provider acceptable to the Agent, provided that the benefits of any
such insurance are specifically charged to and in favour of the Lenders, free
from any other lien and any such charge is duly accepted and acknowledged by
such insurance provider; provided, however, that the book value of the claims,
book debts and accounts receivable which shall be taken into consideration for
the purposes of this definition shall not in any event exceed in the aggregate
the maximum liability under such applicable receivable insurance agreement in
respect thereof and only for up to the principal amount of the insurance
coverage thereof;
"INTERCREDITOR AGREEMENTS" refers collectively to the subordination
agreements to be entered into concurrently with the execution of this Agreement
among the Lenders, the Agent, the Borrower and each of the Subordinated
Creditors, as same may be amended, supplemented or restated from time to time;
"INTERLENDER AGREEMENT" refers to the interlender agreement to be entered
into concurrently with the execution of this Agreement among the Lenders, the
Agent and the Borrower, as same may be amended, supplemented or restated from
time to time;
"LAW" means all applicable provisions of statutes, ordinances, decrees,
orders in council, rules, regulations and orders of governmental bodies and all
applicable orders and decrees of courts and arbitrators;
"LENDER" refers individually to any Person whose name is set forth in
Schedule "A" hereof as a Lender hereunder and shall include any successor or
assign of any such Person and "Lenders" is the collective reference to all such
Persons;
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<PAGE> 62
"LETTERS OF GUARANTEE" is the collective reference to any outstanding
letter of guarantee or any documentary, stand-by or other letter of credit, and
all renewals and substitutions therefor, denominated in Canadian Dollars or U.S.
Dollars, issued from time to time by the Lender that is also the Agent, for the
account of the Borrower under the Revolving Credit Facility in accordance with
the provisions hereof, and "Letter of Guarantee" means any one of the Letters of
Guarantee;
"LIBOR ADVANCE" means such portion of the principal amounts denominated in
U.S. Dollars and outstanding under the Revolving Credit Facility with respect to
which the Borrower has elected to pay interest on a Libor Basis;
"LIBOR BASIS" means the calculation of interest on the outstanding amount
of monies advanced in U.S. Dollars under the Revolving Credit Facility or any
portion thereof as provided under Section 6.1;
"LIBOR INTEREST PAYMENT DATE" means the last day of a Libor Interest Period
and, if such Libor Interest Period is longer than 90 days, the last day of every
period of 90 days after the beginning of such Libor Interest Period;
"LIBOR INTEREST PERIOD" means a period of at least 1 month and of no more
than 6 months, as selected by the Borrower, commencing the day on which a Libor
Advance is made or renewed and ending the last day of such period;
"LIBOR RATE" with respect to a Selected Amount, means the rate of interest,
rounded upwards, if necessary, to the nearest whole multiple of 1/16%, at which
National Bank of Canada, in accordance with its normal practice, would be
prepared to offer to leading banks in the London Interbank Market, for delivery
on each of the relevant Rollover Dates for a period equal to the relevant
Selected Maturity based on the number of days comprised therein, deposits in
U.S. Dollars of comparable amounts to such Selected Amount, to be outstanding
during such selected maturity, at or about 11:00 a.m., London time, two (2)
Banking Days prior to a drawdown date for an advance in U.S. Dollars;
"LIEN" means any interest in property or the income or profits therefrom
securing an obligation owed to, or a claim by, a Person other than the owner of
such property, whether such interest is based on common law, civil law, statute
or contract, and including, but not limited to, any security interest, hypothec,
mortgage, pledge, lien, claim, charge, cession, transfer, assignment,
encumbrance, title retention agreement, lessor's interest under a lease which
would be capitalized on a balance sheet of the owner of such property or
analogous instrument in, of, or on any property or the income or profits
therefrom of a Person, other than Liens incurred in the ordinary course of
business and for the purpose of carrying on same not in connection with the
borrowing of money or the obtaining of credit and which do not in the aggregate
materially impair the use, the income or profits therefrom, of the property
covered thereby in the operation of such Person's business;
"LOCK BOX AGREEMENT" means that certain Lock Box Agreement to be entered
into concurrently with the execution of this Agreement among the Agent and
Gildan Activewear SRL pursuant to which Gildan Activewear SRL will maintain a
Lock Box with the Agent, at the Agent's branch situated in
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<PAGE> 63
Chicago or any other branch which may be determined by the Agent from time to
time, where all payments under all U.S. accounts receivable will be deposited
and whereby standing irrevocable instructions will be given to wire the funds so
deposited, daily, to the Borrower's account in Montreal (Quebec);
"MAJORITY LENDERS" means, as at any time, Lenders to which no less than
66 2/3% of the Revolving Loans are owing or, if no Revolving Loans are then
outstanding, Lenders having no less than 66 2/3% of the Commitments, provided
however that for as long as there are less than three Lenders, "Majority
Lenders" means all Lenders;
"MATERIAL ADVERSE EFFECT" means the occurrence or the failure to occur of
any event or series of events which either singly or in the aggregate would have
a material adverse effect upon the business, assets, liabilities, financial
position or results of operations of the Borrower on a consolidated basis or of
any Unrestricted Subsidiary or on the ability of the Borrower or of any
Unrestricted Subsidiary to perform its obligations under this Agreement, or
under any of the Security Documents;
"MULTIEMPLOYEE PLAN" means a Plan which is s multiemployee plan as defined
in Section 4001(a)(3) of ERISA;
"NATIONAL BANK OF CANADA'S PRIME RATE" means, for any day, the rate of
interest, expressed as an annual rate, quoted or announced on such day by
National Bank of Canada in the City of Montreal as being its reference rate of
interest then in effect for determining interest rates on its commercial loans
made in Canada in Cdn $ by National Bank of Canada;
"NATIONAL BANK OF CANADA'S U.S. PRIME RATE" means, for any day, the rate of
interest, expressed as an annual rate, quoted or announced on such day by
National Bank of Canada in the City of Montreal as being its reference rate of
interest then in effect for determining interest rates on its commercial loans
made in Canada in U.S. $ by National Bank of Canada;
"OBLIGATIONS" shall have the meaning ascribed to it in Article 13 hereof;
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA and any successor thereto;
"PERMITTED ENCUMBRANCES" means the following Liens and other encumbrances,
excluding the security granted by the Borrower or an Unrestricted Subsidiary to
the Lenders pursuant to Article 13 hereof:
(i) created by workers compensation, unemployment insurance and other
social security legislation for liabilities not yet overdue;
(ii) for taxes or assessments not yet due or for which payment is not
yet delinquent;
(iii) for taxes or assessments, due or past due and payable, the
validity of which is being contested in
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good faith by the Borrower by appropriate proceedings timely
instituted; provided, however, that where taxes must be paid or
deposited in whole or in part subject to resolution of such
contest in order to stay enforcement of such lien, such taxes or
required part thereof shall have been so paid or deposited; and
(iv) for services performed for or materials delivered to the Borrower
for which payment is not yet delinquent, and attachments,
judgments and other similar liens arising in connection with
services performed or materials delivered; provided, however,
that the execution or other enforcement of such liens is
effectively stayed and the claims secured thereby are being
contested in good faith by appropriate proceedings and for which
the Borrower or any of its Subsidiaries has deposited with the
Agent a letter of credit or a suretyship satisfactory to the
Agent in an amount sufficient to pay in principal, interest and
costs whatever may be owing should such contestation be
unsuccessful;
(v) the Liens permitted under Section 16.7;
"PERSON" means any corporation, natural person, firm, joint venture,
partnership, trust, unincorporated organization, government or any department,
agency or instrumentality of any government;
"PLAN" means any employee benefit plan which is covered by ERISA and in
respect of which the Borrower or a Commonly Controlled Entity is an "employer"
as defined in Section 3(5) of ERISA;
"PRIME RATE BASIS" with respect to any principal amount denominated in
Canadian Dollars, means the calculation of interest as provided under Section
5.1 and, with respect to any principal amount denominated in U.S. Dollars, means
the calculation of interest as provided under Section 5.2;
"PRIOR CLAIM" means any claim which, by the effect of law, entitles its
beneficiary to be paid in priority to the obligations secured by the Security
Documents, whether resulting from conventional security or from a prior claim,
legal hypothec, trust or presumed trust or any other mechanism or right
benefiting the holder of such claim (a non-exhaustive list is annexed hereto as
Schedule 2.2.4);
"PRO RATA SHARE" with respect to any Lender, means the ratio of the
Commitment of such Lender to the Commitments;
"PURCHASE MONEY OBLIGATION" means all obligations of any Person (i)
consisting of the deferred purchase price of any property, conditional sale
obligation, obligations under any kind of title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business) and
other purchase money obligation, in each case where the maturity of such
obligations does not exceed the anticipated useful life of the property being
acquired or financed and (ii) incurred to finance the acquisition or
construction of such property, including additions and improvements thereto; and
(iii) lease and leasing agreements that are capitalized in the balance sheet of
the lessee of the leased property; provided however that any Lien arising in
connection with any Purchase Money Obligations shall be
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<PAGE> 65
limited to the specified asset being leased, financed or acquired, including
additions and improvements thereto;
"RELEASE" means discharge, spray, inject, inoculate, abandon, deposit,
spill, leak, seep, pour, emit, empty, throw, dump, place and exhaust, and when
used as a noun has a similar meaning;
"RELEVANT MARGIN" has the meaning ascribed to it in Schedule 10.1;
"REORGANIZATION" means the Reorganization of the Borrower whereby future
sales to customers situated outside of Canada will be made by Gildan Activewear
SRL in virtue of the personnel and resources put together by Gildan Activewear
SRL in Barbados; an up-to-date description of the Reorganization is set forth in
the March 30, 1999 internal memorandum enclosed herewith under Schedule 16.16;
"REORGANIZATION DOCUMENTS" refers to the documents outlined in subsection
16.16.4;
"REPORTABLE EVENT" means any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty-day notice period is
waived under Sections .13, .14, .16,.18, 19 or .20 of PBGC Reg. Section 4043 or
any successor regulation thereto;
"REVOLVING CREDIT FACILITY" means the credit facility referred to in
Section 2.1;
"REVOLVING LOANS" is the collective reference to the aggregate of the
outstanding amount advanced to the Borrower by the Lenders under the Revolving
Credit Facility (including by way of the overdraft referred to under subsection
3.1.1) and includes such portion outstanding by way of Banker's Acceptances and
Letters of Guarantee;
"REVOLVING PERIOD" means the period commencing on the date of execution of
this Agreement and terminating at the earlier of:
(1) 3:00 P.M., Montreal time, on the third anniversary of such date. By
written notice to the Agent, the Borrower may request that the
Lenders extend the Revolving Period a first time to the date of
the fourth anniversary of the Credit agreement, and thereafter
for additional individual 12-month periods, each such period to
commence on the day following the last day of the Revolving
Period then in effect, each such period to commence on the day
following the last day of the Revolving Period then in effect.
Any such extension request must be received by the Agent no later
than 120 days before the last day of the effective Revolving
Period accompanied by the latest financial statements and related
information stipulated in Section 16.12, except to the extent
that same were already delivered to the Agent. The decision as to
whether to extend the Revolving Period shall be subject to the
unanimous affirmative decision of the Lenders, failing which,
such decision shall be deemed to be to the effect of not
extending such period. The Agent shall then notify the Borrower
of the Lenders decision no later than 90 days before the last day
of the effective Revolving Period. In the event that the Borrower
fails to deliver either the aforementioned extension request or
the financial information or both within the delays stipulated
above, it shall thereupon lose any right to request an extension
of the Revolving Period for the balance of
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such period and the Revolving Period, subject to subparagraph 2
below shall terminate at the close of business in Montreal of the
last day of the Revolving Period then in effect. The failure by
the Agent to notify the Borrower in writing, of the decision of
the Lenders ought not, under any circumstances, to be construed
or interpreted as a consent by the Lenders to such an extension;
(2) the date that the Revolving Credit Facility is fully terminated
and cancelled as provided under the provisions of Sections 2.4 or
17.2;
"RISK VALUE OF DERIVATIVE INSTRUMENTS" means costs incurred by a Lender
further to the breaking or assignment of a Derivative Instrument to which the
Borrower is a party, as established from time to time in good faith by such
Lender based on the market value, but in case of Default, on the basis of the
formula proposed by the "ISDA Master Agreement" (1992 Version or any other
subsequent version) of the International Swaps and Derivatives Association, Inc.
under Section 6(e) "Payments on Early Termination" in the case of currency or
interest exchange agreements or other agreements governed by such agreement;
"ROLLOVER DATE" means with respect to Banker's Acceptance, Libor Advance or
Letter of Guarantee, the Conversion Date or the date of any advance where the
Borrower has elected that such advance be made by way of Banker's Acceptances or
Letters of Guarantee, or that interest thereon be calculated on a Libor Basis,
as the case may be;
"SALE AND LEASEBACK TRANSACTION", with respect to any Person, means any
transaction or series of transactions whereby such Person sells, transfers or
otherwise disposes of any of its properties and assets to another Person and
within one (1) year of such sale, transfer or other disposition such Person
leases or rents as lessee, the same property;
"SECURITY DOCUMENTS" is the collective reference to the documents
contemplated in Article 13, as same may be amended, supplemented or restated
from time to time;
"SELECTED AMOUNT" means, with respect to:
(1) Banker's Acceptances, the whole or any portion of any advance in
Canadian Dollars under the Revolving Credit Facility or any
portion of the Revolving Loans outstanding in Canadian Dollars,
which the Borrower has requested to be or become outstanding by
way of Banker's Acceptances;
(2) Libor Advances, the whole or any portion of any advance in U.S.
Dollars under the Revolving Credit Facility or any portion of the
Revolving Loans outstanding in U.S. Dollars, which the Borrower
has requested that interest payable thereon be calculated on a
Libor Basis;
(3) Letters of Guarantee, the whole or any portion of any advance in
Canadian Dollars or U.S. Dollars under the Revolving Credit
Facility or any portion of the Revolving Loans outstanding in
Canadian Dollars or U.S. Dollars, which the Borrower has
requested to be or become outstanding by way of Letters of
Guarantee;
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"SELECTED MATURITY" means, with respect to any Banker's Acceptance, Libor
Advance or Letter of Guarantee, the maturities (number of days) elected by the
Borrower under the provisions of Sections 6.4, 8.2 and 9.3, as the case may be;
"SENIOR DEBT" means, with respect to the Borrower, on a consolidated
basis, the sum of all Indebtedness for borrowed money (including corporate
guarantees for borrowed money with the exception however of corporate
guarantees by the Borrower or any Unrestricted Subsidiary in support of
Indebtedness for borrowed money by the Borrower or an Unrestricted Subsidiary)
but excluding Subordinated Debt. For the purposes set forth herein,
Indebtedness for borrowed money shall include, without limitation:
(i) obligations for borrowed money; (ii) obligations under letters of credit or
letters of guarantee or obligations to financial institutions who issued such
letters of credit or letters of guarantee for the account of such Person;
(iii) obligations under banker's acceptances, depository bills or depository
notes (as these latter two expressions are defined in the DEPOSITORY BILLS AND
NOTES ACT (Canada); (iv) Purchase Money Obligations; (v) obligations evidenced
by bonds, debentures or promissory notes; (vi) redeemable shares of its capital
stock which are either redeemable at the option of the holder thereof, are
redeemable at a fixed date or are redeemable during fixed intervals (the amount
of Indebtedness for borrowed money of any such capital stock shall be the
maximum fixed redemption or repurchase price therefor); and (vii) the lesser of
the fair market value of the property subject to a Sale and Leaseback
Transaction and the total net amount of rent required to be paid under such
sale and leaseback transaction;
"SENIOR DEBT TO EBITDA RATIO" means, for any given period, the ratio of
Senior Debt over EBITDA. This ratio shall be determined by using the aggregate
financial results of four consecutive quarters, namely the quarter ending on
the date on which this ratio is calculated and the three preceding quarters;
"SHAREHOLDERS' EQUITY" means the sum of all issued and fully paid capital
stock of the Borrower at stated value, paid-in capital surplus, contributed
capital and retained earnings, but excluding any deferred taxes and intangibles
(an asset having no physical substance such as goodwill, patents, copyrights,
trademarks, franchises, etc.);
"SINGLE EMPLOYER PLAN" means any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan;
"SODEX" means NBC Export Development Corporation Inc.;
"SUBORDINATED CREDITORS" means Fonds de solidarite des travailleurs du
Quebec (F.T.Q.) and Capital d'Amerique CDPQ Inc.;
"SUBORDINATED DEBT" means any indebtedness of the Borrower to any person,
in principal, interest and fees, which is expressly postponed and made
subordinate and junior in right of payment to the Revolving Loans under the
terms and conditions satisfactory to the Agent and the Lenders, including the
indebtedness of the Borrower to Fonds de solidarite des travailleurs du Quebec
(F.T.Q.) and to Capital d'Amerique CDPQ Inc.;
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"SUBSIDIARY" means a subsidiary within the meaning given to such term as of
the date hereof in the CANADA BUSINESS CORPORATIONS ACT as well as a partnership
or limited partnership that would be deemed, because of the way the partnership
units are held, to be a subsidiary within the meaning of said act if it were a
corporation governed by said act;
"TOTAL CAPITALIZATION" means the sum of Senior Debt, Shareholders' Equity
and Subordinated Debt;
"U.S. DOLLAR ACCOUNT" means the U.S. Dollar Account established on behalf
of the Borrower by the Agent at the Branch of Account pursuant to Section 3.3;
"U.S. DOLLARS" and "U.S. $" means the lawful currency of the United States
of America in same day immediately available funds or if such funds are not
available, the form of money of the United States of America that is customarily
used in the settlement of international banking transactions on the day any
payment is due to be made hereunder;
"U.S. PRIME RATE" means, for any day, a rate per annum equal to the greater
of (i) the National Bank of Canada's U.S. Prime Rate in effect on such day and
(ii) the Federal Funds Effective Rate on such day plus 1% per annum;
"U.S. UNRESTRICTED SUBSIDIARIES" means Gildan Activewear Miami, Inc. and
Gildan Activewear Malone, Inc.;
"UNDERFUNDING" means an excess of the present value of all accumulated
benefits under a Plan (based on those assumptions used to fund such Plan), over
the aggregate market value of the assets of such plan allocable to such
accumulated benefits, determined in each case as of the most recent annual
valuation date:
"UNINSURED ELIGIBLE ACCOUNTS RECEIVABLE" means on a consolidated basis, all
of the Borrower's claims, book debts and accounts receivable which are subject
to the Liens created by the Security Documents, for which the account debtor is
not an affiliate of the Borrower and is located in Canada or in the United
States of America or, if located in another jurisdiction, for which the
applicable claim, book debt or account receivable is supported by a letter of
credit acceptable to the Agent that has been assigned or charged to the Agent or
the Lenders and which are outstanding for less than 90 days, other than such
claims, book debts and accounts receivable which are being disputed by the
account debtors or are considered to constitute bad debts under generally
accepted accounting principles;
"UNRESTRICTED SUBSIDIARY" refers to either Gildan Activewear Properties
(BVI) Inc.), Gildan Activewear Miami, Inc., Gildan Activewear Barbados Inc.,
Gildan Activewear SRL, Gildan Activewear Malone, Inc. and any other direct or
indirect wholly-owned Subsidiaries of the Borrower acceptable to the Agent
(acting upon the instructions of the Majority Lenders) that have provided their
corporate guarantee and supporting security as required in Article 13.
- 68 -
<PAGE> 69
SCHEDULE 2.2.4
PRIOR CLAIMS
NON LIMITATIVE LIST
Claims which are due and payable and which are not contested in good faith
and by appropriate measures before a court or GOVERNMENTAL AUTHORITY:
(i) for deductions at source pursuant to the INCOME TAX ACT (R.S.C.
(1985), 5th supp., ch. 1 as amended);
(ii) for deductions at source, employer contributions, interest,
penalties or other sums pursuant to Part III of the EMPLOYMENT
INSURANCE ACT (S.C. 1996, ch. 23);
(iii) for deductions at source, employer contributions, interests,
penalties or other sums payable pursuant to the CANADA PENSION
PLAN ACT (R.S.C. (1985), ch. C-8);
(iv) pursuant to a fiscal act within the meaning of Section 1 of AN
ACT RESPECTING THE MINISTERE DU REVENU (R.S.Q., ch. M-31);
(v) for assessments pursuant to AN ACT RESPECTING THE QUEBEC PENSION
PLAN (R.S.Q., ch. R-9, Sections 50, 59 and 63);
(vi) for assessments pursuant to AN ACT RESPECTING INDUSTRIAL
ACCIDENTS AND OCCUPATIONAL DISEASES (R.S.Q., ch. A-3.001,
Section 324); and
(vii) for taxes, income taxes or duties owed to a municipality or other
body corporate of public law.
- 69 -
<PAGE> 70
SCHEDULE 3.1.2
DRAW DOWN NOTICE
(Letterhead)
(Date)
NATIONAL BANK OF CANADA, as Agent
Syndication Department
1155 Metcalfe Street
5th Floor
Montreal, Quebec
H3B 4S9
Gentlemen:
We refer you to that certain Cdn $90,000,000 credit agreement entered into
among ourselves, as Borrower, National Bank of Canada and the lenders named
therein, as Lenders, and National Bank of Canada, as Agent, bearing formal date
of March 31, 1999, as same may be amended, supplemented or restated at any time
and from time to time (the "Credit Agreement").
Unless there be something in the subject or the context inconsistent
therewith, all capitalized terms and expressions used herein shall have the same
meaning as that ascribed to them in the Credit Agreement.
1. In connection with the Revolving Credit Facility and pursuant to
subsection 3.1.2 of the Credit Agreement, we hereby request that as
of , a draw down be made as follows:
<TABLE>
<S> <C>
(a) Prime Rate Advance
Amount: Cdn $
Amount: U.S. $
(b) Banker's Acceptance
Face Amount: Cdn $
________________________
</TABLE>
- 70 -
<PAGE> 71
<TABLE>
<S> <C>
Period: ___________________________ days
(c) Libor Advance
Amount: U.S. $__________________________
Period: ___________________________ days
(d) Letter of Guarantee
Face Amount: $ ______________________________
U.S. $__________________________
Period: ___________________________ days
</TABLE>
Yours very truly,
GILDAN ACTIVEWEAR INC.
per:
per:
- 71 -
<PAGE> 72
SCHEDULE 4.1.1
CLOSING AGENDA
(SEE DOCUMENT ANNEXED HERETO)
- 72 -
<PAGE> 73
SCHEDULE 10.1
RELEVANT MARGIN AND STAND-BY FEE
1. The "RELEVANT MARGIN" shall fluctuate with the results of the Senior Debt
to EBITDA Ratio as follows:
<TABLE>
<CAPTION>
Level Senior Debt to Agent's Prime Rate Agent's Agent's Libor LG Fees to
EBITDA Ratio Advances Discount Rate Rate Advance (90%
(R) (Cdn, U.S.) B.A. Stamping $ distributed to
Fees Lenders)
<S> <C> <C> <C> <C> <C>
I R < 2.00 +0.50% 1.50% +1.50% 1.50%
II 2.00 < R < 3.00 +0.875% 1.875% +1.875% 1.875%
III 3.00 < R +1.25% 2.25% +2.25% 2.25%
</TABLE>
[FN]
(1) other than documentary letters of credit
</FN>
The interest rates and stamping fees mentioned hereinabove shall be reduced
by 0.25 % at every level, if the Senior Debt to Total Capitalization Ratio
is maintained below 0.50 : 1.00 for four consecutive quarters.
2. "DISCOUNT" means:
F(1) - F
___
F + ( Rate(2) x n(3)/365)
3. The "STAND-BY FEE" shall fluctuate as follows:
(a) 0.25 % if the Revolving Credit Facility is utilized in excess
of 66%;
(b) 0.35 % if the Revolving Credit Facility is utilized between 33% and
66%;
________________________
[FN]
1 Face amount of the Banker's Acceptance.
2 Discount rate offered to the acceptor {average, rounded-off upwards
to the nearest one hundredth, of discount rates offered to National
Bank of Canada) by the money market at the time of issue for a
banker's acceptance for the selected period.
3 Number of days until maturity of the Banker's Acceptance.
</FN>
- 73 -
<PAGE> 74
(c) 0.45 % if the Revolving Credit Facility is utilized below 33%.
(d) *****
(e) Any variation of the Relevant Margins resulting from the above
variations in the Senior Debt to EBITDA Ratio shall become effective
on the day of the receipt by the Agent of the quarterly consolidated
financial statements of the Borrower and certificate of the Vice
President Finance mentioned in 15.12.1 of this Agreement, but at the
latest on the 60th day following the end of such quarter. Such
variation shall apply to the Prime Rate Advances and Libor Advances
outstanding at the time of the variations, but only to the BA's to
be issued after the variation in the Relevant Margin has occurred
and to the fees on Letters of Guarantee payable after such date.
- 74 -
<PAGE> 75
SCHEDULE 11.1
CONVERSION NOTICE
(letterhead of the Borrower)
Date:
NATIONAL BANK OF CANADA, as Agent
Syndication Department
1155 Metcalfe Street
5th Floor
Montreal, Quebec
H3B 4S9
Gentlemen:
We refer to that certain Cdn $90,000,000 credit agreement entered into
among ourselves, as Borrower, National Bank of Canada and the lenders named
therein, as Lenders, and National Bank of Canada, as Agent, bearing formal date
of March 31, 1999, as same may be amended, supplemented or restated at any time
and from time to time (the "Credit Agreement").
Unless there be something in the subject or the context inconsistent
therewith, all capitalized terms and expressions used herein shall have the same
meaning as that ascribed to them in the Credit Agreement.
Pursuant to Section 11.1 of the Credit Agreement, we hereby request the
following:
1. In connection with the Revolving Credit Facility, we hereby request
that as of , a sufficient amount outstanding by way of [Prime
Rate Advance, Banker's Acceptance or Libor Advance] be converted or
continued into:
<TABLE>
<S> <C>
(a) Prime Rate Advance
Amount U.S.$_______________
$_______________
(b) Banker's Acceptance
Face Amount $_______________
Period ______________ days
</TABLE>
- 75 -
<PAGE> 76
<TABLE>
<S> <C>
(c) Libor Advance
Amount U.S.$_______________
Period ______________ days
(d) Letter of Guarantee
Face Amount U.S.$_______________
$_______________
Period ______________ days
</TABLE>
Yours truly,
GILDAN ACTIVEWEAR INC.
per:
per:
- 76 -
<PAGE> 77
SCHEDULE 14.8
TAX MATTERS
- NIL -
- 77 -
<PAGE> 78
SCHEDULE 14.11
MATERIAL CONTRACTS
[TO BE COMPLETED]
- 78 -
<PAGE> 79
SCHEDULE 14.13
ENVIRONMENTAL MATTERS
[TO BE COMPLETED]
- 79 -
<PAGE> 80
SCHEDULE 14.14
SUBSIDIARIES
[TO BE COMPLETED]
- 80 -
<PAGE> 81
SCHEDULE 14.15
PLACES OF BUSINESS
[TO BE COMPLETED]
- 81 -
<PAGE> 82
SCHEDULE 15.12.1
QUARTERLY CERTIFICATE
(Letterhead of Gildan Activewear Inc.)
TO: NATIONAL BANK OF CANADA, as Agent
FROM: GILDAN ACTIVEWEAR INC.
For the quarter ending:
This certificate is delivered to you pursuant to the provisions of
subsection 15.12.1 of the credit agreement bearing formal date of March 31, 1999
(the "Credit Agreement") among the Borrower, the Lenders and National Bank of
Canada, as Agent, as same may be amended, supplemented or restated at any time
and from time to time.
All capitalized terms and expressions used in this certificate have the
meanings ascribed to them in the Credit Agreement.
As of the Borrower, I hereby confirm that as of :
(i) SENIOR DEBT TO EBITDA RATIO (<3.75: 1.00 up to
including September 29, 1999 and <3.25: 1.00
thereafter)
The Borrower's Senior Debt to EBITDA Ratio was , calculated as
follows:
(a) obligations for borrowed money $_______________(A)
(b) obligations under letters of $_______________(B)
credit or letters of guarantee or
obligations to financial
institutions who issued such
letters of credit or letters of
guarantee for the account of such
Person
(c) obligations under banker's $_______________(C)
acceptances, depository bills or
depository note
- 82 -
<PAGE> 83
(d) Purchase Money Obligations $_______________(D)
(e) obligations evidenced by bonds, $_______________(E)
debentures or promissory notes
(f) redeemable shares of its capital $_______________(F)
stock which are either redeemable
at the option of the holder
thereof, are redeemable at a
fixed date or are redeemable
during fixed intervals
(g) the lesser of the faire market $_______________(G)
value of the property subject to
a sale and leaseback transaction
and the total net amount of rent
required to be paid under such
sale and leaseback transaction
(h) (A) + (B) + (C) + (D) +(E) + (F) + (G) $_______________(H)
(i) Net earnings before interest $_______________(I)
(j) Income tax expenses $_______________(J)
(k) Depreciation and amortization $_______________(K)
expenses (excluding any non-cash
expense)
(l) EBITDA [(I) + (J) + (K)] $_______________(L)
(m) (H) divided by (L) _______________
(ii) Fixed Charge Coverage Ratio
(>2.00: 1.00)
The Borrower's Fixed Charge Coverage Ratio was _______________,
calculated as follows:
(a) EBITDA $_______________(A)
(b) Capital expenditures (funded from $_______________(B)
cash flows during such period)
(c) (A) - (B) $_______________(C)
(d) Interest payments on Senior Debt $_______________(D)
made during said period by the
Borrower
- 83 -
<PAGE> 84
(e) The principal repayments of Senior $_______________(E)
Debt made during said period by the
Borrower and not made from proceeds
derived from a public issue of shares
in the capital stock of the Borrower
(f) (D) + (E) $_______________(F)
(g) (C) divided by (F) $_______________(G)
(iii) Senior Debt to Total Capitalization Ratio
(0.65 : 1.00 up to and including
September 29, 1999 and 0.6: 1.00 thereafter)
The Borrower's Senior Debt to Total
Capitalization Ratio was_______________,
calculated as follows:
(a) Senior Debt $_______________(A)
(b) Shareholders' Equity $_______________(B)
(c) Subordinated Debt $_______________(C)
(d) (A) divided by [(A) + (B) + (C)] _______________
Dated:
By:
Title:
- 84 -
<PAGE> 85
SCHEDULE 15.12.2
MONTHLY CERTIFICATE
(Letterhead of Gildan Activewear Inc.)
TO: NATIONAL BANK OF CANADA, as Agent
FROM: GILDAN ACTIVEWEAR INC.
For the month of:
This certificate is delivered to you pursuant to the provisions of
subsection 15.12.2 of the credit agreement bearing formal date of March 31, 1999
(the "Credit Agreement") among the Borrower, the Lenders and National Bank of
Canada, as Agent, as same may be amended, supplemented or restated at any time
and from time to time.
All capitalized terms and expressions used in this certificate have the
meanings ascribed to them in the Credit Agreement.
1. As of the Borrower, I hereby confirm that as of , the maximum
amount available under the Revolving Credit Facility is $ ,
calculated, as provided by section 2.2 of the Credit Agreement, as follows:
<TABLE>
<S> <C>
Authorized amount Cdn $90,000,000 (A)
the aggregate net book value of the Borrower's Insured
Eligible Accounts Receivable (see appendix 1); _______________ (B)
the net book value of the Borrower's Uninsured
Eligible Accounts Receivable (see appendix 2); _______________ (C)
The aggregate of all Uninsured Eligible Accounts
Receivable that are owed by Disqualified Debtor
(see appendix 3) _______________ (D)
the lesser of Cdn $1,000,000 and (D) _______________ (E)
an amount equal to 60 % of the net book value of the
Borrower's Eligible Inventory (see appendix 4); _______________ (F)
</TABLE>
- 85 -
<PAGE> 86
<TABLE>
<S> <C>
the lesser of Cdn $45,000,000 and (F) _______(G)
the aggregate amount of liabilities owing by the Borrower or _______(H)
an Unrestricted Subsidiary, the non-payment of which shall
or may result in the creation of a Lien or other claim ranking
in priority to any Liens of the Lenders under Security
Documents including, without limitation, Prior Claims
(see appendix 5);
80% of (B) + 75% [(C) - (E)] + (G) - (H) _______(I)
Amount available: the lesser of (A) and (J) __________
</TABLE>
Dated:
By:
Title:
- 86 -
<PAGE> 87
APPENDIX 1 TO THE MONTHLY CERTIFICATE
INSURED ELIGIBLE ACCOUNTS RECEIVABLE
------------------------------------
[TO BE COMPLETED WITH RESPECT TO THE BORROWER AND EACH UNRESTRICTED SUBSIDIARY]
<TABLE>
<CAPTION>
AMOUT DUE INSURANCE AGING (BY MULTIPLES
NAME OF CLIENT COUNTRY OF ORIGIN (EXPRESSED IN CDN $) PROVIDER INSURANCE COVERAGE OF 30 DAYS)
<S> <C> <C> <C> <C> <C>
(%) AMOUNT
TOTAL CDN $
</TABLE>
- 87 -
<PAGE> 88
APPENDIX 2 TO THE MONTHLY CERTIFICATE
UNINSURED ELIGIBLE ACCOUNTS RECEIVABLE
[TO BE COMPLETED WITH RESPECT TO THE BORROWER AND EACH UNRESTRICTED SUBSIDIARY]
<TABLE>
<CAPTION>
AGSD (NUMBER OF DAYS)
AMOUNT
(EXPRESSED MORE THAN
NAME OF CLIENT COUNTRY OF ORIGIN IN CDN $ 30 60 90 90
<S> <C> <C> <C> <C> <C> <S>
</TABLE>
- 88 -
<PAGE> 89
APPENDIX 3 TO THE MONTHLY CERTIFICATE
UNINSURED ELIGIBLE ACCOUNTS RECEIVABLE
OWED BY DISQUALIFIED DEBTOR
[TO BE COMPLETED WITH RESPECT TO THE BORROWER AND EACH UNRESTRICTED SUBSIDIARY]
<TABLE>
<CAPTION>
AMOUNT DUE
(EXPRESSED AR AGED LESS THAN AR AGED MORE THAN
NAME OF CLIENT COUNTRY OF ORIGIN IN CDN $) 90 DAYS 90 DAYS
<S> <C> <C> <C> <C>
</TABLE>
- 89 -
<PAGE> 90
APPENDIX 4 TO THE MONTHLY CERTIFICATE
ELIGIBLE INVENTORY
[TO BE COMPLETED WITH RESPECT TO THE BORROWER AND EACH UNRESTRICTED
SUBSIDIARY 1]
<TABLE>
<CAPTION>
BOOK VALUE
DESCRIPTION OF INVENTORY (EXPRESSED IN CDN $) LOCATION
<S> <C> <C>
</TABLE>
- 90 -
<PAGE> 91
APPENDIX 5 TO THE MONTHLY CERTIFICATE
PRIOR CLAIMS
[TO BE COMPLETED WITH RESPECT TO THE BORROWER AND EACH UNRESTRICTED
SUBSIDIARIES]
- 91 -
<PAGE> 92
SCHEDULE 15.12.3
ANNUAL CERTIFICATE
(YEAR ENDED ( DATE ))
TO: NATIONAL BANK OF CANADA
FROM: GILDAN ACTIVEWEAR INC. (the "Borrower")
This certificate of the Vice-President Finance is delivered to you under
subsection 15.12.3 of the credit agreement bearing formal date of March 31, 1999
(the "Credit Agreement") among the Borrower, National Bank of Canada and the
Lenders named therein, as Lenders, and National Bank of Canada, as Agent, as
same may be amended, supplemented or restated at any time and from time to time.
All capitalized terms and expressions used in this Certificate have the
meanings ascribed to them in the Credit Agreement.
We are respectively the [and] of the Borrower and we, in such capacity,
hereby certify to you, as follows:
(i) that we have taken cognizance of all the terms of the Credit
Agreement, the Security Documents and of the contracts, agreements
and deeds ancillary thereto and of all deeds and agreements
governing the borrowings of the Borrower; and
(ii) that we have taken cognizance and reviewed the transactions,
operations and status of business of the Borrower, since the last
certificate given to you or, as the case may be, since the
execution of the Credit Agreement] and that all conditions and
requirements of the Credit Agreement, the Security Documents and of
the contracts, agreements and deeds ancillary thereto and of all
other deeds or agreements governing the borrowings of the Borrower,
have been accomplished and satisfied and that [we do not know of the
existence, as of the date of this certificate, of a condition or of
any fact whatsoever, constituting or having constituted a default or
an event of default under the terms of the aforementioned agreements
or deeds or which would, after notices or by the simple laps of
time, constitute an event of default] or [IF SUCH CONDITION EXISTS
OR HAS EXISTED DURING THE PERIOD COVERED BY THIS CERTIFICATE, THEN
SPECIFYING ITS NATURE AND DURATION AND DESCRIBING THE MEASURES TAKEN
OR INTENDED TO BE TAKEN TO REMEDY THE DEFAULT, EVENT OF DEFAULT OR
ANTICIPATED EVENT OF DEFAULT].
Dated this [day of], 1999.
- 92 -
<PAGE> 93
Name:
Office:
Name:
Office:
- 93 -
<PAGE> 94
SCHEDULE 16.6
EXISTING LOANS AND ADVANCES
(see annexed document)
- 94 -
<PAGE> 95
SCHEDULE 16.7
EXISTING LIENS
(see annexed document)
- 95 -
<PAGE> 96
SCHEDULE 16.16
REORGANIZATION
(see annexed document)
- 96 -
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant
NAME JURISDICTION OF INCORPORATION
- ---- -----------------------------
DOING BUSINESS AS
- -----------------
1. Gildan Activewear (Barbados) Inc. Barbados
Gildan Activewear (Barbados)
2. Gildan Activewear (BVI) Inc. British Virgin Islands
Gildan Activewear (BVI)
3. Gildan Activewear El Progreso, S.A. Honduras
Gildan Activewear El Progreso
4. Gildan Activewear Malone, Inc. New York
Gildan Activewear Malone
5. Gildan Activewear Miami, Inc. Florida
Gildan Activewear Miami
6. Gildan Activewear San Jose, S.A. Honduras
Gildan Activewear San Jose
7. Gildan Activewear SRL Barbados
Gildan Activewear SRL
8. Winners Manufacturing, S.A. Honduras
Winners Manufacturing
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
To the Board Of Directors
Gildan Activewear Inc.
We consent to the use of our report included in this registration statement on
Form F-1 and related prospectus for the registration of Class A Subordinate
Voting Shares of Gildan Activewear Inc. and to the reference to our firm under
the headings "Summary Consolidated Financial Data", "Selected Consolidated
Financial Data" and "Experts" therein.
/s/ KPMG LLP
Chartered Accountants
Montreal, Canada
April 15, 1999
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